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Thursday, 18 February 1971


Senator WEBSTER (Victoria) - Some of the comments which Senator Gair made are in line with Government thinking. I congratulate him for the comments so made. One important point he indicated was that in this urgency motion we find the Opposition attempting to gag the Government in a debate on a most important matter. Honourable senators are tied to 15 minutes in which to discuss this subject. One wonders why the Opposition has taken that course. Surely we are dealing with one of the most important matters which could come before our Parliament. One can imagine only that the socialist attitude in times such as we have is completely incapable of any worthwhile action. Indeed, our attention would probably be drawn to the attitude of the recent Labour Government in the United Kingdom which demonstrated its complete inability to control inflation.


Senator O'Byrne - It destroyed itself correcting Conservative Government errors.


Senator WEBSTER - As Senator O'Byrne has indicated, undoubtedly it was this complete inability which was responsible, to some extent, for its being removed from government. The Opposition rightly introduces this matter of the state of the Australian economy for discussion but it introduces it in a most unusual way. In the speeches of the Deputy Leader of the Opposition (Senator Willesee) and of Senator Wilkinson, I do not think either of those honourable senators referred to the text of the urgency motion. I put to Senator Wilkinson who is with us in the chamber and to his Party that the honourable senator did not discuss at any point the unwise and panic measures of the Government in dealing with the economy'. Nor did the honourable senator discuss the actions which were likely to cause disruption and hardship and he did not discuss on one occasion the damage which was likely to occur to the national interest. I would have thought there was a basis for argument on each of those points if honourable senators had been genuine in their desire to discuss the matter of urgency. It is the problem of inflation within this community which honourable senators wish to draw to the attention of the Senate. This is the important matter to be brought forward at this time. But I believe that loud words from the Opposition and its unreasoned arguments indicate its degree of consistency at this time. I disagree with the motion and I oppose it.

Certainly at the present time there is within the community an inflationary tendency. We have a situation where the cost price of most goods and services is increasing at what appears to the community to be an unreasonable rate. It is a situation in which the value of the Australian dollar is decreasing in its worth each year. This is not a new occurrence. In this changing society most people look forward to and expect a higher standard of living in the sense of the acquisition of material items and this certainly brings an inflationary tendency. Increased funds in hand and a demand for consumer items leads to a higher standard of living. I suggest it is this situation, backed by most significant demands for higher wages and salaries, which is the main component in the inflationary spiral in this country. But the situation is not unique to Australia. Indeed in the world today we have a position which should be worrying to each individual who is concerned with economics in the community. The 1970 report of the International Monetary Fund commenced by stating:

The performance of the world economy during 1969 and early 1970 was marked by severe inflationary pressures. . . .

I believe that highlighted the problem being faced on a world basis. The Opposition would do well to congratulate the Australian Government for its achievements to date. Whatever its action, the level of the inflationary problem is lower in this country than in any other country.


Senator Lacey - There is no consolation in that.


Senator WEBSTER - The honourable senator says that there is no consolation in that. There is no consolation whatsoever for his Party in any situation. It may be that commendation is due not solely to the Government of this country but to the people who reside within the borders of Australia. They are the people who are responsible for this basic position of a lesser inflationary rate to that applying in other countries. My concern is about the international situation and I find it breathtaking today. The reason I am concerned is because many of the pressures placed on Australia are entirely beyond our control and they will have an effect on Australia in future years. In the future this instability throughout the world will have a marked impact on our inflationary rate.

But let us look at the situation outlined by the Minister for Civil Aviation (Senator Cotton) when opening for the Government. He indicated the actual movements in consumer prices in Australia and a variety of countries. I seek the approval of the Senate to incorporate in Hansard a chart which shows the annual movement in consumer prices in. Australia and selected overseas countries from 1960 to 1970. The source of this document is the National Institute of Economic Review. I think it is a very interesting one. It demonstrates the figures that the Minister indicated but in greater detail. Over a period of 10 years it demonstrates a basic stability in the movement of consumer prices in Australia whilst nearly every other country in the world has experienced a much greater escalation in costs. There is some satisfaction in that position, and with the concurrence of honourable senators, I now incorporate the document in Hansard.

