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Published online by Cambridge University Press: 24 January 2025
1 The Commonwealth government has always been able to indirectly affect prices notably by the use of tariffs and subsidies. S. 51(vi) of the Constitution (the defence power) can support price control in times of declared war,The Victorian Chamber of Manufactures v. The Commonwealth (Prices Regulations Case) (1943) 67 C.L.R. 335. State governments retain peacetime price control powers although only South Australia has actively used this power on a widespread basis in the past 30 years (Prices Act 1948-1974 (S.A.)). In reliance upon the territories power s. 122, price control legislation exists in the Australian Capital Territory, see the Prices Regulation Ordinance 1949-1973 which was resurrected from desuetude (in 1973) by the incoming Labor government. Similar legislation operates in the Northern Territory (Prices Regulation Ordinance 1949-1973). The federal government, as of right, is able to determine the price of public sector goods and services that it provides.
2 The case for a prices policy as part of an anti-inflation policy in Australia has been set out by a member of the P.J.T. in Fels, “The Prices Justification Tribunal” [1974] The Australian Economic Review 4'74, 23, 23-25. Parmenter and Webb, “Prices Justification and Microeconomics” [1974] The Australian Economic Review 2'74, 55 argue that the P.J.T. should take a micro-economic approach to prices justification rather than directly attempt to influence the rate of inflationa macro-economic variable. A comprehensive economic criticism of government attempts to interfere in the pricing process is provided by Kleps, “Inflation, Price Stops and Price Controls” [1973] Intereconomics 146. See also Arndt, “Inflation: New Policy Prescriptions” [1973] The Australian Economic Review 3'73, 41, 43-44.
3 The rhetoric of the Labor Party's 1972 election platform was, inter alia: “We will exert our power over prices. We will establish a Prices Justification Tribunal not only because inflation will be the major economic problem facing Australia over the next three years but because industrial co-operation and goodwill is being undermined by the conviction among employees that the price of Jabour alone is subject to regulation and restraint”.
4 This tendency is adverted to by Kleps, op. cit. The price restraint programs in 19 of the 24 member countries of the O.E.C.D. are succinctly summarized in “Recent Experience of Price Control” [1972) O.E.C.D. Economic Outlook No. 11, 72.
5 It was proposed to alter the Constitution by inserting after s. 51(xiv), “(xivA) Prices”. The proposed law to effect this addition (Constitution Alteration (Prices) 1973) was rejected at a referendum, 8 December 1973, with 65.54% of votes cast being against the proposed alteration.
6 This article surveys the operations of the P.J.T. from its commencement of activities on 1 August 1973 to 31 March 1975.
7 Extensive reference to the P.J.T.'s reports is made in Part II. In citing the Tribunal's reports, page references are usually to the pagination employed in the copies of reports prepared by the Tribunal itself. A private industry subscription service and one commercial service (C.C.H. Trade Practices Reporter) also publish some of the Tribunal's reports. A small number of the Tribunal's reports have also been published as Parliamentary Papers, and where reference is made to these, P.P. appears after the citation. The method employed in citing P.J.T. reports is to give the name of the company making the notification, the dealing number and the date of the Tribunal's report.
8 The Prices Justification Act 1973 contained a number of instances of loose drafting, which were corrected by amendments, being largely of form and in length nearly as long as the original legislation, in the Prices Justification Act 1974. The most potentially serious oversights occurred in s. 18 (the notification section). Upon a strict construction, the 1973 Act did not require the notification of a proposed price rise if the goods involved had not been supplied previously for more than 30 days (see now s. 18(2) ). As well, it may have been open to a company, without having to notify the P.J.T., to increase the price of goods to the highest price that those articles had been supplied at anywhere in Australia by the company on similar terms and conditions (see nows. 18(2A)). Further, the original penalty sections were unclear as to whether a flat penalty or merely a maximum penalty was imposed, with the plain words favouring the former conclusion although the 1974 amending Act demonstrates that the latter was the legislative intent (see nows. 18(2B)).The Prices Justification Act 1974 also broadened the P.J.T.'s functions as set out in s. 16.
