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Wednesday, 16 May 1973
Page: 2224

Mr ANTHONY (Richmond) (Leader of the Australian Country Party) - This BUI represents another component of the Government's patchwork quilt and anti-inflationary measures. A bewildering array of measures has been introduced and is about to be introduced to try to keep prices down while wages exert increasingly strong upward pressures. Seeing the inflationary kettle beginning to boil, the Government response is to clamp down the Hd and turn up the heat. The only result can be an explosion with many people being scalded.

The Government's attitude is the most easily identifiable symptom of the economic madness afflicting this nation. Trade unions seek wage increases that relate more to aspiration levels than to productivity levels. The Government disburses money on the basis of political inclination rather than on a broad program founded on economic responsibility. Manufacturing industry is exhorted to keep prices down while costs soar upwards. Meat producers are under the threat of income reduction because of recent price increases, despite the fact that over the past decade prices have only just matched cost increases in the industry. lt is economic madness for the Government to run a projected Budget deficit of over S900m and then to be concerned at an overheated economy. It is economic madness for the Minister for Labour (Mr Clyde Cameron) to suggest that a national wage decision adding nearly 6 per cent to the nation's wage bill - he wanted it to be more - should not lead to price increases. It is economic madness for average wages to be increasing by 10 per cent a year when productivity in nonrural industries over the past decade has fallen, lt is economic madness for the Government to attempt to remove the legal obstacles to industrial anarchy while at the same time calling for price restraint. It is economic madness to expect an unco-ordinated and hastily erected maze of price restraint devices to alter the basic realities of the present inflation problem in Australia. How bad is inflation in Australia?

Mr Innes - You should know; you caused it.

Mr ANTHONY - The answer is that it is very bad.

Mr Innes - Tell us all about it.

Mr ANTHONY - I wish that the honourable member for Melbourne, who is interjecting, would recognise that this is a serious problem and try to persuade his Party to do something about it. Prices are increasing at a rate of about 6 per cent per annum and all the indications are that the rate is accelerating and soon will be reaching runaway dimensions. This is twice the average rate of the last decade. The chairman of Broken Hill Pty Co. Ltd, Sir Ian McLennan, said recently that an inflation rate of 3 per cent per annum was wearable. Now he says:

I have never struck anything as worrying as what we are going through at the moment.

The Prime Minister (Mr Whitlam) says that he recognises inflation as the nation's No. 1 economic problem. The Treasurer (Mr Crean) says that inflation is the main cloud on the horizon. I suggest that inflation is of more substance as a problem than just a cloud on the horizon. I suggest that it is a major preoccupation of the people of Australia.

If the Government is sincere in its conviction that inflation is a major problem, the first step is for the Government to make it clear that the defeat of inflation ranks first and foremost among its economic priorities. It must match its expression of concern with action. It must rank the defeat of inflation above the soothing of the unions' industrial desires and the smoothing of their feathers. It must rank this battle above the determination of the Prime Minister to deliver the goods by means of increased Government spending. The Government should describe in clear and unmistakable terms the community responsibility which it must exercise if this battle is to be won. This call for Government leadership relates not only to a more forthright expression of Government concern but also to positive indications that the Government is willing to set an example to the rest of the community. It is counter-productive to express concern about inflation and to support union demands for higher wages, shorter hours of work and longer holidays. The Government must accept the fact that there is a vast difference between being politically" popular and accepting national responsibility.

There is nothing essentially mysterious about the inflation that is currently being experienced in Australia. It does not derive from a national bout of profiteering by Australian companies; there is no evidence to suggest that profit margins are being expanded. It is not the result of a national business conspiracy to systematically plunder the consumer in the interests of higher profits. Rather is it the result of wages and salaries racing far ahead of productivity. It is the result of irresponsible Government economic management. It is inconsistent to call for restraint by manufacturers while the Australian Government's expenditure for the first 9 months of 1972-73 rose by 10 per cent on last year's level. For the first 9 months of 1972-73 the Government increased expenditure by 10 per cent while its receipts increased by only 5 per cent. To put it simply, our inflation is the result of the work force receiving more than it has earned and the Government spending more than it has received. Australia stands in clear danger of drifting into the same kind of economic chaos that overtook the British economy. Our long term inflationary rate of 3 per cent per annum was admirable by world standards, but we are now inflating at about the same rate as the British.

