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Tuesday, 11 September 1973
Page: 781

Mr BURY (Wentworth) - The Minister for Urban and Regional Development (Mr Uren) joins in a very interesting way - I am not sure whether it is a happy or uneasy partnership - that other great follower of the doctrines of the 1890s put forward by Henry George. I refer to the Minister for Labour (Mr Clyde Cameron) who obviously also is taken in such a solid grip by those doctrines. It will be interesting to see how the 2 honourable gentlemen in combination develop their new ideas and tracts. As to the Budget, we have learned that it confers upon the Minister for Urban and Regional Development huge sums of money to spend. He has busied himself by providing his alibi in advance; that is, if instead of this grand scheme we get a grand mess he will be able presumably to blame the States and other authorities for their lack of co-operation.

I rose primarily to address myself to the Budget and the remarks of the Treasurer (Mr Crean). I congratulate the Treasurer on presenting his first Budget. For almost a generation he was the shadow Treasurer. I can remember year after year how he contributed his ideas to this House. Yet, like so many shadows that come and go, that whisk in and out, the Treasurer his in fact proved to be a very solid shadow. At last he has gravitated to a position of power. Over the years when he made his contributions to this House a large number of people were not inclined to take very much notice of him, but now they realise when they study the question that year by year, little by little, he enunciated much of the policy which is now being embodied in the policy of the new Government. Perhaps they did not listen at the time because they thought that nobody could be as silly as that, that such ideas were not to be taken seriously. Now they await the next onslaught coming to rob them of something or other. Perforce, they have to take the Treasurer very seriously now.

I congratulate the Treasurer on bringing forward various matters which have been under way for some years in the Treasury. I have in mind program budgeting and all the other things which to some extent appear to have been taken over by the Prime Minister (Mr Whitlam). Whether that is so I do not know because, despite open government, it is very difficult to follow these matters. I hope that by now the Prime Minister realises the limitations of open Government. He has recognised these limitations because on several occasions the exchange rate has been varied. Quite clearly this is a case where discussion by the whole Cabinet with more entering such discussion creates more mess and confusion. The only way to handle these matters practically is to confine them to the very few even if at times it does mean excluding Ho Chi Jim and leaving out someone who might consider he should be consulted. Historically it has always been the position that the decisions must be made by a limited number of people who by the time such discussions arise are pretty well primed with all the main considerations which must be taken into account.

As has been stated by a number of people recently, this Budget is notable in that it provides for a huge transfer of resources away from the private sector to the public sector. Whatever view one takes of this situation, it does lead to many practical consequences. Some may rejoice and think more should have been spent on behalf of the public and less on behalf of the private sector but the fact remains that basically it is the private sector which produces distributive income and builds up living standards. What the Budget does particularly is basically to ignore the problem of inflation. When the Treasurer is charged with this or is asked questions about inflation he prefers to reply fairly blandly that inflation did not start with the Labor Government or his custody of the finances of the country. This is perfectly true. Inflation has 'been developing in many ways throughout the western world and taking different forms in different places. Certain serious problems for which the Treasurer and the Government cannot be blamed have played a serious part in our own dislocation. For instance, the Treasurer can hardly be blamed for the recent trend in world commodity prices which have gone up and down like a switchback and dragged the economies of the world in their wake. Nothing done in Australia could avoid the tremendous crisis which has come from this flow of commodity movements and prices nor the movement in capital which has flowed around the world and come into Australia in large quantities.

Other matters also have been beyond his power. For instance, fixing an appropriate exchange rate for Australia has become a complicated business. Of course it is simple enough for any particular group to look around and decide fairly quickly how it would be better off or worse off according to what action has been taken. For several generations we have had sterling to latch on to and we adjusted our exchange rate in accordance with the basic movement in the value of sterling. More recently we have changed from sterling to the United States dollar and now we face confusion. Not only is sterling dragging very badly and its value continually plunging but the United Sttes dollar also is dragging its anchor, if anything, worse. They are continually changing relationships with each other and the other leading currencies of the world have all been changing inter se. This provides a set of circumstances in which it takes a fine degree of judgment to decide the sensible course for Australia to pursue.

One thing that can be said is that by appreciating our currency the Government has followed what might be dictated or suggested by current movements in the exchange rate and in our external trade. The fact is that while the external value of the Australian dollar is being steadily appreciated, its internal value has been steadily weakened by the process of inflation which hitherto has not been as bad in Australia as it has been elsewhere. However this position is rapidly being undermined and changing. It is not a simple judgment to make nor should we come to a simple minded conclusion which is easy to come to in terms of particular interests involved but which does not really add much to the total understanding of the situation. What we must do is follow the notion that the Government is pursuing a high external value for Australian currency but by its conduct is constantly eroding its internal purchasing power. In the end - in the long pull - it will be the way we manage our affairs in Australia which will decide whether, in fact, Australia really has a strong currency or a currency which will steadily become weaker and weaker.

