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Thursday, 7 November 1985
Page: 1744


Senator COOK(3.22) —The Leader of the Opposition (Senator Chaney) in the dying stages of his speech referred to non-political comment. I commence my address by referring to a significant non-political comment made just over a month ago:

Contrary to conventional wisdom, the Australian experience over the past two years is proof that it is possible to put the economic house in order, in terms of reducing inflation and rigidities in the economy, while at the same time achieving a high state of growth and falling inflation and unemployment.

So far the results of the Accord have been good-brilliant-in these terms.

The Secretary-General of the Organisation for Economic Co-operation and Development, Mr Paye, said those words when he visited Australia in mid-October. The Organisation for Economic Co-operation and Development has lately assumed the role of international judge of the performances of the various economies of the developed world. His words are a considerable judgment of approval of the accord. Mr Paye went on to say that much of the success the accord had achieved could be attributed to the trade union movement which, he said, had been extraordinarily sensible and responsible. Anyone who has observed the economic landscape in Australia is bound to agree with those observations by the international head of the OECD.

In the argument that has been launched in this chamber this afternoon several strands of view have been put forward to justify what is the somewhat laughable allegation of the terms of the matter of public importance, that is, that the signs are showing that the accord is damaging the Australian economy. A number of things Senator Chaney has said are nothing more than a cleverly cloaked and concealed attack on the union movement in Australia. It is the outworn rhetoric of the Fraser years. It is the rhetoric that, by virtue of abolishing a centralised wage fixing system and by deregulating then in some form or other the wages market will go back to what we saw in 1981-82 and early in 1983 when there was a wages explosion and when we saw Australians pitted against Australians. That type of approach was discredited then and it certainly is discredited now. One can merely ask Senator Chaney whether he ever learns and why he wants to advocate a return to that system.

We have heard an attack upon the accord, when, of course, the accord is the foundation of the economic recovery this country has experienced since Labor assumed the Treasury benches in 1983. We have never said that the breaking of the drought and other factors did not contribute to that recovery. What is also undeniable is that the accord has achieved what in many respects is the economic miracle of enabling a government to run an expansionary economy and to achieve growth in employment while at the same time halving inflation, reducing industrial disputes to their lowest ebb for 17 years, and achieving a redistribution of wealth in this country from the share going to wages and salaries to that going to profits. We have seen an expanding economy take off on that basis. It was not possible to achieve those sorts of responses without there being an accord which maintained the responsible expectations of wage and salary earners in this country and which enabled the Government to run an expansionary economy and lift it out of the trough it was in.

That is the proven record of the accord. They are the results that are on the scoreboard. They are the results which in part even Senator Chaney was moved in his address to applaud. But what has Senator Chaney put forward as a substitute? His whole approach has been to decry what he sees as current imperfections. Some of them are real, but not real for the reasons he asserts. If one considers his remarks in this debate and the remarks of other spokesmen in the economic field from his party over time one can see that there really is no positive, integrated view of what should happen, but merely a substitution of theory and ideology which, as we saw in the last great experiment of the Fraser years, brought the Australian economy to its knees.

The accord was responsible for achieving an agreement with this Government to adjust wages every six months by virtue of increases in prices. The final arbiter of whether that should be the case is the Australian Conciliation and Arbitration Commission. It has been moved by the unity displayed and the results achieved by the accord once again-this time on Monday of this week-to announce a wage increase of 3.8 per cent which will increase wages to compensate for cost increases through the consumer price index for the first half of this year. Whilst one understands that increased wages are increased costs to the employers, if one looks at the level of redistribution to profits and the profit records racked up by companies operating in Australia, one sees that it is not a cost that is an unfair impost on those companies. That stands as a very reasonable economic statement.

What the Opposition never does in attacking wage increases is to look at their two-dimensional aspect. As I have indicated, whilst wage increases are a cost they also provide purchasing power in the pockets of consumers. Wage and salary earners in this country are the main body of consumers. If there is not a market to purchase, there is not a market for manufacturers and retailers to sell to. Because the accord guarantees an enhancement and maintenance of real purchasing power it also guarantees a real and continuing market for producers of goods and services in Australia, as it does for imports into this country, which I will deal with in a moment when I go to the effects of the devaluation. The two-dimensional aspect is frequently denied by the Opposition. The effect on purchasing and demand is something that it never addresses. However, it is a very real economic need and without it the economy would contract.

