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Wednesday, 16 May 1973
Page: 2227

Mr WHAN (Eden) (Monaro) - Unlike the Leader of the Australian Country Party (Mr Anthony), I certainly would never invite the Minister for Labour (Mr Clyde Cameron) to be my doctor. I feel quite sure though that if the Minister for Labour happened to succumb to such a suggestion he would have no difficulty in reaching the proper diagnosis, which undoubtedly would be myopia, the inability to concentrate on any but one single issue, one single election slogan at a time. We have heard tonight that inflation rests solely and wholly on one of the many factors which contribute to price rises - wage claims. To demonstrate and emphasise such a narrowly based argument it is necessary to resort to distortions of the facts as they stand. It is true that this Government has been burdened with a Budget deficit running close to $ 1,000m. The components of the deficit are interesting. The Treasury has given them in its publication - the Treasury Information Bulletin. Is the Country Party questioning the honesty of the Treasury? The Treasury stated that $638m of this deficit was due to the previous Government's commitments. An extra $260m of this was due to the panic stricken state of that Government as it exploded into the last stages of its reign and it was necessary, it felt, to try to hold the ship together by pouring into the economy another $260m. So out of $ 1,000m we can attribute $900m to the last Government. So it is necessary to resort to this type of distortion to justify an argument which is so narrowly based that it becomes an election slogan than can be understood by the simplest of Country Party supporters. Of course, there are many causes of inflation. It is interesting to look at Australia's record in regard to productivity. In 1968 the increase in the productivity index was 3.21 per cent. In 1970 it had fallen to 0.8 per cent. All the time there was a steady 2 per cent per annum increase in wages.

An interesting phenomenon - I suspect that this is one of the areas which the Prices Justification Tribunal will reveal as a major factor in the demand for increased wages - is that marginal tax rates are increasing all the time. The extra dollar that the wage earner gains from the Arbitration Commission is eroded at a greater rate as his income increases. So the taxation schedule, acting as an accelerator on inflation, is a concealed pressure point in this whole process. Also, the flow of money or the availability of funds in this country was increased dramatically during the reign of the previous Government. Assets such as land in particular, not commodities, were sold at phenomenal prices to overseas interests. This was one of the main factors aggravating the flow of overseas capital into this country. Money chasing too few goods' was the slogan we heard from honourable members opposite around 1960 and 1961. Indeed, that also happened under the previous Government in the closing stages of its reign. Huge sums of money were flowing into this country to buy land and other assets which were not offset by commodities produced for people to buy.

Another area on which the Prices Justification Tribunal will centre its attention is what is happening in this country in the field of technological development. It is interesting to read from a report produced by the Department of Trade and Industry that a survey based on 1,321 enterprises revealed that research and development expenditure by them was $95m. This represented 1 per cent of the total sales of those enterprises. Seventy-five per cent of those enterprises were wholly or mainly Australian owned, but they incurred only 39 per cent of the total expenditure on research and development; whilst 61 per cent of that expenditure was spent by overseas firms. There is other evidence that Australian enterprises are not responding to the possibilities of increased technological development. There are many reasons for this, so diverse and complicated that only the Prices Justification Tribunal will reveal the areas in which this type of restraint is having an effect on inflation in Australia.

An interesting analysis along these lines, to break down the components of price and identify the pressure points, was published recently in the 'Quarterly Review of Agricultural Economies'. This revealed yet another facet of the sort of information that the Prices Justification Tribunal will reveal. For example, about 4 per cent of the retail price of a woollen suit is the value of the raw materials. On the other hand, something like onequarter of the retail price of knitting wool is the value of the raw material. In other words, the value added to the suit naturally increases the price. The raw material component accounts for a considerably smaller proportion of the retail price in the case of a suit than in the case of knitting wool. Under different economic pressures the price of a suit may rise and the price of knitting wool, for example, may remain stable, depending on where the price pressure occurs. Only after we have made a detailed examination of the components of price will we be in a position to make a sensible decision about where action must be taken to stem this flow.

Another aspect for the Prices Justification Tribunal to consider will be the actual market mechanism - whether it is a monopoly mechanism, a cartel mechanism or a free competitive situation - that fixes prices. Meat prices will be an interesting study for the Prices Justification Tribunal because I believe from the evidence that is available on the market pricing of meat - there is a lot of evidence available - that meat is a competitively priced commodity. It will be of use to examine these types of markets in order to get a contrast with a monopoly pricing situation. In the case of meat and particularly in the sale of livestock, even at the point where it changes hands from the farmer to the next person in the process - a merchant or a meatworks operator - there are different types of pricing mechanisms which can influence the price paid. For the same total demand on any given day different prices are obtained under the bidding system which is adopted generally in Australia - it is called a progressive bidding system - and under a tender or sealed bidding system. We obtain a different price again if we have a contract arrangement stretching over time.

