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SUBJECTS: taxation reform, business taxation system, Ralph Report, Asian-Pacific
region, Australia's relationship with Israel.
Thank you very much Chris for that very warm and generous introduction.
To Leon Kempler, to his Excellency the Ambassador to Australia from Israel,
Sir Zelman Cowen, the former Governor-General of Australia, my ministerial
and parliamentary colleagues, the Governor of the Reserve Bank, Ian Macfarlane,
and many distinguished guests, ladies and gentlemen.
It is for me a particular honour and pleasure to be at this lunch. And there
are a number of things I want to say about the connection I feel I have
with the Chamber and what the Chamber represents in terms of relations between
the people of Australia and the people of Israel.
But I think it is appropriate for me to say at the very beginning that I
know that I speak on behalf of all of you here, and I know millions of Australians,
in expressing to the Government and the people of Turkey our immense sadness
at the enormous natural disaster which has overtaken that country. I've
asked the relevant sections of our Government to assess what assistance
Australia can provide to the Government and to the people of Turkey and
I know that the thoughts of many Australians and most particularly those
within our community who have family links with Turkey will be very much
with the people who are suffering as a result of this terrible natural disaster.
Ladies and gentlemen my pleasure in being here today and the honour I feel
in being invited to address this lunch is based in no small measure than
on the association at a personal level I've had, long pre-dating my entry
into public life, with the Jewish people of Australia and the profound admiration
that I've had for the State of Israel and what that country has achieved
since it's formation in 1948 in such adversarial and difficult circumstances.
And I'm very proud of the fact that I've led a government which has, whilst
its kept its eye very clearly on the maintenance of a fair and just peace
in the Middle East, is a Government that has always in terms of its voting
record in the United Nations and generally in a diplomatic sense deported
itself in a way that is profoundly sympathetic and understanding towards
the Government and the people of Israel. And the Australian Government has
always understood the difficulties faced by the State of Israel and has
pursued policies which are conducive to a further understanding of that.
I welcome very warmly the message that was sent to this luncheon by the
newly elected Prime Minister of Israel, Ehud Barak. He starts with a very
large mandate and I can say from personal experience its always good to
have your first term in government with a very large majority because you're
bound in the course of taking decisions that are important to the future
of your country and the long term stability of your government, you are
bound to take some decisions that are going lose you a few friends and lose
you a bit of support. I look forward to the Prime Ministership of Mr Barak.
I wish him well. I know that he will pursue a just and lasting peace in
the Middle East and I know that it is the desire of not only of my government
but of all Australians of goodwill that there be that peace which recognises
the legitimate rights, not only of the State of Israel and the people of
Israel, but also the legitimate rights of other nations and other peoples
within the Middle East.
The relationship between Australia and Israel is a very close relationship.
It is a relationship built on some common values. It is a relationship built
on the common value of our commitment to individual liberty and freedom.
Israel has been since her foundation a beacon of democracy and liberty in
the Middle East. We share those values and those aspirations with Israel
and our two peoples feel close as a consequence. We have of course very
special links through the vibrant character of the Jewish community in Australia,
but not only that but also because of the great respect so many Australians
feel towards Israel and what Israel has achieved over the last 50 years.
We have substantial economic links. But those economic links can be advanced
and I'm glad that the information technology delegation that was led by
Richard Alston to Israel was seen in such a highly successful light and
I hope that the delegation dealing with agribusiness, which will shortly
go to Israel, led by Phil Scanlan of Bonlac will be equally successful because
in those two areas in particular, information technology and agribusiness,
there is much to be shared between our two nations and our two societies.
And it is through those sorts of links that we can build the modern 21st
century characteristics of the relationship. The bonds of culture, the bonds
of freedom, the people to people links, the cultural links, will always
be there. But as Dr Johnstone exhorted us to do we should always keep our
friendships in good repair and the friendship between Australia and Israel
is no exception and we must seek in every way to build new ways of deepening
and widening that friendship.
And on that score I would like on behalf of the Government to address some
words of thanks to you Mr Ambassador as you complete your tour of duty here
in Australia. Over the last four years you have represented your country
with great skill and dignity and grace. You have been a fine Ambassador
for the people of Israel. You have understood the character of the relationship
between our two nations and our two societies and you have interpreted in
a new and fresh way the relevance of the links between our two societies
as we move towards the 21st century. And I therefore thank you and your
wife for the great work you have done in building even deeper links between
our two societies and on behalf of everybody here I wish you well in your
diplomatic and personal future as you leave this country with our immense
gratitude and our immense goodwill for a job remarkably well done.
In his introductory remarks Chris Anderson was kind enough to speak of the
health and the strength of the Australian economy. And I want to spend just
a few moments reinforcing the importance and the relevance of the strong
economic climate that has been created in Australia over the last few years.
