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Thursday, 25 August 1983
Page: 306

Dr THEOPHANOUS(4.10) —Unlike the previous speaker I will address the issue of the National Economic Summit Conference. In so doing I hope to show that the completely negative approach and response of the conservatives towards the Summit is mistaken. But also mistaken is the view which was put forward in a kind of indirect way by some of the conservatives that the Economic Summit itself and the consensus achieved automatically solves the economic crisis which has gripped this nation under the direction of the conservatives. It certainly was not the intention of the Treasurer (Mr Keating) or the Prime Minister (Mr Hawke) to imply that the Summit in and by itself would have achieved some magical transformation of Australian society and economy. The resolution of the economic crisis and its attendant social problems can only come about with the transformation of social and economic values and structures. This is indeed the essence of the democratic socialist philosophy of the Australian Labor Party, and it is recognised by all.

The value of the Summit and the consensus achieved depends crucially, therefore , on what actions are taken by the three major participants-the employers, the unions and the Government. Unless each group conforms with the undertakings made at the Summit the long term goal will be difficult to achieve. The Economic Summit can therefore be regarded as a success if three conditions are satisfied. Firstly, the employers must be convinced and continue to be convinced that a substantial expansion of the economy is in their interests as much as it is in the interests of employees and the unemployed. They must therefore be supportive of increased levels of government expenditure and-I will emphasise later-public participation in industry. This will mean also that employers must be persuaded to go along with substantially greater budgets than in the past, certainly greater budgets than have been the case under the quasi-monetarist policies of the conservatives. In this regard, the rejection of conservatism was quite specific as is underlined by the following clauses of the Summit statement:

Participants in the conference recognise the importance of tackling the problems of unemployment and inflation simultaneously. The conference agrees that to achieve the necessary rates of growth in activity and employment will require the maximum fiscal stimulus consistent with the need to reduce inflation and to avoid upward pressure on interest rates. Monetary growth should be adequate to support real growth in activity and employment without being inflationary.

There were other important agreements on the part of employers. I refer to the introduction of the Economic Planning Advisory Council which will be a step towards more rational, cohesive, systematic and less wasteful economic decision- making. There was also broad agreement on the introduction of a prices surveillance authority as part of the prices and incomes policy. The latter is a welcome acknowledgement that monopoly pricing is an important element in the inflationary crisis. Together, these and other agreements are a tacit recognition amongst governments, unions, and many employers that the monetarist policies of the previous Government were totally inadequate in the face of deep- rooted, persisting, economic problems.

However, the issue on which the employers did not wholeheartedly agree was the role of wages and wage indexation. Although the employers were persuaded on the need for a centralised wage fixing system-that was an important achievement- there was little agreement on indexation of wages for full consumer price index increases. Indeed, the remarks of various employer groups and organisations regarding wages clearly indicate that much conservative thinking still prevails. The familiar, outdated arguments about the wonders of the market were all too apparent; that is, the greater the wage restraint the greater the level of private investment and the greater the level of output and employment. As we are all aware, this dogmatic and supposedly logical chain of events is based on ill- conceived, unfounded faith in the so-called market forces and has, I believe, been refuted by recent experience all over the world.

Wage freezes will not necessarily raise the level of profits. Although in some cases it will cut costs of production significantly it will also undermine the level of aggregate demand since this restraint means cuts in the workers real, disposable income. This was emphasised by John Maynard Keynes during the Great Depression. Keynes traced the sources of unemployment to a deficiency of effective demand whereby economic agents, considered collectively, were not spending enough on the output of the economy to employ fully its work force. If only economic agents could be induced to spend more, output would rise, leading to a rise in employment. In this context it is easy to perceive the arguments against continuous reductions in real wages which, by the way, this Government has accepted and is beginning to reverse through its actions in the Australian Conciliation and Arbitration Commission.

Businesses do not invest in new productive capacity if they do not see a growing demand for their products. Having spoken to many industrial groups in the last three months, I might say that the paramount problem which they focused on all the time was the deficiency in demand, a deficiency created by the policies of the previous Government. Although it is desirable to increase profitability, if profitability is increased private investment will not automatically rise. One needs only to see the predictions about profitability and private investment for the forthcoming year to see that point. It is important to prevent practices such as the automatic flow of profits off-shore and to encourage in a very dramatic way greater investment in manufacturing industry in Australia. The Government will adopt a series of measures in its industrial policy to encourage that trend so that the gains in profitability that are made as a consequence of the recovery do in fact remain in Australia and go towards creating jobs.