9 As at 31 March 1975 the Tribunal was constituted by 9 members, under the Chairmanship of Mr Justice Williams.
10 An example of goods coming within s. 18(2A) was colour television sets; a public inquiry determined the justified price for these goods when first introduced into Australia, Philips Industries Holdings Ltd, Matter No. N 74/2708, 20 August 1974.
11 E.g. each dress in a row of dresses of the same style but made of different materials and in different colours and sizes could be characterized as goods “of a particular description”.The P.J.T. has used its power to grant exemptions (s. 18(8)) from the notification section to overcome problems that retailers and wholesalers dealing in many goods might have in strictly complying with ss. 18(1), 18(2) and 18(2B).
12 That changes in the quality, or composition, of a good are a substitute for changes in the price of the good was apparent during the various “Phases” of the United States “New Economic Policy” to control inflation, commencing in August 1971. For instance, one of the most publicized attempts to evade U.S. price control regulations came to light when George Meany, the leader of the largest labour confederation (the A.F.L.-C.1.O.), discovered that his favourite Matzo Ball soup contained only three Matzo Balls after price control legislation compared to four before it was enacted. The “Case of the Missing Matzo Ball” (as it became known) vividly illustrates one method of corporate resistance to interference in the pricing system.
13 The provisions under which the prescribed period may be extended are ss. 18(4), 18(4A), 18(4B) and 18(5). The prescribed period is also potentially open ended if the Tribunal considers the company whose prices are subject to justification has provided insufficient information to the inquiry, s. 18(5)(b)(ii),s. 18A(2)(b)(ii) ands. 19(2).
14 For the determination of the “prescribed day” see s. 18A(2).
15 Ss. 18(7), 18A(4). Prosecutions for any alleged breach of the Act can only be instituted with the consent of the Attorney-General, s. 31(4). Jurisdiction to hear and determine actions arising under the Act is conferred on the Commonwealth Industrial Court, s. 31(3).
16 First Annual Report of the Prices Justification Tribunal 1973-1974, Appendix No. 2.
17 Totals to 31 March 1975 have been notionally constructed by the author from P.J.T. releases to the press since 1 July 1974 and the progression of dealing numbers on notices lodged with the Tribunal, together with the statistics provided in the First Annual Report of the P.J.T. 1973-1974.
18 Id. 81-82 and Appendix No. 9,
19 See n. 90 infra.
20 The coercive effect of the costs imposed by a public inquiry was explicitly recognized by Professor Reddaway, (a former member of the U.K.'s former National Board for Prices and Incomes) who was seconded to the P.J.T. as a consultant for two months in mid-1974. With regard to this area of the P.J.T.'s operations, the Professor said: “The job of the P.J.T. is to be selective in the price applications it investigates. Inherently, any company which does not agree with the Tribunal's assessment of what its price rise should be incurs a severe penalty in lost revenue if the application goes to public inquiry. Because of this the P.J.T. is in a position to effectively penalize companies which don't toe the line.'' The Age, 27 August 1974, 9 (emphasis added).
21 First Annual Report of the P,J.T, 1973-1974, 31.
22 S. 18(9) requires the terms of exemptions to be published in the Gazette (and few issues appear which do not contain the details of several exemptions). The Tribunal has categorized the principal grounds of exemptions, First Annual Report of the P.J.T. 1973-1974, 34-36 and Appendix No. 4.
23 First Annual Report of the P.J.T. 1973-1974, 71. An example of a typical exemption granted to a retailer (The Myer Emporium Ltd) is provided in Appendix No. 6 of the Report.
