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Wednesday, 5 December 1973
Page: 4316

Mr ANTHONY (Richmond) (Leader of the Australian Country Party) - I wish to address my remarks on this Bill to the 25 per cent tariff reduction enacted by the Government in July this year. Most Australians will always appreciate it if some worthwhile reduction in tariffs can be made so that the cost impost on the community at large is kept to a minimum level. But, as the previous Minister responsible for the operation of the tariff system, I must say that I am critical of the crude way in which this across the board reduction was made, without any discrimination being applied. I believe that the nondiscrimination will act unfairly and unjustly on certain industries. Because of this and because the Chairman of the Tariff Board was involved with the recommendation that this should be the procedure, the confidence of industry has been undermined quite considerably. It has been given a shake.

This action had all the hallmarks of a hasty decision. There was not the investigation in depth that there should have been. The decision took no account of industries that have been before the Tariff Board recently, when adjustments have been made to the level of protection allotted to them by the Government after recommendation by the Tariff Board. These are significant industries. As a result of recent investigations, some of them had the level of protection reduced. Now, immediately on top of that decision, the Government has stripped another 25 per cent off that level of protection. People in those industries must doubt the credibility of the functioning of the Tariff Board if, after a recommendation made only in recent times, the Chairman of the Tariff Board can accept that another 25 per cent should be taken off. Also, the decision had all the indications that it had been made hastily and crudely, because there was no consideration or discrimination in respect of special preference tariffs that are provided under the New Zealand-Australia Free Trade Agreement and less developed countries which are allowed to bring in certain commodities at a much reduced or concessional rates. When the full impact of these concessions is felt, I am sure that industries will suffer.

The Minister for Overseas Trade (Dr J. F. Cairns) said that the employees of any industries affected would be compensated. That is a rather spurious argument to use. I find it somewhat contradictory and confusing and certainly, administeratively, nearly impossible to justify special unemployment relief for those who can claim to have been affected by the competition from imports as compared with other people in the community who receive normal social services unemployment relief. In conjunction with the statement about the 25 per cent across the board tariff cut, the Government announced that employees affected by this decision would be given special unemployment treatment; that, in fact, they would receive from the Government compensation at the wage rate they were earning during the previous 6 months. This is a rather unusual set of circumstances. How long that policy commitment will apply, nobody knows; but certainly we all knew that it would not have any immediate impact on industry, that with the booming circumstances of trade around the world the cold winds of competition from imports would not be felt this year but possibly would be felt next year.

The decision to reduce tariffs by 25 per cent was made in relatively unusual economic circumstances. The economy was in a period of pronounced boom. Retail demand was surging ahead and, with the quickening pace of activity, resources were coming under strain. The supply capacities of industry were stretched as demand pressures were fed by the high level of liquidity in the economy. Industrial production was increasing, but at an uneven rate, and serious shortages already were evident in certain areas, such as the building and construction industries. That was the domestic situation - a climate of boom and shortages.

Faced with a deteriorating situation, the Government looked for ways of relieving the pressure on resources. For months it had been rejecting advice to raise interest rates. It was framing a Budget which would increase Commonwealth expenditure by the largest amount and the highest percentage increase since the early 1950s. It clearly was not prepared to act at that stage through financial and monetary policy. One avenue of approach appeared to be particularly attractive, and that was the idea of reducing tariffs. When the Australian Labor Party came to power our foreign exchange reserves were at a very high level - $4,800m, or considerably more than our annual import bill. Our balance of payments situation was strong, despite revaluation of the currency. The Government proposed to increase imports by making them more competitive in terms of related price. An increase in the flow of imports would alleviate the strain on resources in Australia. Our balance of payments could stand it. The assumption was that our industries could do so, too.

Following a report of officials, tariffs were reduced unilaterally by 25 per cent in July. At the same time provision was made for assistance to employees who might be unemployed as a result of that decision. At face value, the decision seems to have paid off. Imports are now rising strongly and only a handful of workers has been obviously disadvantaged to date. But for the workers in the textile and clothing industries considerable concern is growing. If the forecast of increased imports next year as world trade tends to slacken proves correct, there is a chance that the jobs of something like 80,000 people will be put at risk. Many of these 80,000 people are associated with decentralised industries and many of them are women in the work force who find it difficult to get alternative types of work. The decision was hailed as being courageous but it was nothing of the kind, and I said so at the time.

