Written for the NSW Young Labor Unemployment Committee in November-December 1976 mainly by Seumas Dawes, Shane Easson, Chris Warren and myself, in that order, as a discussion paper. Most of the paper was published under the heading ‘’Women and Children First’ in the NSW ALP left journal Challenge, Number 3, February 1976, p. 6.
The May figures for the Australian labour market released by the Minister for Employment and Industrial Relations, Mr. Street, show that 5.2% of the Australian workforce is unemployed. In New South Wales this figure is over 6%. Nationally there was an average of 16.1 people out of work for every job available in May, as compared with 15.4 in April.
The Minister has argued that continuing high unemployment is a result of recent wage increases. Mr. Whitlam believes that public sector cutbacks have been a major contributing factor. Others have expressed the view that it is symptomatic of a continuing crisis in the capitalist world.
Whatever view one holds, it must be argued by the Labor movement that unemployment is Australia’s major political issue, and it is essential that the Australian Labor Party must re-establish its commitment to full employment as a policy goal.
In the past this has been linked with a policy of economic growth – the expansion in production was sufficient to absorb the rate of growth of the workforce so that conditions of full employment (i.e. 98.5% of the workforce being employed) could be met.
The Vernon Committee in 1965 found “…economic growth …is the central objective to which the other stated objectives should be related.”
However, since the recession hit the world economy in the early seventies, even though GDPs have increased, there has not been a corresponding increase in employment. In the 1950s and 60s, full employment was defined in economic terms as the point where capacity output and equilibrium output were equal. We have now reached a static point of less than full employment equilibrium. The traditional Keynesian (demand management) and Monetarist (free marketeers) theories have proved inadequate for an increasingly complex economic system. Our view is that one of the greatest challenges facing the Labor movement today is to develop a consistent framework of policies which will aim at bringing about the long-term goals of full employment, a reduction in the inflation rate and a more insulated economy.
This paper is a contribution to such a debate.
NSW Unemployment Highest In Australia
The NSW unemployment is currently over 6% of the workforce and is rising. There is no prospect of this rate of unemployment falling to any significant degree both in the short or long term. With any high level of unemployment those with physical or mental handicaps are the first and hardest hit. With the present level of unemployment, the proportion of migrants, women, blacks and young people out of work is far greater than other groups. In the Sydney metropolitan area, well over 30% of Aborigines are unemployed. It is these groups which have traditionally taken on the lower paying, low skilled jobs – jobs which are decreasing in proportion to the rest of the labour force because of the trend to capital intensive
The Fraser government aims at reducing inflation by a policy of ever-growing unemployment, irregardless of the social costs involved. It is not concerned with the structure of unemployment. Youths have borne the brunt of the present level of unemployment.
People under 21 comprise approximately 40% of Australia’s unemployed despite the fact that they account for only 12% of the workforce. At the end of February 1977, youth unemployment in Sydney’s western suburbs was over 50% of the total unemployed: e.g. Liverpool 58.1% and Mt. Druitt 55.1%. The unemployment rate for those under 21 is four times that of the rest of the workforce. The ratio of junior unemployed to job vacancies was 35:1 at the end of June 1976. In some country areas this figure is as high as 600:1. It has been estimated that in each of the last two years, 20,000 school leavers have remained at secondary school a year longer than they had originally planned, because they could not find employment. Yet, the number of school leavers will increase until at least 1980. 25% of unemployed youth have been out of work from 3-6 months, while a further 20% have been unemployed for more than six months. The average period a young person is unemployed is about 19 weeks.
School leavers under 16 are not paid benefits at any time. There has never been any detailed investigation into the relationship of the educational system to vocational guidance. The state government should increase the number of careers advisers employed for state schools and incorporate vocational guidance into the curriculum of schools. More accessible and thorough vocational guidance together with retraining schemes for the young may go some way towards alleviating the present situation, but at best this is only a partial solution to a seemingly insurmountable problem.
Social Welfare: A Growing Area of Concern
Of great disadvantage to the unemployed is the current administration of the Department of Social Security and Employment and Industrial Relations. At present, both Departments have failed to produce anything like a comprehensive guide to inform the unemployed of their rights. As a consequence, many people have been denied their full entitlement to benefits and/or have been refused benefit for different periods.
Often payment has been delayed for six weeks because the recipient left their last job of their own accord, even though they may have been forced to resign or had left in anticipation of another job which had subsequently fallen through.