24 Infra p. 383 ff.
25 Strickland v. Rocla Concrete Pipes Ltd (1971) 124 C.L.R. 468.
26 Id. 507.
27 Bank of New South Wales v. The Commonwealth (1948) 76 C.L.R. 1, 256 per Rich and Williams JJ.: “If pl. (xx.) was intended to apply to banks, the Commonwealth Parliament would thereby acquire legislative powers over State banks from which it is expressly excluded by pl. (xiii.). It was contended that the placita could be reconciled by implying an exclusion of State banks from pl. (xx.), but to do this would require the insertion at the end of this placitum of some ... words .... We can find no justification for such an implication, and in our opinion the placita can only be reconciled by applying the maxim generalia specialibus non derogant, and by regarding corporations which are banks as placed in the separate category expressly provided for by pl. (xiii.) and therefore as corporations outside the generality of the classes of corporation referred to in pl. (xx.).”
28 Bank interest rates are already indirectly controlled by the Reserve Bank of Australia.
29 Berger Paints (Australia) Pty Limited, Matter No. N 74/4082, 11 November 1974.
30 E.g. The Bank of New South Wales and the Commercial Banking Company of Sydney.
31 Daily Telegraph, 8 January 1974, 6.
32 See n. 90 infra.
33 The author's treatment of this area has been influenced by a limited circulation paper published by the RAND Corporation: Alexander, “Prices and the Guideposts: The Effects of Government Persuasion” (1973).
34 W.D. & H.O. Wills (Australia) Limited, Matter No. N 74/1891, 29 August 1974.
35 In an early statement, the P.J.T.'s registrar was reported as saying ''There are a great many things to be gained from public inquiries in terms of case law and precedents”, The Age, 12 January 1974, 19. Cf. the views of an assistant registrar in the same period-"One public inquiry doesn't lay down the basis for any other companies within an industry”, The Bulletin, 16 February 1974, 17.
36 The Broken Hill Proprietary Company Limited and Australian Iron and Steel Proprietary Limited, Matter No. N 73/7, 10 October 1973; P.P. 209/73, 5. The role of the P.J.T. may be compared to that of the Price Commission of the United Kingdom, where the legislature has not delegated the determination of a “justified” price to a statutory body, but instead, has determined this matter itself by enacting a code enumerating precisely the circumstances in which prices may be increased. The Price Commission is thus left with the purely mechanistic task of deciding whether any price rise application passes the statutory litmus test. The role of the U.K. Price Commission is succinctly summarized in the first B.H.P. report, op. cit. 8.
37 E.g. In Blue Circle Southern Cement Limited, Matter No. N 74/3855, 29 November 1974, nine pages (25%) of the report is given over to a discussion of “the cement industry”, with a further three pages describing “the company”.
38 E.g. “We are inclined to say that at least some regard in setting prices ... should be paid to .. .', The Australian Estates Company Limited, Matter No. N 74/3936, 10 December 1974, 11 (emphasis added); “some deduction should be made in the increased wages cost sought to be recovered by the Companies”W.D. H.O. Wills (Australia) Limited, Matter No. N 74/1891, 29 August 1974,16 (emphasis added); “The Tribunal considers that a major part of the $1.74m. claimed by the company ... should in this instance be disallowed”, Carlton and United Breweries Limited, Matter No. N 74/1825, 9 April 1974, 16 (emphasis added); “We appreciate the basis upon which the Company relies in submitting this item amongst cost increases ... but do not agree that the full amount should be allowed as a cost”, The Cascade Brewery Company Limited in respect of Tasmanian Breweries Pty Ltd, Matter No. N 74/1674, 19 April 1974, 8-9 (emphasis added); “Although some part of this decrease may reflect the effects of the downturn in economic activity, rather than a long term productivity improvement, we do not necessarily accept that this part should be fully ignored for that reason.... We have not fully accepted the claims insofar as they are based on operating losses incurred in respect of certain particular [sic.] newspapers”, John Fairfax and Sons Limited and Associated Newspapers Limited, Matter Nos. N 74/3176, N 74/3177 and N 74/3305, 13 September 1974, 38-39 (emphasis added).
