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Transcript 2534


Photo of McMahon, William

McMahon, William

Period of Service: 10/03/1971 to 05/12/1972

More information about McMahon, William on The National Archive website.

Release Date: 14/02/1972

Release Type: Interview

Transcript ID: 2534

Interviewer : Richard Carleton
Q. Mr McMahon, the Premiers' Conferenc& today-. one
cannot help but feel is something of a char-ade. It has all-:
happened before. The Premiers come to Canberra on Sunday
night, breathing fire and brim stone. They come and meet
you in the cordiality of the Cabinet Room and it's all over.
The Commonwealth makes a concession. There is no long-term
solution that has come out of any of these Premiers'
Conferences. Is there one in the future?
PM: I don't think there is. And certainly there
couldn't be one under present circumstances when wages are
rising so rapidly and the'States are unable to tax to the
extent necessary to recoup the moneys. In other words
Q. Would the....
PM: Look, please don't interrupt when I am trying
to give an answer to what is a tremendously important
natimhal problem. This is important. In cases like this,
it is not a charade. In fact, I have done my best to
ensure that they are listened to with attention, we take
notice of what they have said and we adapt our policies as
far as we practicalaly can and as far as we think it is wise
to'meet their wishes.
Q. But you called it a pilgrimage yourself, this
PM: I did call it a pilgrimage but that does not
necessarily mean to say it is a charade. There is a totally
different meaning of the two words. What I do believe is
that they played a contribution, a marked contribution towards
an understanding of the problem and towards the solution
of it. Far from being a charade, it was a valuable exercise
and one that will be of benefit for the nation.
Q. They will be back in June and apparently the
same thing will be played out again. They will be back in
February next year. There is no solution to the States'

long-term problems of finance.
PM: PM: Q. PM: There is no solution to this if present
conditions continue.. But what I have done in order
that we can get the most detailed and careful analysis
of this, I have asked the Australian National University
to establish a small school of the top-thinking economist
we have got in the country and I hope two of. the most
important and capable civil servants we have had
Sir John Crawford and the former Secretary to the
Treasury, Sir Richard Randall. A school will be
established so that we will know the facts associated
with CommonwealthStt rltin and see if they can
come up with a better answer.
Mr McMahon, forgive me, but the problem has
been with Australia virtually since the lastwar when
the States gave up their income taxing power8. Now in
1972, you are proposing an investigation which will
produce a possible solution in years to come. In the
next three or four years
I don't think so at all, with great respect
to you. These men know the dangers and the difficulties
and they have been specifically charged with the objective
of getting an answ6r as soon as they can, and as and when
they are able to give us solutiorsor recommendations, they
will do it. You are not seeing this in twelve months'
time, or anything, though?
I don't know how long it will take, but so
long as we get an answer and I must impress this upon
you that while wages go up the way they are, between
11 and 13 per cent per annum, or averaqe earnings go up
at that rate, it is not going to be an easy solution, and
the solution has not been found in any other country of
the world.

Well, I will come to wages in just one
moment, but can I raise a point that you made in your
opening address to the Premiers today where you spoke
of " excessively gloomy views being put about" and this
giving rise to lack of confidence in the community.
Would you name for me the people you claim are putting
about " excessively gloomy views"?
PM: Q. PM: Q. No, of course I won't but it is commonly
practised and why should I enter into an argument with
a particular individual. In fact I don't like speaking
about individuals. There is too much discussion about
them already. I believe in policies. I believe in saying
" Here is a problem. This is the way we are going to solve
it" but I do have-to stress that people don't quit4
understand, for example, the problem of unemployment;
because I pointed out if you look at it in what is
called and now I am using academic language
" seasonally adjusted figures for unemployment", you
will find that the figures are not far different from
the long-term average, and our figures are better than
any other country in the world. These are points that
have to be made. The talk of seasonal arguments and the
like has gone on for some time
But what you have got to do about them,
you've got to understand them. And I would like even,
to try and give you, if I Could, an explanation of why
the seasonal figures are the ones that you lookza+, But
go on, you ask me further questions now.
Well, Sir, I won't go into the seasonal
points because I don't want to bring up the matters you
brought up in the House yourself last year not
looking at the seasonal figures but rather at the
absolute figures.

PM: Well I said that one was the one that was
emotive in quality and that created the greatest public
interest and could be used for political purposes.
But if you want to look at it for economic and national
purposes, the figures that you should look at are the
seasonally adjusted figures.
Q. Well, now just to go back to the excessively
gloomy views, one of the problems that you ' have said
you are facing yourself is that these views are being
put about, So I don't understand why you won't name the
persons who are responsible for it.
PM: Because it is not my practice to be naming
persons. I believe in fighting the issues, as I said
before, and every time you get a Prime Minister naming
people, irritating them, then it has a counter-reaction 0
and the ones that suffer are people like myself,-and you
get into a kind of a bra~ 4l that does nobody any good.
We are here to solve national problems and that is what
we will do.
Q. Let's come now to the spiral
of which you spoke a moment ago. The argument of the
ACTU through Mr Hawke is that the Unions cannot be
expected to hold back on their wage demands whilst the
Federal Government makes no constructive policy towards
price control.
PM: The problem here is to understand causes
and effects, and Mr Hawke knows the answer just as well
as I do. And the cause of our problems today is that
average earnings are rising so substantially between
11 and 13 per cent. Now the simple fact is that if wages
rise, earnings rise greater than productivity increases
which are about 2 per cent, you must get-built into that
a cost inflationay factor of the difference between the
two. It is inevitable that it will happen. So if Mr
Hawke cares to get on the platform or on television and
talk about the realities of life, he will be driven to
the con~ lusion that the primary cause is wages and this is
one that we have to find the answer to, if possible, through
the Arbitration system.