In any case, the Social Services Act does not allow for people to be denied benefits which should be their right.
Especially within the Department of Social Security it is the lower division officers who deal with the public, e.g. clerical assistants from the Fourth Division who staff the counter. The further we move up the hierarchy, the less contact we find with the public.
This means that incorrect information may be given out as it is relatively inexperienced officers from both Departments who deal with the public. This represents the failure of both Departments to be structured along lines which best serve the public.
At present it takes an average of 4-5 weeks from the time a person registers for unemployment benefit to the time a social security cheque arrives. The reason it takes so long is largely due to the understaffing of both Departments. The Fraser government, in its assault on the unemployed does not care that with the volume of work confronting the Department of Social Security, only limited services are provided thus cheques are not received regularly, and other delays occur. Many people find it almost impossible to wait any long period for their benefit to come through. The main options in such circumstances are either to approach charities or the State Department of Youth and Community Services.
This Department however, only provides $5.50 per week for a single person, $11.20 for a married couple and $19.50 for a married couple with children, while they are waiting for their unemployment benefit to arrive.
Yet to qualify for this allowance the applicant has to prove that he or she was retrenched from his or her previous job. The allowance is not available to people who resigned from their jobs for whatever reason.
The Department of Youth and Community Services should increase its allowance and make it available to all unemployed people.
This question was taken up with the Minister, who promised to investigate the possibility of revising the qualifications for the allowance.
It should be noted that the Department is only picking up the tab caused by the delays in paying unemployment benefits by the National Department of Social Security, and that this Department has been crippled by the cutbacks of the Fraser government in staff levels despite the increased volume of work due to rising unemployment.
The Commonwealth Employment Service (CES) seems to be more of a dole agency than a job-finding service. Under its Work Tests provision, which are arbitrarily enforced, considerable damage is done to its reputation to prospective employers. If an officer of the CES believes a person isn’t seriously searching for work, the officer may refer the applicant to an employer who he would expect would reject the applicant for a reason such as dress. Alternatively, the applicant may not, for some reason or other, turn up for the job interview.
The result could be that the person referred will have his unemployment benefit postponed or rejected. But in the process the CES may find that employers may be less enthusiastic about notifying the CES regarding future job vacancies, because of the unsuitability of many of the applicants referred.
The effectiveness of the CES is curtailed if one of its main functions is merely to handle Social Security income statement forms and to enforce provisions for the benefit.
Unemployment Benefits – A Living Wage?
Unemployment benefit has remained stable at $36.00 per week for those under 18 since May 1975. At present a single person over 18 receives $43.50 per week. There seems to be no logical reason why there should be this difference, especially when people under 18 are living away from home.
No rent allowance is paid to unemployed people. A person on a pension or sickness benefit is paid $10.00 per fortnight if that person pays rent. This amount should be increased and made available to unemployed workers.
The Fraser government has decided to tax unemployment benefit as well as sickness and special benefit. This means, for example, a person who is unemployed for 6 months in the financial year and who works for the remainder has to pay tax on the paltry amount of benefit received as well as on income earned. Indeed, Life was not meant to be easy.
For married people, a person whose spouse is working is not paid unemployment benefit. If the husband and wife are both unemployed, the husband is paid the unemployment benefit. With de facto couples, the income of one is taken as income for both, which means that a claim for benefit will be rejected. A husband whose wife is working is eligible for sickness benefit (at the single rate plus an allowance of $7.50 for children), but a working wife whose husband is working is not eligible for sickness benefit as she is deemed to be supported by her husband.
An alternative to all of this would be to treat couples as separate entities. Thus, the income of the spouse of an unemployed would not affect their eligibility for benefit.
Therefore a married person or person living in a de facto relationship would receive payment at the single rate plus allowances for children, or in the case where both husband and wife are unemployed, each would receive benefit at half the married rate of benefit plus half the allowance for children.
a) No benefit is payable if the claimant is a direct participant in a strike.
b) If someone is dismissed by his employer for going on strike he/she is ineligible for unemployment benefit for the duration of the strike.
c) A person who resigns or is dismissed by an employer for refusing to work with persons replacing striking members of another union is ineligible for benefits for the duration of the strike.
