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Thursday, 1 September 1960

Mr McMAHON (Lowe) (Minister for Labour and National Service) .- The honorable gentleman from Bendigo (Mr. Beaton) has just delivered his maiden speech in this place and has covered a very wide range of subjects. Most of them, as honorable gentlemen know, will be covered in detail either during the course of the Estimates debate or in the debates that take place when particular bills, such as the social service bills, are brought before the Parliament for discussion. The honorable member used a great number of cliches relating to the Government. I do not intend to comment upon those cliches, as I think that on his maiden effort he should be left alone. There are one or two subjects which I think I ought to speak about. I think I should indicate that they have been thought of before and have received attention, not only by the Government, but, in particular, by the primary producer.

The honorable gentleman mentioned a floor-price scheme for wool. He should now be told that a few years ago the then Minister for Customs put before the Australian wool-growers a plan for a floor-price scheme. That plan was rejected by an overwhelming number of Australian woolgrowers. I happened to be the Minister for Primary Industry for three very hectic years and I think that I know a little about the prospects of success of a wool stabilization scheme. I am not against such a scheme if it could be devised and if it could be made efficient. What makes such a scheme well-nigh impracticable is that there are possibly 800 different types of wool, and the money simply is not in the wool industry to promote a scheme which would be effective. I have come to the conclusion that it would be difficult to get the wool-growers to agree to such a scheme.

The honorable member also mentioned education, on which subject I also hope to touch during my remarks. I am sorry that I cannot touch all the subjects the honorable gentleman has mentioned. We shall hear of them during the course of the debate on the Estimates. I am certain that he will not have very much of his argument left when the debate is concluded.

For my own part, I have listened with careful attention to very nearly every contribution that has been made by the Opposition. I think it should be stressed that there are three ways in which one can look at a budget. You can look at it as being related to the running of a great business. The Government undoubtedly includes commercial enterprises, such as the PostmasterGeneral's Department. The present Budget provides for a surplus so that we shall be in a sound financial position which will give us a degree of flexibility to meet any financial change that might occur during the current year. Secondly, we can well look at a budget as an instrument of social change - as a means of transferring purchasing power, or income, from one section of the community to another. That is illustrated where taxation is imposed upon one section of the people in order to give benefits to another section. This Budget not only increases pensions, but it introduces the merged means test, which is a reform of great significance to the Australian people.

Thirdly, you can look at a budget as an instrument for economic control. My friend from Melbourne Ports (Mr. Crean) claims that this Budget does nothing as an instrument of economic control. I hope to prove, during the course of my remarks, that the major task that faced the Government, and the major responsibility that it accepted, was to use the Budget mechanism in order to control those forces that might interfere with our development in the future. So far from refusing to use it as a method of economic control, the primary objective of the Budget was to ensure that it did control the controllable influences of the economy in the interests of the future.

There is one other way in which the Budget can be looked at. Some honorable members have used this debate to express their personal views or to hare off on particular influences which might appeal to them. The Leader of the Opposition (Mr. Calwell) has used this opportunity to hare off in the direction of constitutional reform. He has not bothered very much about whether or not the proposals that we have put before the committee are for the benefit of the community.

Having said that, I want to repeat that you can look at the Budget in three or more ways, and that in this Budget each of the three ways has been kept in mind. We have dealt with our problems by a combination of the three methods, and I believe that we have introduced, technically speaking, a perfect Budget.

I have also listened with great interest to what members of the Opposition have said for another reason. I believe it is the responsibility of members of Parliament to reflect the opinions of their constituents. I listened with great care to what those who lead the Opposition said. Not one of them has mentioned the great social issues that were debated in this chamber when I first came here. Did you hear the Leader of the Opposition mention full employment? Did you hear him mention housing? Did you hear him mention the problem of pensions? Of course, you did not! He hared off in the direction of constitutional reform. If you believe, as I do, that members of the Opposition should have the confidence of their electors, what conclusion do you come to? That no one in their constituencies confides in them. I say that because they have not touched the great social issues. Instead, they have dealt with consitutional reform. I understand that, outside the chamber, they have suggested an increase of ls. 9d. in the £1 in company tax, but they have been cautious enough not to mention it here.