There is little doubt that we are now experiencing the strongest economic
fundamentals that Australia has seen since the late 1960s and in many ways
the fundamentals are better now than they were then because then we were
living in something of a world of economic unreality. We still then lived
behind high tariff barriers. We lived under a centralised wage fixation
system. We saw our markets as rather limited. The potential economically
of the Asian Pacific region was yet to be fully realised and when we look
back on those years, prosperous though they were, we could see that in a
sense they were something of a calm before the economic storm which overtook
the world in the 1970s with the end of fixed exchange rates, the quadrupling
of oil prices and the other fundamental changes that occurred around the
world.
But now 30 years on our economy has been transformed. We are now an outward
looking economy. We have low tariff barriers. We have a floating exchange
rate. We are very much part of the global economy. We see information technology
as being at the leading edge of economic achievement as we go into the next
millennium. And importantly we've had governments, and I say governments
because I am willing to give credit to my predecessors in one or two areas
where I believe they undertook reforms that have been important to the long
term economic strength of this country. And I think particularly of the
decisions taken to deregulate the financial system and reduce tariff levels
in Australia. But we have therefore had governments and most particularly
the government that I've had the privilege of leading over the last three
and a half years that have been willing to embrace fundamental change and
reform and it is no accident that we have been able to stare down the worst
economic downturn Asia has ever experienced.
People often say to me that we have been lucky. Now we have been lucky.
It's a great saying about Australia - the lucky country - coined by Donald
Horne. But it's also true that you make your own luck. You make your own
luck in life and you make your own luck as a nation. And we have made our
own luck over the last few years. We could have squibbed it with the budget
when we came into office. We could have said oh well if economic growth
increases it will whirr back into surplus as somebody once famously said.
We could have done that. We could have taken the easy way out in relation
to industrial relations reform. We could have squibbed the fight that was
needed to reform the Australian waterfront. We could have put taxation reform
aside because it was too difficult. We could have gone soft on competition
reform. We could have done all of those things. And if we had done all of
those things, if we had sat on our economic reform hands after 1996, you
would not now be experiencing the sort of buoyant business conditions that
I think most Australians in business are now experiencing. And the economic
strength we now have and the respect that is now afforded to Australia in
international political and economic forums is no accident. It is a consequence
of the policy changes that we have embraced over the last three and a half
years.
A few weeks ago I was in the United States and naturally I visited not only
Washington, but also the financial centre of the world New York and I found
there the greatest level of respect for the strength of the Australian economy
that I have encountered at any time in the 25 years that I have been visiting
that city in various political capacities. And the greatest thing to me
out of what Australia has achieved over the last few years is the psychological
boost it's given all of us. We've always been a confident people. We've
always been an optimistic people. But there's also been quite a number amongst
us who believe that when it gets to the rough and tumble of international
economic competition sometimes we can't cut the mustard. But what I think
out capacity to stare down this Asian economic downturn has done is that
it's given to us a national self-confidence, a national self-belief, a national
sense of economic achievement, the like of which this country has not had
certainly not in my experience and perhaps in our experience since the end
of World War II.
So we are looking at a situation where our economic fundamentals are very
strong. And as I frequently say this is not a council of complacency or
smugness. You climb one economic reform hill and you find another in front
of you. You never rest. You can never say well we've had three and a half
very good years. Now we'll sit back and enjoy it and just let the economy
look after itself. Once you start to do that people are entitled to ask
the question are you any longer fit to be in government? Because the process
of reform is an ongoing one It's an ongoing challenge. And that is why having
successfully negotiated 85 to 90 per cent of our tax package through the
Parliament, and I regret the fact that we didn't get the lot. We went to
the Australian public with a package. The Australian public voted for that.
I felt right up until Senator Harradine made that famous speech in the Senate
I thought there was a chance of getting the lot through. And when he stood
up and said "I can't", or "I can not", I think and he
didn't. I knew that what we had to do was to sit down and negotiate with
the Australian Democrats and see what we could get through.
And as a result of that negotiation we didn't get everything but we got
85 to 90 per cent of it. And that represents the most historic change to
our taxation system since Federation.
But the next shoe to fall as far as taxation reform is, of course, reforming
our business taxation system. And I want first of all in my remarks about
it today I want to record my immense gratitude to my friend and an eminent
Australia businessman, John Ralph, who is here today, for his chairmanship
and stewardship of this remarkably coherent examination of Australia's business
taxation system. I also want to thank Rick Allet and Bob Joss who assisted
John Ralph in preparing this review.
