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Thursday, 7 November 1985
Page: 1740

Senator CHANEY (Leader of the Opposition)(3.03) —The Opposition brings forward this matter of public importance because of the events of the recent week and because of the events of the last year. In addition, we bring it forward because of the soothing words that we continually hear from the Government about the operation of the prices and incomes accord and because of our belief that the accord in fact contains very substantial dangers for the future economic welfare of Australia. Last Monday the Australian Conciliation and Arbitration Commission agreed to the distribution of some of the more recent fruits of the accord. Australian wage and salary earners received a general 3.8 per cent wage rise which reflected the arrangements which the Government had entered into with the trade union movement under the accord. Of course, nothing could be more effectively designed to support that soothing message that the Government has put out that the accord is looking after us all, that it has been a successful instrument of economic management and that it is delivering the economic goods to the people of Australia.

We have been treated to a very illuminating illustration of the impact of the accord over the days since that decision was announced last Monday. The real impact of this bounty which is supposedly flowing from the accord has been demonstrated by what has happened to the Australian dollar over those few days. On Monday Australian workers received a 3.8 per cent increase on an Australian dollar worth US69.7c. Since then the dollar has declined on a daily basis. Today the most recent figures available show that the dollar was valued by the market at US66.15c and that is a 5 per cent loss in the value of the dollar over those few days. The situation is that the wage and salary earners of Australia have been handed a 3.8 per cent rise in a dollar which has deteriorated in its value against the United States dollar by 5 per cent already.

Even that does not measure the full impact of what the Government is doing to the Australian economy. If we measure the value of the Australian dollar, not against the United States currency alone but against a weighted basket of currencies which represents our trade with the rest of the world, and if we look at the trade weight index we find that the dollar at the beginning of the week was marked at 63.2 and by Wednesday it had gone down to 59.3. In a matter of a few days the value of our currency as a means of purchasing the many goods that we buy from overseas-the far too many goods that we buy from overseas when one looks at what we export-has declined by more than 6 per cent. It is important that it be clearly understood that we have a situation where a 3.8 per cent rise last Monday is reflected in a massive loss of value in the dollar over the last year and a fall of 5 or 6 per cent, depending on how one measures it, in just a matter of a few days since that rise was announced.

I do not think anything could more accurately prove that Treasurer Keating, who has been wandering around the world trying to sell the economic achievements of his Government, has been identified as a snake oil salesman rather than as a salesman of a genuine effort. We face that awkward situation where the Government's economic policy is being seen as a matter of trying to sell snake oil. It has been described as a matter of forced optimism by the Australian Financial Review as recently as this morning. The soothing message continues because, of course, the Government wants to collect the best possible news that it can.

The Leader of the Government in the Senate (Senator Button) today talked about the latest unemployment figures. Of course, the Opposition welcomes the fact that there is some drop in the percentage of Australians unemployed. Senator Button very quickly skated over some of the main features of the recent employment figures which are in the publication of the Australian Bureau of Statistics and which show that in fact seasonally adjusted employment showed a slight decline in October 1985, with both employment and unemployment declining. With employment declining, why did unemployment decline? It declined because there was a 4.5 per cent drop in the participation rate. The news is not quite as cheerful as was suggested by the Leader of the Government in the Senate. In fact these figures show that there was a decline in employment of 43,900. The bulk of that decline was focused in New South Wales and Victoria, in those fine Labor States which have been trumpeted at us as models of economic management and models of Australian Labor Party achievement. The people of Australia need to know that employment fell. There was a reduction in unemployment because a significantly larger number of people were not seeking employment in the current environment.

This fall of the Australian dollar is the most prominent of the warning signs which are being flashed at the Government and at the Australian people. This is the market's judgment of the accord and of the results that it has achieved for Australia. The other major warning signs lie in the continuing problems that the Government faces. Of course, they are not just problems the Government faces; they are problems that we as Australians face, of a massive balance of payments deficit. If we go on buying more and more without being able to sell enough to match it, we have a very significant problem. There is no sign of any solution to that major balance of payments deficit which is dogging this Government and its policies and which is dogging the implementation of the accord. Another judgment has been made on the accord. It has been made by our balance of payments figures and it is a very black mark indeed.