These provisions are draconian, especially since a person must serve a waiting period of 7 days after registering for unemployment benefits before qualifying for benefit. Strikes which last more than a week always have a justifiable reason.
A person under 18 is only able to earn $3 per week and a person over 21, only $6 per week before it affects their unemployment benefits. Anything earned over these amounts is deducted dollar for dollar from benefit. Between November 1972 and May 1976, part time employment increased by 27.6% while full-time employment only increased by 1.1%. Yet by allowing only minute income before benefit is affected, the provisions for unemployment benefit discourage part-time employment.
One area not directly related to unemployment, but which does affect migrants, is the payment of a Special Hardship benefit. At present migrants coming to Australia from Britain, New Zealand or Canada who wish to bring their aged parents or invalid relatives to this country find that an Australian pension is immediately payable to that person once they arrive in Australia because of a special agreement between the governments of Australia and these other countries.
However, with migrants from any other country, they have to sign a maintenance guarantee with the Immigration Department, and promise to fully maintain the aged or invalid relative. For many migrant families this causes extreme hardship and reinforces their low standard of living within society, especially when they have to care for their relative completely.
In cases where the invalid or aged relative cannot be maintained by the sponsor a claim for Special Hardship benefit may be made by the relative who is being maintained by his/her family. To be eligible for this benefit, the income of all relatives in Australia are taken into account and means tested. This usually leads to the claim being rejected.
We propose that:
a) Public Transport concessions (similar to those available to pensioners) be made available to the unemployed.
b) The N.S.W. government should look into the question of the Department of Youth and Community Services providing immediate assistance to the unemployed.
c) A moratorium on home repayments for the unemployed.
d) Unemployment benefit be increased for those under 18.
e) A rent allowance be made available to those on unemployment benefit.
f) Benefits be made available to school leavers during the long vacation.
g) The allowable income be greatly increased for those engaged in part-time employment.
h) Married or de facto couples be treated as separate entities when calculating benefit.
i) Unemployment, sickness and special benefit be not treated as taxable income.
j) The holding of an inquiry into education and its relation to vocational opportunities so that long-term employment goals can be set.
k) That, because of the special situation of the young unemployed, the Department of Employment and Industrial Relations set up a separate officer to deal with the problems of the young unemployed.
l) That the State governments employ more teachers as career advisers in schools and that vocational guidance be made part of the curriculum in high schools.
A Manpower Policy for Australia
At present the Department of Employment and Industrial Relations claims to have two schemes designed to meet the need for an utilisation of manpower resources: The Relocation Assistance Scheme (RAS) and the Community Youth Support Scheme (CYSS).
The function of the first scheme specifically covers the transport of someone placed by the CES to a job in an area which does not have someone with the required skills.
It is designed to satisfy the labour market demand on an Australian-wide basis and involves the CES funding the cost of moving house of the person placed.
However, the limitation of the scheme is that there must not be someone with the same skills required for the job living closer to the site of the job. For example, if a person in Sydney wants to move to Western Australia, there must not be anyone with the required skills living between here and Western Australia, or else he will fail to qualify for relocation assistance.
Besides rendering any unskilled worker ineligible, this provision means that almost no-one will qualify for the scheme.
The Relocation Assistance Scheme is just another example of window dressing by the present government.
The CYSS is designed to orientate people to present themselves to a prospective employer, but it provides no worthwhile skills and has nothing to do with the creation of jobs for the unemployed. Its main purpose is to boost the morale of young people waiting for their first job.
With increasing automation and the development of new technologies, industry is becoming more capital-intensive and bottlenecks of labour are likely to occur. Many of the more menial tasks involved in producing goods are being eliminated and it seems a doubtful proposition to suggest that there will be a sufficiently great rise in the numbers of specialist and technical positions available to compensate for this. But even if this were the case, there are a significant proportion of school leavers whose basic educational qualifications are not high enough to gain entry into these careers.
With the young presently unemployed, about two out of every three have not attempted beyond fourth form. It would seem that these people will have difficulties in finding stable employment if educational qualifications are to be the main guide for eligibility to pursue technical training.
One area in which this problem is being felt is in the number of apprenticeships being offered. The following figures from the N.S.W. Department of Industrial Relations illustrate this:
|Trade||% change 1974-76||Change in job Nos.|
|Metal and Electrical||-8.15%||-607|
|Other Metal trades||-29.56%||-251|
Yet in these areas there is already a shortage of skilled labour, a shortage that, with the present decrease in the number of apprenticeships being offered, will be disastrous in a few short years.