The Deputy Leader of the Opposition (Mr. Whitlam) has not denied that up to £104,000,000 of our national income should be provided for the development of underdeveloped countries.

Then the Opposition came to the problem of education, with which I hope to deal in more detail towards the latter end of my speech. So we do not hear Opposition members speaking on any of the great social issues of other years. We do not hear them speaking on things which might touch the needs and aspirations of the Australian people. Instead, each of them has spoken according to his own particular tune and made no contribution to the problems of the economic and financial development of the country.

I think it might be wise if I considered this Budget against the background of what has happened. I do not want to go too deeply into the relevant figures. I do feel that some figures should be impressed upon the minds of honorable members. When I have mentioned them, I think that some conclusions, of necessity, will have to be drawn.

Before I deal with those figures, I want to mention what has been said about the preceding Budget and this Budget by the Leader of the Opposition and by the honorable member for Melbourne Ports (Mr. Crean), who is one of the few people who knows what he is talking about when the Budget is under discussion. Last year, the Leader of the Opposition said that this was a prosperous country. The echo came - and so say all of us! This year, the honorable member for Melbourne Ports went a stage further, and denied what had previously been said by the Leader of the Opposition to the effect that a depression was just around the corner. He said that we do not deny that prosperity exists and that it extends over a wider area than ever before. In other words, as a logical, calm, sensible person he expressed his opinion of the performance of the Menzies Government. Again I think the response is, " And so say all of us ". This Government has been successful, and it will remain so for many years to come.

I said I would not mention many figures. I shall mention some, because I think they show the extent of our development and what has been achieved. Last year, according to the White Paper that has been presented to the House by the Treasurer (Mr. Harold Holt), our gross national product increased by 8 per cent. If that were to happen in Russia it would be hailed as a tremendous achievement; here it is let go without anyone becoming excited. Wages and salaries rose by 9 per cent., the amount of money spent on consumption rose by 9 per cent., the amount of money spent on education rose by 10 per cent., and the amount spent on public works programmes rose by 10 per cent. They aire performances of a kind of which I believe any country ought to be proud1. Certainly we on this side of the chamber are proud of them.

To complete the picture, I should add that, according to what is called the consumer prices index, the prices of a limited range of commodities rose by about 3.7 per cent. That increase was too big, but if you look at the other figures you come to these conclusions: First, that development was substantial; secondly, that the wage and salary earners more than held their own in terms of the percentage increase of production; and finally - I want to emphasize this point - that it is in the manifest interests of the wage or salary earner that he permanently keep the Menzies Government in office. That last point ought to be emphasized. On all the figures that are available to us there is good reason for the wage or salary earner whom I represent to keep the Menzies Government in office.

I do not want to create the impression that everything in the garden is rosy and that we have not problems in front of us. Of course we have problems. Perfection cannot be achieved, and we have never claimed that it can be. This year problems emerged which, if not controlled fairly quickly, could cause real difficulties in the future. Those problems arose in two ways. I am sure the committee will forgive me for dividing this part of my speech into two sections - one relating to the condition of the economy internally and the other relating to our international trade and1 our international financial relations. At home, whilst our production record was exceptionally good; we did suffer from what might be called' exuberance. In every sector of industry and commerce we tried to do too much,, with the result that demand became greater than the available supply of goods and services, wages and salaries rose at a rate which was greater than that of national production, and costs rose. The problem of inflation emerged.

