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Tuesday, 26 October 1971
Page: 2481

Mr WHITLAM (WERRIWA, NEW SOUTH WALES) - I ask the Prime Minister a question. Does the right honourable gentleman recall telling the House on 18th February that his predecessor, the right honourable member for Higgins, had contributed wisdom and leadership to the fight against inflation? I ask him whether the right honourable member for Higgins told a Liberal Party dinner last Wednesday that:

It is little use to dampen down demand by raising taxes or interest rates and by, increasing government surpluses, which is the classic economic antidote to demand inflation. . . . Such action may be as harmful as would be the action of a physician who treated a patient for an illness he did not have, and could well make his condition worse.

I ask: Are the anti-inflation measures stigmatised by the right honourable member for Higgins as 'harmful' and 'of little use' those currently being followed by the Government? Docs the Prime Minister retain his former respect for the economic wisdom and leadership of the right honourable member for Higgins and, if so, will he commend that right honourable gentleman's advice to the Treasurer while he himself is overseas?

Mr McMAHON (LOWE, NEW SOUTH WALES) (Prime Minister) - I think what the honourable gentleman will remember is thatI commended the policy decisions made by the right honourable gentleman from Higgins whilst he was a member of the Cabinet, and that included the time when he was the Prime Minister as well as the time when he was Minister for Defence during the last Budget discussions on the state of the economy and the measures which should be taken in the national interest. I have not read in any detail the comments made by the right honourable member at a Liberal Party branch. But what I will repeat, as has been said over and over again in this House, is that the major cause of our problems of inflation today is due directly or indirectly to wage increases.

I have also pointed out very, very clearly that the policy of the Budget - and as I have said the right honourable gentleman was present when the decisions were made - was to prevent demand inflation superimposing itself upon wage cost inflation, directly or indirectly caused. There is only one answer to be given here. But first, may I go further and say that I have pointed out again and again that, should we regard it as necessary to take action we will do so. 1 should like to point out to the honourable gentleman 3 ways in which we have taken action in recent weeks which is a clear indication of our sensitivity to the problems and our willingness to act whenever we think it is desirable to do so. As an example, we have made sure that there will be 3,000 fewer immigrant workers coming into Australia over the Christmas period than we budgeted for at Budget time. Secondly, the Reserve Bank of Australia has, with the Government's approval, agreed with the trading banks that their advance limits should be increased by something of the order of $5m a week, permitting cash flows to go on in the companies and a greater degree of flexibility to be achieved. Thirdly, those who care to look can see that at the short end of the bond market the Reserve Bank, again with the approval of the Treasury, has agreed that there should be some moderation of interest policies. I can assure the House that we are watching this problem with very great care and as and when we consider it desirable we will take action._

But if the honourable gentleman who asked this question was really sincere and wanted some impact on inflationary forces, he should ask his colleague, and 1 believe master, to ensure that when the next national wage case comes on the Australian Council of Trade Unions will observe moderation. If moderation is observed 1 believe that we will quickly overcome our problems. If moderation is not observed in the wage claims then, Sir, I can assure you that we will be looking at the future with considerable difficulty. I go one step further and say that if there is a national wage claim the House can be assured that the Australian Government will intervene and will caution the greatest moderation in wage demands.

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