The reason for the decreased apprenticeship intake is partly due to economic recession. However, employers are demanding school certificate qualifications to be of a higher level than in previous years, due to the fact that they have more people to choose from.
As a result, many school leavers who are capable of undertaking an apprenticeship will miss out on a trade when there is already a shortage of tradesmen. It would seem that if employers have been unwilling to employ sufficient apprentices to meet our future needs, then there is a need for some sort of government policy to train apprentices, for example, in the building industry.
There is at the moment no manpower policy in Australia. At best we have a piecemeal programme which collectively serves to make the development of the labour market a little less haphazard than it could be.
One area that needs to be further developed is in technical and further education. As the table attached to the end of this part illustrates, expenditure in this area on a per capita basis is far lower than for universities and CAEs.
The Technical Teachers Association of New South Wales has recommended the following changes in apprenticeship training schemes which would mean full-time training in technical colleges followed by training within industry. The committee supports the proposals:
1. Students should be selected for apprenticeship training after completion of an approved period of secondary schooling. This period may be varied according to the educational standards deemed necessary to successfully practice within particular trades.
2. Where it is deemed appropriate that all technical college training is to be completed before commencement of apprenticeship, the period of full-time training may be up to two years. If it is considered essential that some additional part-time technical college training should be provided for apprentices while gaining experience in industry, the full-time training should be of one year’s duration.
3. Courses of one year’s duration should be designed to cover one-third to two-thirds of the content of present trade courses, and may in some cases cover the work of more than one trade.
4. Practical work should be given special emphasis to compensate for early on-the-job experience and training as presently gained by first and second year apprentices.
5. Where practicable students should undertake an amount of productive work, such as the present arrangements whereby pre-employment students of Carpentry and Joinery and Bricklaying build cottages for the Housing Commission of New South Wales.
6. Courses should contain strands in humanities which are designed to help the student understand society and its problems, and to prepare him to fit into the industry of his choice.
7. Students should be paid a living allowance during the period of full-time training which is sufficient to compensate them for the loss of income which would have been available under existing apprenticeship arrangements.
8. On completion of full-time training, students should enter apprenticeship at the present first or second year level. The point of entry would vary according to the length of full-time training which has been completed.
9. For those students who do not complete all technical training within the full-time period, attendance at a technical college should be for a further one to two years on the basis of one day per week or the equivalent time in a number of full-time blocks.
10. The total costs of technical education for full-time and part-time students should be met from government sources. This would include allowances paid to full-time students and wages paid to apprentices for their periods of day release or block release.
A serious case can be made for the proposition that the education system in Australia is administratively disorganised with little or no relationship between the courses run and the employment opportunities that result from the courses. Clearly a relationship must be established between post-secondary education and the employment opportunities that are available.
With the present continuing high level of unemployment, there is an urgent need for job creation schemes similar to the RED scheme. These schemes should be directed to socially useful work, such as the clean-up of polluted rivers, planting forests in areas that have been deforested, council works, or the restoration and improvement of recreation areas.
These projects should complement the restructuring of Australian industry to train people for employment in other areas. The vehicle building industry in Australia, for example, is oversized and inefficient due to the number of companies producing in Australia, compared to the small number of goods which they produce.
It has been continued in its present form, however, because there is no alternative employment. The Australian government would be able to rationalise inefficient industries by involving itself in the creation of a defence industry and developing highly technological industries such as electronics and heavy machinery.
The government should examine the feasibility of processing minerals such as bauxite to aluminium, or iron ore to steel, as a means of creating job opportunities and an increased economic return.
If the establishment of industries as outlined above cannot be financed from within the economy, the national government should negotiate for an overseas loan to achieve this purpose.
In the interim, a job creation scheme involving, say, 10 100,000 persons at a cost of $7,000 per person per year would involve an outlay of $700 million plus administrative costs.
Unless such a scheme was involving socially useful work, training schemes could be developed to teach people the skills required for the demands of an increasingly highly trained workforce.