What the accord has achieved is that at long last it has got unions off the narrow-minded pursuit of wages, wages, wages. It has substituted for that an all-round ability for unions to enter into the mainstream of economic life in this country and deal with governments, employers and the other authorities that fix and deal with wages, prices and taxes. They have been able to come to a compact about living standards and engender into their behaviour a degree of security. The accord now enables them to look at the impact of prices, wages, taxes and the social wage so that they can, in the end, bargain for living standards. It has diverted the unions from being confined to the narrow pursuit of money wages to the real pursuit of living standards. Living standards mean full employment and a healthy, expanding economy. The record of the accord has been to achieve that. Over the last year we have seen growth in the economy of nearly 5 per cent. We are looking in prospect to a growth rate in the next 12 months also of 5 per cent. Again, we are looking at ongoing, sustained economic growth and expansion. Without that growth and expansion, job prospects do not exist for Australian wage and salary earners and for the young people who are coming on to the wages market.

The accord has produced that security. It has led to a lack of industrial disruption as people are no longer placed in the position of not knowing whether their living standards will be maintained and forced out on to the wages market to maximise the price of their labour and to engage in industrial disputes. The alternative model the Liberal Party seems to be suggesting-I say `seems' because it is never quite clear which wages policy it supports from one week to the next-is more direct bargaining. Direct bargaining means more disputes. More disputes means more dislocation, more insecurity and more uncertainty as relativities between wage and salary earners are distorted and as groups set out to maximise the price of their labour. Thankfully, that is a scenario that Australia has got away from and, as a result, the economy has grown and expanded and job prospects are very bright indeed.

What Senator Chaney also did today in speaking on this matter of public importance was to blame the accord for the devaluation of the Australian dollar. I am surprised that as an Australian he did not seek the opportunity in this debate to point out that the international currency traders have fundamentally misunderstood the impact of the 3.8 per cent wage increase and, as a consequence, have reacted on the basis of knowledge or information which is not sound. This temporary reduction in the Australian dollar is a reflection upon those traders, not upon the intrinsic health and well being of the economy. Let me reach therefore for today's Sydney Morning Herald. It deals with this point in an editorial headed: `What Keating should do'. It states:

To the currency market in New York, Australia is just another small country with a balance of payments problem. When the wire services announce that some judge has just awarded every Australian worker a 3.8 per cent pay rise, New York sells the Australian dollar. Poor Mr Keating, who has been flying around the world explaining the subtleties of his Government's economic policies and generally talking up the Australian dollar, comes home to an exchange rate ``crisis''.

What is the Treasurer to do? Preferably nothing.

That is the advice of the Sydney Morning Herald. That editorial concludes with a paragraph or two that should be read into this debate. It states:

Certainly, suggestions that the Government should seek a further cut in real wages for the additional depreciation are nonsense.

If the trade deficit narrows as quickly as the Government predicts, and if the economy slows as quickly as we fear, the dollar could recover quite dramatically. Foreign exchange markets are notoriously volatile, and the market for the Australian dollar is thinner than most. This time last year, the dollar was grossly overvalued, having risen strongly against almost everything except the US dollar through the second half of the year. This time next year, business's main concern about the dollar could be that it is recovering too strongly and threatening to wipe out too much of the competitive gain of 1985. Floating currencies are like that.

It would seem, in view of that analysis, that the honest, fair and reasonable thing to have done would have been to use the forum of this debate to explain the subtleties of the Australian economy to the international currency traders so that they would understand how intrinsically strong that economy is rather than use it to attack the Government and to try to break the confidence within the wider community in the handling of the economy by the Government and the faith that the wider community has expressed in the accord.

I started my speech with a quote from the Secretary-General of the OECD, Mr Paye. It is interesting to reflect upon what he saw when he was in Australia in October. He would have seen that we were suffering now because our recovery has been too strong; in fact it has been too good. There are signs that the domestic recovery is overheating. There is currently a powerful demand for credit. Despite the record interest rates that Senator Chaney refers to, there is a strong surge and continual demand for credit. That is a sure sign of consumer confidence and a sure sign that people believe that the future is sound for their investments and that their borrowings can be repaid. In terms of the internal finance markets it is a sure sign too, unfortunately, that we are beginning to get to the stage of overheating.

Another sign of possible overheating is the shortages that are now showing up in the labour force. During all the years of Liberal rule trade training and the training of key skilled workers languished because of the lack of a labour market program. We now find that with growth and demand key skilled workers are in short supply and employers are bidding up prices informally, as they try to attract workers from one company to the next. That is a problem that we are addressing, but it is also an indication of overheating in the labour market and something needs to be done about it quickly otherwise it will retard our general expansion.