39 E.g. “the Company should pass on some of the fruits of the productivity and efficiency measures which it has successfully put into practice”, Arnotts Limited, Matter No. N 74/2534, 13 September 1974, 15; “In all the circumstances we regard the additional wage costs as unavoidable. However, regardless of the method by which the additional wages were imposed, we consider that the Company should absorb a proportion”, Brick and Pipe Industries Limited, Matter No. N 74/2009, 5 August 1974, 7 (emphasis added).
40 First Annual Report of the P.J.T. 1973-1974, 56.
41 Australian Paper Manufacturers Limited and Cellulose Australia Limited,Matter No. N 73/62, 24 October 1973; P.P. 247173, 11.
42 General Motors-Holden's Pty Limited and General Motors-Holden's Sales Pty Limited, Matter No. N 73/770, 21 December, 1973, 58-59.
43 Ibid.
44 B.H.P. and A.I.S., Matter No. N 74/1637, 28 March 1974, 43-48.
45 Id. 43. Advertising expenses were stated to be a cost that would not neces, sarily be considered allowable.
46 The Information that the P.J.T. suggests companies send it in support of a notification reflects a concern with the criteria outlined: see First Annual Report of the P.J.T. 1973-1974, Appendix No. 11.
47 The P.J.T. did circulate a memo, on its proposed activities to prescribed companies in July 1973. The memo contained a paragraph on matters that could be relevant in an inquiry and also set out the forms the P.J.T. uses: see First Annual Report of the P.J.T. 1973-1974, Appendix No. 10.
48 B.H.P. and A.l.S., Matter No. N 73/7, 10 October 1973; P.P. 209/73, 5.
49 Alcoa of Australia Limited, Matter Nos. N 74/1180, N 74/1484 and N 74/2596, 16 August 1974, 24.
50 South Australian Brewing Company Limited, Matter No. N 73/883, 16 January 1974-. Even after several other inquiries relating to the brewing industry, the Tribunal indicated that interstate price comparisons assisted only “a little more”, Carlton and United Breweries Limited, Matter No. N 74/1825, 9 April 1974, 18.
51 B.H.P. and A.I.S., Matter No. N 73/7, 10 October 1973; P.P. 209/73, 5, 7.
52 Id. 14.
53 Mayne-Nickless Limited, Matter No. N 74/2532, 2 August 1974, 23, 26.
54 Id. 23.
55 The Conciliation and Arbitration Commission had awarded, by consent, a $25.40 wage increase to Mayne-Nickless drivers. The P.J.T. looked at a contemporaneous decision of Queensland's Industrial Conciliation and Arbitration Commission which had awarded drivers under a similar award a $16.00 p.w. wage increase. The P.J.T. then stated that it was ''not satisfied that increases in wages beyond $16.00 per week could be regarded as a justifiable reason for raising prices”, Mayne-Nickless Limited, Matter No. N 74/2532, 2 August 1974, 25.
56 B.H.P. and A.I.S., Matter No. N 74/1637, 28 March 1974, 12-13.
57 Not only industry has been critical. The Treasurer (then Mr Crean) publicly stated that “Any tendency [by the P.J.T.] to treat all wage settlements reached without arbitration as in the nature of sweetheart agreements and not allowable costs would be manifestly unfair. It could have effects on profits, which ... could have damaging economic consequences, particularly in the long run”, Australian Financial Review, 4 November 1974, 7.
58 Sydney Morning Herald, 11 February 1975, 8.
59 Tooth & Co. Limited, Matter No. N 74/3246, 18 October 1974.
60 W.D. & H.O. Wills (Australia) Limited, Matter No. N 74/1891, 29 August 1974, 16.
61 Australian & Kandos Cement Holdings Limited, Matter Nos. N 74/3491 and N 74/3465, 14 November 1974, 8. The Tribunal simply stated “We do not consider this claim would be justified in this case”.
