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Wednesday, 13 November 1985
Page: 2079

Senator MAGUIRE(3.29) —This afternoon we are debating a matter which has been proposed by Senator Michael Baume from New South Wales and which states:

The impact of the Hawke Government's policies on interest rates and the value of the Australian dollar.

It is very important, in addressing oneself to the matter that has been put forward today by Senator Michael Baume, to place on the record for the Senate the interest rate history under the Fraser-Howard Liberal Government. In early 1980 the interest rate on savings bank first mortgages was 9 1/2 per cent. By early 1982 it had risen by four whole percentage points to 13 1/2 per cent. That is the interest rate record in the declining years of the Fraser-Howard Administration.

One wonders just what the Opposition is seeking to achieve by proposing this matter of public importance for discussion. Is the Opposition in favour of continuing economic growth in Australia or is it espousing a policy of no economic growth? Are members of the Opposition in fact economic pessimists who feel happy only when the economy is depressed or when there is declining production and falling levels of employment? Are they the so-called new conservatives of Australia-those people who take an ideological view of conservative politics and are essentially happy only in an economy with high bankruptcy rates, where they believe bankruptcies in fact weed out the weak producers in industry so that only the fittest survive? Is that the doctrine and the dogma that they subscribe to in proposing the matter we are discussing today?

I think, in fact, the matter of public importance really implies that the Opposition is in favour of a situation of no economic growth in this country. That is what I think it really boils down to. Of course, since 1983 the Labor Government has broken decisively with the past economic policies in this country. We have embarked this country on a policy of economic growth, not a policy of economic stagnation. Under the previous Administration, particularly when Mr Howard was Treasurer, we had an economy with high excess capacity and underutilisation of plant and equipment. That was done deliberately as a matter of policy, essentially to keep price and cost levels down in the community. The only remedy that the previous Government had for cost and price rises was to run the economy with a high degree of slack and excess capacity. This Government has turned its back on those policies and has given Australia a controlled economic stimulus. We have been able to do that with lower inflationary pressures than were applied under the previous Fraser-Howard Administration.

The centrepiece of the Government's policy is, in fact, our incomes policy. We have been able to embark on a controlled stimulus to the Australian economy without the inflationary pressures which accompanied previous policies that were operated by the present Opposition. In turn, the centrepiece of that incomes policy is the accord with the Australian Council of Trade Unions. Within that accord we have been able to define the concept of a social wage. The accord takes a broader view of income than just wages. A key element of the accord has been the indexation of wages for cost rises brought about by inflation increases. Vital to that, of course, has been the centralised wage fixing system through the Australian Conciliation and Arbitration Commission. Of course, the Liberal Party Opposition does not support such a centralised wage fixing system. However, the centralised wage fixing system will enable this Government to discount future wage rises by up to 2 per cent for the increase in the level of inflation due to devaluation of the dollar. Effect will be given to that discounting in the next national wage case, to be heard next April, when wage rises based on the last two quarters are awarded.

As a part of the accord with the ACTU we are operating a policy of awarding income tax cuts in return for discounting wage rises that would be awarded as a result of the inflationary effects of devaluation. That arrangement has been accepted by the trade unions, which recognise that disposable incomes will rise as a result of tax cuts that will take effect from September next year as a trade-off. Discounting will quarantine the price effects of devaluation of the Australian dollar. Of course, any policy espoused by the present Opposition just could not do that. It could not achieve that result, particularly, as I have indicated already, as the Opposition would scrap Australia's centralised wage fixing system which is operated through the Arbitration Commission. As a result of our policy, import price rises will have less effect on wages; hence, the subsequent effects of wage rises on prices will be lower.

