PREMIERS' CONFERENCE ON PRICES AND
INCOMES MATTERS AM) ALL OTHER ASPECTS
01? INFLATION
OPENING STATEMENT BY PRIME MINISTER
There can be today no more important reason for the
Australian Government and the State Governments to come together
than for the purpose of addressing ourselves jointly to action
against inflation. The ready response of all Premiers to the proposal
for this meeting is a measure of your concern about the prob~ lem
of inflation. That concern is fully shared by the Australian
Government and I am convinced by the Australian people.
It is, I may say, a concern which is not peculiar to
Australia. In all the advanced economics of the world, people
are expressing similar concern. Our own position is no worse
than many and a good deal better than some. But that.. as I
shall have reason to point out, is in itself cold comfort.
As you all know, the initiative for this meeting came
from the Premier of Victoria. Mr. Hlamer wrote to me on 9 April
suggesting that what was necessary to achieve effective action
against inflation was the development and implementation of a
comprehensive national prices and incomes policy. He pointed
to the division of relevant constitutional powers between the
Australian Government and the State Governments and. suggested
that a Premiers' conference should be convened in an effort to
achieve close understanding and co-operation between all of us
in this matter. We moved quickly to welcome thait initiative;
and you have responded promptly to my invitation to meet here
today " tto discuss prices and income matters and all other aspects
of inflation"
I 2.
Let there be no doubt as to the seriousness with which
the Australian government views inflation. We have been elected
on a platform of social change. We have promised the Australian
people a program of wide-ranging and overdue reforms in the
social structure of this country. To carry out that program
is the primary objective of this government.
But we now find the possibilities for desirable social
change threatened by a potential resurgence of inflationary
pressures. We are fully alert to the distortions inflation
wreaks on the distribution of incomes; its insidious effect in
reducing the real value of savings; its unfair impact upon those
in greatest need; its adverse longer-term consequences for
growth; and, above all, the danger that if no action is taken
inflation will develop into accelerating inflation.
To the extent that inflationary pressures re-emerged it
would reduce our capacity, both in the Budget and more generally,
to bring about the social changes which are our foremost aim.
Because we have a responsibility to pursue our program to carry
out our mandate we must find effective means of tackling
inflation. We are determined that the realisation of our program
will not be thwarted by any lack of resolution in coping with
inflation, I fully recognize that political views around this table
differ. But in this matter all of us have a common interest.
Inflation adds to the problems of us all. Most certainly,
inflation runs counter to all that my Government stands for and
seeks to achieve. Now that the worst manifestations of last year's
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unemployment situation are behind us, we rank inflation as the
number one economic problem. We will do all we can to bring
rising prices under control.
But inflation is an evil which permeates the economy and,
more, the society. It is widely recognised that there is no
simple solution to it-it has to be tackled across a broad front,
and by every means at the command of governments. I hardly need
to add that, in the Australian context, that means that the State
governments have a vital role to play. Mr Iamer's message and the
presence of every Premier acknowledges this fact.
I turn now to the measures which the Australian Government
has already taken, and the further measures which we propose, to
bear down against rising prices:-
SRevaluation: On 23 December within three weeks of taking
office the Australian Government revalued the Australian
dollar. The primary purpose of that measure was not to
curb rising prices but to correct a fundamental disequilibrium
in Australia's balance of payments. But a secondary purpose
was to exert a downward influence on our domestic price level.
In this respect our decision to revalue is having, and for
some time ahead, will continue to have beneficial effects on
prices in wide areas of the economy.
SReaction to Devaluation of the U. S. Dollar: It was with
these same joint considerations in mind that we determined
what reaction should be given to the announcement on
12 February that the United States dollar was to be
devalued. Our decision to sit pat and thereby
appreciate further against the U. S. dollar and any
other currencies which followed it, wholly or in part
was in line with our decision of 23 December. As a result
of these twin decisions, import prices are now stable they
may even be falling moderately. That in itself is testimony
to the beneficial effects of the decisions in providing a
countervailing influence against rising prices. Similarly,
those firms which had previously undertaken borrowings in
foreign currency should now be enjoying actual or prospective
windfall gains as a result of the recent changes in relative
exchange rates. It is our feeling that the sense of
corporate well-being that must bring should also find some
reflection in the market-place for prices.
