Subjects: Tax reform, economy, interest rates, business taxation reform,
social politics, Snowy River Scheme.
E&OE....................
Thank you very much, Mr Chairman. There's been a few changes since 1981.
For example, when I addressed the 20th annual meeting we still
had a mechanism called rather obscenely a "crawling peg" fixed
exchange rate. We didn't have a floating exchange rate. We still had a very
high tariff wall around Australia. We hadn't dreamt of privatising any of
our major government business enterprises and I just failed in my second
attempt to persuade the Fraser Government to introduce a broad-based indirect
tax. Now it's called a Goods and Services Tax. But, I guess, that little
reminder is an illustration that some things do stay the same but with the
opportunity of government you can bring about some other very significant
changes.
And one of the themes that wanted to develop tonight is the current strength
of the Australian economy, and most particularly the fact that the Australian
economy was able to stare down such a bad economic downturn in the Asian
Pacific region, is really due to the cumulative benefit of major economic
reforms undertaken over the last 15 or 20 years. And those major economic
reforms include a number undertaken by the former Labor government. And
I've never been unwilling to give that government credit where it is due,
particularly in relation to some of the financial sector reforms and the
changes relating to reducing the level of tariff protection which, for a
Labor government, was a particularly difficult political undertaking - of
course, I might quickly add, by way of the partisan commercial, aided and
assisted at that time by a very high-minded Opposition that didn't try and
block things in the Senate. Think what we might have done with tariffs,
for example, given the emotive places they occupy.
But, seriously, the last 20 years - and I hadn't intended to start on this
but the Chairman introducing me provoked me to do so - over the last 20
years we really have seen the undertaking of major economic reforms deliver
a cumulative benefit. And it's really when you add all of those things together
you find the explanation - financial sector reform, which gave us a very
well regulated and prudentially supervised banking system, very transparent
banking system, very strong financial sector reforms, the changes to the
industrial relations system carried out after the Coalition was elected
in 1996, the very, very major turnaround in the fiscal position that was
engineered by the Coalition over the last three-and-a-half years. You add
those things to all the other reforms and you do begin to understand how
it was that the Australian economy was able to so successfully work its
way through the impact of the Asian economic downturn.
I wanted tonight to briefly sketch the political, social and economic equation
as I see it in Australia at the present time. And you can never talk about
the Australian economy in isolation from the social or political climate.
And the climate in which we operate at the moment really has three very
important characteristics. We've gone through a period in which we have
undertaken as a government and as a community a lot of very significant
economic reforms and embraced a lot of economic change. And the question
naturally arises, particularly in the wake of the very surprising result
of the election in Victoria, as to whether we have now reached a point of
reform fatigue as to whether the community is really saying we've had enough
reform, we want a period of economic and social consolidation. And the textbook
theories are all very well but there is a human dimension to all of this
and you have to pause and call a halt for a while. I don't believe, myself,
that the community is quite saying that but I think the community is saying
a number of things to us, in government, about how reform is handled. So
the first part of the climate that you've got to factor in is the fact that
we have gone through a very lengthy period of economic reform over the last
10 or 15 years.
The second very, very important element that we have to inject into any
consideration of the Australian economic and political landscape - and this
has a very big social dimension - is the clear evidence of a growing divide
between rural and regional Australia and the relative affluence of the rest
of the country. This is something that I've become very conscious of over
the last 12 months. And it is real and unless it is addressed it is going
to significantly scar the future of this country because it represents a
challenge to something that we have always held very dear in Australia and
that is the contribution that the bush makes to not only our wealth but
also to our national psyche. And what we're witnessing at the moment is
generically a very affluent country. And large sections of our society are
displaying an unparalleled degree of affluence and economic contentment.
And there are sections of the Australian community that have, to borrow
Harold McMillan's famous phrase, "never had it so good". And the
rest of the community is very aware of it. And I think we all know that
disadvantage, or the sense of disadvantage, is often a relative thing. And
if you have areas of the country which are feeling left behind or left out
at a time of economic plenty they feel the disadvantage and the deprivation
all the more keenly and, indeed, more keenly than if the country were in
a state of economic recession.