It is without question the most comprehensive and detailed review of Australia's
business taxation system ever. It is not, of course, the first review that's
ever been carried out of Australia's taxation system. We have been regularly
reviewing our system now for as long as I have been in Parliament. In fact,
within a few months of my coming into Parliament in 1974 we got the report
of the Asprey review which was commissioned by the late Billy Snedden when
he was Treasurer in the McMahon Government. And now a quarter of a century
on the big thing that has changed is that governments have begun to implement
reviews of our taxation system.
We have brought about fundamental change to the general taxation system.
We are now about to focus on fundamental change of the business tax system.
And we couldn't have been better served by the report that John has delivered.
And I want to thank him very warmly on your behalf and on behalf of the
Government for the tremendous dedication that he has brought to the task
over the last nine or ten months.
Now, I can't announce to you today, much as all that a few people suggested
I should, I can't announce to you today all of the decisions that the Government
has taken on the review that John and his colleagues have prepared. I can
however take you as best I can into my confidence, the Government's confidence,
regarding the process that we are going to bring to an examination of the
review.
We have commenced the detailed examination in Cabinet of the Ralph report.
We haven't taken decisions, we still have a number of meetings to hold and
quite a deal of analysis to undertake and no doubt at various stages quite
a lot of questioning of members of the review group and people associated
with preparation of the report.
I am able to say to you that the Australian business taxation system will
undergo quite fundamental change as a result of the recommendations of the
report. And without canvassing areas of the report that I cannot canvass
by dint of the fact that many elements of it do have a market sensitivity
and until the Government has taken a decision as to which direction to go
it is inappropriate to speculate.
But I can say a number of things about the recommendations that are important
for the Government's understanding and I hope the business community's understanding
of it. And that is first and foremost it's very cohesive and integrated.
It represents a total road map of the way forward so far as our taxation
system is concerned. It's not one of those reports that, sort of, puts and
takes and where you end up with something that lacks coherence and lacks
integration. It's a report that quite properly is designed to make this
country competitive in the 21st century.
And I frequently say at gatherings like this that we are, for better or
for worse, we are part of the global world economy. Those who think that
in some way we can go back to the old days of shutting out the world and
letting it pass us by are deluding themselves. We can't do that. And if
we are to survive and if we are to do better than we are doing at the present
time then, of course, we have to be part of the global economy. And that
means we have to make investment decisions in this country as attractive
as possible. It means that when we are looking at something like the capital
gains tax, which I and the Government believe does need significant change
and reform, we need to look at the attractiveness not only of Australians
making investment in this country but also the attractiveness of Australia
for people elsewhere to make investments. When we are looking at the attractiveness
of Australia as a country in which to invest we must also look at the capacity
of Australian companies to invest abroad and the value of the returns those
Australians get from investing abroad.
It is no secret that one of the issues that we need to resolve and one of
the issues that's been a matter of very significant public debate in Australia
over the last few months is, of course, the question of whether or not we
might as a community opt for a lower general company tax rate, say 30 per
cent, paid for in part by the removal of some existing provisions in the
taxation legislation such as accelerated depreciation.
Now, this has quite legitimately raised debate from within the business
community about the relative impact on sectors. And that's a proper debate.
If you are a manufacturer you will bring a particular view to tax reform.
If you are in the service industries you will bring another view. If you
are in the mining industry you will bring yet a third view.
But it's important not only as we assess those competing claims, it's also
important when the business community assesses those competing claims that
they don't look at one section of taxation reform in isolation. It's not
good enough for the manufacturers to say, well, I'll look at the impact
on us, of say a lower company tax rate and less accelerated depreciation,
without also looking at the aggregate impact of taxation reform generally.
Because I think it is fair to say that what has already gone through the
Parliament has in relative terms been of greater advantage to some sections
of the business community than it has been to other sections.
And what is important therefore when the Government reaches its decision
as well as when business reaches its decision that all of us take into account
the aggregate impact, the integrated impact, the whole impact of taxation
reform and all aspects of it on the operations of business.
I know that there is intense interest and speculation not only in the media
but within the business community. And we are keen to take our decisions,
to announce them and to see them implemented as soon as possible. But it
is also desirable that we get those decisions right. You don't get one or
two bites of business taxation reform. The opportunity that is in front
of us at the moment is an opportunity that comes only once in a generation.
And just as we took time to take our decisions in relation to general taxation
reform and the result turned out to be a very positive one so it is with
business taxation reform that we will take not an inordinate amount of time
but we will take the right amount of time in order to reach the right decision.
We will involve those in the community who should be involved in discussions
to the appropriate degree. Can I point out that there has already been very
extensive consultation between John and his committee and members of the
business community in putting this reform proposal together.
I find it very difficult on an occasion like this or indeed any other occasion
when I am addressing a gathering of men and women who are involved in business
in Australia to talk without turning a great sense of optimism and enthusiasm
indeed excitement about the economic prospects that lie in front of this
country.
Chris said in his remarks that we occupy a very special place in the world.