 

The document reveals the underlying problem facing our community. I also suggest to honourable senators that one of the documents which was of great benefit to members of the Parliament was the 1970 White Paper on the Australian economy, and I would like to refer to it. It was before members of the Parliament last July. Under the heading 'Cost and Prices', the document at page 12 reads:

Wages are the largest element in costs, but by no means the only one. Profit margins, interest rates, taxes and charges all have a direct part, in determining the cost levels within the economy and, proportionately, can do as much to raise costs as wage movements. At times, also, external factors, such as export and import prices and exchange rate movements, can have considerable influence, in one direction or the other, on the domestic price structure.

Mr Deputy President,this pinpoints the problem of inflation in our community, and I indicate that this is the view which I hold very strongly. The document continues:

Nevertheless, it is a major fact of experience that average wage and salary earnings have for long been rising faster than productivity and that, in the past year or so, the gap between the two has widened. Over the 10 years to 1968-69 weekly earnings rose at an annual average rate of 5.4 per cent. Productivity in that decade rose by about 2.5 per cent per year. There was thus an average gap of something just under 3 per cent. The average annual rate of increase in consumer prices in that period was 2.4 per cent.

In 1968-69, however, average weekly earnings rose by 7.2 per cent - considerably faster, that is, than the average of the proceeding 10 years. Meanwhile productivity increased at the good rate of 3½ per cent. Thus the gap widened in that year. In 1969-70 it looks as though average earnings increased by about 8 per cent. Unless it can be supposed that productivity similarly accelerated, which is very unlikely, the gap will have widened further.

I believe there is authority for saying that in 1971 there is a likelihood that the rate of increase in average earnings will be somewhere about9½ per cent. If that position follows on from the recent national wage case decision, I believe that we will face a fairly extreme position in the ensuing year. Indeed, though we are concerned about the Australian inflationary situation for the quarter to December 1970, I believe the first 3 months of this year will show a greater rate of escalation.

I impress upon honourable senators also that the community has at the present time built up an inflationary psychology. This outlook is very important because it is having an enormous effect in many areas of the community. As a member of the Australian Country Party, I have continuing discussions with those engaged in primary production. If I had time I could deal' with a great variety of the problems facing primary industries at the present time. The problems of inflation are extreme for primary producers. The inflationary psychology within the community has led to a 2-level economy in this country. On the one hand we have the very bouyant conditions which could be said to apply to the metropolitan areas and on the other hand we have the very depressed economy which applies in many rural areas. This is somewhat of a reflection of the inflationary psychology.

From the experience of inflation occurring in the community over some 10 or 20 years, one can be assured that governments are not opposed to inflation, but they are opposed to an unreasonable escalation of inflation. There appears to have been an accepted 3 per cent rise in the cost of goods and services during past years. Pri-vale industries are saying: 'We must do the job now and not wait for another year because both wages and costs will be at a higher level at that time'. Australia today is known as a country with an extremely high standard of living, but the very core of the problem which creates that position is related to this inflationary psychology. I believe that the demand which has been created for money, for men and for materials in recent years is the main accelerator of this problem.

Honourable senators may recall, as will each Minister in this place, that at Budget time in the last 2 years I have expressed my great disappointment at the fact that the Budget figures and the departmental requirements reveal that 10 per cent more staff was required by the Public Service - and I am pleased to see the Minister nodding his head in acceptance of this fact - and at least a 10 per cent increase of expenditure by the departments. 1 remember that the Ministers who are present now gave me the answers that they thought appropriate. But the action that is being taken at the present time is one which, with hindsight may not have been necessary if the demand for more labour and more departmental funds had been resisted and so lessened the competition between private industries and governments.

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







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