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Thursday, 7 November 1985
Page: 1791

Senator SHORT(9.36) —Mr Acting Deputy President--

Senator Georges —This will be good, if it's going to be another union bash.

Senator SHORT —No, it will not be a union bash at all, Senator. First of all, I congratulate my friend Senator Cooney on his very enjoyable and entertaining remarks. He is a man of infinite legal experience and wisdom. I thought his remarks tonight made it patently obvious that, in gaining that legal wisdom, he had had a lot of experience in defending hopeless cases. He did it very well tonight! More seriously, I wish to pick up and comment on a couple of points which Senator Cooney made. It seemed to me that several of his remarks tonight epitomised the fundamental mistake that the Hawke Labor Government is making in terms of achieving the objectives that it says it strives to achieve.

There is no point in Senator Cooney talking about compassion, social equity and social cost, implying that one political party has a concern for these matters and the other political parties do not, without acknowledging and recognising any feelings of that nature that any politician, political party or member of the community has. They are fine words only, if they are not achieved in the context of hard, rational, thought-out economic policies. We might say to ourselves that economics is a hard and a dismal science, but it has been proved beyond all doubt throughout history that an ignoring of economic rationality is the surest way to avoid bringing compassion, care and social equity to our people. One just cannot ignore economics in the way it was tonight. One cannot care for a growing community unless one has a growing economy. There is no alternative to that.

Senator Cooney criticised the Opposition for having grabbed at an individual statistic over the last few days-he said that we plucked it out and cited it out of context-namely, a statistic reflecting the fall in the value of the Australian dollar. I put it to Senator Cooney that it was not an individual plucking out of a statistic. It was a highlighting of a statistic resulting from a combination of factors that affect our economy. If we had better achievements and better results in those other fundamental parts of our economy, we would not be seeing the falling dollar and, by definition, the day by day fall in Australian living standards that that falling dollar leads to.

Senator Cooney spoke of housing costs and I agree with his concern, but there is no way one will get housing costs down unless one gets inflation and interests rates down. In a situation now where the Government is presiding over the highest level of interest rates in this country for a least half a century-and on some people's calculations for a century, one will do the people of this country a grave disservice in trying to enable them to get adequate housing and shelter.

I want to use the occasion of this cognate second reading debate on the Appropriation Bills to do three things. I want to attempt to debunk the myth which has so skilfully and assiduously been developed by the Prime Minister (Mr Hawke) and the Treasurer (Mr Keating), with a bit of help from their friends in the media, over the past two and a half years that this Hawke Labor Government has demonstrated itself to be an effcient economic manager, and a more efficient economic manager than the previous coalition Government. Secondly, I want to record my grave concern about where the Australian economy is at the moment and where it is heading. Thirdly, I would like to make a few suggestions as to what we should be doing about it.

It is inevitable that the Government will portray anyone who raises concerns about the present level of performance and the likely future direction of the economy as just another prophet of doom. I guess I would do so, too, if I were in the Government's position. That is politics. But in my remarks tonight I hope that I will present myself as a political economist rather than just a politican, because the issues facing Australia are such that they should be beyond purely party politics. If they are not and if we do not reach some better measure of agreement as to which way this economy is going in identifying the present situation, heaven help us in finding the solution to our problem. It is about time that the Government started taking note of what economists in this country are saying. If it does not do so, the road ahead for all Australians will be even rockier than it will be in any case.

Let me say a few words about the first issue I want to deal with, and that is the myth that has been so skilfully developed by the Government, with some help from its friends in the media, that it is an efficient economic manager. How do we judge whether a government is an efficient economic manager? It is not easy. One cannot just look at the results in terms of employment, inflation, interest rates, output growth and so on. These results are often influenced by events outside the Government's or the nation's own control. The Whitlam Government was obviously influenced, to its disadvantage, by the first oil price shock in 1973. The Fraser Government was equally obviously influenced to its disadvantage by the world recession and the Australian drought in 1981 and 1982. The present Hawke Labor Govenment's results have been influenced in the opposite direction-in a favourable direction by the growth of the American economy since late 1982 and by the breaking of the drought in early 1983. Measured economic results have to be treated very cautiously when used to assess the economic management efficiency of any government. But with those qualifications, there are certain criteria against which any government's economic management efficiency can be assessed.