International agencies have been painting some very glowing pictures of the Australian economy under the policies of the Hawke Government. There have been accolades from the Organisation for Economic Co-operation and Development, the organisation of the world's developed industrialised countries based in Paris. The OECD has painted some very positive pictures of the Australian economy. On Monday of this week a report released by the National Australia Bank in conjunction with the Australian Chamber of Commerce indicated that `cost pressures for business eased significantly in the September quarter'. So, the Australian Chamber of Commerce is saying that in the September quarter of this year cost pressures faced by business were down and eased significantly compared with what they were in previous quarters. A survey has been published by the Westpac Banking Corporation in conjunction with the Melbourne University Institute of Applied Economic and Social Research. This forward index of economic growth indicates that Australia has and will have the strongest economic growth of any major Western industrialised country. That is a far cry from what happened in the past under the Fraser-Howard regime. I thought the Australian Financial Review, in an article on 29 August this year, summarised the position very appropriately under a headline which said--

Senator Michael Baume —Have a look at today's Australian Financial Review.

Senator MAGUIRE —I point out to Senator Michael Baume that the headline was `The Australian economy now the best in the west'. That is what we have achieved. Seeing that Senator Michael Baume is so keen on quoting from today's newspapers, I would also like to refer to a major article in today's Sydney Morning Herald in which Mr Gittins referred to the achievements of this Government. Mr Gittins pointed out that in the two and a half years of the administration of Australia by the Hawke Government we have continuously had 5 per cent per annum real economic growth. I believe that by the end of this financial year that will accumulate to around 15 per cent economic growth over and above the inflation rate.

We have the lowest real labour costs per unit of production since the early 1970s, and that has been a major boost for industry in Australia. Of course, as I indicated earlier, this situation has been made possible by the trade-off through the social wage. We have the lowest level of strikes in Australia for 16 years. There is now far less dislocation and disruption in our country than has been the case in the last 16 years. Admittedly, Mr Acting Deputy President, I regret to say, the situation is not so good in your State of Queensland. However, in the rest of Australia there has been a tremendous reduction in the level of industrial disputation. Under the accord this Government has operated a policy of industrial consultation, in marked contrast to the policy of industrial confrontation which applied under the Fraser-Howard Government and which is also practised under the Bjelke-Petersen Government in Queensland.

I would simply like to point out that in my own State of South Australia, under the Government of Mr John Bannon, the number of days lost per employee as a result of industrial disputes has now fallen to the level in Japan. The rate of days lost in Australia now is similar to that of a country which has one of the lowest rates of industrial disputes in the world. I think it is a very big achievement for South Australia to have a record similar to that of one of our major trading partners. Under this Government the rate of inflation has been reduced significantly. We have ended the period of high inflation that existed under the Fraser-Howard Government. All honourable senators will be aware that for many years the policy espoused by the Fraser-Howard regime was that of fighting inflation first. The members of that Government said on public platforms around the country for many years that they would fight inflation first; but look at the result. Consumer price increases were running at a rate of 11 1/2 per cent per annum in the 12 months before we assumed the treasury bench. That was the rate of increase under the party that said that it would fight inflation first. It said that it rejected the notion of double digit inflation. Yet, it bequeathed to the Australian people a rate of inflation of 11 1/2 per cent. We have reduced that rate to 7.6 per cent.

Senator Michael Baume would be well aware that the 2.2 per cent rise in the September quarter was very well received in the Australian community. I think that Senator Michael Baume was an adviser to Mr Howard during part of the Fraser-Howard Government period. In the last year of office of that Government 180,000 jobs were lost in Australia. That was the record of that Government under Mr Fraser and Mr Howard. They brought the manufacturing industry to its knees. Labor promised in 1983 that it would create half a million new jobs in the first three years of its administration. The record speaks for itself. This Government has been in office for just 2 1/2 years. Already 460,000 extra employment positions have been created, so we are well on target for meeting that objective of half a million jobs in three years.