Q. Implicit in Mr Hawke's argument seems to be
PM: I did ask you a few minutes ago if you would
let me finish...
Q. Sorry, I thought you had finished.
PM No, I hadn't quite finished. . But what I
wanted to end, therefore, is this question of prices.
Naturally enough, we are giving a great deal of
consideration to this problem of prices, but it is not
a problem that you want to go creating the impression
" Well we are having conferences about it to see what we
can do" because if you did, then I think you would find
quite a number of people in the community would be
bumping up their prices in anticipation of what-is likely
to happen in the days to come. But nonetheless we don't
within the Cabinet, of course we discuss the whole of the
national economy and every single aspect of it and we will
continue to do so.
Q. Sir,' the Government's last Budget, the Budget
you supervised as Prime Minister was styled as an
" anti-inflationary" Budget.
PM: Who styled it that?
Q. Well, it has been styled that way not only
by the commentators, of course, but by your own Ministers,
and by your own Treasurer.
PM: Well let me correct you, please, because
Mr Snedden is my Treasurer, and I, too, have said it
was a Budget that was designed for several purposes,
not one. The first one was that w( should ens ure growth
and that we should keep unemployment down. They are
two objectives. The second of them is enormously
important to me personally, and I have wanted to keep
unemployment to a low rate ever since I have been in
the Government, over 21 years. And the third, the major

problem we face today, a long-term problem, is how do
we handle the problem of wage increases and, consequently,
of inflation. So when you say it was singularly or
solely an anti-inflationary policy, that isn't accurate.
There were three objectives in our policy.
well insofar as inflation has continued since the
Budget for the seven months since the Budget, plus the
concessions you made today to boost employment, do you
then acknowledge that the strategy, the third point of the
strategy of the Budget to control inflation has failed?
No, I don't because again I think you must
try and understand the difference between the powers that
we can exercise and what we try to do. Now there are
two different types of inflation one is what you call
demand inflation*-and that is the old classical fotm of
inflation too much demand chasing too few goods.
There is a second kind that is quite new to us, and that
is the rapid increase in wages that has been occurring
in recent months Which you are hoping to control?
Which we hope to slow down and finally control.
But we in the Commonwealth have very little powers because
other than in our Territories, the ACT and the Northern
Territory, we have no power whatsoever to control.
other than through the Arbitration system.
If the problem is really serious, Sir, why
don't you seek those powers?
Go to a referendum?
Yes. Yes, we could probably do that-but that is a
process that would take about nine months at least to
become effective. It is seven months since the last Budget and
in that time you haven't been able to control inflation.
No, but we did feel frankly, when I want
away, up to Queensland at the end of December, I was fairly
certain we had got it where we had seen the glimmerings of
PM: Q. PM. Q.
PM: Q. PM:
Q. PM:

a prospect of bringing it under control because the
Arbitration Commission in what is called the Carpenters'
Case had acted with sweet reason and had shown that
wage increases were beyond the capacity of the community
to sustain or to pay. To my horror, we then found that the
Electricity Commission of Victoria went and gave a 9 per cent
increase beyong our capacity to control. And. then the
Municipal Officers got an increase. And-. then the claim
was made by the Electricity Commission for an extra week's
leave. Now all these things have happened since December,
at a time, as I have said, and subsequent to the time when
I felt that at long last we had got this problem under
Q. Well if that glimmer, Sir, just to conclude
with on this point, if that glimmer of hope that you
have is dimmed for the rest of this year, could you
now give a pointer that'you might .466k powers for the
Commonwealth to control wage increage?
PM: Well what we are trying to do first of all
is to look at the problem of containment, or isolation-
I used the word today of isolating these three cases
to Victoria. If we can do that, and we will try to the
maximum of our capacity, then we can see another glimmer
of light in the difficulties in front of us. But now I
must confess I will be looking at this question of
greater Constitutional powers for the Commonwealth.
, In my view, the one area where, if we are to exercisip
ouerall economic management, the one area where & should
try and get greater powers is to see what we can do in
terms of this control of the wage structure. But we
couldn't do it directly and we would never want to do
it directly. We would want to do L~ t through the
Arbitration Commission.
Q. Mr McMahon, thank you for speaking on
" This Day Tonight".

Transcript 2534