62 Mr Justice Moore, Sydney Morning Herald, 11 February 1975, 8.
63 Australian Financial Review, 9 October 1974, 9.
64 As corporate results were announced in December 1974-March 1975, a growing number of companies ascribed to the PJ.T. at least partial blame for decreased profits. Some of the leading companies whose reports fired a salvo at the P.J.T. were: Rothman's of Pall Mall (Australia) Ltd, Wakefield Investments Ltd, Australian Pulp & Paper Mills Ltd, Carlton and United Breweries Ltd, Amatil Ltd, W.R. Carpenter (Holdings) Ltd, Tooth & Co. Ltd; J. Gadsden Australia Ltd,H.C. Sleigh Ltd, Cadbury-Schweppes Australia Ltd, Alcan Ltd. Further, the i>.J.T. came to have vocal detractors even among the ranks of the political party that created it, notably in the form of Mr Jack Egerton, senior vice-president of the A.L.P., who in one statement said, inter alia, “There is a limit to the number of academics Australia can carry and we seem to have reached that level. Unfortunately, it is also true that business has lost confidence. One of the contributing factors is the P.J.T. It seems that the Tribunal needs careful consideration by the Government. In the first place, the Tribunal makes price increases respectable and removes the responsibility from employers to a Government tribunal. It penalises the efficient employer and encourages the inefficient. It encourages companies to show a loss and it is quite possible companies would maximize their losses. The Prices Justification Tribunal performs no meaningful task and should be abolished.” Australian Financial Review 15 January 1974, 1.
65 B.H.P. and A.I.S., Matter No. N 74/1637, 28 March 1974, 49.
66 Ibid.
67 Arnotts Limited, Matter No. N 74/2534, 13 September 1974, 11-12.
68 The varying interpretations that can be put on above “average” profits (apropos risk or barriers to entry) is well illustrated in W.D. & H.O. Wills (Australia) Limited, Matter No. N 74/1891, 29 August 1974, 21-24.
69 E.g. CSR Limited adopted depreciation accounting as from 1 April 1974.
70 B.H.P. and A.I.S., Matter No. N 73/7, 10 October 1973; P.P. 209/73, 9.
71 B.H.P. and A.I.S., Matter No. N 74/4808, 12 December 1974, 21.
72 E.g. W.D. & H.O. Wills (Australia) Limited, Matter No. N 74/1891, 29 August 1974, 23. The P.J.T. interest in profits as a return on funds employed can also be seen in the type of information it suggests accompany a notification, see First Annual Report of the P.J.T. 1973-1974, Appendix No. 11, para. lO(c)-(e).
73 B.H.P. and A.I.S., Matter No. N 74/4808, 12 December 1974, 20.
74 B.H.P. and A.I.S., Matter No. N 73/7, 10 October 1973; P.P. 209/73, 9.
75 Shell Australian Securities Limited, Matter No. N 74/42, 3 May 1974, 45.
76 B.H.P. and A.I.S., Matter No. N 74/1637, 28 March 1974, 48.
77 B.H.P. and A.I.S., Matter No. N 73/7, 10 October 1973; P.P. 209/73, 14.
78 B.H.P. and A.I.S., fatter No. N 74/1637, 28 March 1974, 62.
79 B.H.P. and A.I.S., Matter No. N 73/7, 10 October 1973; P.P. 209/73, 12.
80 The relevance of attempting to find a “proper” balance (or “gearing”) between debt and equity in a company's financial structure is predicated upon the theory that there exists an optimum financial structure for any company. The traditional learning that there is a debt/equity ratio that minimizes the weighted average cost of capital and maximizes the value of the firm has been challenged by Modigliani and Miller, whose seminal work is “The Cost of Capital, Corporation Finance and the Theory of Investment” (1958) 48 AmericanEconomic Review 261. Modigliani and Miller modified their initial hypothesis in a number of subsequent articles to be found at (1959) 49 American Economic Review 655 and (1963) 53 American Economic Review 433. A more recent article has postulated that the Modigliani-Miller hypothesis may be supported oil even more realistic assumptions than those originally propounded, Stiglitz, "A Re-examination of the Modigiani-Miller Theorum" (1969) 59 American Economic Review 784. The whole debate requires an excursus into a complex area of the theory of business finance; Pierson and Bird, Business Finance (1972) Part III, contains a useful examination of the financing decision, not only in theory but also as practically possible in Australia.