These criteria include at least the following: Has the Government been a prudent manager of its spending and taxation powers, bearing in mind that the only money governments have for spending comes at least eventually from taxpayers? That is an important criterion on which a government can be judged. Another criterion is whether the Government has taken action to maintain the value of our currency, both within Australia and against other currencies. Has it provided the right environment for the encouragement of lasting new job creation through economic growth? On each of these counts the performance of the Hawke Labor Government falls well behind that of its predecessor, the Fraser coalition Government.

Let us look at a few facts for once and forget about the myths. What about good management in spending and taxation? In the seven years of the Fraser Government, government spending grew on average by 2.2 per cent each year. That is very careful and prudent management-in fact, it is the most careful and most prudent economic management displayed by any government in Australia's post-war history. In the first two years of the Hawke Government, the average annual increase in its spending was more than three times greater than the 2.2 per cent of the Fraser years. It is true that government spending growth has been pulled back this year, but the average is still much higher than that of the previous Government. Because of this lack of discipline over spending, the Hawke Government has had to pull more tax dollars from the pockets of Australians than any previous government in our history. The Hawke Government is the highest taxing government in Australia's history. It is that by whatever measure one wishes to choose.

That is not the end of the story because, despite record taxation, the Government has still not taxed enough to meet its undisciplined spending. So it has had to resort to continual borrowing to balance its books. In three Budgets the Hawke Government has had to borrow no less than $20,000m just to meet this gap betwen its profligate spending and its taxation receipts. That borrowing equals about $1,250 for every man, woman and child in Australia. Per taxpayer the figure is closer to $3,000 each. That borrowing has to be repaid and repaid with interest. This year the interest bill, in a year when interest rates are at their highest ever level, and leaving aside altogether any repayment of the borrowing, is more than we Australians spend on the defence of our country and more than the Federal Government spends on education. This adds up to one very simple fact-that is, the Hawke Labor Government is living way beyond its, and therefore Australia's, means.

The consequences for us all will be dire. They are already starting to surface and I will mention them in some detail as I proceed with my remarks. That leads me to the next of the criteria that I mentioned-namely, whether the Government has taken action to maintain the value of our currency. It is true that inflation, as measured by the consumer price index and most other price indices, fell during the first two years of the Hawke Government. Views differ as to the reasons for this. Personally, I believe the decline was due less to the policies of the Government than to other influences, including the wages freeze which the Hawke Government inherited from the Fraser Government. However, I do not wish to be churlish on this point; I do not need to be. Rather, I just wish to point out four facts. First, even during those two years when Australia's inflation rate was declining, it was still well above that of our major trading partners and, therefore, we were becoming increasingly uncompetive. Secondly, regardless of what happened in those first two years, inflation is now on the increase again in Australia and that is so quite unequivocally. Thirdly, interest rates, after allowing for inflation, are now at their highest level in at least 50 years and probably a century. Finally, the value of the Australian dollar against other currencies has fallen in 1985 more than virtually any other currency has. It has fallen by more than it has fallen in living memory, certainly in our post-war history.

The Australian dollar is now on a slide that it will be very difficult to reverse. This year alone the value of the Australian dollar has fallen by more than one-quarter so that, whereas in January 1985 one needed $4 to buy something overseas, one now needs $5. I say to Senator Cooney that that means that the standard of living of every Australian has fallen. The fall in the Australian dollar this year has been the most significant contributor to the fall in our living standards which has occurred for quite a long time. The fall has been due very largely to the policies of the Hawke Government and to the perception of those policies by the rest of the world. In simple terms, the world is passing judgment on Australia through its lack of confidence in the value and stability of our dollar.