On the international front, as my colleague, the Treasurer, pointed out to honorable members yesterday, there was a substantial fall over a period of seven years of the prices that the primary producer received for what he produced and sold overseas. The figures show that since 1953 the returns for our primary commodities have' fallen by approximately 30 per cent., but that the prices we in Australia have had to pay for the things we import have increased by approximately 10 per cent. We found, therefore, that' besides this domestic problem of exuberance and of demand exceeding supply, with the consequent pushing up of wages, salaries and other costs, we were confronted with the problem, in relation to our international balance of payments, that we were not earning enough overseas. We were not paying our way. Consequently, the Government was compelled to take action to bring those forces that we could influence under control. Here to-night I admit that everything in the garden is not rosy. On the contrary, we know we have problems, and we have resolutely attempted to solve those problems, particularly by way of budgetary action.

Before I touch upon constitutional reform, education and one or two other matters, may I mention what I regard to be the two most important problems with which we are faced? May I try to put the problems of our balance of payments and of price rises into perspective? I think that ought to be done. We started from the healthy position that at the beginning of this year we had approximately £500,000,000 in our first line of reserves, and a sum of the order of £200,000,000 in our second line of reserves. That, I repeat, was a healthy state of affairs. No nation keeps £700,000,000 in reserve just for the sake of keeping it there, with no useful purpose to serve. A nation keeps money in reserve in case it is needed in times of temporary difficulty. In the conditions in which we find ourselves, the Government is prepared to let its London funds run down. It believes that the problem now before us could be temporary, and that it is in Australia's best interests to allow our overseas reserves to run down rather than to take internal action which could severely affect production and employment.

Having said that, I next pose this question: What really is the nature of the problem? I think it can be summed up by saying that last year, on what is called our current account, we had a deficiency of about £243,000,000. That indicates the extent to which we have to increase exports, decrease imports, or keep international capital coming into Australia.

What have we done? We cannot influence overseas prices; they are beyond our control. But in two separate sets ot actions the Government has taken steps which I personally believe will help our balance of payments problem. I .am certain that by this time next year we will see a quite different picture from that which we saw emerging at the beginning of this year.

The committee knows the actions that were taken by the Government, but I shall briefly refer to them. First, there was the intervention in the basic wage case, primarily because wages and salaries rose last year by £165,000,000 and we thought it Was desirable that an opportunity should be given to the community to absorb those increases without causing undue inflation. Secondly, the Reserve Bank tightened up the supply of money. The provision was made in the Budget for the imposition of extra taxation on companies and on private incomes. I repeat, Mr. Temporary Chairman, that I believe those two sets of actions are sufficient at present to control those forces which affect imports, and that we can expect to see a more healthy state of affairs next year than we saw at the beginning of this year. Now, Sir, this is an interesting point. If the Opposition had been on the Government benches, what would it have done It would have done at least two things, and I think they ought to be mentioned. The other night, in a television interview in Sydney, in which I happened to be one of the participants, as did the Deputy Leader of the Opposition (Mr. Whitlam), the Leader of the Opposition (Mr. Calwell) stated that it was an article of faith with the Labour Party that international capital movements should not be permitted to Australia and that he thought it would be desirable to impose additional company taxation of ls. 9d. in the £1. These were just some of the statements that were made.

Let me look at them. If we imposed additional company taxation at the rate of ls. 9d. in the £1, we would undoubtedly drive up prices and costs here. If we did not permit international capital movements - and there has been none over the last ten years - we would have no money at all in reserves in London, and we would not be in the sound position we are to-day. I venture to say that without private capital movement and public capital movement we would have gone back to the hillbilly stage and that the development of this country would have been not so much retarded as stopped in its tracks. There we have the Opposition's policy. I repeat this is an example of using the Budget as an economic means of controlling those forces that could cause us grave difficulties in the future.

