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Tuesday, 30 August 1960

Mr BURY (Wentworth) .- The Deputy Leader of the Opposition (Mr. Whitlam) will, of course, have an opportunity - and I am sure he will use it - if not before, then certainly in December of next year, to propose such constitutional changes as he thinks are desirable for the furtherance of his socialistic purposes. Most of us on this side of the Parliament feel that there is no need whatsoever for any hurry in this matter. The honorable member mentioned legislation concerning restrictive trade practices which has been in existence in the United States of America since 1890 or thereabouts, and he deplored, by- implication, the absence of legislation on this subject in Australia. Of course various Labour governments have been in power for periods of many years since Federation, and one is forced to conclude, therefore, that they have sadly neglected their opportunities to introduce this kind of legislation. The honorable member made the curious statement that the States are inactive in respect of hire-purchase legislation. If he has time to study what goes on in New South Wales, he will find that there is a considerable body of legislation on hire purchase on the statute-book of that State. He will also find that strenuous efforts have been made by the States to achieve some degree of uniformity of treatment of hire-purchase problems.

The honorable member has shown, as honorable members opposite frequently do, a desire to control everything, but such control is by no means essential for the basic purpose of combating inflation, although the Opposition continues to argue that these strict controls are necessary for this purpose. What was necessary a few years ago, and still may well be necessary, for the socialization of the economic processes of Australia, is certainly not an essential element in the process of controlling inflation. Of course it is fashionable now for the Opposition to trundle out these arguments in favour of controls, advocating them not for the express purpose of achieving socialization by having control of the whole economy but as a necessary means of curing inflation.

There is a curious difference between Mie Leader of the Opposition (Mr. Calwell) and his deputy in their approach to the matter of inflation. The Leader of the Opposition is one of the founding fathers of Australian inflation, if such movements can be attributed to individuals, or responsibility for them placed on individuals. Two basic themes which run through the thinking of many persons in this country certainly gained a fillip when the honorable gentleman's party was in power. " Populate or perish " was his motto, but when he began the huge immigration scheme that has added so many to the numbers of Australians, he introduced something which made at least some considerable degree of inflation in Australia completely inevitable. His Government was in power when the White Paper on this subject was published, although that Government did not necessarily contribute much to the paper in the way of ideas. But it was the sponsor.

If any one is responsible for initiating the two main causes of inflation in Australia, members of the last Labour Cabinet must bear a very heavy part of that responsibility. It is true that the Ministers of that Cabinet, who are still members of this House, are only the rag-tag and bob-tail remnant but, they too, were responsible. Undoubtedly, the major cause of inflation has been the huge immigration programme. For that programme, the Leader of the Opposition rightly claims credit, but he must also assume full responsibility for its economic effect.

Apart from those two issues with which the Leader of the Opposition was closely associated, every time he opens his mouth he gives support to the kind of things which make more intense the degree of inflation. He tries to conjure up virtually non-existent unemployment and urges still further monetary expansion to cope with the imaginary situation. Every lime the talks about the Colombo Plan, the Territories, the development of the Northern Territory, or about social services he, in effect, advocates the use of more millions of pounds. Yet noticeably absent from his statements are the ways and means by which the resources of this country, the strain on which is the basic cause of. inflation, can be increased. Far from helping to increase the resources available to carry out these huge pipgrammes, he would reduce even those resources by curtailing overseas investment in Australia.

The speciality of the Deputy Leader of the Opposition (Mr. Whitlam), expressed in many places, is to complain bitterly about some of the inevitable results of the policies of immigration and hyper-full employment, which his leader played such a part in initiating. He complains of a lack of resources for providing schools, roads, public utilities, and all the other things that governments provide. But there is already a virtually impossible burden on the capital resources of the country, which can be carried now only with a considerable degree of inflation. If the Deputy Leader of the Opposition were to spend more time in considering the origin of existing policies he might come to wiser conclusions on how to make ends and means meet.

He made much of the very serious problem of the marketing of primary products. Of course, Australia depends essentially on its primary products. But he asked what the Government had done to increase the price of primary products. As far as intergovernmental negotiations and trade missions are concerned, there is virtually no stone that the Government has left unturned. The Deputy Leader of the Opposition did not explain how, if the balance of world supply and demand of primary products is tilted against the primary-producing countries, this situation can be remedied. He seems to imagine that some kind of ganging-up by the primary-producing countries could alter this very unpleasant and hard fact of life.