But I think we do have a major challenge on our hands with the community
to come to grips with this, to recognise that there is in the bush or rural
and regional Australia, however you collectively describe it, a sense of
falling behind, of having been left out. And there's no easy answer to that
because as you all know so many of the problems of rural Australia are the
product of almost irreversible forces such as, or uncontrollable rather
than irreversible forces, such as a decline in commodity prices and the
long-term disappearance of demand for particular products. In many ways
handling this issue and ensuring that we don't lose that part of our national
psyche represented by rural Australia and that we make the people of that
part of rural Australia feel included and part of the Australian community
is about as big a challenge a government has got at a state or federal level
anywhere in Australia.
The third element that we have to contend with, and we as politicians can
never ignore it, and that is that every once in a while, of course, you
try and get elected and, therefore, you have to pay some regard to what
I call the political state as well as the social and the economic state.
And you have to constantly balance the two sort of competing imperatives.
On the one hand, you are elected to government to do good things and to
bring about beneficial economic reforms but, of course, if you don't hold
government you have no capacity to do anything at all and you always have
to try and balance those two. I frequently say to my colleagues in the Parliamentary
Liberal Party that it's very important that we maintain not only the reform
faith but also the political faith. And that means being zealous but not
too zealous. I encapsulate it by saying that there's not much point in being
120 percent pure in Opposition. It's probably better to be about 90 percent
pure in government. So there is a balance to be struck.
But, of course, there's another change that's occurred in Australian politics
over the last 10 years quite markedly and it's occurred around the world
but it's quite profound in Australia and that is the process of what I call
de-tribalisation of Australian politics. People are no longer rusted on
to one or other side of politics to the extent they were a generation ago.
When I was learning my political craft in the Liberal Party in the 1960s
I operated on, it sounds vaguely redolent of the bygone economic management
age, I operated on a 40-40-20 rule - and 40 percent voted Liberal, 40 percent
Labor and 20 percent were in the middle. I think the modern manifestation
of that is a 30-30-40 rule where you have 30 percent Labor, 30 percent Liberal
and perhaps 40 percent moving around in the middle. People react counter-intuitively
now to a lot of issues and I think it's one of the things that political
parties have got to come to terms with.
There are plenty of examples we can find in recent years of people voting
against the traditional patterns. Now, this is not absolute. It is still
possible to divine and discern certain straight lines as far as political
allegiances are concerned but they are a lot more mixed now and they're
a lot less predictable. And people don't feel as ideologically committed.
The Cold War ended 10 years ago and I often heard people, when I grew up,
say, well look, I think the government - at that particular time it was
a Liberal government - is doing a terrible job but I can't possibly vote
Labor. And, equally, I would hear Labor people saying the reverse of the
Liberal Party in respect of an incumbent Labor government. Now, that sort
of permanent zealous commitment is not quite as frequent anymore.
So all of these things mean that we are operating in a different political
climate than what we were a few years ago. We're operating in a climate
where there's been major economic reform and the public feels that it's
done its bit to contribute towards that. We have this particular problem
in Australia, although I suspect it's not confined to Australia, of coping
with rural and regional or non-metropolitan decline and the social and economic
and political challenge of that. And, finally of course, as practising politicians
and this is of less concern to you as it is to me, we have to cope with
a more volatile and a less predictable political climate.
Now, we remain very committed to a reform agenda. I like to think that the
last three-and-a-half years have been characterised by some quite fundamental
economic reforms. And if we flick through them I think labour market reform
has been more far-reaching than it's been given credit for and it's one
of the reasons why we have a far better productivity performance than we've
had for a long time. And I think the changes in the power balance in the
industrial relations arena, I think to a more level playing field, have
been very beneficial. They have not been attended by the degree of industrial
disputation that people predicted would occur. And, overall, I think we've
got a lot to be pleased about in that area.
We have, of course, achieved a major fiscal turnaround and that's made a
contribution, although it's certainly not the only reason why we have, despite
the increases of recent days, the lowest interest rate structure in about
three decades, a very low rate of inflation, a still pretty strong business
outlook, an employment growth factor over the last couple of years, particularly
the last six months, which has been the best for a long time and, pleasingly,
a significant reduction in the level of youth unemployment, although it
still remains unacceptably high and we still have quite a distance to go
on the unemployment front. And, of course, we have embraced, after a lot
of argy bargy, politically and legislatively, we've embraced a major change
to our taxation system, one that we sort of dreamt of for a long time and
attempted by a number of people on both sides of politics and finally realised
when we won the election last year. It didn't survive in its pristine form.
