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The Australian Nation

What sort of nation?

At the first federal election in March 1901, protectionists and free traders battled it out to control the new nation. The issue which had to be decided was how high the customs duties on imported goods would be. How could anyone get excited over this? Because the two sides represented not only different interests, but different ideals.

The protectionists wanted to keep out foreign competition and build up local industries so that the nation would develop a strong and diverse economy; it would never be a great nation or a secure nation if it only grew wheat and wool. Protectionists called those who imported goods selfish and unpatriotic.
Protection

The free traders said propping up uneconomic factories forced everyone to pay the high prices for their goods, which damaged the economy overall. If nations did not erect barriers against each other’s trade, all their economies would grow more and there would be less international tension. Free traders called factory owners who demanded protection privilege seekers and monopolists.
Free trade

The result of the election was a narrow win for the protectionists. But they did not control the parliament, because the third force, the Labor Party, had done well and held the balance of power. The Labor Party could not decide whether it was for free trade or protection. Protection promised jobs for workers, but it also put up prices. Protected boot factories would give some workers jobs, but make all workers pay more for boots. Labor supported the protectionist government of the first prime minister, Barton, but some Labor members voted with the free traders to reduce the duties in its customs bill. The first Commonwealth duties were only mildly protectionist, much lower than the old Victorian ones.
Labor as third force

After three years Barton retired from politics and became one of the first judges in the High Court. The new leader of the protectionists and second prime minister was Alfred Deakin. He wanted to be a scholar or a poet or a religious leader, but he turned out to be good at politics, which he had stumbled into and was always thinking of giving up. He was a magnificent orator and skilled at getting people to work together. He came from Melbourne where workers had joined with owners of factories and workshops to make Victoria the stronghold of protection. He had more influence than any other man on what sort of Commonwealth it was to be.
Alfred Deakin’s influence

Deakin persuaded the Labor Party to support protection by linking protection to wages. This was called new protection. A factory owner would only get protection from overseas competition if he paid fair and reasonable wages. Many workers had thought the argument over free trade and protection was a bosses’ trick. Neither policy made much difference to the workers. Now protection was going to deliver what every worker wanted: a bigger pay packet. With united Labor support Deakin passed really protectionist duties in 1908. For the next sixty years protection was the settled policy of Australia.
New protection

Deakin, with Labor support, also introduced a bill for settling strikes and industrial disputes. Representatives of bosses and workers would have to appear before a special court and accept the judge’s ruling. This is compulsory arbitration. It was developed in Australia after the huge strikes of the 1890s. These had shocked the community. Bosses refused to negotiate, workers and their families suffered, services stopped, governments ordered out troops. It seemed like all the old-world ills were starting up in this new land. The solution was to make the parties settle matters peacefully. Both bosses and unions were suspicious of the scheme, but since unions had lost so badly in the strikes and were still very weak, they supported it hoping it would give them more than they could get by their own efforts.
Arbitration

One of the first tasks of the Arbitration Court was to decide what were the ‘fair and reasonable wages’ which a factory owner had to pay to enjoy protection from foreign competition. Justice Higgins decided that wages should not give just a bare living and they should not be settled by market forces; they should allow the worker to live as a ‘human being in a civilised community’ and support a wife and three children. He summoned some wives of workers into court to examine them on their household budgets, for wives were usually in charge of spending. He then settled a wage, the basic wage, which became the standard which the court used whenever it had to settle wage rates. No man could be paid less than the basic wage. Extra rewards were given for skills and the court became the judge of what these extras should be and who should do what job. All this was laid down in an award which covered wages and conditions for a whole industry.
Basic wage

The court set women’s wages lower than men’s because women did not have a family to support. Women’s wages had always been lower than men’s, but in making this difference into law the court made it harder to change it. Nearly all women in paid work at this time were single women who would become full-time homemakers once they were married. Lower wages for women was hard on women whose husbands had died or left them and who had to work to support their children.
Women’s position

Almost everyone believed that a married woman’s place was in the home – even the women who had just won the battle to get women the vote. They said that women should get the vote because they were citizens, but also because they were homemakers and carers of children and therefore had a different and valuable perspective to contribute to politics. If they had said that they wanted the vote as a first step to entering all male positions of power, the men would have been much slower to give it to them.

At this time Australia was seen as one of the most progressive nations on earth. Its women were citizen mothers and by a court of law their husbands earned enough wages to support them and their children. Over the next two decades, Australia seemed to fall behind. Other nations began schemes for social welfare which covered sickness, unemployment and old age. They were insurance schemes: everyone contributed and you got benefits as you needed them. The only social welfare benefit in Australia was the old age pension introduced in 1908.
A progressive nation

Australia advertises itself to the world
A most progressive nation: Australia advertises itself to the world.