Our boom was matched by and drew strength from an international boom. Shortages in Australia were matched by shortages overseas. It was clearly naive for tie Government to expect this move in itself at that time to induce a dramatic increase in imports when industries in supplying countries -were at full strength. Reduction in tariffs may have been able to alter relative prices, but it could not in itself increase the volume of imports. Similarly, Australian industry was embarrassed by an abundance of orders - not by a threat of import competition. Clearly, lags would apply and any adverse effects would be later ones. Imports are now increasing across a wide range of products, probably largely in response to the considerable revaluation of the Australian dollar against our major trading partners, as well as to growing efforts to obtain supplies from overseas to supplement domestic supplies. The effects may well be felt in 1974 when world demand may ease considerably. We may be caught between the scissor blades of rising costs and falling commodity prices. Overseas industries will be looking for markets, and their prices will be more competitive.

Clearly the tariffs reductions have had an uneven impact. In some industries where the margin of surplus protection was considerable the impact will be muffled. But what of those industries such as clothing, footwear and food processing where tariff protection under normal circumstances was crucial? It was because of this mixed picture that we had a Tariff Board to report on the individual requirements in industry. If it is argued that protection levels were excessive in general they are not excessive in particular areas. It is these particular industries and the workers they employ that are in jeopardy.

I repeat that it was a crude decision to apply a decision right across the board, taking into account industries that have been reviewed in recent times. I was attacked in some quarters over my attitude to tariff cuts when I said that to do it in a manner such as this without being discriminating and without taking into account the special circumstances of our tariff protection system was, while bold in some ways, a little absurd. There are many industries where protection has applied for a long period and where there has been no review. The previous Government established a procedure for the review of all tariffs. This review admittedly would have taken a period of 6 years.

I believe that because of the excessive inflationary pressures that we have at the moment there is some justification for the Government's having an across the board cut but, if it had used a more analytical method and if it had applied a few qualifications, taking into account industries that may have been reviewed in the last 2 years, or if it had taken into account an industry which might be affected by the less developed countries preference or which had come under the New Zealand and Australia Free Trade Agreement, I would have found it a worthy decision that I could have defended. If some of those industries that have not been reviewed for a long time were in a tight protection position, I am sure that the Minister would have acted quickly to see that a form of temporary protection was given.

Dr J F Cairns - I will bet you would not have defended it, though.

Mr ANTHONY - In reply to the honourable Minister, I accepted the policy of applying it right across the board but not in such a bland way as it was done. I think that the Minister was overseas at the time but if he had participated in the Cabinet discussion I am sure he would have brought up the point that I am bringing up at the moment, because it did shake the confidence of industry when the Chairman of the Tariff Board was prepared to put his name to a recommendation which might automatically mean a further 25 per cent reduction on industries that had been reviewed in the last 12 months, as well as meaning that the Tariff Board was not genuine when it made the recommendations at the level at which they were made to the Government. In other words, it decided that a further 25 per cent could be trimmed off.

The tariff structure is complex and of long standing. Most of the protective arrangements were established before the Second World War, and the overall protective impact may have declined since then. I mentioned that the Government had instituted a review to try to overcome this, and it wanted to try to reduce the impact of the inflationary pressures, many of which have been induced by this Government itself. I am not opposed to tariff reductions. Indeed, tariff protection involves a cost to the community and should be minimised, but I firmly believe that adjustment of our tariff arrangements should be selective and should discriminate. That is why I opposed the 25 per cent unilateral reduction in non-revenue tariffs. Most imports already enter duty free and the impact of the reduction on the remaining industries would be both postponed and uneven.

The situation now is that we are arbitrarily linked to the United States dollar and as that currency gains strength our currency in turn revalues against other major currencies, such as sterling and the yen. So industry which is concerned about overseas competition, is being caught both by the policy of the Government to reduce tariffs indiscriminately and by the changing value of our currency. The effect is that imports from those countries have gained an additional competitive advantage not through the strentgh of our currency but through the changing strength of the United States dollar. It is time to float our dollar and let it find the true market value instead of letting it be fiddled and manipulated by politicians who make the political decisions when currency should be adjusted.

We have seen 3 alterations in our currency this year, two of these by arbitrary and deliberate action of the Government, and one of them by default. I would not for one minute say that there should not have been some alteration to our Australian currency but it is coming into question now whether the currency is the right and proper value. If it is allowed to go free nobody can dispute that the market is not determining what is the correct value. Through that means its value will be free from political manipulation. It will be free to respond to the circumstances of .1974, whatever they may eventually turn out to be. In the meantime the competitive position of Australian industry has been dealt a severe blow, and the impact is yet to come. All the signs are that competition will be more severe in 1974 as we see a slackening in international trade. I only hope that the Government is prepared to take action and to be a little more discriminating when industries are going to feel the full impact of the predictions for 1974.

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