We got about 85 percent of it. It would have been better if we'd got the
100 percent but we're realists. Once Senator Harradine said, I can't or
I cannot or I won't - I forget exactly what the precise expression was but
it meant no - so we realised we had to negotiate with the Australian Democrats
and that's another new element.
The public, incidentally, is not really interested in long, philosophical
dissertations from one or other side of politics as to why the other side
should unilaterally capitulate and give in and let your legislation go through
the Senate. I mean, we might think they're very interesting things and we
might dine out at Liberal or Labor Party gatherings depending on who the
politician is about how terrible and outrageous and what an absolute assault
on democracy it is for the Senate to obstruct this fine piece of legislation.
But, in the end, I have an uncomfortable feeling that what the public is
saying is very simply, you're the Government, you're the Prime Minister,
you get it fixed, you get it through, don't bore me with all the rhetorical
debates. And I certainly found as I went around Australia during the debate
in relation to native title and a number of other issues that that was certainly
the case. So all government is something of a learning curve no matter how
long you've been in and that's something that I've certainly learnt over
the last three-and-a-half years, that the public is interested in outcomes.
And may I say the younger generation in Australia is particularly interested
in outcomes as far as their politicians are concerned and far less in ideology
or prejudice or protesting or fighting long resolved rhetorical battles.
So you have to work with political minorities, you have to work with independents,
they're a feature of the political landscape. You might wish that you had
absolute majorities in every parliament but that is not the case. We do
remain very committed to a reform agenda. But I think that reform agenda
has to be carried forward having regard to the sort of constraints and the
sort of climate in which governments, and particularly the national Government,
operate at the present time.
Right at the moment we are negotiating with the Labor Party and the Democrats
regarding the business tax reform package. And I am very hopeful that we
will get that package through largely, perhaps not totally, but largely
unamended. And I am cautiously optimistic that that will turn out to be
the case. The indications from both the Democrats and the Opposition are
that they are not interested in a very long drawn out Senate inquiry process
of the type that applied in relation to the Goods and Services Tax.
And if we can bed those business taxation changes down, and if we can successfully
handle and negotiate and work our way through the implementation process
so far as the Goods and Services Tax is concerned, and that represents a
very, very important challenge for us, then we will certainly have a great
deal on our plate over the next 12 months.
But in saying that we are conscious of the sort of climate in which reform
must take place I wouldn't want anybody to imagine that I subscribe to the
reform fatigue theory of politics nor indeed that we have lost our commitment
to economic reform. It is just important that we and our constituencies
and the broader Australian community understand the considerations that
we must take into account in advocating and implementing reform.
I've had the view for a very long time that the Australian public will accept
fundamental change and reform in the economic area if you can satisfy the
public on two counts. The first is that you have to persuade them that the
reform is good for Australia. I have to say with the benefit of hindsight
and disclosing the thoughts of a political advocate as well as an economic
reformer that the argument that in the end I think mattered more in the
last federal election campaign about the Goods and Services Tax was the
argument that overall it would probably be beneficial for the whole country.
Individuals may have thought well, it won't be particularly good for me
and there may well be people in this room who feel that individually those
changes were not particularly beneficial but collectively they felt that
those reforms would be good for Australia. Because there is a sense of altruism
within the broad community and there is a belief that the national benefit
in the end is something worth supporting and something worth promoting.
And the second condition that you have got to fulfil is that you have got
to satisfy people that the reform you are proposing is fundamentally fair
to the average Australian. If you fail either of those tests, if a reform
fails the national interest test or if it fails the fairness test then it's
not going to get, in my view, out of the barrier let alone past the winning
post. So I do think that they are the two things and if you look at all
of the major reforms that in the end have succeed in this country you can
probably judge them against those two criteria.
Now, there are a number of areas of not only the Australian economy but
a number of areas of the Australian community where further reform is necessary.