Comparison of Expenditure on T.A.F.E. with Expenditure on Universities and CAEs
(a) Total (Capital plus Recurrent) Expenditure 1974, Calendar Year
|Expenditure 1974||Expenditure per EFTS|
|Department of Technical and Further Education||88,047||$62.0M||$704|
(4.5 x TAFE figure)
(5.5 x TAFE figure)
(b) Recurrent Expensiture 1974, Calendar Year
|Expenditure 1974||Expenditure per EFTS|
(4.4 x TAFE figure)
(4.5 x TAFE figure)
Two facts stand out from this table:
(i) Expenditure per EFTS in high education institutions is 4½ times the expenditure per EFTS in TAFE institutions.
(ii) The TAFE colleges enroll more EFTS students than the universities and CAEs combined.
It might be added that there are only 21 CAEs and six universities compared with 66 technical colleges and over 125 associated centres.
Regional Unemployment – Newcastle and Wollongong
The provincial centres of Newcastle and Wollongong are presently experiencing some of the highest levels of unemployment in the State. This unemployment is primarily due to the effect of the recession on the narrow industrial base of both cities.
It is important that the industrial and employment base of these cities is widened so as to cushion the effects of the economic downturn and the deleterious consequences for the iron, steel and subsidiary industries.
To do this, the state government, through the Department of Decentralization and Development, should provide incentives for the development of new secondary and tertiary industry in Newcastle and Wollongong.
Further, the relocation of government departments to these areas should soak up some of the present high unemployment.
A future national Labor government should pursue policies designed to promote greater industrial development in these centres. The development of an indigenous defence industry could be advantageous here.
Moreover, as mentioned elsewhere in this report, it would be beneficial from an economic and employment point of view that the Government adopt policies which would lead to the establishment of processing plants for certain raw materials. Australia, for example, might be able to increase the quantity of steel exports. In 1971 only 2% of Australia’s iron ore exports were processed to pig iron or steel.
The Jackson Committee Report: Background to the Present Malaise
The Committee to advise on policies for manufacturing industry correctly identified the central problem of Australia’s manufacturing industry in their 1975 report.
It was built up over a short period of time when the domestic market was rapidly expanding. Given the post-war baby boom, high immigration intakes, and a relatively stable economic system, it is not difficult to see why this occurred. With the rate of growth of the domestic market now greatly reduced, manufacturing industry has come to a standstill.
The share of private gross fixed capital expenditure going to manufacturing has declined much faster than manufacturing’s share of GDP. In the year ended February 1975, there was a fall of 7.7% in the number of people employed in manufacturing.
The sector cannot compete with more profitable sectors such as mining for capital investment finance. Witness the publicly stated reluctance of large multinational investors such as the large insurance houses and the State Superannuation Board, to place funds in manufacturing enterprises. The result of this is that capital stock has run down to alarmingly low levels and thereby further reducing the competitiveness of the sector.
The problem of lack of funds has also served to exacerbate the difficulties experienced by many medium and small sized firms in servicing their debts and maintaining their cash flows – since the 1960s the ratio of current assets to current liabilities has shown a steady decline.
The Importance of the Manufacturing Base: In 1971-72, the manufacturing industry was responsible for 20% gross fixed private expenditure, 20%, by value, of exports, 25% of GDP employed 25% of the workforce and sold 87% of the turnover domestically.
Clearly, we are talking about a sector which has a large and clearly defined impact on the economy. It is also true, however, that these figures understate its importance because they do not take account of the interdependencies which exist in any economic system. For example, the rural sector is heavily dependent on manufacturing for machinery and chemicals, and the demand for clerical, administrative and professional staff is, to an extent, a co-efficient of manufacturing.
By using input-output data a commodity flows between sectors. The Jackson Committee estimated that for every ten jobs created in manufacturing, five jobs are generated elsewhere.
Policy Alternatives: If the Labor movement is to be concerned with its own strength, the provision of jobs and the independence of the Australian economy, it must move towards developing more practical and imaginative policy alternatives to those which the present government is advocating. The themes of these policies should be as follows:
- Recognition of, and adaptation to, change as specified by the Jackson Committee.
- Greater self-sufficiency for the Australian economy as a whole.
This involves a refusal to become totally integrated into a world economy dominated by the industrial superpowers.
In the specific, we propose the following:
(a) A gradual reduction in the average rate of protection for Australian industry. For all but one year between 1961-62 and 1973-74, the average duty paid on dutiable imports (i.e. imports which directly compete with Australian production – approximately 45% of total imports) varied between 23% and 26%. In terms of world comparisons this is a relatively high figure.