I have often said that Australia occupies a unique intersection. We are
a nation that has deep links with the people and the nations of Europe.
We are in many ways a projection of western civilisation in this part of
the world. We share great democratic and liberal values in the broader sense
of that word with the countries of North America.
But here we are geographically in the Asian-Pacific region. And our cultural
and political and other life is being enriched by the contribution of hundreds
of thousands of Australians of Asian descent and Asian background. And when
you put all of that together you find a country that is really quite unique.
There is no other society in the world that has that combination of background,
of values, that intersection of geography and history that Australia has.
And it provides to us not only a tremendous economic opportunity but it
provides to us a tremendous political opportunity. And the great change
that I have felt as Prime Minister of Australia over the last few years
as I have visited the nations particularly of our region is that the view
of Australia has changed. Because of our economic achievement and strengths
we are seen with a new respect. We no longer ask ourselves those rather
silly questions of whether we are part of Asia, whether we are Asian, whether
we are in Asia or we're enmeshed with Asia. What is happening now is we
are just being ourselves as Australians in Asia. And we are finding, I think
to our advantage, that we are no longer seen as the anxious outsider seeking
admission into the rich club of Asia and the Pacific. Rather, we are seen
as a very confident, self-assured, successful, where appropriate compassionate
partner in the Asian-Pacific region.
I am proud of the fact that we were strong enough economically to be, along
with Japan, the only country in the world that contributed to the IMF bail-outs
of Indonesia, Korea and Thailand. I am proud of the fact that we are seen
in this part of the world as punching above our weight. Most of all, I am
proud of the fact that we are seen as doing it with that special combination
of unique Australian values that our history, our geography and our cultural
inheritance has given us.
Ladies and gentlemen, I thank the Chamber for the invitation to be here
today. I salute those in the Israel-Australia Chamber of Commerce for the
contribution they make to the vibrancy and the success of the business community
in Australia. Many people in this room today have made a massive contribution
to the economic strength and the economic vitality of our country. You have
enriched the quality of the country's business life and many of you have
also made a massive contribution to the quality of Australia's cultural
life.
As Prime Minister of Australia I am very conscious of that. I honour that
contribution and I warmly thank you for what you are doing for Australia
and in particular in the context of this gathering the great and enduring
links between the people of Australia and the people of Israel. Thank you.
[ends]
AUSTRALIA-ISRAEL CHAMBER OF COMMERCE
QUESTIONS AND ANSWERS
CROWN TOWERS, SOUTHBANK, MELBOURNE
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QUESTION:
David Griffiths from Macquarie Bank. A question for Mr Howard. If we look
at the implications of the tax reform and look at particular things like
accelerated depreciation and then we lay across that the Kyoto greenhouse
effect and what that will have on West Australian business, it goes to the
heart of a lot of our growing businesses which has driven our sector. My
question is, have you looked at the regional implications of tax reform
and things like the Kyoto and is there anything the Government can do to
address those issues?
PRIME MINISTER:
Well, the answer is that we are, of course, very conscious of regional implications
as we look at the Ralph Committee recommendations. It is true that a number
of mining companies have expressed a concern about the situation where you
might have a lower rate of company tax but accelerated deprecation would
be withdrawn. Not all mining companies have put that point of view. It's
also true, if you look at the analysis of the impact of taxation reform
generally quite a lot of that analysis produces a situation where the benefits
to the mining sector have been assessed as greater than the benefits to
other sectors. And that is relevant to the exhortation I made in my earlier
remarks that as people react to business tax reform and business changes
I ask them to take into account the aggregate impact of taxation reform.
Now, I know the contribution of the mining industry of Western Australia
to this nation's export income. I think it's about 25 per cent of our export
income comes from the mining exports of Western Australia. And I am very
conscious of that and we don't intend to take decisions that are going to
impose unfair burdens or to cripple the capacity or indeed retard the capacity
of the mining industry to go on making a contribution. And I am also very
conscious of the revenue climate of large mining projects in Australia.
So the answer to your question shortly is, yes, I am aware of regional implications.
The longer answer is the one you have just heard and we'll certainly endeavour
to put all of those things into the balance.
QUESTION:
Good afternoon Mr Prime Minister. My name is Wolf Blass, I am the founder
of Wolf Blass Wines International.
PRIME MINISTER:
Hello Wolf.
QUESTION:
We are part of the Fosters Corporation and I am delighted to see my friend
John Ralph to be there. We are the wine State and I want to speak on behalf
of the wine industry and as you are aware we just have made an announcement
that we have passed $1 billion revenue..
PRIME MINISTER:
Congratulations.
QUESTION:
.we have become the sixth biggest export revenue earner for Australia. However,
my question is the tax reform. We at the moment are paying 41 per cent and