This Bill does not represent a panacea for the nation's economic problems. It does not even indicate that the Government has correctly diagnosed the problem, much less seriously considered it. I quote from the second reading speech of the Treasurer on this Bill. He said:

In introducing this Bill the Government is certainly not pretending that some simple solution has been revealed to it. We have, it is true, learnt a good deal from experience elsewhere, and one of the most obvious lessons is that policies to contain inflation must be broad and multi-pronged.

Let us look at the policies tried overseas. In Canada the government established a prices and incomes commission in 1969 which sought agreement from the unions, business and the Government to a program of voluntary restraint. The unions rejected the proposal but business and professional leaders accepted price restraint. The commission turned out to be a failure because wages continued to forge ahead making it impossible to bold price restraint. Voluntary price control measures of the 1960s in the United States of America were as ineffective as the more recent Canadian moves. Governments in the United Kingdom, Canada and the United States of America, to quote some key examples, have tried voluntary price control. There are some important conclusions to be drawn from their experiences.

Firstly, short term price freezes are perhaps successful in the short term, but they merely defer the problem. If they are to succeed they should be seen as an introduction to long term restraints. Secondly, long term restraints if they are to succeed must be more broadly based than on a program of voluntary price restraints without other fundamental restraint measures. Bitter experience overseas has eventually led to a 2-pronged approach utilising firstly monetary and fiscal policies and secondly price control measures accompanied - I emphasise this - accompanied by wage restraints. This is a reality which the Australian Government refuses to face. The Government of the United Kingdom has established a pay board to ensure that wage rises are limited to £1 a week plus 4 per cent but not to exceed £4.8, and a price commission to which large firms and nationalised industries must submit proposed price increases. Increases are allowed only for inescapable costs like wage increases and wage rises within the specified norm. Moreover, trading profit and distributors' margins are controlled, share options frozen and dividend increases limited to 5 per cent.

The Treasurer claims to have learned a good deal from experience elsewhere. If he has there is precious little evidence of it. The Bill before us represents part of a range of mutually inconsistent and half thought out economic statements made and measures introduced by this Government. The proposed tribunal will not be able to alter the cost pressures at present bearing on prices although it will publicly establish the reality of those pressures. There is no indication of what staff backing will be available to the tribunal in its investigations. There is no indication of what criteria will be adopted in considering what constitutes a justifiable price increase. The tribunal will not be interested in mining and exporting companies. There is something strangely inconsistent in the Treasurer attributing a substantial measure of the rise of consumer prices to meat and then saying: 'We do not care what foreigners pay for our goods.' Perhaps the Treasurer is not aware that the meat industry is export oriented and that increases in meat prices reflect the world shortage of meat.

One might pursue the economic logic of the Australian Labor Party a little further and quote from its greatest economic exponent, the Minister for Labour. In a fresh exposition of Cameronian economics he said recently that the Government should attack price rises, not wage rises. 'It is price rises which after all constitute inflation', he said. Continuing his expedition into uncharted areas of economics the man who sought $11.50 a week increase in the national wage stated: 'By discouraging price increases we automatically discourage employers from granting increases in wages and salaries.' As the final pearl of wisdom he concluded: 'A prices policy effectively becomes an incomes policy.' I suggest that the Prime Minister should despatch Mr Cameron with all possible haste to advise Mr Heath of his revolutionary anti-inflationary discovery as a contribution to the restoration of the British economic fortunes. I personally am grateful that the Minister for Labour is not my doctor, for he would be liable to diagnose the cause of old age as thinning hair and need for glasses. 1 referred earlier to the unco-ordinated array of anti-inflationary devices being set up by the Australian Labor Party. In case is tempted to think that the remark was empty rhetoric. I shall briefly outline the. steps a manufacturer would have to go through if he wished to raise the price of one of his products on an Australia-wide basis. Let us take, for example, a large manufacturer of bread. In South Australia the price of his product would be subject to mandatory price control. If he wished to raise the price in New South Wales he would be subject to the determinatmon of a maximum price by the New South Wales Prices Commissioner. The Labor Opposition in Victoria has promised to introduce price controls if it wins the State election. But this is not the end of the obstacle course. The Joint Parliamentary Committee on Prices set up on 12th April has authority to investigate complaints on the prices the manufacturer is charging and to initiate investigation into price movements in his industry. Furthermore, if his business receipts exceed $20m a year his proposed price increase will be subject to inquiries by the Prices Justification Tribunal. And, as the coup de grace, the

Western Australian Government has resubmitted a Prices Control Bill which is being debated at present.