My final criterion on judging of the economic management efficiency of the Government is whether it has provided the right environment for the encouragement of lasting new job creation through economic growth. The Hawke Government does score some points on this criterion, notably for its deregulation of financial institutions-a deregulation, however, which it essentially inherited from the previous Fraser Government.

But the Government fails miserably on other aspects of the criterion, particularly in its blind adherence to the wishes of the trade union movement in wage fixation and its refusal to countenance any deregulation in the wage fixing area despite again the indisputable fact that some greater flexibility in this area would create new jobs and would assist in tackling the crime of youth unemployment in Australia. It is a crime that 25 per cent of our 15 to 19-year-olds are unemployed. It is a crime because it is unnecessary. The Hawke Government bears a very heavy responsibility for this crime.

While I am on the subject of unemployment, in recent days we have heard much about the growth in employment that has occurred in recent times and for which the Government takes credit-credit that I believe is not justly its. But even if one looks at the figures over recent years for the growth in employment in Australia, the Hawke Government does not measure up adequately and comparably with the previous Government. For example, in the three years between November 1978 and November 1981 the average annual increase in employment was 2.2 per cent. In the period May 1984 to May 1985, the highest period of growth to date in the period of the Hawke Government, the increase was also 2.2 per cent. However, the big difference was that most of the employment growth in the period of the Hawke regime was public sector growth whereas under the Fraser Government public sector growth was very limited; by far the overwhelming amount of employment growth in that period was in the private sector. The myth that has been perpetuated that the Hawke Government has done a better job at employment creation than the Fraser Government is simply incorrect on the basis of very simple facts.

Thus, on most of the criteria on which efficiency of government in its economic management can be judged, the present Government measures up very badly both in absolute terms and relative to the previous coalition Government. It is about time that the myth that the Hawke Government is a good economic manager is dispelled once and for all. It simply is not supported by the facts.

I am extremely concerned about where the Australian economy is heading. The reasons for my concern, I guess, are implicit in what I have just said. The problems are there for us all to see. Let me reiterate a few of them. I do so in the presence, I might add, of not one member of the Government in the chamber.

Senator McIntosh —Rubbish!

Senator SHORT —There is now one Government member. Thank you, Senator, for staying.

Senator Parer —Senator Cooney is still here.

Senator SHORT —I apologise to Senator Cooney. This is a very important debate and there are two members of the Government present. There are now three. If I keep talking--

Senator Puplick —How many Ministers?

Senator SHORT —There is no Minister at the table. There is no Minister in the Senate and there has not been for several minutes. I am, as I said, extremely concerned about where the Australian economy is headed. I have mentioned some of the reasons. I will reiterate a few of them. Inflation is again on the rise. Throughout the whole period of the Hawke Government the inflation rate in Australia has been considerably higher than that experienced by our major trading partners. The gap is widening. We have in this country a system of wage fixation through automatic wage indexation which has locked us into an economic inflationary spiral from which it will be impossible to escape unless that system is changed. There is no suggestion, not even a vague hint on the part of this Government, that that change will occur or even be considered.

We face a major balance of payments crisis. Despite the largest fall in the value of the Australian dollar since the Second World War, our imports are still increasing while our exports are lagging. There are very good reasons to expect that this situation will continue. We hear from the Government that the traditional J curve effect of a devaluation is still to occur. The lag is longer than has been the case in the past. There are very good reasons to expect for a variety of reasons on this occasion that, that lag will grow longer and longer than we have ever experienced in the past. In the interim, even if the J curve does take effect in time, we will face a very severe mauling of our external account and the value of the Australian dollar. That in turn will further fuel the inflationary spiral and put great pressure on the Government's wages deal with the unions, a deal which was struck without the slightest regard for its effects on business, particularly small business. Interest rates, as I said, are already at their highest level for at least 50 years and they seem certain to increase further.

