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Tuesday, 18 September 1973
Page: 1179

Mr MCMAHON (Lowe) - The Bill now before the House seeks to amend section 51 of the Australian Constitution by inserting a new paragraph (XiVA.) so as to enable the Australian Parliament to control prices. That is a very limited area and one that does not directly affect the causes of inflation. Section 51 provides that the Parliament shall, subject to the Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to 40 different functions of government, such as taxation, naval and military defence, banking, currency, coinage and legal tender, and insurance. These powers are concurrent with powers of the States, as the Prime Minister (Mr Whitlam) pointed out yesterday. Theoretically, both the Commonwealth and the States may exercise the power. The concurrent use of power is, however, subject to one vitally important constitutional qualification, that when a State law is inconsistent with a law of the Commonwealth the latter shall prevail and the former shall, to the extent of the inconsistency, be invalid. That section establishes the supremacy of Commonwealth laws over State laws of a concurrent kind. It must also be interpreted against the context that real power rests with the Commonwealth Government in the sense that the power of the purse establishes clear superiority.

It seems prudent before we become too involved in argument that we should first draw this distinction: The Bill is designed to amend the Constitution to empower the Commonwealth Parliament to make laws relating to prices. In itself this is not enough. The Commonwealth Parliament must, if it wants actually to exercise power over prices, introduce a Bill into this House and have it passed into law by the Parliament. Two separate conditions are necessary: Firstly, the constitutional power and, secondly, the exercise of that power by Parliament.

My first reaction to the second reading speech of the Prime Minister was that it was a disgrace to the Parliament and bore all the evidence of incomplete and inadequate preparation. It has at least 10 blunders, inaccurate statements or, more accurately, calculatedly crafty misrepresentations bordering on fraud. Let me illustrate. The Prime Minister said: The Australian Government has been active and effective over a broad front from the time we took office and inherited a growing level of inflation. . . . The economy in December continued high inflation with the worst employment for 5 years.' They are the Prime Minister's words, not mine. But these are the facts. According to Professor Nevile, during 1972-73 inflation was lower than in either of the 2 preceding years. In Budget year 1971-72 the consumer price index rose by about 7 per cent to 8 per cent. By the December quarter of 1972 when my Government was in office it had fallen to a rate of 4.6 per cent and as the Treasury had pointed out in its latest annual survey, by December 1972 there was good reason for optimism as to the future course of prices. Treasury went on to say that such views were rudely shattered early in 1973. Treasury had good reason for such optimism and for the rude shattering of its expectations. Again according to Professor Nevile, in the December quarter of 1972 the implicit price deflator which is used for national income and expenditure purposes had been reduced to a rise of only 2.2 per cent and the gross national expenditure deflator had fallen by 2.3 per cent as compared with the previous December quarter. This was a good foundation to build on. But it was quickly shattered by Labor. In the June quarter of 1973 the consumer index under Labor rose by 13.2 per cent. These are the facts. This is where the truth lies, not in what the Prime Minister has said. As to unemployment in actual numbers and leaving aside school leavers, who traditionally and temporarily add to the unemployed in November, December and January, the numbers of unemployed fell from 97,877 in March 1972 to 82,431 in October 1972. I do not believe that any honest and technically qualified person believes or claims that seasonally adjusted figures are an acceptable measure of trends in unemployment. Certainly Treasury does not, nor did the Department of Labour and National Service do so when I administered that Department. The Prime Minister and the Minister for Labour (Mr Clyde Cameron) were predicting unemployment of 180,000. This never came to pass, largely as a result of action taken by my Government. This is the second illustration of crafty misrepresentation.

The Prime Minister went on to say: 'We, Labor, inherited "stagflation" '. This also is false. As I said in the House - and I have not been contradicted - the Treasurer admitted in a veiled but complimentary way that non-farm production at constant prices rose by over 5 per cent and was growing at a faster rate at the end of 1972. This also was a good performance. And as Treasury pointed out, the growth of non-farm production at constant prices - and if this is what Labor likes - seasonally adjusted, within the year, was considerably higher. In the first half of 1972-73 the seasonally adjusted annual rate of growth was 6i per cent and there was an acceleration in the second half to considerably more than that figure. I repeat that this third statement about inheriting 'stagflation' is false.

The fourth statement is: *We' - that is, Labor - 'have combined this strong and basically healthy economic situation with the most effective and far-reaching program of social reform*. Does he honestly and sincerely argue that the economy is basically healthy with a consumer inflation rate of 13.2 per cent; with bottlenecks and shortages becoming endemic and covering a very large sector of industry; with the loss of man days worked through strikes reaching record figures - 860,000 in January to June 1973, but twice as many as in January to June 1972 - and with the loss of wages of $13m in January to June 1972, rising to $24m in January to June 1973? Does the Prime Minister claim that the failure to honour promises made in his policy speech and before add up to farreaching and effective reforms? Does he make the same claim in respect of the failure to honour his promise in his own policy speech that he would not increase taxes when in fact he increased taxes in his first Budget by $650m in a full year and $339m in this Budget year?

