E&OE...................
Well thank you very much Nicholas Platt. To my Ministerial colleague
Joe Hockey the Minister for Financial Services in the Australian Government
to Andrew Peacock the Australian Ambassador to the United States,
Michael Baume the Australian Consul General here in New York, many
other distinguished guests, ladies and gentleman. I want to thank
the organisations that have brought this luncheon together and the
fact that they bring together an organisation which is concerned about
the involvement of the rest of the world in the affairs of Asia, that
is the Asia Society, the fact that the hosts also include organisations
that bring together the fostering of good relations between Australia
and the United States and organisations that are concerned about the
economic strengths and the economic well being of our two societies
is certainly very appropriate for the subject of my address.
I'm coming to the end of what has been a two week visit out of my
country. A visit which has taken me, not only to the United States,
but also taken me to Australia's best customer America is a good one,
but we have one that's even better and that is Japan and the visit
has in both countries has reinforced to me a number of things. First
and foremost of course its reinforced the interaction and the interdependence
of our relationships both politically and economic with those two
countries. Its brought home to me how important economic strength
is in the world. How much economic strength allows a nation of Australia's
size of just under 19 million to punch considerably above its weight
and I've had the opportunity over the last couple of weeks to reinforce
to all of the people I've seen, which have been at the highest levels
of Government in both Japan and the United States, the continued commitment
of Australia to a very deep and abiding involvement in the affairs
of the Asian Pacific Region.
I'm rather pleased that when introducing me Nicholas referred to that
phrase of mine, the unique intersection that Australia occupies because
it does to my mind encapsulate very well where Australia is placed
in the world. We are unusual in occupying that intersection. We do
of course have very strong and abiding links with the nations of Europe.
We have a shared history, we have a shared language, with one of them
we have a shared culture with so many of them. We of course have,
as all of you in this audience particularly know and understand, we
have a special affinity and a special affection for and a shared history
with the people of North America, particularly the people of the United
States.
But there we are geographically, side by side, cheek by jowl, with
the peoples of Asia. And that does give us a special opportunity and
it gives us a special responsibility. And in taking advantage of that
opportunity and in discharging that special responsibility we can
best do so from a position of economic strengths and economic example
and economic vitality. And of a number of things that I'm particularly
proud of, that the Government I lead has been able to achieve over
the last three and a quarter years, one of them is the fact that in
Asia's time of trial and economic difficulty, Australia was able to
be a good helpful and reliable friend. It wasn't just an association
of rhetoric and an association of expressions of goodwill. We were,
along with Japan, the only other country that participated in the
three international monetary fund bailouts of Indonesia, Korea and
Thailand. And at a very critical stage of the negotiations between
the international monetary fund and Indonesia it was the representations
of the Australian Government to the International Monetary Fund which
I believe played a very important role in perhaps injecting a greater
sense of realism and a greater understanding of the need to achieve
a balance between the economic and the social considerations in relation
to that particular country.
We've been able to do these things and I believe without exaggeration
to play a very constructive role over the last few years because of
greater domestic economic strengths and it brings back to all of us
the importance that if you seek to have some influence in the world
you must do so in part from a position of economic strengths and economic
dependability.
The Australian economic story of the last few years is a very good
one. We are growing very strongly, last year we had a growth rate
of around five per cent. We have the lowest net government debt to
GDP ratio of any country in the OECD. We have the lowest interest
rates as my Treasurer humorously says since man first walked on the
moon in 1969. We have very low inflation. If we can get rid of the
other 50 per cent of Telstra, we'll have no net Commonwealth debt
by the year 2002. And we have course are now getting the benefit of
a number of fundamental economic reforms that have been carried out
in Australia over the last few years. And when three weeks ago that
wonderful afternoon that in my political career I will never forget,
there was returned to the House of Representative from the Senate
a series of bills to amend the Australian taxation law and I had the
opportunity of moving that the House of Representatives approve the
legislation and thus finally pass into law the bills to reform Australia's
taxation laws after years and years of debate and advocacy.
We had an interesting debate and I talked about the five pillars of
the modernisation of the Australian economy over the last 15 or 20
years. I mentioned the fiscal consolidation that has been undertaken
in the last three and a quarter years where we've turned a deficit
of $10 .5 billion into a surplus in two years. I talked about the
financial deregulation of the Australian economy, first recommended
by the Canberra report, which I commissioned as Treasurer in 1979,
looked at with some trepidation by the incoming Labor Government in
1983 but then to its great credit and with our support in Opposition
embraced in full and that led to the floating of the Australian dollar,
the admission of foreign banks into Australia, the abolition of exchange
controls and a number of other measures which have underwritten the
operation of the Australian financial system since.
