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Monday, 17 September 1973
Page: 1049

Mr HAYDEN (Oxley) (Minister for Social Security) - In bringing on this matter of public importance the Opposition could not be criticised for being short of gall. The key terms of the discussion are:

The failure of the Government to exercise proper management in the handling of the economy.

No one is more discredited in the issue of the economic handling of this country than this Opposition. In 23 years of administration this country's economic progress was regularly convulsed by the stop-go policies which were purposely injected into the community. The loss to the economy would be measured in thousands of millions of dollars. The recession from 1971 - purposely brought about by the economic policies imposed by the present Opposition which at that time was the Government - caused at least $2,000m in lost production to the economy - $2,000m worth of goods and services lost to the economy. The honourable member for Flinders (Mr Lynch) - the new economic spokesman, a disciple of some peculiar type of economist - is one of the people who have come before the House and spoken about a basically sound economy 10 months ago. Ten months ago unemployment was still mounting. It was at a record high. There were 130,000 people out of work and on the lowest rate of unemployment benefits imaginable - a rate so low that when people were unemployed they were projected immediately into a situation of poverty.

Mr DEPUTY SPEAKER (Mr Scholes)Order!The honourable member for Evans has hardly kept quiet during the last 2 speeches. I suggest he do so. I suggest to the Deputy Leader of the Opposition that he has made his speech and he should let the Minister make his speech.

Mr HAYDEN - This 'basically sound economy' was characterised by massive unemployment - a basically sound economy where private capital investment was absolutely stagnant, where per capita private consumption was flat as a tack and where every economic industry was completely thwarted in any movement forward. There was a total absence of confidence in the economy. This was the achievement of the Government of that time. These are the people who, when they talk of proper economic management, think in terms of mounting unemployment, of a collapse in the economic performance of industry and of a general hammering down of the performance of the economy overall. These after all are the people who in 1971, contrary to all the economic advice available in the community - even from Treasury I rather gather- decided to become the architects of the 1971 disaster. Not satisfied that the previous year had been a bad year for economic performance they set about making it even worse. Not satisfied with the fact that per capita growth was only a half of one per cent, that retail sales had slumped badly, that private investment was falling away and that private dwelling commencements, were falling quite dramatically over the previous years, they set about accentuating this sort of trend.

The result was, as I mentioned earlier, unemployment greater than 130,000 at December last year when the election was being fought. So that is the sort of proper economic management that they resort to. Very conventional lines for them, very cruel lines for the Australian public, whether they are individuals in the workforce or people who are operating industry. Their great achievement - and I refer back to the statement of the Deputy Leader of the Opposition, the new-found economic expert with unique theories on the economy who says that the economy 10 months ago was basically sound - was for private capital investment in the second half of 1971-72 to be 8.4 per cent less than in the first half of 1970-71. That was the sort of collapse that they brought about. In 1971-72 they imposed a surplus of $630m to bring the pinch on in conventional or in orthodox economic policy management which was clearly designed to bring about an economic recession. Of course, what happened was that with the approach of the election in late 1972 the then Government was jolted into panic, and this is where we get the seeds of the present problem. This -is the point which must be made now. There was a complete turnaround from a $630m surplus in the previous year to a *$120m deficit. So the Government injected another $750m into the economy. But more than that was involved. It did very little to control our external reserves so there was massive injections of money into the economy from that direction. The then Government was not prepared to act. So we had this enormous increase in the volume of money in the economy. In the second half of 1972 it was 17 per cent which, as far as I can establish, is unequalled in the economic management of the country.

What does this mean? This increase, backed by the accumulation of reserves going to the small export sector of the economy, led to distortions and to this massive injection of money into the economy. This was to be spent to stimulate demand, but there was no backing in increased goods and services. That was as far as the Government could conceive. All it wanted to do was to survive. I point out that the deficit for which it budgeted was even greater at the point it went out of office than it proposed to have, because the more the Government panicked the more it spent. It did not announce this publicly. These are the problems which we inherited: Mounting unemployment and the injection of this money into the economy - all the signs of stagflation. Quite clearly we are not going to resort to those orthodox measures which caused so much harm and suffering to the general community. We have taken completely different steps. We are setting about managing the economy in a responsible way. We will ease up liquidity and increase demand by increasing the supply side of the sector. This is something which the Opposition when in government never tried before. It criticised our proposals for a 25 per cent cut in tariffs. But what we effectively did was to avoid any suffering for the public, including those people who, through employment' changes, will be transmitted to other sources of work but will still get their full average wage, established by what they were earning in the previous 6 months. They will still receive that amount. Demand will still continue. They will not suffer. They will not have unreasonably low unemployment benefit rates imposed on them. That keeps demand going.

What we will do is to meet that demand by allowing the supply side of the sector to meet it. We will do that by encouraging imports into the economy and by taking some of the strain from the internal capacity of the economy to meet that demand. That is much more sensible and responsible than slashing into the economy, than hammering a boom on the head and pulling it off with a jerk which is what the previous Government did. The currency appreciation which we carried out in December again was designed to ease the rate of increase in costs. Already the index on the cost of imports shows that we have achieved a 5 per cent reduction in cost's, which has been fed into the economy. The latest appreciation obviously had to take place because external reserves are still mounting. Unless we achieve this sort of appreciation we will continue to have money pumped into the export sector of the economy. This will cause distortions because of the capacity it gives that sector of the economy to increase demand and also to increase the pressures from other sectors of the economy, such as wage earners and the suppliers of resources who are trying to equal the income levels which are being achieved there.

We cannot have massive injections of money into the economy unless we increase the supply of goods and services. This is something which the Opposition never learnt in government and today it has clearly displayed that it still has not learnt that lesson. The movements in interest rates are a perfectly legitimate action aimed at soaking up excess liquidity. The liquidity problems of the Opposition, as a government, were caused by this massive injection or expansion of the money supply into the economy. In the first half of the last financial year it was 17 per cent. The total increase was twenty something per cent. But most of this was injected by the Opposition when in government. It is the guilty party. There is a lag between when this massive injection occurred and when it started to take effect. Quite clearly we have inherited the inflationary problems of today from the actions the Opposition took when it was a government. But we will certainly not inherit the sorts of policies which the Opposition took. We have taken other steps. We have set up the Prices Justification Tribunal. There is the proposal to have a referendum on price control. We will continue to handle the economy as the requirements of the economy demand. We will not move in arbitrarily and heavy-handedly to cause a slump in the economy.

What will members of the Opposition do? They propose a prices-wages freeze. What is that? It is nothing more than a slogan, unless there are constructive policies to back it up. What is the meaning of a prices-wages policy? There is a whole range of these suggestions made by honourable members opposite. But they have never spelt out the details of these policies, and they will not spell them out because they have no idea what they are talking about. Honourable members opposite think that it is a topical slogan and they are flinging it about with abandon. But what are they talking about? They know - and one of the following speakers, I expect, will be the honourable member for Berowra (Mr Edwards) who would know better than anyone else - that, by themselves, policies such as this will be useless. Honourable members opposite must spell out now the practical measures that they suggest should be introduced to back up any such prices-wages freeze or prices-wages policy, which can serve only as a very minor and marginal expedient and as a bridging towards more effective policies.

Mr DEPUTY SPEAKER (Mr Scholes)Order!The honourable gentleman's time has expired.

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