One must also bear in mind that a tariff for one industry represents a tax on all. However, we do not wish to declare ourselves as being disciples of Rattiganism.
What we are advocating is a gradual reduction in the level of protection over a period of, say, 20 years, with certain benchmark reductions being planned for every five years. Implicit in such a policy would be ample forewarning of our intentions for both business and workers and the provision of retraining schemes, industry grants etc., in order to bring industrial efficiency up to par with that of the rest of the world.
This committee believes that a more efficient and competitive industrial sector is essential in safeguarding unemployment levels in Australia. It must be recognised that ad hoc protection policies can only serve to perpetuate the present archaic structures which have led to the present crisis in manufacturing.
(b) Supplementary to a general reduction in protection should be an alteration to the means whereby it is granted. We believe that a system of bounties should be phased in to replace our shambles of a tariff system.
A bounty system has a number of advantages which are not shared by tariffs. These are that bounties are a payment for consolidated revenue and, as such, must be reviewed by Parliament each year and that they are more flexible in that they can be applied to particular sectors of the community, regions, the efficient employment of women, migrants, handicapped persons and firms which are developing new technologies.
(c) No debate on industry protection can be developed without consideration of the body which advises the government of the level of assistance which should be granted.
This body is the Industries Assistance Commission (IAC). When the old Tariff Board was abolished and the IAC was set up in January 1974, it was given a brief to not only take account of the efficient allocation of the resources of capital, labour and technology, but to also report on the social consequences of any proposed changes to assistance level.
It is patently obvious that the IAC has chosen to ignore this designated function. We believe it appropriate that the method of appointing Commissioners be drastically altered so that it is no longer stacked with bastard-Keynesians and Monetarists.
If this course is adopted then the IAC can serve a genuinely constructive role in safeguarding Australia’s future industrial development.
The development of a two-tiered business policy: In Economics and the Public Purpose, Galbraith divided business into two groups: the planning system – the big corporate sector – and the market system – small business.
It is the planning system, or monopoly capitalism which seeks to control the prices of input, output, competition, consumption and the State.
Naturally small business would act the same way with the same powers as the monopoly capitalist sector. But its practical abilities are curtailed by the very nature of its disaggregation.
In terms of its sheer size and associated economies of scale, the planned system is able to spread its risks over a longer time, thereby generating higher and more stable returns in capital and labour.
Thus to assume that business is homogeneous as do the orthodox policy-makers, is to ignore the very nature of modern capitalism – seeking counsel from Adam Smith would not serve to be a fruitful policy alternative for the Labor movement.
A complete and receptive business policy would involve special assistance for small business regarding decentralization, technological research, conditional wage subsidies, management training, etc. These are areas which are dealt with in a subsequent part of this report.
However, there is one policy which we would urge be immediately adopted by the Party. This is the introduction of progressive corporate tax scales. To support this view a useful analogy can be drawn between personal, income taxation and corporate taxation. It is obviously unfair that a wage earner of $7,000 per annum should be taxed at the same rate as a person on $50,000 per annum.
Yet a Company with a turnover of $100,000 is subject to the same tax rate as a Company with a turnover of $100,000,000. A progressive tax scale could reduce the burden of many small and medium size businesses experiencing liquidity difficulties, especially in times of inflation.
On this point of business facing difficulties serving debt repayments, an idea which could be investigated is the partial implementation of inflation-adjusted or current cost accounting methods as proposed by the Matthews Committee.
Under the present accounting procedures capital stock is valued at its historical cost and not its current cost so that profits may tend to be overstated. If inflation-adjusted accounting methods were adopted, on a sliding scale, for businesses with a turnover of a certain amount, then they would be in a position to offer investors an adequate rate of return and thereby attract more funds for development and expansion.
Industrial development policies
(a) Assistance in developing export markets: It was argued by the Jackson Committee that the only way out for manufacturing industry is to develop new export markets. While we disagree that manufacturing expansion must be solely for exporting, this must be seen as a major cause of the growth of the sector.
A type of body such as an Industrial Export Commission should be established to industry and co-ordinate attempts to seek new markets for our manufacturers. This body could also be empowered to grant financial assistance to firms developing products specifically for export purposes.