Inquiry into Proposed B. H. P. Price Rises: At the request
of the nation's largest industrial enterprise we set up an
inquiry into steel price rises proposed by the company. In
the result rises averaging 3 per cent occurred instead of the
rises of 7 per cent proposed. Steel prices have wide
repercussions throughout the economy. There can be no doubt
that, had steel prices risen by 7 per cent, prices generally
would be rising even faster than they now are.
Joint Parliamentary Committee on Prices: Other things being
equal, importers should now be seeing reductions in the landed
prices of their goods. We are concerned to ensure that such
reductions are passed on. They were intended to accrue, and
should accrue, not to a particular group but to the Australian
people as a whole. We look for appropriate action in that
field from the price-setters involved. And to encourage them
in that action we have referred the question to the Joint
Parliamentary Committee on Prices, as one of its first major
areas of investigation.
We have, similarly, referred to that Committee fr investigation
the question of meat prices the recent
sharp rise in which has so greatly contributed to
the large rise in the Consumer Price Index recorded
in the March quarter.
Our attention has been drawn more recently to the
marked disparity which now exists between retail
prices of petrol in Sydney and Melbourne. My colleague,
the Minister for Minerals and Energy, has now received
a report on this matter which has been prepared for the
Australian Automobile Association. As he has said
yesterday in the House, this matter will be pursued
with vigour and to the full limit of the Government's
powers.
Liquidity Measures: As I said in my statement announcing
the revaluation of the Australian dollar, the flood
of foreign capital into Australia had resulted, by the
time we took office, in " a build-up of domestic liquidity
to a dangerously excessive level". With the economy
picking up pace there was here a tinder-box ready for
the match. It was, clearly, imperative that action be
taken to dampen any such prospective conflagration.
Simultaneously therefore with revaluation we moved to
check any further build-up of liquidity from this source
by imposing the 25 per cent deposit requirement scheme
on new borrowings abroad. Such borrowings have, to all
intents and purposes, largely ceased,
Again, by way of follow-up to this the Treasurer
on 1 February last announced measures to broaden
the coverage of restrictions on overseas borrowing
and associated measures. The coverage of the controls
was extended to include not only formal contracts to
borrow but also indirect forms of borrowing and
transactions having a similar effect on capital inflow.
Monetary Policy: The measures I have just referred to
were of course taken within the context of our policies
towards the balance of payments and the inflow of
capital from abroad. But, as I have made clear, they
were also taken having in mind the contribution they
could make towards diminishing a major problem
the state of domestic liquidity. This brings me to
the subject of monetary policy generally.
It is I think agreed on all sides that, whatever other
steps may be necessary to check inflation, all are likely
to prove futile unless fiscal and monetary policies in
the broad are sensibly and responsibly geared to the
productive capacity of the economy. Such policies are
not, in themselves, enough: but we believe and we
are supported by all competent opinion both within
Australia and overseas that they are the essential
basis, the sine qua non, for an effective antiinflationary
strategy.
On the monetary front, with economic activity
continuing to expand strongly, continuation of
the unduly easy stance of monetary policy would
have been fraught with dangers for the period ahead.
We have, accordingly, seen as appropriate the decision
by the Reserve Bank to make a call of one per cent to
the Statutory Reserve Deposits of the major trading
banks in April.
Similarly, in approaching the difficult decisions
involved in setting terms for the May loan recently
announced decisions in which of course you in your
capacities as members of the Loan Council have so
responsibly participated we have had to set aside
what we would have liked to do in favour of what it
was clearly necessary to do. We have, in short, met
the yields which, since the February loan, had emerged
in the market. To have attempted to maintain a lower
yield structure would have meant continuing large-scale
purchases of bonds by the Reserve Bank with consequent
expansionary effects upon the liquidity of the private
sector. In present and prospective circumstances we
were not prepared to countenance such an outcome.