Mr Aldred —There were no incentives like that in the Budget.

Dr THEOPHANOUS —I will deal with that on another occasion when I give my speech during the Budget debate. Let us look at the arguments which were presented. In an attempt to ruin the understandings of the Summit, some employer organisations -not all-argued before the Arbitration Commission for a continuation of the wages freeze. That could have meant the ruination of the understandings of the Summit and of the prices and incomes accord. The previous speaker argued that one of the aims of the Summit was to fulfil the obligations of the prices and incomes accord. The Government is not ashamed of that situation. It is part of the very essence of our economic strategy. The important point is that large sections of the community, including, I might say, the majority of employers, were aware that that was part of the understandings of the Summit and agreed with it. That is why the conservatives have been left with nothing else to say. They have no wages policy. They have no solution to the economic crisis in this country. They are left simply holding the baby, so to speak, without being in a position to put forward any constructive proposals-unlike the approach of the Australian Labor Party.

Let me consider the second factor in the success of the Summit; that is, the union movement must be in a position to abide by the prices and incomes accord. As I mentioned a moment ago, any attempt to destroy the indexation system would in fact have destroyed the accord and led to a disastrous situation. I now turn to the agreement which the unions saw as part of this overall package. I read again from the Summit communique:

The unions recognise that urgently required improvements in the social wage can be achieved through government expenditure on essential services. To this end the union movement will pay regard to such expenditures in determining any claims.

This is the inner meaning of the prices and incomes accord between the Government and the unions and indeed a major aspect of the Labor Party's whole economic strategy. The following extract from the accord illustrates this point:

The government will aim to eliminate poverty by ensuring wage justice for low income earners, reducing tax on low income earners, raising social security benefits and making other improvements to the social wage. Urgently required improvements in the social wage will be achieved through expanded government expenditure on essential services and the social infrastructure as indicated in Labor Party policy. It is acknowledged that the extent to which such expenditure will be able to be increased will depend considerably on the government's success in achieving a non-inflationary expansion of the economy, which in turn will be substantially influenced by the extent to which the prices and incomes policy is successfully implemented.

So the unions' commitment to the accord is conditional on the Government continuing to fulfil its obligation. But the unions also have expectations of employers and professional groups, as specifically outlined at the Summit. The accord states:

But employers, for their part, recognise that during the period of wage restraint, dividend increases should also be restrained, and they will so recommend to their organisations and will expect the government to so recommend to all public companies.

If restraint is to be exercised, then such restraint should be exercised universally. As such, it is important that non-wage incomes are not increased faster than movements in wages. This principle should be followed where there are existing authorities in this area and where there are no such authorities, groups should be encouraged to agree to have their fees determined on a voluntary basis by members of the Australian Conciliation and Arbitration Commission.

Surely these are historic agreements, because they provide the basis for a negotiation process between the various groups in the community-the union movement, the employers, professional organisations and the Government-to achieve economic recovery. It is important that all groups, including the union movement, fulfil their obligations under these requirements. In that respect I am certain that, while the Government proceeds in this way and while employers proceed in a responsible fashion, the accord will continue and economic recovery can be achieved in this country.

The third condition for the success of the Summit has already been alluded to; that is, the Government must be prepared to go ahead with a continuous expansion of the economy. Of course, this must be done in such a way that employees, the unemployed, the needy and other groups in the community will gain something as a result. Indeed it is difficult to over-emphasise the importance of the Government's continuous action program for the success of the accord. Furthermore, the greater the impact of the fiscal stimulus, the greater the chances of success of the prices and incomes policy. I know that the conservatives opposite seem to take some delight in the suggestion that the accord will fail. They may be trying to create, through nuisance value, a situation in which it may break down. Let me assure them that while the Government lives up to its part of the bargain the union movement will also continue to act responsibly, with restraint and in accordance with the provisions of the accord and in so doing will continue, I am sure, to provide the basis for long term economic recovery. We should also recognise-I cannot go through all of them-that there were a large number of specific commitments within the agreement. Perhaps I can indicate to honourable members the most important of them; that is, the one which refers to the redistribution of income and wealth in favour of the poor and the disadvantaged. The accord states:

While the Summit recognises the difficulties for Australian society in meeting the increasing social security costs, deprived groups must not be subject to the restraints mentioned above. It remains the overwhelming desire of the nation to ensure that those in genuine need are fully supported, whether they be the sick, the aged, the disabled, the unemployed--

MR DEPUTY SPEAKER (Hon. Les Johnson) —Order! The honourable member's time has expired.