As a government we have been running a firm monetary policy, but not a monetary policy that is too tight, cracks down too much and chokes off the expansion that we have been able to generate. When Mr Paye came here and delivered his verdict on the Australian economy the accord and the prices and incomes policy were seen to be working. They were seen as having achieved real growth, reduction in inflation and reduction in unemployment. Those are the achievements that he saw. He saw also what this Government has been able to achieve since it took office. As I have said, for two years in succession, we have had economic growth of nearly 5 per cent, with a third in prospect, compared with an annual average growth rate of 2.1 per cent during the previous seven years when the Opposition, which has launched this matter of public importance today was in government. Since April 1983, we have had employment growth of 487,000 new jobs-that is a 7.8 per cent increase. That has been forecast as the highest rate of job growth in the OECD in 1985 and 1986 and more than double the OECD average growth for those two years. We have had the lowest unemployment level in three years. It stood at 8.1 per cent but, on today's figures, it is below the 8 per cent barrier. We feel that that trend will continue. Until the depreciation, there was a virtual halving of the rate of inflation and we had, through 1984-85 the lowest annual rate of wage increase in 22 years. There was a consequent reduction in real unit labour costs to below the levels of the late 1960s and early 1970s and, hence, a restoration of the profit share, as I have said. Mr Paye saw all those things achieved as this Government moved to turn the economy around, and he then delivered his judgment.

I think that the Opposition lacks real nerve on the economic front. As Paul Keating said last month in an address to the Canberra branch of the Economic Society, the real situation is that Australia is troughing it out at the bottom of the J curve. With the devaluation there has been an immediate cost increase which has blown out the current account deficit by virtue of the higher impost on imports and the economy has sagged. The economy is sagging, but temporarily, and as it sags to the bottom of the J curve, Senator Chaney and the Opposition lose their nerve. The J curve, intrinsic to economic theory and practice in the world, means that after that lag, export contract prices will be renegotiated, export prices will rise, export volumes will go up, import volumes will come down and the current account deficit will reel back in a long sustained movement. In that sense, if we just hold fast to the longer range view and if we are not panicked by a skittish dollar, by momentary lapses or by a lack of understanding of the Australian economy by money dealers in New York, we will come out of the J curve and we will have that long sustained growth.

Senator Chaney overlooked saying in this debate that compared with the present level of the current account deficit, when he was in government in 1981-82 the deficit on the current account was 6 per cent of the gross domestic product. In 1984-85 it was 4.9 per cent. It is a lower figure than the figure in 1981-82 when Senator Chaney's Party was in government. That is not to say that we are happy with that figure as a percentage of GDP but, nonetheless, it puts in perspective the qualms that Senator Chaney raised today. He overlooked saying in this debate that in this financial year additional exports generated by the depreciation of the dollar will mean a decrease in imports. It will add about 1.25 percentage points to the growth in GDP in this country and will directly create about 100,000 new jobs, half of which will be in the manufacturing sector. All of those things have been ignored and put aside in this panic matter of public importance that was brought forward by the Opposition today.

The devaluation, I believe, has occurred because of the falling exchange rate. It is but a temporary blip and next week or the week after the rate is bound to go up again. I am reminded that the last time that the Opposition launched a debate in this chamber about the falling exchange rate, the next day or the day after the value of the dollar rose quite rapidly. One can think only that if the money markets were listening to the Government's side of the argument in that debate they took heart from the Government's remarks.

The accord is, of course, the basis of the economic strategy that has caused economic recovery in this country. The accord will continue to be maintained. Without the accord, it would not have been possible to have achieved a discounting for the devaluations that have occurred. We have negotiated a discounting so that in the next wages round 2 per cent will be shaved off the increase that will be awarded through the CPI. It would not have been possible, in a situation envisaged by Liberal Party theorists as to how the labour market should be run, to achieve an across the board discounting of that nature. One only has to think about a deregulated wages market and a centralised discounting system to see immediately that it would not have been achieved.

What also has been neglected is the question: What would have been the level of wage growth in this country had there not been an accord that guaranteed security for workers? When we moved away from indexation in March 1982 there was a 17 per cent increase in wages. In a climate of sustained economic growth and expansion, increasing employment prospects and a low inflation rate, as we have now, we would be looking at double that figure. We would be looking at double that figure if we abandoned the centralised wage fixing system. So no one can say that the accord has not held good; that it is not an important document in terms of regulating the economic health and well-being of this country; that it does not involve all of the social partners in concert with this Government in directing their attention to the basic ills in the economy to get the settings right, to create employment, to keep down inflation and to maintain an expanding economy with an export market for the manufacturing industry.