In these connections I should also say that the Treasury
and the Reserve Bank have been asked to make a detailed
study of the various aspects of the regulation of the
financing activities of non-bank financial
intermediaries.
STask Force to Review the Programs of the
Previous Government: The Government is, of
course, aware that in approaching questions of
overall economic management it will be necessary
for it to give considerable attention to fiscal
as well as to monetary policy. As a first step
in that regard I announced on 3 April last the
constitution of a special " task force", under the
Chairmanship of Dr. Coombs, to examine the programs
carried over from the previous government.
Its efforts should assist us in seeing what scope
there may be for pruning expenditures. Clearly,
it will be necessary in that or other ways to
" make room", within the totality of the public
and private demands upon the economy, for the
carrying through of our own priority programs.
SPrices Justification Machinery: My colleague the
Treasurer has, only yesterday, introduced into the
Parliament a Prices Justification Bill, I shall not
seek to detail its provisions here. However, companies
will be required to give prior indication of price
rises so that they can be examined, their effects
assessed and their justification determined by the
Tribunal set up for the purpose. The Tribunal may also
investigate cases where circumstances suggest price
reductions should have occurred, but have not, It
will also be able to inquire into and report on price
increases which companies made prior to the measures
coming into force in the hope of beating the gun,
We shall be appointing to the Tribunal persons of the
standing and quality of those who have constituted the Trade
Practices Tribunal. In that case, of course, the members were
appointed by our predecessors. They have our respect and
confidence. Restrictive Trade Practices Legislation: As an important
aspect of its attitude towards competition policy with
the bearing that has upon the ability of price-setters to
push up prices the Government proposes to introduce
more effective legislation to deal with restrictive trade
practices. The proposed legislation will deal with contracts
in restraint of trade, monopolization, resale price
maintenance, price discrimination, anti-competitive mergers,
exclusive dealing that substantially lessens competition
or leads to a monopoly position and unfair and deceptive
practices affecting consumers. It will deal with these
provisions by directly prohibiting them instead of, as at
present, leaving them to be restrained separately after timeconsuming
enquiries. By this means the legislation will
have an early impact on the economy.
Protection Policy: Another aspect of what I have called
competition policy is to be found, of course, in the
area of protection against competition from overseas. The
Government has confirmed its support for the progressive
review of the tariff by the Tariff Board which is now
in progress. We will ensure that the further references
required to enable the Board to complete its review will go
forward. The Government proposes to establish a Protection Commission
to advise on assistance for both primary and secondary industry.
Some two months ago I asked Sir John Crawford to advise on the
functions, structure,
membership and procedures of the proposed Commission.
Sir John's report will be available about the middle of the
year and the Government will act promptly when the report
has been received.
Action in the The Minister for the Capital Territory,
who is present with us here today, has approved the
preparation of legislation to set up a Business Leases
Review Board to examine harsh, unconscionable or unfair
rentals of commercial premises which are producing
unnecessary inflationary repercussions in the Territory.
The Minister has also approved the establishment of a
comprehensive AOC. T. Homes Insurance Scheme similar to the
successful low premium War Service Homes Insurance Scheme,
The Minister is examining proposals for a public conveyancing
service, controls over excessive advertising and similar ways
of reducing ultimate costs to the consumer. By way of
buttressing, within the Capital Territory, the actions
possible uinder the amb~ it of the Prices Justification Tribunal,
the Minister has also ap~ proved the re-activation of the Prices
Regulation Ordinance which was introduced by the Chifley
Government but which has lain dormant for some years.
* Consumer Protection: The Australian Government has been
concerned about the need for improved means of protecting
consumers against unfair trading practices. To that end
we are moving to exploit the capacities of our own
scientific and technical experts in thle formulation and
implementation of a framework of standards for consumer
products.
11.
The Cities: We believe that inefficient cities are one
source of inflationary pressures. Present-day
inefficiencies in our major cities increase the costs
borne by city dwellers in their capacities as home-buyers,
as commuters, as rate-payers and as taxpayers more generally.
In the longer-term, the policies of the Australian
Government, designed as they will be progressively to
improve the efficiency of city living in Australia and the
welfare of our city dwellers, will contribute to
removing the inflationary pressures which these present
inefficiencies help to generate.