(b) Specific purpose investment subsidies: It is envisaged that certain developments which would lead to greater economic self-sufficiency for Australia would be eligible for conditional subsidy in their initial stages. A good example of such a project would be the processing of raw materials hitherto exported in unprocessed form. The following figures demonstrate the extent to which minerals processing has remained a dormant area in our industrial development:
- In 1971 only 51% of iron ore production was processed to pig iron or steel. 2% of raw exports were processed.
- In 1971, 50% of Australian bauxite was processed to alumina, 16% of that to aluminium. Exports were 57% processed.
Industrial initiatives which might attract such a subsidy are those which provide goods for which we have been principally dependent on overseas supplies. Examples of
(c) Research and development – The Industrial Research And Development Grants Commission:
If Australian industry is to become a viable and competitive sector, it must embark upon a rapid recapitalization programme in order to increase its protective efficiency. Our position in world terms will further decline unless greater emphasis is attached to industrial research and development.
The eventual aim would be to establish Australia as world leaders in technological progress, instead of perpetuating its present position in the second division.
The following figures represent Australia’s lack of commitment to research and development:
In 1971-72, $170M went to research and development, i.e., less than 2% of the GDP. In the UK and USA the rate is about 5%, and for Canada and Sweden about 2-3%.
Industry and the CSIRO must work in concert to ensure that there is no impediment to the evolution and implementation of new technologies.
(d) The Commonwealth Development Bank: In the six years to 1975, the Commonwealth Development Bank made 75% of its new lending available to rural producers. Only a small percentage has gone to the smaller manufacturing firms.
The Commonwealth Banks Act directs the CDB to render assistance to small firms. This would be an area which could be profitably drawn upon if it were to ease its lending restrictions and provide finance at concessional rates of interest for firms intending to establish or develop new ventures. It would be most useful for smaller firms, since it is they who are least able to obtain long-term capital.
In an area such as Australia with its limited capital market, we are faced with two alternatives as far as major investment projects are concerned. The first is that we allow unlimited foreign investment and thereby become the satellite of the major industrial states, depriving ourselves of a good deal of wealth and independence.
The second is that public equity becomes a precondition to as many major developments as possible. Ideally this would also include public control, though it must be recognised that this may be difficult to achieve in all cases.
The choice appears to be obvious.
The most immediately recognizable sector where government ownership is required would be mineral extraction and processing; however the manufacture of heavy plant and equipment may also be considered. For the purpose of exposition, the most convenient to illustrate is that of mineral processing.
The following serves to demonstrate the extent to which mineral processing has remained a dominant area in our industrial development:
See details of mineral processing, above.
Australia may maximize profits for mining ventures by processing much of the raw material which is presently being processed overseas. This could be done by:
(1) Government export controls – the Australian government could enforce restrictions or levies on the quantity of exported unprocessed materials.
(2) Selective taxation – waiving or minimising tax collection in exchange for a company co-investing with the government in plant processing machinery. The taxes virtually lost by this inducement would be recouped by taxing the profits of processed raw materials which should be higher than unprocessed materials.
Cleary there is much to be gained by public equity in large scale projects such as this. The profits accruing to the public sector can be used to finance other spending programmes which may have previously been outside the National government’s budgetary constraints.
Some implications of the growth of the mining sector – The Gregory Thesis.
The much touted Gregory Thesis is hardly a new concept in economic terms. The central idea presented by Dr. Gregory is that it is possible to measure approximately the influence of the average tariff level and changes in that tariff level on various sectors of the economy by observing the adjustments of each sector to a rapid growth of mineral exports.
The author puts forward the following estimate:
…that the effect of the rapid growth of mineral exports on the rural exporting industries is approximately equal to the effect, in the absence of the mineral exports, of a doubling of the tariff level. For the import competing sector the effect of the mineral discoveries is estimated to be approximately equal to setting the average tariff at zero and introducing an import subsidy.
Basically, the effect of the emergence of a new export sector is that there will be a reduction in the size of the traditional export sector (primary production and industrial production) or there will be a reduction in the import competing sector (domestic manufacturing industry). The most likely outcome is that both sectors will be affected. The extent to which they are affected would depend on a number of complex economic variables.
The reasons for these effects are as follows:
The emergence of a new export sector would mean, in the short run, that balance of payments
A sizeable balance of payments surplus tends to force up domestic prices, i.e., it would be inflationary and there would be pressures to reduce the surplus by appreciation of the currency.