He referred again, as he has so often, to the Commonwealth's establishment of a shipping line. It is one of my personal regrets that we find it impossible, for cost reasons, to run a shipping line. One would think that a great island situated as Australia is would be a natural place from which to run a shipping line. But the economic facts are against us. The lowest charter rates that the Australian National Line can offer for overseas trade are about 50 per cent, higher than ruling world charges. The cost of running a ship under Australian manning rules is quite impossibly high.

According to the Tariff Board, which presumably went into the matter very carefully, the rate of turn-round of our ships is only back to two-thirds of the rate which existed before the war. The present rate may be almost twice as good as the rate immediately after the war, but despite the huge outlay on handling machinery and the general improvement in conditions on our wharfs, we can still achieve only twothirds of the rate that obtained before the war. This is no foundation for the establishment of an Australian shipping line.

If we established such a line, the Australian taxpayer would be called upon to pay a most fantastic subsidy. We now have world shipping competing for our trade. Most trades are subject to charter and international rates if we so desire. It so happens that it suits most of our primary producers to have an arrangement with the conference lines to have ships running at certain times. They make their bargains with overseas shipowners. Of course, we should do everything that we can -to keep shipping rates down, but to suggest that the solution is to pour tens of millions of pounds of the taxpayers' money into a shipping line, just to satisfy some peculiar quirk of pride, is fantastic.

The honorable member for Werriwa referred to the unattractiveness of government bonds, but every time it is suggested that interest on government bonds should be raised he and his supporters are the first to protest. The Government has made an effort with its special bonds, but I believe that, ultimately, the only way to solve this problem is to cure inflation, in which case confidence in owning government paper would be restored once more, or to raise the rate of interest. The Labour Party has given no indication whatever of supporting any policy which would in hard fact meet the problem of inflation. Indeed, the reverse is the case.

The honorable member deplored the fact that so many of our companies were raising such a large portion of their resources in the form of loans rather than in the form of shares and equity. Any thinking person must share this sentiment. Of course, our taxation system is overdue for revision, because if companies obtain money in the form of share issues that greatly increases the incidence of taxation. If you tax profits in the hands of companies and then, when they are transferred to a shareholder, you take a full further exaction, the result is these horrible quirks. In order to borrow, these companies have to pay interest rates. If. by some means, compulsory or otherwise, you are going to funnel these funds which are now going into private hands towards government loans, you are going to cut down the rate of expansion throughout private industry. You cannot have it both ways. Australian resources are very limited. The Government is already spending a very high proportion of the national income, and unless you can cut down by some means the continual demands that are involved in a huge immigration programme, you are bound to get these pressure points.

If, in fact, as no doubt many members of the Labour Party would like, you cut off and divert the rewards which have gone to private enterprise and try to expand the public expenditure sector at its expense, you would in fact slow down the whole working of .the system. This Budget certainly goes some distance at least towards breaking down the inflationary process. Anybody who looks around at what other things might be done, particularly those who have read the Radcliffe report - and one would hope that the Government and other authorities concerned would have digested that report by now - may have one or two thoughts on the subject of interest rates, because the socialist inhibitions which have affected our own authorities in the matter of interest rates have been a severe bar in controlling the private enterprise economy. We have a position now where people who are fortunate - a favored few - enjoy bank overdrafts, which are a kind of credit rationed to the relatively few and available at 5i per cent, interest. The banks are not able to exert discipline on the banking system by means of interest rates; it all has to be done in the form of who does or does not get a bank overdraft at interest which must not exceed 6 per cent.

In the current position when capital is short and the pressure on the sources is so strong in a private enterprise system, one way of properly imposing restrictions is to use the weapon of interest rates, and if the authorities forego forever using bank interest rates as a means for disciplining the system they will forego one of the most useful instruments. This is recognized in many circles but unfortunately, as in so many cases, when politics and political inhibitions rather than economic hard sense enter the picture, we pay the penalty. No doubt the Opposition will talk about the wickedness of the banks and the fact that increased interest rates might bring them some benefit; but that is incidental. The level of profits enjoyed by the banks are readily controllable by the central bank, and if we are to continue to keep these old inhibitions about interest rates we will find it increasingly difficult to have any control whatever over this growing money market; and of course this money market outside the banks grows. It has been pushed outside the banks by the restrictions over the years; and the inflationary conditions imposed on the banks have meant that other enterprising people have come along and have taken the existing credit and channelled it into other directions where there' is a quick return. Thus the velocity of the circulation of money - the rate at which we use available funds - has greatly in creased. But it still remains from the point of view of basic control that the origin of credit is through the banking system in expanding and contracting advances and in the fluctuations caused by movements in overseas funds. However one may look at the hire-purchase and outside money market, it is only a fringe factor compared with the importance of proper controls over the banking system.

