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Tuesday, 10 December 1974
Page: 3318

Senator STEELE HALL (South AustraliaLeader of the Liberal Movement) - I support the remarks of Senator Carrick who is quite right, of course, to refer to the 95,000 people who possibly will be retrenched employees as 'unused capacity'. I wonder what the Labor Party would have done in Opposition if the Government of the day which it opposed had this sort of unemployment in prospect. I am sure that Labor's cries of alarm and disaster would have been much more vigorous than they are now from the present Opposition which, I believe, is at least giving the Government some understanding, if only it will listen, of the problem. As Senator Carrick rightly points out, the interest rates now charged on house mortgages in Australia prohibit so many people, who previously could have envisaged buying a home over a long period of time, entering into house contracts. So that very important part of the market which had been extending downwards when interest rates were reasonable and when people were encouraged to buy long term rather than to rent, has now been largely destroyed. The impact on the building industry in Australia has been dramatic.

While I agree with Senator Carrick that interest rates must be lowered, in my opinion it is not possible to lower interest rates while we have inflation running in excess of 20 per cent and heading next year towards 30 per cent. It is simply not realistic to expect interest rates to be reduced in the face of inflation which is of a greater nature in prospect in the future than we have had during 1974. Only a subsidy directly from the Government will reduce interest rates in the face of trends which will tend to force interest rates even higher. The basis of all of these problems of course is inflation. That is the basic cause. Inflation is growing worse, not better. Palliatives are being applied today which will not in essence be effective.

A very ominous news report which I heard over the weekend in South Australia stated that the Highways Department in South Australia had announced that its work accomplishment next year will be down 25 per cent. This reduction will not be caused by the expenditure of less money, it will be simply because inflation has destroyed one-quarter of South Australia 's road program next year. The real effects of inflation are only now becoming apparent. Unemployment will grow more rapidly in the new year. Programs such as construction carried out by the Highways Department in South Australia will be reduced. House building will be reduced because, as Senator Carrick rightly pointed out, the market is not available and couples cannot afford the huge sum which now has to be part of their earnings.

I want to say in very brief terms that the whole of this economy will fall to pieces unless the Government can come to grips with the rate of inflation. We can pass Bill after Bill, with palliative after palliative, and they will mean nothing if we have an inflation rate of 30 per cent by June next year, as business people in Australia tell us we are going to have.

Senator Sir Magnus Cormack - A rate of 35 per cent.

Senator STEELE HALL -Senator Sir MagnusCormack knows very well that there is no reason why it will stay at any particular inflated figure. Economists will tell any government that there is no stabilising factor in high inflation rates. They will either drop dramatically under some disastrous economic effect, or they will grow even higher. They will not be stable. It is time the Government looked at all these various things it is doing, looked at all its day-to-day announcements and started to do something about the basic cause of it all. What is the building industry? What is the basic cost factor in the building industry? What are buildings made of? What is the basic cost of raw material? It is a very small factor when you look back to the start of the manufacture of the components of a house. One sees first of all, in the most clearly evident form, in the housing industry the effects of the wage and salary explosion. Here it is affecting the greatest sector in this community, and, may I say, the most worthy sector.

Until the Government comes to grips and does something positive about the explosion in wage and salary demands all that we do here will be ineffective. So far the Government has offered nothing to attack the basic cause of our problems that will do anything for us in 1975. 1 join Senator Carrick in his remarks. I will vote for the Bill as a palliative measure but I say that the Government is doing nothing to meet the major challenge in front of it. It is making small isolated moves but they will not reduce the rate of inflation. The Government will not reduce the rate of inflation until it deals with the basic cause of it.

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