We face a fundamental foreign debt problem in this country at the moment. Our foreign debt is of the order of $68,000m. At the moment the interest and capital repayments on our foreign debt consume one out of every three export dollars we earn. I am absolutely staggered to hear from the Treasurer and his representative in this chamber, the Minister for Finance (Senator Walsh), several times this week that we do not have a foreign debt problem. There is no more serious problem facing this country, and this Government is treating it in an ostrich-like way. Papers released yesterday by the Bureau of Agricultural Economics predict a fall of 26 per cent in the value of rural production in 1985-86, a very small increase in the price received by farmers for their goods and services and a very significant increase in the prices they have to pay for their imports. We have on our hands a rural crisis of considerable magnitude and again the Government seems not even to acknowledge that such a crisis exists.

What should we do about the problems of which I have been speaking tonight? I would not for one second pretend that the government of the day has the answers to these problems readily in its hands. That would be to fall into the trap into which this Government has fallen in a massive way over the last two and a half years by saying to the Australian people: `She'll be right. We, the Government, know the problems; we will be able to fix them'. That is the greatest con and crime that has been perpetrated on this nation for a long time. It takes away from individual Australians the feeling that they need to develop their own enterprise, incentive and effort. Governments cannot solve our problems but they can set an environment in which we can better solve them.

What would I do if I were advising the Government? The first thing that must be done is for the Government to take a closer account of its own spending. If the Government is not prepared to exercise greater discipline and restraint in its spending, none of the other problems of which I have been speaking tonight will be solvable. The Government must relook at its whole policy towards wage fixation. An added degree of flexibility must be introduced into the Australian wages system, otherwise our uncompetitiveness will continue unabated, regardless of what other measures we may take. If that occurs, we will go further down the road of economic decline. I was very interested to read this week a report of Professor Helen Hughes's first Boyer lecture for this week in which she said:

Unemployed Australians would be looking for laboring jobs in rapidly growing Asian countries in another 30 to 50 years unless present trends could be changed . . .

She pointed out:

. . . Australia, which had the world's highest per capita income a century ago, had the slowest growth of any industrial country since 1900 and was now fifteenth on the wealth index of developed nations.

Senator Bolkus —It is the long free lunch.

Senator SHORT —It is a free lunch induced by those on the other side of this chamber who have conned the Australian public into believing that governments can do everything for them and that people do not have to do anything for themselves.

Senator Bolkus —It is always the worker. Why do you not pick on anyone else?

Senator SHORT —It has nothing to do with an attack on the worker. If Senator Bolkus thought a bit more about Australia and a bit less about Latin America his side of politics might be a little better.

Senator Bolkus —Mr Acting Deputy President, I raise a point of order. I resent that inference. I am concerned about Australia. This man is here to represent only one faction within Australia-one elite group-and he has the gall to accuse me of not being representative of all Australians. I ask him to withdraw.

The ACTING DEPUTY PRESIDENT (Senator MacGibbon) —There is no point of order.

Senator SHORT —In future I will listen with interest to what the honourable senator says about the situation in Australia. I must have been missing something.

The Government must look again at its tax proposals. The whole thrust of the tax proposals is anti-business; it is particularly anti-small small business and anti-incentive. If we as a nation think we will grow and provide the goods and services that we want to provide as a caring and compassionate nation and we do not provide the incentive for the creation of income and wealth in this country, we are sadly deluding ourselves. Above all, this Government needs to show some leadership and a sense of direction to this nation. The problems we are facing in Australia are not just the Government's fault in a policy sense, critical though I am of those policies. Even more important is the failure of the Government to show leadership and to say to the Australian people: `We want growth, prosperity and job creation in this country'. Until it does that and adopts policies which are in line with that sense of direction, the problems to which I have alluded tonight, which I believe are of greater concern to this country than we have had in a generation, the problems will not go away; they will worsen.