I thought of tariff reform. Once again particularly of the statement
made by the former Labor Prime Minister, Bob Hawke in 1991, with our
strong support from Opposition, to reduce tariff levels in Australia.
I of course also recalled that great thing that had been left unchallenged
in Australia year after year, that is the deregulation of the labour
market which has been undertaken very vigorously by my Government
over the last three and a quarter years and has played a major role
in boosting the productivity of the Australian workforce and the Australian
labour market.
And the fifth and final of the pillars of economic reform has of course
been the renovation of the Australian taxation system. And that taxation
reform is undoubtedly the biggest change to our taxation system since
World War II and arguably the biggest change to our taxation system
since federation. It will introduce a broad based indirect tax, a
goods and services tax we call it, it will replace a very outdated
old fashioned wholesale sales tax, it will replace a number of taxes
at a state level. I'm pleased to tell this audience, amongst those
will be stamp duty on share transactions and it will also replace
immediately the Financial Institutions Duty which is levied by State
governments. Importantly, it will give to the Australian States a
guaranteed revenue base to provide the Government schools, the hospitals,
the roads, the police services which are the bread and butter of the
provision of public services by governments in Australia.
All-in-all it represents the major renovation of our system and it
will be accompanied, wisely in my view, at precisely the same time
with major reductions in personal income tax. I've never believed
that it's wise in politics to try and implement major structural reforms
separating what might be seen as the electorally harder bits from
the electorally more attractive bits, because surprisingly voting
publics have a tendency not to remember for terribly long some of
the electorally attractive bits, but to remember for much longer some
of the electorally harder bits. So taking my cue from other countries
that have disconnected elements of the reform, we've kept the two
of them together. And when on the 1st of July next year
the Goods and Services tax comes into operation, also on the 1st
of July there will come into operation the largest reduction in personal
income tax in Australia since the end of World War II.
Taken together it does represent a mammoth reform. It's going to make
our exports cheaper, it's going to cut the cost of fuel, and that
is very important in a country as large as Australia. It's going to
reduce business costs overall and I think its going to inject a great
deal of additional vitality into the Australian economy.
Now that in a sense is one shoe of tax reform. The other shoe which
will start dropping on the 31st of July when we receive
a report from a very respected Australian businessman, John Ralph
who's written it with the assistance of a number of other very well
known Australian businessmen including Bob Joss who's done such a
marvellous job of running the Westpac bank in Australia over the last
few years. That report will deal with the renovation of Australia's
business taxes. Now I would be the first to acknowledge that we need
reform in that area. I understand the view to be widely held in many
areas of the investment community that the odd change here and there
to the capital gains tax would be extremely welcome. I understand
that people are arguing very strongly for a more competitive corporate
tax rate. I appreciate that in an increasingly globalised economy
where seamless transfers of capital are almost as quickly matched
by increasingly seamless transfers of job opportunities, that it is
important if you want to attract capital from, for example the United
States, it is important to have the investment choice tax-wise as
neutral as it can possibly be. And without endeavouring or trying
in any way to pre-empt what John Ralph's committee is going to recommend,
I can assure you that those sorts of considerations and the need to
make Australia as attractive as possible as an investment destination
will bulk very largely in our minds.
And as many in this audience will know, one of the specific focuses
of my visit to New York has been to associate myself with the efforts
of many both within the government and within the business community
in Australia to promote Australia as a world financial centre. And
indeed Joe Hockey's specific responsibility within the government
includes very much that particular activity. And in doing so I believe
that I speak, and Joe speaks, from a position of great generic economic
strength as far as our country is concerned because I can't think
of a time when it's possible to speak with credibility as positively
as we can now about the strength and the optimism of the Australian
economy. So I can assure this audience that we will have that particular
aspiration of making Australia a world financial centre, that particular
aspiration very much in our minds when we sit down in a few weeks
time, as we will, to consider the recommendations of the Ralph Committee.
I just want to say two other things before allowing plenty of time
for people to ask me questions, and I want to return to a theme that
I developed for a moment at the gathering yesterday which I addressed.