Proposed Establishment of Housing Standards Committee:
As a contribution to improving efficiency and reducing
costs in the housing construction industry, the
Australian Government is contemplating a forum
in which housing standards and guidelines based upon
proper technical analysis rather than upon traditional
notions will be worked out. It would involve an expert
technical unit in the Australian Department of Housing
to undertake the necessary research, development and
co-ordination, this work to be undertaken in close
association with all interested parties. We would
establish an " Australian Housing Standards Committee" for
this purpose.
SConsultations with Management and Trade Unions:
Economic management is largely the responsibility of
the Australian Government. We accept that responsibility,
and our actions have already gone far to reflect that.
However, one group or one Government alone cannot grapple
fully with the problem. To do so requires a wider effort.
In a real sense, that is why we are here today.
I shall come shortly to the ways in which the States
can support our own efforts, But there is also the
private sector. We are planning this year to have
economic consultations, as our predecessors did, with
representatives of important areas of the economy
manufacturing, commerce, the trade unions and so on.
We will be putting it to them-to employers and
unionists alike that we look to them to support by
the exercise of restraint in their price and wage
proposals the policies which this government already has
initiated or has in hand.
Just as we will be seeking the support of the nongovernment
sector to these ends, we would hope that
you, the political leaders in your States, will take
opportunities to do the same.
What the Commonwealth Seeks of the States
I spoke earlier of Mr. Hamer's reference to the division
of relevant constitutional powers between the Australian
government and the State governments0 There is certainly scope
for complementary action by our several governments which will
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bear on particular aspects of the inflationary problem. Five
months ago when we came into office we sought and obtained the
co-operation of the States in immediate measures to relieve the
unemployment situation that was concerning us all. I hope that
we can look to the State Governments for the same willing
co-operation as we address ourselves to the rather different
problems of today.
Specifically, I would now like to suggest the
following areas which appear to be promising in this respect.
Action to Complement the Australian Government's
Prices Justification Legislation. The legislation
introduced yesterday by my colleague the Treasurer
will apply only to companies whose receipts exceeded
million in the preceding financial year. That
limit has been struck to ensure that the scheme is
administratively manageable. The Australian Government's
legislation will bring under scrutiny prices charged by
the larger companies which are the " price leaders" in
respect of many products. But there are large areas
of economic activity which will not be brought under
scrutiny. That is to say, there is ample scope for
complementary action by the State Governments to
support and reinforce the impact of the Australian
Government's initiative,
Land Prices. The Australian and State Governments
need to consider, together, whether something can
be done about soaring land prices. In the longer-
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term, new cities will help to take pressure off
living space in and around our existing cities.
But action with a more immediate impact is also
needed. I wrote to all Premiers on 27 December 1972, seeking
co-operation on this important matter. My colleague,
the Minister for Urban and Regional Development, is
actively pursuing it. Your Governments have been
invited to introduce legislation to stabilise land
prices so that land needed later for growth and
development can be acquired at prices free from
speculation. The Australian Government is discussing
with your Governments the establishment of State Land
Commissions, to participate actively in the land
market and to increase the flow of residential land
at reasonable prices.
I know that some States are more advanced, and more
willing to advance, in these directions than are
other States. I know too that the problems vary in
intensity and nature as between States. We hope that
all States will be prepared to make their contribution
to the prime objective of giving Australian families
access to land at fair prices.
Building Costs. There are various possible ways in
which State Governments might act to check the serious
upward spiral in building costs and particularly,
of course, the costs of housing construction.
As the Treasury said yesterday in its published
Round-up of Economic Statistics, the demands being
made upon the housing sector are now clearly
excessive. As a result, house-building is under
severe strain from lack of men and materials.
Office-building is also going on apace especially
in the central business districts of the big cities
and there is some evidence of a prospective glut in
this sector. Some reduction in activity in officebuilding
would of course release resources and this
could marginally ease the problems in the housing
sector. We recognise, of course, that the scope for
transferring the particular resources concerned is
limited and it would in any case no doubt take some
time before any significant relief could be hoped for.