Honourable members may consider this to be an extreme example but 1 can assure them that it is indicative of the present hotchpotch of anti-inflationary measures set up or being considered in Australia. The Prime Minister's answer to inflation is to set up - you guessed it - a committee of Commonwealth and State officials to meet in Melbourne on 26th May to consider State action to reinforce the Federal prices justification legislation. It will be of little solace to our bread manufacturer to know that the Prime Minister does not think it realistic to expect really to control wages and salaries.

A simple piece of arithmetic would clearly illustrate the difficulties confronting a prices justification tribunal concept. In 1970-71 350 companies were eligible for examination by a tribunal such as that set up by this Bill. Let us be conservative and assume that each company applies to vary the price of, say, 10 products each year on the average. That adds up to 3,500 price variation examinations a year. Obviously the greater the number of applications the less effective the public impact of subsequent tribunal decisions on each one will be. If after an examination of a proposed price the tribunal gives approval on the ground that the price increase request is based on increased wage costs, the function of the tribunal becomes nothing more than that of a rubber stamping authority. If the tribunal does not allow for wage cost increases, the business seeking to pass on costs will be forced out of production.

I think of no better example than that of BHP in its present predicament. It was prepared to try to co-operate with the Government. It made a request to Mr Justice Moore for an increase of 7 per cent in steel prices, which it felt it needed. On a preliminary examination the commissioner decided that 3 per cent was sufficient. The Government backed up the decision and allowed only a 3 per cent price increase, the result being that BHP has now deferred $l,300m worth of expansion because it is uneconomic to continue. Is this the sort of decision we will get out of a prices justification tribunal? If it is it will only lead to a dampening of expansion and confidence in Australian industry. It seems to make little sense to have such an authority without also attacking other basic cost pressures. In New South Wales, under a Labor government, such an authority operated immediately after the war from 1946 to 1949, but it was eventually abandoned as it was considered to be useless, lt was nothing more than a rubber stamping authority justifying price increases on wage increases which were flowing through. 1 am worried by the haphazard way the nation's economy is being handled. 1 am worried by an evident lack of Government appreciation of the nature of the current wage-prices rat race. The disjointed set of committees and tribunals is no substitute for a systematic and rationally based Government campaign against inflation, but there will be no such campaign until the Government accepts the fact, however unpalatable, that the major contributor to inflation is wage increases in excess of productivity rises. In the current economic environment there are no winners; we are all losers. The wage earner loses because taxation and inflation take the substance out of his wage increases. The manufacturer loses because he is subjected to intolerable cost pressures and possesses little range of pricing options. The consumer loses because the dollar is depreciating in purchasing power by 6 per cent per annum. The exporter loses because Australia's rate of inflation is rising almost as fast as that of any of our major competitors around the world. The pensioner loses because his income is fixed and is being systematically reduced in purchasing power. The farmer loses because he was never able to pass his costs on, and costs are running at such a rate that they are practically out of control and too much for him to cope with.

I call on the Government to recognise the reality of the position and demonstrate some leadership in the matter. What is being discussed is not some paper concept that is of academic interest to certain people but something of concern to all Australians. Inflation, if not checked, can be destructive of the very fabric of our society. It sets the consumer against the producer, the employee against the employer and the farmer against the housewife. I call for serious consideration to be given to the introduction of the concept of productivity bargaining in wage determination procedures. In this process higher pay and other benefits are related to the acceptance by employees of some change in the method and practice of work which will lead to greater efficiency of operations and productivity. This technique was a major innovation in British industrial relations in the 1960s and would inject a fruitful new criterion into the negotiations arena.

This Bill and the attitude it represents are not good enough. What is needed before this perfunctory legislation is enacted is a totally co-ordinated approach by the States and the Commonwealth in attacking all aspects of inflationary pressures. This means that the Commonwealth will have to face up to its obligations by recognising the effects on inflation of wages and incomes and not be frightened and dictated to by trade union pressures and accept that this matter can be overlooked and is of no importance. The Bill is nothing more than a political front to cloud the real issue of inflation and the responsibility of the present Government to do something about it.

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