The third really major warning sign that we face-and this will impact on many individual Australians, impact on many businesses and ultimately impact on employment-is the record high interest rates which the accord has delivered and which it will continue to deliver. That is another judgment on the accord and the results that it has brought for Australia. There can be no argument that these problems promise to impact severely on the Australian economy and on the Australian people. Naturally the Government has tried to focus the economic debate on the areas of improvement in the economy. The Opposition has consistently welcomed the areas of positive policy development that it recognises in the Government and it has consistently welcomed any improvements in the economic statistics. Let me mention some of those areas of improvement, but before doing so let me say that it is consistently so that the areas of improvement are grossly overstated by most of the Government spokesmen. Again I refer to the term used by the Australian Financial Review-that we have an air of forced optimism in what the Government is putting forward. It is true that there has been a lift in employment and a reduction in unemployment, which we welcome. It is true that there has been a reduction in inflation, although it is again rising. We welcome the reduction. It is true that there has been economic growth. We welcome that again. Any changes for the better will be welcomed by the Opposition.

This debate, which is limited in time, is not one where we can debate in detail what are all of the causes of any improvements which have occurred. To the extent the accord has contributed, the Government's share has been bought dear, as is shown by our balance of payments situation and as is shown by the interest rate situation and the fall of the Australian dollar. The point needs to be made again that the accord was not the cause of the breaking of the drought in Australia and it was not the cause of the widespread international recovery which has been very useful to Australia. It was not the accord which accounted for the reduction of costs and inflation which was brought about by the Fraser wage pause. Even the Government would admit that they were major factors in the improvements which have occurred in the Australian economy. All of those improvements are independent of the accord. The fact is that we have a government which is unable to defend the accord in the face of the real measurable and identifiable problems of a declining Australian dollar, high and rising interest rates and a balance of payments situation for which no solution is in sight. That was brought out yesterday when we had the spectacle of Senator Walsh finally, when pressed at Question Time, saying that the steep decline in the Australian dollar was best sheeted home to what occurred in wages in 1981.

I suppose one can go back and look at the sorts of long term structural factors in unemployment that were referred to by Senator Button in Question Time today. One can do that and one can go back to the Whitlam days and look at the enormous change in the structural situation under the Whitlam Government. One can probably say: `Yes, that was a contributor to the long term non-competitiveness of much of Australian industry'. One can point to areas of difficulty during the Fraser years and say: `Yes, that contributed to our long term structural problems'. But the critical point is that in looking ahead the accord locks us into many of the structural difficulties which exist in the Australian economy. It provides no escape route; it provides no relief; it provides for the maintenance of the structural difficulties which were referred to by Senator Button in this chamber earlier to-day. If the Government was genuinely concerned about doing something about the structural imbalances in the Australian economy, it is the view of the Opposition that it would certainly not be entering into an accord which, for example, provides for a 3 per cent productivity round next year which will further make the Australian labour force uncompetitive and the Australian economy uncompetitive in many of its sectors.

The criticism that we make of the accord and the criticism that we make of the Government is not a criticism which is based on the Government not understanding the reality of the problems that it faces. Our criticism is that, having shown understanding of at least some of those problems, the Government has refused to face up to the implications of what policies are required to deal with those problems. Honourable senators do not need to go back very far to see the proof of that. If they look at what was said by the Treasurer in his Budget Speech they will find very clear statements about how important it was, if we were to have a competitive position in the world market and if we were to benefit from the decline in the value of the dollar, which was, in the Treasurer's words, `restoring our competitive edge', to have the discounting of wages to ensure that those benefits flowed through.

The Leader of the Government in the Senate, to his discredit, has tried to indicate that that was a rather vague undertaking in the Budget, notwithstanding that in this chamber after the Budget it was confirmed by Government Ministers that what the Government was seeking was the discounting of wage rises for the consumer price indexes effect--

Senator Button —You know what the words in the Budget Speech to which you refer say.

Senator CHANEY —Senator Button should look at the answers which were given in this chamber. It was confirmed by his colleagues that there would be discounting and that discounting would be sought at the wage hearing which has just ceased. This is typical of the slipperiness of the Leader of the Government in the Senate. He is not prepared to acknowledge what was said by his ministerial colleagues as to the meaning of those words and the subsequent backdown of this Government in the face of the Australian Council of Trade Unions.