And that is that one of the great dividends of what has happened in
Australia over the last year, one of the great dividends of the fact
that we have been able to stare down the worst economic collapse Asia's
had in the last 40 years, is that it has given to the Australian people
and to the Australian nation a sense of self-belief about the capacity
of this country to succeed internationally that I don't believe it's
had before.
Australians by character and by nature are openly confident people.
Yet there's always been within many of us, in many Australians a belief
that whatever our assertiveness may be and whatever our confidence
may be, when it comes to the international economic stage it's always
been a bit difficult and a bit threatening and a bit intimidating
out there. And what we've been able to do over the last year against
all predictions and that is to defy a collapse that by all the conventional
rules should have engulfed us, and indeed most people in Australia
believed it was going to engulf us in one form or another by about
the end of 1998, has I believe not only sent a very powerful message
to the rest of the world, but it's also sent the very powerful message
to all Australians and to the entire Australian nation. It's demonstrated
to the world that we are a can-do community, that we do have a capacity
to slug it out and survive and to stare down the worst that a fairly
hostile world economic environment can offer.
Now, there are reasons for it, and I've described the various reforms
that have been undertaken in Australia over the last 20 years which
have played a part in the strengthening and in a time of crisis the
fire-proofing of the Australian economy against the Asian economic
downturn, and I might add that one of the things that also greatly
aided us during that very difficult period in 1997 and 1998 was the
skilfull management of the exchange rate in Australia by the Reserve
Bank. Now all of those things came together when they were most needed.
But I think the best thing of all that's come out of it beyond the
employment growth, the low inflation, the low interest rates, the
high levels of business investment, valuable though all of those things
are, the psychological value of Australians finding that they've been
able to defy and overcome this major economic challenge I think it
is made an incalculable contribution to the national sense of self-worth,
belief and confidence of our country. And in the end that is infinitely
more important than any more narrowly based economic doctrine, or
economic goal, or economic prescription. So as Prime Minister I find
that of all of the emotions, if I can put it that way that one feels
out of the experience of the last year, that is far and away and infinitely
the most satisfying and the most enduring.
Can I simply conclude Nicholas by thanking you and your colleagues
for having me here again here in New York. I think you've helped host
a few luncheons for me in the past. I do value very much the involvement
of the organisations that have sponsored today's lunch and it's another
opportunity for me to say again as Prime Minister of Australia how
deep and abiding and how important is our relationship with the United
States. We have our differences, we've had one this week on one aspect
of our export trade of which I won't dwell any further because it
is already well-known to the audience. We've believed that we've been
treated less than fairly and have made that very plain in our discussions
with the American Administration. But the relationship is deeper and
more long-standing and more important than an understandable and deeply
held difference, and in some quarters of the Australian community
a quite bitterly held difference, on a particular trade issue and
today is an opportunity for me to say again how very important that
overall relationship is and I'm delighted that I've had the chance
of addressing this lunch today to share some of my thoughts with you.
Thank you.
QUESTIONS AND ANSWERS
QUESTION:
My name is Dick Radez and I am not a shy American but I work with
US pension funds and endowments and venture capital fund to fund managers
that invest in venture capital funds in Silicon Valley in Europe.
We have been prevented from investing in Australian venture capital
opportunities over the years because of both the legal treatment of
the venture capital investment vehicles in your country, the capital
gains tax and whatever. Now, I have been after your Minister, Mr Hockey,
about this already and he's agreed to take another look at a presentation
in the Australian venture capital community gave to Mr Ralph. But
given that his brief seems to be on rather a larger scale there is
one more concern with things like trying to create another Silicon
Valley down in Australia where we think you have got the intellectual
talent and the experience and software information technology, the
Internet. How do we get this revisited if the Ralph Report doesn't
touch upon it as fully as it might?
PRIME MINISTER:
Well, I think Ralph will have something to say about it. And I can
assure you that it will be very thoroughly visited when we look at
the Ralph Report in every respect.
QUESTION:
You talk about the five pillars and that's fine. It seems one pillar
you have missed out on is immigration. What are your comments on that?
PRIME MINISTER:
Well, I don't think I did miss out on it at all. I was describing
in that speech, and again today, the five things that I believe have
contributed to the strength of the modern Australian economy. So the
question though of immigration policy is a separate issue. We have
achieved the economic strength we have now either because of, in spite
of, or based upon in some way the immigration policy we have presumably
followed over the last 20 or 30 years. So I don't think it can be
said that in arriving at where we are now the immigration policy that
we have followed is flawed. We have, as a Government, the view that
at the moment the current intake is about right. The current intake
is lower than what it was at some stages in the1970s and 1980s. It
is an intake that has a greater proportion of people with skills and
with a greater emphasis on business migration. It is, of course, based
on a completely non-discriminatory principle. It is open to this or
any future government to vary the level of immigration in the future
if it believes that economic and social circumstances require it.