81 Australian Paper Manufacturers Limited and Cellulose Australia Limited,Matter No. N 73/62, 24 October 1973; P.P. 247/73, 13.
82 Alcoa of Australia Limited, Matter Nos. N 74/1180, N 74/1484 and N 74/2596, 16 August 1974, 23.
83 First Annual Report of the P.J.T. 1973-1974, 67.
84 First Annual Report of the P.J.T. 1973-1974, 62.
85 Advertising expenditures are the P.J.T.'s normal example of a cost that may not be “allowable”, as distinct from unavoidable, e.g. B.H.P. and A.l.S., Matter No. N 74/1637, 28 March 1974, 43. Significant statements by the Tribunal on its attitude to advertising are to be found in the following reports: Lever & Kitchen Proprietary Ltd, Matter No. N 74/1766, 15 May 1974; Colgate-Palmolive Pty Limited, Matter No. N 74/3502, 30 October 1974.
86 Hogan, “The Prices Justification Tribunal and Economic Policy” (1974) Bank of New South Wales Review, No. 13, 10, 13,
87 Sydney Morning Herald, 14 November 1974, 25 (emphasis added). The letter continued by saying that the Prime Minister did not intend to reflect on the manner in which the P.J.T. was carrying out its statutory responsibilities, but in the circumstances this was little more than a formality. That the Prime Minister had a clear message for the Tribunal is indicated not only by the italicized passage but also by the extensive publicity which the “private” letter was given,
88 B.H.P, and A.I.S., Matter No. N 74/4808, 12 December 1974, 21.
89 First Annual Report of the P.J.T. 1973-1974, 67.
90 E.g. B.H.P. claims to have lost $19.3m. through the disallowance of impact costs. AC.I. calculated its impact costs at $800,000 per month, while MayneNickless estimated it was losing $50,000 a day while waiting for a P.J.T. decision.
91 First Annual Report of the P.J.T. 1973-1974, 44.
92 Arnotts Limited, Matter No. N 74/2534, 13 September 1974, 15,
93 Id. 7.
94 Australian & Kandos Cement Holdings Limited, Matter Nos. N 74/3491 and N 74/3465, 14 November 1974, 8-9.
95 Id. 9.
96 B.H.P. and A.I.S., Matter No. N 74/4808, 12 December 1974, 27.
97 Id. 28.
98 General Motors-Holden's Pty Limited and General Motors-Holileii's Sales Pty Limited, Matter No. N 74/2277, 23 August 1974, 39.
99 The effect on dealer profit margins of only allowing the money amount of increases in wholesale prices to be passed on into retail prices can be seen from the following examples (which are taken from the Austral Motors inquiry, Matter No. N 74/4605, 17 December 1974, 8):
1 Id. 19.
2 Ibid.
3 Prices Justification Regulation 10, Statutory Rule No. 216 of 1974, notified in Special Australian Government Gazette No. 92E, 18 November 1974.
4 Among the various statements made, (and upon which the P.J.T. was never able to adjudicate), were that petrol would become $1 per gallon if the notification were approved. The company claimed the rise would only be a few cents per gallon. The government also claimed that Ampol was bound by an unexpired agreement fixing the supply price of indigenous crude; the company denied it was a party to any such agreement.
5 First Annual Report of the P.J.T. 1973-1974, 19.
6 E.g. The A.C.M.A.—Bank of New South Wales, Survey of Industrial Trends, December 1974 sought to determine the investment plans of business compared with the previous year. Of those responding to the survey, 62% intended reducing investment below the previous level; only 13% intended increasing investment above the previous year’s level
7 E.g. in the Fairfax inquiry; John Fairfax & Sons Limited and Associated Newspapers Limited, Matter Nos. N 74/3176, N 74/3177 and N 74/3305, 13 September 1974.
8 H.R. Deb. 1973, Vol. 86, 1888 (10 October).