So it will be necessary for the Prices Justification Tribunal and its allied body, the Joint Committee on Prices, to examine in detail the pricing process for each commodity; otherwise we will never be able to understand how we can correct the situation. For example, in a cartel arrangement it may be that the pricing arrangements are competitive but there are industry agreements which restrict the services available to the industry. It is no good from the consumer's point of view having new technology if among the people involved in the industry there is an industry agreement which prevents that new technology from being applied. So it could be that, instead of attacking wages and profits or in some way attacking the actual monetary implications of the mechanism, we will have to attack an agreement on the question of services offered to the industry.

A very good example of this situation is the industry with which I am most familiar - the wool industry. There can be no doubt that the cartel agreements between the wool selling brokers who are members of the National Council of Wool Selling Brokers were the reason for the restraints on the introduction of technological developments in that area. All 1 ask from the Country Party, whose members are interjecting, is that it be objective even if it is myopic.

Mr King - What about supply and demand?

Mr WHAN - We have now a situation where technology, which is the main fuel for increases in productivity, in too many areas of Australian industry is subject to restraint for various reasons. The solutions to these problems will at all times be different. It is for that reason that the Bill we are now considering does not define any specific action to be taken in the event of a particular price rise. In one instance it may be action in regard to profits. In another instance it may be action in regard to competition. In yet another instance it may be a recommendation that research and development be carried out to improve the technology, and therefore the productivity, of the particular industry.

In the area of applied technology in this country we are very deficient. We have a great deal of fundamental research but much of this does not find its way into increasing productivity in our industrial situation. It may well be that, by putting its finger on this sort of problem, the Prices Justification Tribunal will point to a completely unexpected outcome of its deliberations. I would expect this to be true if the whole study is, as this Bill will ensure it is, objective in its approach to the consideration of inflation and price rises.

Mr O'Keefe - That is completely futile.

Mr WHAN - We hear from the sidelines that such a thing is completely futile and other comments such as: 'What about supply and demand?' These sorts of comments are typical of the reactions that come from this very slogan orientated approach to the sort of problem we are considering tonight. Supply and demand is, of course, the traditional response. But what does it mean? Supply and demand means that on one side, if demand fluctuates violently in the face of fixed supply, the only thing that can happen is that prices move like a yo-yo. When prices move up and down rapidly we hear squeals from the Country Party. If they are right at bedrock bottom and the price for wool is something like 15c per lb, we hear squeals from the Country Party. That is what happens when we hear talk about supply and demand in this naive and inane fashion.

We need to look at the mechanism behind supply and demand. We need to know what the market mechanism is in order to avoid these unfortunate fluctuations and their effects both on the consumer and the producer. It is of no use shouting slogans at the industry. We must bring to bear on these market problems an objective approach which will help us to understand the very basis of the price formation process. We now have a very effective mechanism to do just this in the form of the Joint Committee on Prices. That Committee will be receiving inquiries from the public and from various industries and it will direct the attention of this place to those pressure points in our economy which need attention. These can then be considered on a larger and deeper scale by the Prices Justification Tribunal, which is the subject of this Bill.

This Bill is designed to overcome one of the difficulties which might confront the Tribunal if no limitation is placed on the area of investigation. The Tribunal will investigate only those corporations whose gross turnover exceeds $20m. This will include most areas of activity in this country. It will mean that the Tribunal is not wasting its time on small industry groups or small struggling industries. It will be considering the very large sector of our economy - largely overseas owned - which calls the tune on nearly every pricing arrangement. Therefore, under this sort of restriction the Tribunal is placed in a workable situation. About 380 corporations come within the ambit of its interest and there is complementarity between this group which I am talking about now - the Prices Justification Tribunal and the Joint Committee on Prices - because it is the Joint Committee which will have contact with the public and discuss the issues with the public. It will, as is quite right and proper, establish the priorities for investigation indirectly because that Committee will respond to the pressures which the average man in the street and his wife feel when they shop. I commend this as a very constructive approach to a very real problem. It is a problem which I might point out to this House has not yet been solved in regard to the theoretical approach of overseas economists or domestic economists. It is not a price control measure as is sometimes implied. It is not a distorted and singular approach to one aspect of the economy. It is an attempt to get a basic understanding of our economy which will then help us to prescribe the appropriate solution to the problem of prices.

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