I remind honourable senators that at the National Economic Summit Conference in April 1983 the decision was taken and the Summit advised the Government that its policy should be to fight inflation and unemployment simultaneously. That is what we are doing. The legacy left by Mr Howard when he was Treasurer was high unemployment and high inflation. The National Economic Summit indicated to this Government that it should fight high unemployment and high inflation simultaneously. I point out that we are doing just that. Of all the new jobs being created, over 80 per cent are being created in the private sector. They are not band-aid jobs; they do not result from make work schemes. They are permanent jobs in the private sector. As a result of that rapid rate of new job creation we have seen a marked fall in unemployment. The peak rate of unemployment in the recession which resulted from the policies of the Fraser-Howard Administration was a massive 10.4 per cent-double digit unemployment. We reduced that rate in October this year to 7.8 per cent, a marked reduction in the unemployment rate. For the first time since September 1982, unemployment is now below 8 per cent. Of course, the 7.8 per cent unemployment rate is unsatisfactory. I do not believe that it is acceptable. We will be making sure that unemployment continues to fall. In just 2 1/2 years since the National Economic Summit this Government has reduced not just the absolute level of unemployment but the actual unemployment rate by a quarter.

Other economic indicators show the strength of the Australian economy under the Labor Administration, but, as I have said before in this place, the bottom line is the reduced level of bankruptcies in the community. It can be said that over the whole period of the Fraser-Howard Government one of the few growth industries was the growth in receiverships and liquidation. It is really illuminating just to look at the figures on bankruptcies under the Fraser Administration and under the Labor Government because in the last financial year in which the Liberal Party governed this country there were 5,151 bankruptcies. In the financial year 1984-85, which has just finished, the number of bankruptcies has been reduced by 8.2 per cent to 4,727. I am pleased to say that since the end of the financial year the preliminary figures show that the number of bankruptcies is continuing to fall in Australia as a whole. However, I regret that Queensland is not pulling its weight. Over the last two years, while bankruptcies have fallen by 8.2 per cent nationally, they have risen by 42.4 per cent in Queensland-a dismal economic record indeed.

Under the Liberal Party the exchange rate for the Australian dollar was fixed. That Government operated an interventionist policy to maintain the exchange rate. In today's jargon it was a policy of regulation. That was how the Liberal Government set the exchange rate. Of course, those opposite now say that they support markets and the market orientation of policies. They accuse the Labor Party of being the regulatory party of this country but the fact is that it was the Liberal Party that operated a fixed exchange rate involving intervention and regulation. It was Labor that deregulated the Australian dollar. The exchange rate is now floating. It is set by market forces, essentially by supply and demand in the market place. The Liberals opposite do not seem to like that type of policy. They do not seem to like the practical effects of market forces while they espouse them in theory and on paper. In a perfect market there are many buyers and sellers. Perhaps it can be said that in our infant foreign exchange market in Australia there are still relatively few transactions. Activity is on a small scale. That could be reflected in the rates that are set in that market.

Those opposite deny that the positive effects of the devaluation of the currency will take time to work through the system. They cannot seem to wait for those positive effects to show up. As a result of a devaluation the first thing to rise is import prices, essentially because there will be a number of goods in transit-on the water so to speak. There is no scope to reduce the volume of those imports, so there tends to be an increase in prices and, therefore, in import values, immediately after a devaluation takes place. It takes some time for the volume effects of a devaluation to work their way through the system. It is only when volume falls that the value of imports is likely to be reduced.

The Government has said repeatedly that there will be little beneficial effect of the devaluation on the balance of payments in the period from July to the end of December. In that period, we expect little positive effect on the Australian balance of payments. Essentially, it seems that the Opposition cannot wait. It seems to want policy responses but we have said repeatedly that the effect will not show up during the current calendar year. We have also indicated time and again that the slowing of domestic demand and expenditure during the financial year which will end at the end of June will help the balance of payments. It is very noticeable that less than one-third of the total balance of payments deficit recorded for October was due to physical trade factors. Less than one-third related to the excess of imports over exports. The great majority was in other areas of the balance of payments, including the so-called invisible items in the balance of payments. I believe that that reflects the long term effect of Liberal Party policy of not developing Australian industry to get into the trading sector. I instance Australian freight and shipping, which have been neglected for years. We could have done a lot better in those areas in the long term to shore up the balance of payments. I believe that it is very difficult for the Liberals to raise such subjects as they have not put forward any policies to correct the situation.

The ACTING DEPUTY PRESIDENT (Senator MacGibbon) —Order! The honourable senator's time has expired.