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Thursday, 18 February 1971

Senator GAIR (Queensland) (Leader of the Australian Democratic Labor Party) - I do not think anyone would dispute that the country's economy - for that matter, any nation's economy - is the most important subject with which the Parliament could concern itself and which it could discuss. Today we are discussing as a matter of urgency the recent statement made by the Prime Minister (Mr Gorton) about the reduction of governmental expenditure necessitated by the inflationary trend that is in evidence. I feel that the Leader of the Opposition (Senator Murphy) has done a disservice to the Senate by proposing his motion because he has limited the debate on this most important matter to 3 hours and has limited to 15 minutes the speaking time of each honourable senator, with the exception of himself and of the Minister who is in charge of the debate each of whom has half an hour in which to speak. We are expected to survey and to examine, if at all possible in a constructive way, this evil of inflation and the solution to the problem. I repeat that the Leader of the Opposition has done a disservice to the Senate because already on the business sheet there is provision for a debate on the Prime Minister's statement. A motion that the statement be noted has been moved. Senator Murphy moved for the adjournment of that debate. If that matter were before the Senate, more time would have been allotted for discussion and individual senators would have had more than 15 minutes to discuss the subject.

Everyone agrees that inflation is an evil which befalls our economy periodically. If left unbridled, it could destroy the stability of our economy and bring about the worst thing that could befall us, that is, a depression. There is not very much difference between a depression and unbridled inflation. In a depression workers have no work; hence they receieve no wages. In an extreme inflationary period workers have jobs for which they are paid wages which have little or no purchasing power; so they are not that much better off. Inflation is

Australian Economy169 one of the most pressing issues in our times; it .underlines many of our social problems. This inflationary trend means that elderly people see the value of their savings eroded by price increases. They become increasingly dependent upon the taxpayer and upon the goodwill of governments. Social services become overstrained and inadequate. Wage earners feel that they are being cheated because their increased earnings are absorbed largely by higher prices. Increased taxation renders them very little advantage. Young people are deterred from saving because the rate of interest paid on accounts does not cover the rise in the cost of housing and of the items that they are saving to buy. The permissive consumer oriented philosophy of live it up now, forget tomorrow, worry later' is fostered among the young. Who can blame them? This happens. We have seen it happen.

Businessmen do not like inflation because of the unpredictability of future costs and because of the difficulty that it generates, in relation to vigorous financial planning. Throughout the community a premium is placed on superficial activities such as land speculation and dabbling in speculative shares on the stock market, to the detriment of productive investment. Investors are disadvantaged because they are caught up in a cost-price squeeze. Their prices are determined on world markets and their costs are determined on the domestic scene.

Farmers are the worst hit by the phenomenon of inflation, although it is worth remarking that Australian export manufacturers and mining concerns would be in a far healthier position if their domestic costs were not rising as fast as they are. The major social problem lies with the 500,000 farmers, their dependants and the country towns which make their living by servicing primary industries. They are already faced with the terrible collapse of markets due to increased competition from synthetic fibres, to the glut of wheat following the green revolution in Asia, and to the protectionist move of Great Britain in joining the European Common Market. It is too much to expect farmers to cope with the nagging pressures of inflation in addition to what they are bearing at present. In the community there is general agreement 18 February 1971 on the evil of inflation, even though there are differences as to the priorities that should be given for the treatment of it.

I have not risen to adopt a critical attitude towards the Government's early attempts to correct the inflationary trend; rather have I risen to appeal to the Government to approach this evil in a constructive way and to formulate some national plan that could be carried out and given effect without destruction, without hurting more than can be helped, or without hurting to a greater degree than is necessary. In 1960 the Government was under the leadership of the then Mr Menzies. Recognising that inflation was upon us and without any great haste he gave effect to an economic policy which at the time I likened to an inexperienced motorist who found himself in a skid and put on his brakes. The motorist inevitably capsizes the vehicle. That was the effect of a precipitous antidote to inflation employed by the Menzies Government.

We witnessed a lot of young people and :new business people who had not been established very long and who were still depending on overdraft to carry on having their overdrafts called in. Those small "businessmen went to the wall. I hope there will not be any precipitous ill-considered action taken by the Government in its own area or in the field of private enterprise which will have effects similar to those of 1960-61. That is why I say we. should be ;patient, at least to the extent of giving the Government time to examine and consider every possible process in rectifying, arresting and correcting this inflationary trend. The statement presented on behalf of the Prime Minister in this place on the other day shows a reduction in governmental spending. That is good. That is a field in which some saving can be effected without any great injury to people as a whole.

If we examine the figures in the last Budget and the estimated expenditure for the ensuing year we find that already we have exceeded that expenditure by a considerable sum. Now the Government is merely trying to wipe out the additional expenditure which has occurred since the passing of the Budget in August last year. It might be necessary for the Government to go further in this connection. But whatever it does let it give mature consideration to every aspect with a view to finding a successful solution to the inflationary trend. Once inflation is analysed it is seen as a complex phenomena requiring a complex set of policies in response. One action is not going to correct inflation. To obtain any permanent or near permanent solution we have to correct it in many fields. Economists have done more work on inflation than almost any other topic so there should not be any lack of advice. The problem tends to be that often there is a lack of up to date information available in time to assess just which factor is most significant in causing inflation at a time when government response is needed. The classic cause of inflation is summed up in a short phrase: Too much money chasing too few goods.

In a situation of excess demand in an economy the prices of things will tend to rise. Often this will be concealed in a labour shortage. There is no doubt that excess demand for wage and salary increases is a contributing factor. I am not opposed to the worker obtaining a just return for his labour. Not at all. But today the worker should be wise enough to know that under the present wage structure we have a system of a dog chasing its tail. Recently there was a 6 per cent increase in wages.

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

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