Courtesy Melbourne University Archives (Commercial Travellers’ Association Collection)

One reason why insurance schemes were not adopted here was that many Labor people were opposed to them. They did not want to have to make insurance contributions; they wanted the rich to be made to pay for the people’s welfare. Nor did they want unemployment benefits. They wanted work, work at good wages and if there was no work the government should provide work. Once there was an unemployment benefit, they said, governments would not worry about finding the unemployed work. Governments in Australia had been great providers of jobs because they ran railways, built roads and ports, cleared land and drained swamps. When unemployment rose, they had usually expanded their works to provide more jobs.
Opposition to social security

In the Great Depression of the 1930s unemployment rose to 30 per cent and at one time or another probably half the workers experienced unemployment. Times were so bad that governments did not have the funds to create jobs on public works. There was no unemployment benefit. At first the unemployed had to rely on handouts from charities. Then the State governments gave out vouchers which you could take to shops to buy food. But governments thought it was bad to support people who were doing nothing and most of the unemployed themselves wanted work not handouts. So governments put a special tax on those in work to get funds to provide work for the unemployed. The work was often hard and sometimes the unemployed had to leave home to take it. It was not full-time work: you got more hours if you had more responsibilities. Married men with large families got most.
Great Depression

The Labor governments of John Curtin and Ben Chifley, which held office during and after World War II, were determined that workers should never suffer again as they did in the Depression. They planned to manage the economy more closely to keep people in work and they introduced a full range of social security benefits, including unemployment benefit. The Labor government planned to pay for this welfare out of ordinary taxation because its supporters did not like contributions to an insurance scheme, but workers for the first time now had to pay income tax.
The welfare state

Our social security is still paid for in this way. Some say insurance schemes are better because since everyone contributes, everyone is eligible for benefits without means tests. Our welfare is ‘targeted’ to those who need it most, but those getting welfare can then become targets for those who resent supporting them. Welfare is one group paying for another instead of the community making provision for itself. Only with the Medicare levy do we have a community provision for welfare.
Insurance versus targeting

For three decades after the war, very few people received the unemployment benefit because there was close to full employment. Since the mid-1970s governments have not been able to manage the economy so well and many people have been unemployed. Since they received a benefit, there was less pressure on governments to find work for them. But now governments realise that a permanent life on welfare is not good for the unemployed or for society. The unemployed are more likely now to be doing community work or in training. ‘Work, not handouts’ is a message we are re-learning.
Dole versus work schemes

During World War II women did work they had never done before and that men thought they would never do. They managed heavy machinery in factories, drove tractors and mended cars. They got higher wages; a few even the same pay as men. After the war things were meant to return to normal, but they never did. Before the war women had begun a campaign in the unions for equal pay. This now strengthened and after a long fight with small victories along the way, the Arbitration Court finally accepted the equal pay principle in 1972. The idea of a wage-earner being paid for dependants was dropped. In the 1960s and 1970s more and more married women were working and the notion of the man as sole breadwinner was disappearing. Of course children were still an added expense. Instead of wages being adjusted for children, welfare payments were made to parents with low incomes.
Equal pay

Australia’s founding policy of protection was first brought into question in the 1960s. It had helped many industries to grow, but the old free-trade argument was raised against them. The high price of their products was a burden and the industries became inefficient because they were shielded from competition. The argument was put first by economists who worked in the universities, the newspapers and the public service; it was taken up by the Labor Party with some hesitation and then wholeheartedly by the Liberal Party.
Economic rationalism

It was actually the Labor governments of Gough Whitlam in the mid-1970s and of Bob Hawke and Paul Keating in the 1980s that removed nearly all the protective barriers. They believed this would create a strong and efficient economy that would benefit workers in the long term even if the abolition of protection made some of them unemployed straight away.

The new free traders were called economic rationalists. They believed nearly all controls on the economy produced more harm than good. They were fierce opponents of the arbitration system and industry-wide awards. They said fixing one set of rules for factories throughout the country was rule making gone mad. Businesses would work more efficiently if managers and workers decided on what rules would work best for them. Trade unions wanted to keep to the awards because they thought workers would not have as much power if they were negotiating with the boss at the workplace.
Workplace bargaining

The Liberal Party took up the attack on the arbitration system, but it was the Labor government of Paul Keating which took the first step towards workplace bargaining. The Liberal-National government of John Howard has moved more firmly in this direction. That odd Australian invention – a court which sets wages – is still there, but is under threat.

In the early twentieth century Australia was called a social laboratory because of its experiments with new ways to secure welfare. Now the economic rationalists say our economy suffered from too much control which we must abandon so that we can keep up with world’s best practice. They say being part of a global economy increases efficiency and prosperity.
Global economy

There is no longer a strong protectionist movement. There are people who say that even if our industries do not have protection from imports, they still need government encouragement. They also fear that in being open to the world we may lose control over our own destiny. They say that the people who control international finance and multinational companies are not interested in our welfare, only in their own.

To join the world or protect ourselves against it: we are having the same argument as at the start of our nation. Both sides think their method is the best route to prosperity. In this dispute, we must not lose sight of what prosperity is for. We may no longer use Justice Higgins’s methods, but we should still make sure that all citizens have the chance to enjoy a decent living in a civilised society.
What is prosperity for?

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