The second point with which I wish to deal relates to the problem of inflation. I want to put the problem of inflation in perspective. I believe that the Labour Party has dramatized the problem to too great an extent, and that could give rise to additional problems and to a lack of confidence in the stability of our currency. First of all, let us look at the actual figures of inflation. According to the recent consumer index, there has been over the course of the last seven years an increase in consumer prices of the order of 21 per cent., or an average of 3 per cent, per annum. These consumer indexes always exaggerate the actual position, and 1 think it would not be unfair to say that if 1\ per cent, is the figure, that could be regarded as realistic. That must make arrant nonsense of the argument of the Deputy Leader of the Opposition that since this Government has been in office there has been inflation of the order of 98 per cent. I think that this dramatization of the growth of inflation should be corrected immediately.

Then we have the question of international comparisons. The honorable gentleman said that while our prices have increased by something like 98 per cent., in a comparable period the increase in the United Kingdom had been 50 per cent., and in the United States of America of the order of 18 per cent. That, I say, is arrant nonsense. This is, without doubt, one of the cheapest countries in the world to live in. If any honorable member does not like it here - there are many members of the Opposition about whose loyalty I have doubts - let him go somewhere else and see whether he can live there satisfactorily. I recently had the good fortune to go to the United States. You need the most modern and up-to-date computing machines to cope with the changes there in prices and in the cost of the things you buy. The ordinary person has to shop about to find drug stores where he can buy his breakfast or dinner at a fair price. I mention that to put the matter in perspective. We thought that a rise of 3.7 per cent. last year was too great an increase in the inflationary pressure. We also think that the measures we have used will bring it under control. I give the House the assurance that we will find this time next year a radically different position from that which we find to-day.

Again I ask: What does the Opposition propose? How would it get over the problems? I have said that the Leader of the Opposition suggested that he would increase company taxation by1s. 9d. in the £1. He stated also that the Labour Party is against high or moderate interest rates and that it believes that the interest rate of 5 per cent. should be consistently reduced. If that were done very few people would want to save. The real inducement to save is what you get from your savings. If there were a consistent reduction of interest rates, I venture to suggest that we would not get the savings and we would not get the money we need to put into Commonwealth bonds for the financing of our public works. If there was an alternative to the Government's policy, where would we find it? We would not find it in an increase by 1s. 9d. in the £1 of company tax. We would not find it in a reduction of interest rates, because that would lead inevitably to an increase in inflationary pressures and would take us back to where the Labour Party was in the 1930's and to where Mr. Chifley was during 1949, when inflation was running at the rate of 9 per cent. per annum.

Before concluding, let me refer to education. I touch on education because the Deputy Leader of the Opposition has a thing about education. I mention these facts: First of all, education is a State responsibility, and secondly, this year the education vote of all the States increased by10 per cent., although our national product increased by only 8 per cent. In other words, education has taken a larger than proportionate increase of our national product. We believe in education. The Government has shown its goodwill and intentions by what it has done with regard to university education. So far as secondary and tertiary education are concerned, may I say this: The Public Service Board of New South Wales - the State to which the Deputy Leader of the Opposition allegedly belongs - has prepared a report on education, which is shortly to be published. The report states, firstly, that the wages and salaries of New South Wales teachers are better than those in any other part of the Commonwealth, and secondly, that the board thinks that the education system in that State is efficient and that the numbers of students attending classes are not, generally speaking, over-large. The board expresses its great pride in the education system of my own native State. In Victoria, the position is much the same, and Mr. Bolte claims that he has never refused any effective increase in the vote for education in that State. We find the Deputy Leader of the Opposition criticizing the Labour Government of his own State, trying to prove that it is an inefficient government and that it is not giving due weight to education. I have said that we believe in education. We have agreed to the States having an extra £40,000,000 this year. The country is over-fully employed at the present time, and it is doubtful whether a very substantial increase in funds could be effectively spent by the State Governments this financial year.

I sum up in this way: The whole of our Budget discussions was directed towards using the Budget as a method of controlling the economic climate, and we believe that we can keep that climate healthy. We know that we have problems, but we are confident that the honorable member for Melbourne Ports was right when he said that this is a prosperous country and its prosperity is more widely spread than it was before.

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