You are left with three policy options in order to restore an equilibrium position in the balance of payments:
(a) Revalue and reduce the size of the traditional exports sector.
(b) Revalue and reduce the size of the import sector through cheaper imports.
(c) Deliberately bring about an increase in inflation.
The third option is quite obviously ruled out as a stated policy, so that leaves a choice of (a) or (b), neither of which are palatable choices.
The conclusion that we must draw from this is the mining development in Australia must be closely scrutinized as it proceeds. If it is allowed to be controlled by transnational or indigenous corporations, then clearly the jobs of those workers in importing, competing and the traditional export sectors must be threatened.
- Unemployment continues to rise at a time when institutions such as the Social Welfare system and the Education system remain static in outlook, and ineffectual.
- Australia lacks any form of long-term economic planning linking economic management objectives with education and manpower policies.
- Regional imbalances are only paid lip-service to when economic policy decisions are made.
- The present recession has brought to a head longstanding anomalies and deficiencies in Australian manufacturing development.
- Further integration into the world economy must be challenged and the public planning sector must become more influential in controlling Australia’s economic future.
The document, completed against my wishes, listed the members of the Young Labor Unemployment Committee, as if we had all signed off on the paper.
Of the members of the Young Labor members on the committee responsible for this document, all but one were on the left of Young Labor, a majority influenced by the school of Ted Wheelwright-Transnational Corporations-Marxist political economy mumbo jumbo-speak. Edward Lawrence Wheelwright (1921-2007) was a Professor of Economics at the University of Sydney, who excited thousands on the left to think ill of global capitalism and the mixed economy.
As this was a combined report by the members of the committee, my dissent on the thrust and some of the detail was subsumed by the majority opinion.
It is a snapshot of what influential numbers of the NSW Young Labor left then thought.
A year before this was written, I had moved from alignment with the ALP Left (of which I was loosely identified; because I knew no one prior to joining the party and most of the young people I met were ‘anti-Head Office’ that seemed a comfortable tribe to belong) to the NSW Right which was more like home. Bob Carr and John McCarthy, whom I met as visiting speakers to St George Young Labor meetings, were people I felt more comfortable with than the NSW left politicians Tom Uren, Arthur Gietzelt, or Frank Walker. Reading Karl Popper – and Bryan Magee’s little book on Popper (1973), as well as George Orwell’s essays, and Robert Murray’s book on The Split (1970) convinced me that the ALP left was not my natural habitat.
Eventually, Seumas Dawes (later in order: NSW ALP Organiser, Assistant Secretary of the NSW ALP, economic adviser to the Treasurer Paul Keating, private equity partner, and wealthy investor), Shane Easson (later in order: Education Officer of the NSW ALP, Chief of Staff to NSW Premier Barrie Unsworth, MBA graduate, business consultant & author of many of the submissions on ALP redistribution), and Jim Rannard (town planner) moved to the ALP Right too. I tried to convince Seumas and my brother that they could have a big influence on the Right, who needed ‘ideas people’.
I am not sure if I ever heard of Kevin Auld again. Chris Warren eventually became national secretary of the Media Entertainment and Arts Alliance (which was the name of the union that merged Actors’ Equity, the Australian Journalists’ Association, and a few others). In the union movement, I found Warren articulate, but sometimes stridently leftwing, as if he wanted opportunities to take factional advantage. For example,on 23 October 1991 the “Day of Outrage, when there was a one-day strike against the NSW government’s industrial relations legislation, Warren insisted that I do no media on the day as his members would all stop work, he confidently asserted. It needed to be ‘one out all out’. Thus, on the day of the state stoppage it was as if I was on a vow of silence, ludicrously unable to speak to the media. The phone from media newsrooms rang hot; camera crews were outside our home. Warren had falsely represented what he could ‘control’. Earlier, he had criticised my decision to call off the original strike (to assist with the Olympic bid. Members of the Olympic Games Organisation Committee were in town to assess Sydney’s merits to host the 2000 Games. I did not want the movement to be blamed for losing the bid. So I delayed the strike a few weeks.) Warren also publicly, and at a meeting of the Labor Council delegates on a Thursday night, called for Michael Costa’s and Mark Duffy’s sacking for political heresy, when a paper they had written for an internal Labor Council staff meeting in 1989 was leaked.
In fairness, I am sure we all look back on our histories in the movement with a mix of feelings, including an element of embarrassment.