Immigration if you look at the sweep of years since World War II immigration
has been of enormous benefit to Australia as it has to the United
States. But it's always been important to ensure that the aggregate
flow of immigration and the composition of it in terms of skills versus
family reunion is right for the economy at the particular time. So
we don't have a doctrinaire view about the level of immigration we
have a pragmatic view. And the pragmatic judgement at the moment is
that the current level is right. There is a view that if you doubled
or trebled immigration overnight, if you could do that you would have
an enormous impact on the so called aging of the population. There
have been some studies done on this and that particular view is somewhat
misplaced and somewhat exaggerated that it's not quite as simple as
that. But that does not say that a higher intake might not be sustainable
in Australia in the years to come. I don't rule that out but I think
there is some mythology about, around about the impact in the short
to medium term of a dramatic increase. It just doesn't compute according
to the advice I have it doesn't quite work out in practice like that.
QUESTION:
My name is Tim Copland from Goldman Sachs, Mr Howard. With the falling
gold price and the relative strength of the Australian dollar the
Australian gold mines are hurting at the moment. Do you propose to
provide them with some assistance whether it's by tax relief or some
other means to help out the Aussie gold miners?
PRIME MINISTER:
Well, it's not immediately in contemplation, if I can put it that
way. Look, I mean, fair try but..
QUESTION:
Nicholas Hyde from JP Morgan. I have been out of Australia for about
two years and one thing about being in the United States which I find
different to Australia is the depth of the economy across all regions
and across the smaller towns of America. And I was just wondering
when I look at Australia I see more of a concentration in the major
cities and hopefully with the increase of information flows, you know,
is the Government doing anything about trying to get the wonderful
performance of the economy into centres other than just within the
major cities of Australia?
PRIME MINISTER:
Well, I am not surprised that you would find that difference. I mean,
because of the huge size of the United States and the vastly bigger
population of course that is a difference. I mean, I might be statistically
wrong in saying so but I don't think I am conceptually wrong in saying
that Australia is probably the most urbanised western society. I mean,
it is one of the things that people still have great difficulty in
coming to terms with about Australia of just how big our cities are.
Of how big, for example, by world and United States standards a city
like Sydney is. So we are a very urbanised society and it is also
true that as the nation is doing very well economically there are
still significant areas of social deprivation and economic deprivation
in the regions. I mean, the major cause of the rise for a moment and
then thankfully the disappearance of One Nation was not, in my view,
race but it was economic deprivation and alienation in regional areas
of Australia. And it's something that every society has to grapple
with but we are doing a number of things in relation to that. We are
making very strenuous efforts including out of the proceeds of the
privatisation of Telstra. We are making very great efforts to provide
more communication services in the bush. We don't want communications
haves and have nots in Australia. We are working very hard at that.
But one of the reasons why we are so very angry about the American
decision on lamb, now that you have asked me, is the opportunity that
is.I mean, here is a group of people of really battling Australian
farmers without any government help, got off their backsides and carved
out a new market in this country and whack, it's taken away or certainly
penalties put on it. Look, I think there are a large number of particular
policies that we are following in telecommunications, in land renewal
through our Natural Heritage Trust proposals. We are trying to tackle
the problem of getting medical practitioners into country areas, we
are trying to reduce the cost of country students boarding in universities
or colleges in the cities. There are a whole range of things that
we are doing. But it's a very good and relevant question because side
by side with the national economic strengths and the extraordinary
prosperity of a number of parts of Australia, particularly in parts
of the larger cities and some of the coastal areas, there are communities
that feel as though they are left behind and we are working very hard
to bring them along as best we can.
QUESTION:
Philip Hedger from Pfizer [inaudible]. You have just been to Japan
and we do a lot of business both in your country and Japan as you
know. And I wonder if you could give us your, sort of, first hand
appreciation of the economic positive indicators that have just come
out of Japan in the first quarter and doubtless you spoke with various
ministers there whether you feel that there's cause for prolonged
optimism there?
PRIME MINISTER:
Well, I think the Japanese economy has undergone a number of very
necessary structural changes. I think there are more needed. The best
sense I could get was tha