Senator Button —Have the guts to ask me a question about it on Monday.

Senator CHANEY —The Leader of the Government has the ultimate capacity to set the business of this chamber and he is pleading for an opportunity to explain his position by my asking him a question. Mr Acting Deputy President, have you ever heard anything more fraudulent or more of a sham? The backdown of the Government with respect to its undertaking in the Budget that it would retain the benefits of devaluation for the Australian people and for the Australian work force stands as the most recent indication of this Government simply not living up to its own knowledge and to its own beliefs. We have a situation where the world can see that the Australian devaluation, which has already fed through into inflation in this country, has not, to this point, been discounted in the wage rises which are flowing through to the Australian work force. We see a plummeting Australian dollar as the prize for that particular piece of dishonesty and ineptitude on the part of the Government.

There are a great many other things in this accord which I think stand condemned. The accord, in providing a deal between the trade unions and the Government, has in fact left the Government in the situation where it has very little room to manoeuvre. We have a situation where there are significant deteriorations in the economic position of the Government and yet it has, under the accord, already traded off a good deal of the room in which it has to move. The real irony in the position that the Government now finds itself under the accord is best explained by looking at the position that it now has with respect to interest rates. I understand that under the accord interest rates are a matter which should be kept down by the Government, but it is quite clear that the Government's policy and its deal with the trade unions leave it in a situation where it requires a high interest rate policy if it is to do anything to stem the run against the Australian dollar. The Government has put forward a Budget strategy which is based on increased private sector activity and increased private sector investment, and yet we have a government which is pursuing policies which are maintaining and will continue to maintain very high interest rates. Perhaps the Leader of the Government in the Senate, if he is going to speak in this debate, will let us know when he thinks there might be reductions in interest rates. When will there be the reductions in interest rates that were promised by his colleague Mr West? Of course there are not going to be any reductions in interest rates, because this Government has brought about a situation where only the maintenance of high interest rates will keep the Australian dollar from going into a free fall situation.

It is ironic that this Government, which purports to stand for the people of Australia, is subjecting the people of Australia to a situation where, quite clearly, our balance of payments position is such that the value of the Australian dollar will remain under threat. Quite clearly, while the value of the Australian dollar remains under threat, interest rates must remain very high. The fact of the matter is that if the Government is to meet the very difficult challenges which it faces-they are challenges which are difficult, they are not challenges which can be met simply by some minor change of policy setting-it has to face up to the fact that the settings of the accord are not compatible with the long term economic health of this country. The sad fact of the matter is that there will not be the continued employment growth and there will not be the maintenance of the value of the Australian dollar which is necessary if there is to be any hope of price and wage stability in this country. We have a situation where the Government has condemned us to the very greatest series of difficulties under its precious accord.

There is no lack of non-political comment to bear out the difficulties to which I have referred. I refer very briefly again to this morning's Australian Financial Review. One finds the suggestion that interest rates are soaring as the dollar keeps falling. I refer to the editorial which was put forward in the newspaper because it sums up very clearly a view which the Opposition has been asserting through the Leader of the Opposition and many other spokesmen. The article states:

Put simply but frankly, the collapse of our dollar has been caused by the refusal of the rest of the world to believe all our forced optimism. In particular, it is not convinced that the maintenance of the accord, and with it the power of Mr Crean and Mr Kelty over our economic policy, really is in our best interests.

We have been sold an economic policy pup by the mandarins of the ACTU and the Treasurer's Office. Contrary to what they continually claim, incomes policies are not some quick-fix solution of the problems of small, open economies like Australia. Unfortunately, the Government's economic and political strategy is predicated on that very assumption. Although it could never admit it publicly, the Hawke Government must be becoming increasingly concerned that its emphasis on the accord has turned out to have been a terrible mistake.

That quotation summarises the view which the Opposition puts forward and which it believes requires very careful attention from this Government. It is the view of the Opposition that nothing could be more desirable than to see the continuation of the positive economic trends to which I have referred. It is also the view of the Opposition that the problems we face with respect to the value of our dollar, our balance of payments and the interest rate arrangements in this country are simply not compatible with continued progress. It is necessary for the Government to change its policy setting if the people of Australia are to be spared a great deal of unnecessary hardship.