Does that claim apply to the failure to honour his promise made at the Festival Hall on 2 May last year that he would not repeal or reduce any educational benefit which is already being paid? I point out that he has already done so. What of the unbelievable series of blunders associated with the home building industry - particularly the provision of homes for young married couples - associated with an ill-conceived and futilely administered policy of increases in both official and market rates of interest which will add about $19.68 a month to the cost of a $15,000 home? Promise after promise has been callously, arbitrarily and cynically dishonoured. Does this add up to far-reaching and effective reforms? Heaven help us if these failures are the basis for the attempt to change the Constitution to give power to the Commonwealth to control prices. The Prime Minister went on to say:

We assert the basic duty and responsibility of the national Government for economic management.

I agree that responsibility for overall economic and financial management must be and remain a function of the Commonwealth and I have pressed this view strenuously and persistently during the time I have been in the Parliament. But what is obvious now, and was strongly suspected at the time the Labor Party assumed office, is that Labor had neither the talent nor the ability satisfactorily to administer the Australian economy. Suspicion has now hardened into fact.

Let us look at the facts again. The pressure of inflation had been substantially reduced at the time we left and Labor assumed office. Now inflation is galloping. Prices are rising alarmingly at a rate of 13.2 per cent, as I have already emphasised. The rate of economic growth was running at a high level. Now, as I have mentioned, bottlenecks are developing. Housing is in a mess and the money market is in turmoil. We showed that we could do the job through the proper application of wage restraint, Budget policy, monetary and income controls, including changes in the value of currency, control of the growth of the civil service and public psychology and persuasion. Labor has failed miserably because it has failed to use the economic, financial and psychological methods available to it even with the good going and all the prospects running for it when it came into office. Is this the kind of government to which greater power should be given? Think and think hard because it is the people of this country, not the members of the Government, who will pay the price and it will be a savagely inflationary one.

Turning now to the prices referendum Bill itself, these are the reasons why I will vote against the Bill. The Government already has the necessary power to control inflation and therefore prices, but it will not effectively use the weapons available. Why give it more when it has done enough damage with what it already has? Control of prices is a control of effects, not causes. Prices come at the end of a long process. To be effective control must start with the causes. Control must start with, amongst other things, wage and income costs, through the Arbitration Commission; excess demand, through the Budget; import prices, through changes in the exchange rate; the money supply, interest rates and changes in the international value of the currency to sop up the money supply and slow down excessive growth and tariff policy to ensure greater competition. Prices control, even temporarily, would be ineffective without control of incomes, particularly wages.

Mr Whitlamled us to believe that Mr Hawke had assured him that if the Government would go ahead with the prices referendum he would undertake to restrain inflationary wage settlements when price controls were instituted. For Mr Whitlam that was a critical assurance from the head of the Labor Party and head of the Australian Council of Trade Unions. The Prime Minister confirmed this at question time on 17 September. He said that

Mr Hawkehad told him that 'if the Government were able to moderate the rise in prices through the application of such constitutional powers as is obtains, the trade union movement would fully co-operate in restraining wages and incomes'. Mr Hawke has since denied that he made any such promise and added:

Mr Whitlam's statement to Parliament included a promise which I could not give.

This critical part of Mr Whitlam's assumption and argument has thus been destroyed. Income and wage controls have very dubious value except for a short period and that was pointed out very effectively, I believe, by the honourable member for Kingston (Dr Gun) who immediately preceded me in this debate. Listening to him I would have imagined that he was speaking from this side of the House and would have been recommending that this Bill be rejected.

Price control without income controls would be dangerous and against the best interests of Australia. Both the Prime Minister and the honourable member for Kingston know this and they are both understandably very sceptical about their effectiveness. At the Electrical Manufacturers dinner last night, 17 September 1973, Mr Whitlam said:

I frankly confess that I have always had reservations about the value of price control regulations' - reservations I have publicly acknowledged and explained.

With reservations of this kind how can he, with sincerity, now ask for specific constitutional powers to deal with the problems, knowing he now has the relevant powers if only he chooses to use them? Price controls are, as I have said, an end result and not a cause of inflation and can be used capriciously and for blatantly political purposes. The honourable member for Kingston said that price controls would not increase production but would probably reduce it and, if my recollection is correct, he said they would create distortions, inadequacy and shortages. I agree with those statements of the honourable member for Kingston.

Finally, there is an easier and quicker method to achieve the same objective than by holding a referendum, and that is for the Commonwealth to persuade the important States to refer to the Commonwealth powers, under section 51 of the Constitution, over prices and incomes for a limited period, say for 6 months or 1 year. To sum up, I think the cost of a permanent reference would be too high and the public would soon become tired of controls. We are a free people and quickly become frustrated and irritated by controls. This has been our experience in the past and is now the experience of the United Kingdom where a recent gallup poll, referred to in 'The Economist' of 8 September 1973, showed that whereas a year ago 75 per cent of the people with a definite opinion said that the unions should hold back on wage claims to control inflation but now 52 per cent think that they should now go ahead, clearly indicating that the public has become tired of income and wage controls. The public psychology can change quickly, particularly when the people have to suffer inconvenience without obvious benefits. For all these reasons, I can assure honourable members that I will vote against this Bill.

Motion (by Mr Hansen) put:

That the question be now put.

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