Free-market plan roils Australia

A report commissioned by the Australian government on how it should bring on a free-enterprise economy has presented the government with a series of extraordinary problems.

The report has taken the government at its word and recommended a wholesale deregulation of the economic system.

Among the committee's recommendations:

* Abolition of all controls on interest rates and borrowing policies by banks.

* The granting of licenses to an unspecified number of foreign banks to compete in Australia on the same terms as Australian banks.

* Removal of government controls over foreign exchange rates, allowing the market to set the rate for the Australian dollar.

* The sale of most government financial institutions providing credit for Australian industries and agriculture.

* Removal of government tax deductions for insurance and other financial organizations which support the government bond market.

* The removal of ''hidden'' financial aid for farmers and industry, and their replacement, if necessary, by specific budget provisions.

* Abolition of double taxation of company dividends.

2 The report took over two years to complete and runs over 800 pages, including hundreds of recommendations all aimed at allowing market forces to operate.

The author of the report was a committee appointed by the Fraser Liberal government, which consisted almost entirely of businessmen supportive of the government's noninterventionist economic approach.

The committee was headed by Keith Campbell, head of the L. J. Hooker organization, in the top 100 of Australian companies and one of the country's largest real estate development companies.

The committee gave the government the answers it wanted on objectives, but it did not suggest how it should solve its political problems in meeting those objectives.

Foremost among these problems is steep mortgage rates, an issue behind the government's growing unpopularity. The rates are at a record high, about 12 percent, roughly 21/2 percent below the government bond rate. The problem could grow worse if interest rates were freed, as the report recommends. If that happened, it is expected that mortgage rates would rise at least 2 percent.

Aware of these circumstances, the federal government has been busy these past few weeks. It has been examining ways to provide a subsidy to help reduce the effective interest rates on home mortgages.

Before the report was published, the federal Cabinet spent almost a week considering it. The Cabinet then authorized the federal treasurer to make a statement which to some extent downgraded the report as an economic blueprint for the government.

Treasurer John Howard has been the most enthusiastic government supporter of the anticipated deregulatory regime the report recommends. But the Cabinet forced him to say that the government would ''naturally seek to achieve a balance between economic, social, and political considerations and realities.''

It is clear that members of the Country Party, the minority element within the government, are likely to oppose the recommendations to dismantle the support system which successive governments have set up to help primary industry groups.

The report was greeted derisively by the opposition Labor Party, and some of its recommendations were condemned by the Australian Democrats, a party holding a balance of power position in the Australian Senate.

The Labor Party spokesman on financial matters, Ralph Willis, told the Federal Parliament that the report ''confronts the government with the full implications of its own ideology. To that extent it is an utterly momentous document.'' Mr. Willis made it clear that the Labor Party would oppose the bulk of the committee's recommendations.

Sen. Don Chipp, a Democrat leader and former member of the Liberal government , denounced the report's call for uncontrolled interest rates. He said home buyers and farmers were already overcome by interest rates, and his party would oppose freeing them from government controls.