But the Government believes that the State Governments
particularly those in whose States most of the large
office projects are going forward should at least
examine the possibilities. Is there a glut? Will
there be a glut? What could be gained for housing if
office building were restrained? And what means of
restraint are available? Surely these are matters which
are worthy of some examination by State Governments in
co-operation with us.
As a separate matter, I have been personally disappointed
in the slow and reluctant acceptance by some of the
States of the Australian Model Uniform Building Code
which you yourselves have worked out and I sincerely
hope that those States which have not so far adopted it
will do so. I would propose to invite each Premier to nominate
a representative or representatives to engage in the
work of the contemplated Australian Housing Standards
Committee. We shall provide more details in direct
ministerial contacts.
Restrictive Trade Practices. I referred earlier to the
Australian Government's proposal to introduce more
effective legislation to deal with restrictive trade
practices. These practices are rife in Australia and
their very purpose is usually to keep prices up. They
serve to aggravate inflationary trends and the need for
effective legislation to control them is pressing.
The Australian Government recognizes that the existing
Restrictive Trade Practices Act is not effective for
this purpose. More effective legislation is being
prepared and it will be introduced into the Australian
Parliament as soon as possible, But there will not be
sufficient constitutional power to permit the legislation
to cover the whole field of restrictive trade practices.
The legislation will depend, in the main, on the
corporations power as that power was construed by the
High Court in the Concrete Pipes case. There are still
many uncertainties as to the scope of this power and
it is plainly limited in a number of respects. For
example, many trade practices, particularly those
relating to services, do not involve corporations.
This is, I believe, an area where a co-operative
effect by the Australian and the State Governments can
and should be made. Some states have already indicated
17.
a willingness to co-operate by enacting legislation
referring to the Australian Parliament the necessary
power to deal with those trade practices that are at
present beyond its reach. We are grateful for their
indications of willingness to co-operate and propose
to take the matter up with them very soon now that
the nature of our own proposed legislation is almost
settled. I hope th. at other States will f6llow suit
and make it possible for the Australian Parliament
to deal effectively with the whole range of these
undesirable practices. The best method of co-operation
in regard to this matter would be a reference of power
similar to the one that was effected by Tasmania in
1966. A State that was not prepared to refer power
could assist by enacting legislation complementing
that of the Australian Parliament. I would hope that
this course would also be seriously considered.
Consumer Protection. I have already referred to our
own intentions in this field. But if effective action
is to be taken Australia-wide it will need the active
support and co-operation of the States. In that
context, I suggest that the Premiers might ask their
appropriate Ministers to meet with the Australian
Minister of Science to discuss ways of arriving at
uniform standards for consumer products and ensuring
that those standards are observed.
Measures of this kind make a direct contribution to
community welfare; but in the present context we
also see them as assisting competitive market forces
B P
18.
to reduce the scope for irresponsible pricing.
0 a 0 0 a 0
Finally, a word on incomes. Some take the position
that the be-all and end-all of anti-inflationary policies is
to fulminate against wage rises. That is not our position.
On the contrary, we have moved to correct, in the areas under
our own control, some evident anomalies and injustices. We
have acted to increase social service payments to those who
have been most cruelly harmed by inflation. We make no apology
for acting quickly to honour our election pledges in these
fields. We are happy that in Tuesday's decision the
Arbitration Commission has recognized the particular needs of
low wage earners in giving them a substantial rise from the
unrealistically low levels of the recent past. The Government
does not take any rigid and doctrinaire position on these matters
and our attitude to future wage claims, in National Wage Cases
and elsewhere, will pay full regard to all of the circumstances,
social and economic, which prevail at the time.
Tuesday's award was, of course, a large one, and it
will add substantially to costs. With productivity rising as
the output of the economy picks up, the greater part of industry
should be well-placed at present largely to absorb these
increased costs. I now invite the Premiers, in turn, to put forward
their own proposals and their views on the suggestions I have
made. We will not solve everything in one day. But we can
make progress in identifying areas where the national and State
Governments can act together against a problem which, as I began
by saying, confronts us all.