Whatever is done about dealing with inflation certain things must be done and these are difficult for any government of any persuasion to achieve. Firstly, something must be done to limit the constant growth of incomes at such a pace. The constant putting up of incomes, irrespective of what is produced and the productivity involved in the process, must be slowed down. It is essential to bring government expenditure under much closer control and also to pursue sound management policies in regard to Budget deficits and generally to contain the local fiscal situation. Unless government expenditure is controlled, limited and curtailed no system of price fixing has the least chance of success, except for a very short period. It is also vital that the Government take charge of the monetary policy - the supply of money. We have had considerable growth in this respect partly from overseas - something has been done to curtail this - and also by internal domestic expansion. This growth was well under way before the Government came to power.

With respect to inflation it is no good referring back too far historically and saying that somebody else has had it worse. The really guilty party with inflation is the last person who had reasonable control of averting the disaster. So whatever has happened so far, the present responsibility now fastens directly and primarily straight away on the Treasurer. It is a difficult responsibility to take but the Treasurer cannot avoid it. He has to defend himself. Is he doing everything he can to curtail and inhibit this process? I would suggest that at least in one respect he has now come to realise this situation with respect to the money supply. He has announced what used to be abused as most horrible when the Opposition was responsible for running the country, namely, that a credit squeeze is about to be instituted. I personally believe that something of this kind is really required, but it will have some very unpleasant consequences.

Today in the House we heard certain statements about the bond market and putting up rates of interest. If the economy is to be slowed down and if we are to slow down the rate of growth obviously there must be a rise in interest rates. This will have a number of other effects on the economy which will not be pleasant from the point of view of anybody. As has already been pointed out today, it will affect the housing situation, the ability to go on constructing houses and the ability for young people to pay for their houses. As indicated in the Budget Speech, the Treasurer is already well aware that housing is so crucial to the total economy that it becomes a very sensitive indicator. If the economy is to be slowed down, housing is the most effective area in which to start doing this. Clearly this has to be done.

Despite this, huge sums of public money are earmarked in the Budget for State housing, so there will be a continued huge expansion of housing in the public sector, and the private sector will find it very difficult with the impending and increasing credit squeeze which will be applied month after month from now on. This is an unpopular tiling for any government to do. It is rather amusing now to see the Treasurer changing sides, and instead of talking of a great credit squeeze, as he used to describe this kind of policy, inventing a slightly more euphonious term for it. But in fact it remains a credit squeeze.

We have begun - and it must be continued - a progressive tightening of money. The money supply has become much too large and ill disciplined. Presumably from now on interest rates will rise, on whatever day the increase takes effect. If this process is to make any impact on inflation it will have to be applied progressively. It will make it more and more difficult to operate profitably in the private sector. As it passes around from one to the other it will gradually have the effect of slowing down activity. This is the first real, effective move that the Treasurer and the Government have made towards inhibiting the process of inflation. This is utterly essential for Australia's future.

The Minister for Urban and Regional Development said that the Australian Government must have power to control prices. This is now the current cry. One can see that the idea of the Government is that prices will rise higher and higher under the impact of what it is doing, whatever inhibiting effect the curtailment of money supply and credit restrictions will eventually have. Many price increases are now in the pipeline, and the simple theory put forward is that if the Government has power to control prices all will be well. As I said earlier, without limiting incomes, without curtailing Government expenditure and controlling money supply, no measure of price control has the least prospect ultimately of being successful. This is the basic reality. The other things are mere trimmings.

Price control as such we experienced in the closing years of the Second World War and just afterwards. When it is really attempted on a large scale by the Government it becomes rapidly evident that you cannot have price control by public authority unless in turn you can control all the ingredients which go to make up prices. They include wage rates, raw materials and so on. To control prices by edict you have to finish up with iron-clad control over the whole economy. That is why I personally resist any idea that power to control prices should be transferred to Canberra on a permanent basis. Ths power is not really wanted for price control. Price control is merely the deception to get a favourable vote to transfer power to Canberra. I believe this is a snare and a delusion. It will not be properly worked. We will get involved in all sorts of tangles. There will be detailed control by and through the bureaucracy and the Ministers. There will be personal interference according to preferences which people express, but we will end up with an iron-clad control over the whole of the Australian economy. This is why I believe we should resist any process of legislative price control.

We have a little time to watch what happens in Canberra with an experiment in price control. If price control had a chance of being successful anywhere in Australia it would be in Canberra, which, is full of the necessary control and administrative ingredients. But we should set our face against any idea of transfer of direct powers over prices and all the ingredients necessary to maintain price control from the States to Canberra on anything but a very short term basis.

Debate (on motion by Dr Jenkins) adjourned,

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