If we look elsewhere at what might be done to control the situation, it is obvious that one of the pace-makers in the Australian economy has become the Conciliation and Arbitration Commission. Each year we solemnly debate £20,000,000 one way or the other, an increase of taxation, or cutting off a few fringe benefits; but the Conciliation and Arbitration Commission, sways the whole economy of the country. Even in the space of a single year it can itself inject directly another £200,000,000 of purchasing power into the economy. It is an extraordinary position we are in when the Government virtually aspires to control in rough terms the working of the economy, but washes its hands of the whole wage system. It has been the fashion until very recently to say " Keep politics out of this and let the Conciliation and Arbitration. Commission do it ". The commission is hedged in and talked to by all sorts of pressure groups, and it has to make its decisions on the fiction that there is a sort of industrial dispute spreading beyond the borders of one State. What in fact it is doing is to determine the whole trend of the economy throughout Australia. This problem is bedevilled because naturally every government intervenes in the wage mechanism, as was in fact charged against this Government for its intervention in the court on the last occasion. But if it had not intervened we should have been on a course perhaps not of disaster but certainly of far more intensive inflation.

There can be no real change in the position obviously unless the support of the trade unions themselves can be enlisted; and it behoves some of the more thinking members of the trade union movement to think just where this process is going. It is true, if we take the last twelve months or so, that in the March quarter average weekly wage earnings were 9 per cent, above those of the previous quarter, whereas prices had increased by only 6 per cent. But if we look at the trend of real wages over the last three years we find that they have not risen very much. Certainly the real value of the basic wage has not risen very much, and we continue in the position whereby we fix a wage which goes into the next range of prices, and costs are put up. There are of course a number of companies which automatically increase their prices whether it h necessary or not to do so, when their wage bill increases; but they are only a small part of the economy. At least three-quarters of the economy has no prospect whatever of passing on heavy increases in its wage bill, except by increasing prices. And so this horrible process goes on.

If, in fact, the criterion by which the Conciliation and Arbitration Commission measures wages is capacity to pay, there is no real discipline in the system, because if as the result of wage increases the economy generally gets slack, losses are made, and because of the full employment policy the Government is virtually forced to pump more money into the system to keep the process going. If there is a threat from overseas, either the Tariff Board or the import control mechanism restricts foreign competition, and so it is looked after in that way. The faster wages rise the more inflation occurs and still higher profits are made. If, in fact, by the beginning of next year the Conciliation and Arbitration Commission is going to say again that industry can afford to pay, it may be true that industry in one sense can afford to pay; but it can only do so because the Government relies upon the second turn of the wheel to pump more money into circulation. So, there is no real discipline in this process except finally our overseas position. That position is affected in two ways - directly because of the demand for imports, and also and more seriously on this occasion because it puts up to disastrous levels the costs of our primary producers. Unless various divergent elements in the country get together and say " We have had enough of this inflation so we will keep it within limits bearing in mind our migration programme ", we are in for more and more inflation until such time as we are disciplined by a fall in overseas funds, the tightness of our overseas position and the fact that our primary industries will not be able to carry on. Every one concerned, particularly the serious trade unionists, should look at what happens when the process of inflation goes a bit further. Take a look at Latin America, for instance. You can keep on shoving up wages, you can keep on trying to apply various controls; but, in an inflationary world, it is not the wage-earner who ultimately gains. The people who go to the top are not the people who are the constructive elements. They are those who put a considerable premium on the mere manipulation of money.

If this is to be stopped, if we are to shrink back from this process of perpetual inflation, we shall need a very much greater degree of co-operation on the part of all sections of the community than is evident now. At the moment there is no real solid political basis for an attack on inflation in Australia. Every one is against inflation in general, but no side will take measures which will hurt that side. It is true that we shall be fully employed and that we may enjoy an illusory prosperity if the process goes on, but, in the long run. our investment will be far less effective, we shall not use our resources to the full, we shall not enjoy anything like the high standard of living that we would enjoy otherwise, and a considerable number of elements within the community will suffer more and more. I urge honorable members on both sides of the House, if they are serious about our inflationary problems, if they are not merely treating the matter as a political football, to strive to establish a greater degree of co-operation on all sides than there has been in the past.

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