The Whitlam Government’s handling of the economy precipitated public controversy whilst it was in office, and it continues to be the subject of significant historical debate.
Some historians and commentators credit the Whitlam Government with bold changes such as the 25% tariff reduction it enacted, which helped open up the Australian economy to the global markets, while others criticise the increase in public expenditure that occurred during its time in office. The controversy centred on the Government's financial management as much as its policies.
Any appraisal of the Whitlam Government’s economic performance should take account of the global economic environment in the mid 1970s. The Bretton-Woods monetary system came to an end in 1971. Inflation was a problem suffered by a number of Western economies. The 1973 oil crisis had plunged the United States, Britain and a number of other Western economies into recession. These events had a profound effect on the Australian economy, and this period marked the end of the post-war boom that Australia had enjoyed for more than two decades.
The Whitlam Government helped to open the Australian economy to the world by implementing a 25% cut in tariffs across the board in its 1973 budget. Whitlam regarded the existing tariff structures as inefficient, inequitable and against the national interest. Whitlam argued that the tariff reduction would stimulate greater efficiency in the Australian economy, and make it more competitive. The measure was also justified on the grounds that it would help supress inflationary pressures on the economy. If the cost of goods and services was reduced by allowing greater competition through increased imports, the effects of inflation could be restrained.
Establishment of the Industrial Assistance Commission
On January 1, 1974, the Whitlam Government established the Industrial Assistance Commission to replace the Tariff Board. One of the principal functions of the new Industrial Assistance Commission was to improve the efficiency of the Australian economy, by providing expert advice to the government through requested and self-initiated reports and inquiries. It also served to improve the transparency with which industry assistance was distributed and to assist industrial adjustment to economic change. This organisation eventually merged with others into what is today known as the Productivity Commission.
The Trade Practices Act
The Trade Practices Act sought to promote competition in the Australian economy by outlawing anti-competitive activities such as price-fixing, collusion, monopolisation, and anti-competitive mergers. The legislation also provided enhanced consumer protections – penalising businesses that propagated false advertising or treated consumers unconscionably. These measures were enforced by the newly created Trade Practices Commission, the predecessor of the Australian Competition and Consumer Commission that exists today.
Targeted Stimulus for Unemployment Affected Areas
The Whitlam Government initiated the Regional Employment Development Scheme in September 1974. It created tens of thousands of jobs in areas that were suffering most from unemployment. Funding was provided directly to local councils to employ workers to participate in projects that enhanced community infrastructure such as parks and recreation facilities. Workers were also employed on environmental projects. Selection of workers was made according to the availability of alternative jobs for them. The scheme was designed to avoid the ill-effects that unemployment can have on workers and their families, while also enhancing their skills and funding the improvement of important and useful community facilities. At its peak in June 1975, the scheme employed almost 32,000 people. It was eventually wound down as economic conditions improved.
Establishment of the Foreign Investment Advisory Committee
In 1975, the Whitlam Government created the Foreign Investment Advisory Committee – the predecessor of the current Foreign Investment Review Board. The purpose of the organisation was to monitor the level of foreign investment in Australia, and to regulate the takeover of Australian companies to ensure that Australia’s economic interests were defended. These criteria were formalised through the Foreign Acquisitions and Takeovers Act, which the government introduced in 1975. Despite the fact that the Fraser Government replaced the body with the Foreign Investment Review Board which operated in a modified way, it and the Foreign Acquisitions and Takeovers Act remain the primary tools by which the Australian Government enacts its foreign investment policies in the defence of Australia’s national economic interest.