One of the things that we are going to focus on at our national convention
of the Liberal Party in Melbourne next year is social policy. Having focussed
an enormous amount over the last several years on economic change and economic
reform we believe that some of the fundamental directions of social policy
in this country deserve a more serious examination at a national political
level.
Now, this examination will take place against the background of our commitment
to the maintenance of a social security safety net, our commitment to the
principles of mutual obligation that have underpinned our embracing of Work
For The Dole and a number of other policies in the welfare area. But consistent
with those commitments, I think the time has come for a more serious examination
of social policy. The implications of an ageing population, although the
population I hasten to add is not ageing at quite the rate it is in a number
of other countries. And given that some of the reforms of earlier years
have given us a capacity to deal with that ageing process rather better
than many other countries.
So, ladies and gentlemen, that represents, as best I can put it to you as
Prime Minister, to come to the end of 1999 and the end of this century and
this millennium, an overview of the circumstances in which Government is
operating at the present time. As I said at the beginning of my remarks,
you cannot ignore, when you are looking at economic policy, you cannot ignore
either the social dimension or the political dimension. You cannot ignore
the national culture.
I often hear people who might loosely be described as having strongly, economically
liberal or economically rationalist views argue to me that this or that
is how it is done in the United States. Now, I always say that I note that
with a great deal of interest and there are many things about the United
States, or indeed other countries, that are flung in my face as adopting
the right model or the right approach. And I try to remind them that there
is a national culture in this country which requires that certain things
be done differently.
We, in my view, have often found the right balance between what you might
loosely call the excessive involvement of government or the fussing involvement
of governments in many European countries. And the belief in some parts
of the United States is virtually no role at all for government. And I think
Australia has always managed to put itself fairly sensibly in the middle.
When I am asked the question, what do I think the role of government is
in Australia, I think the role of government in Australia is a limited role
but nonetheless a strategic role. And there will always be certain things
that government has to involve itself in.
And I had a very powerful reminder of that several weeks ago when I spent
the whole weekend celebrating, along with the men and women who had worked
on it, the 50th anniversary of the commencement of the Snowy
River Scheme in this country. And as a 10 year old school boy at Earlwood
Public School here in Sydney I can still remember in October of 1949 one
of my Labor predecessors, Ben Chifley, announcing the commencement of the
Snowy River Scheme. And that particular scheme for that generation of Australians
and particularly the generation of Australians who made this country their
home from war torn Europe had an impact on the national psyche and the way
we thought of ourselves and the role of government in the Australian community
that has never left us.
Now, I think the role of government has to be limited but it nonetheless
has to be strategic. And in a way, if you look back over the last 30 years
and you examine political debate and you listen to political and economic
discourse you can see as always a pattern of the pendulum swinging from
one side to the other. We did go through a period both here and around the
world where people imagined that every single problem could be solved by
government intervention and if it was a federation by federal government
intervention. It manifested itself in the United States with Lyndon Johnson's
great society, as he called it, where you tried to solve all the social
problems by federal government intervention. It manifested itself here with
the, I think, the excesses of the Whitlam years where there was not only
a massive ramping up of federal government expenditure but an unnecessary
excursion of federal governments into areas that belonged to state and local
government.
And then in a way in the 1980's I think perhaps in some parts of the world
the pendulum swung back perhaps in a number of areas and perhaps a little
too far, although I think the changes implemented in Britain and the United
States by the Thatcher and Reagan governments not only provided a great
model for the rest of the world but also it left lasting benefits in those
two societies.
I think as we've got into the 1990s and we've shed ourselves of the influence
of some of the ideological offshoots of the Cold War, I think we now have
a more balanced and sensible approach to the role of the individual, the
role of business and the role of the States. We don't want the State doing
things that businesses can do better. We don't want, in my view, the Government
running business enterprises that are better run by private enterprises.
We don't want the Government dictating the entirety of the education system.
We don't want the Government excessively intruding into our lives. But we
do see a role for Government beyond just setting a macroeconomic climate
we also see a role for Government in areas such as infrastructure provision
and some of the other strategic responsibilities. And I think we have therefore
reached a more balanced attitude towards the respective roles of Government
and individuals and businesses within the Australian community.
Can I finish by saying, ladies and gentlemen, that I am, of course, filled
with an enormous amount of optimism and hope and enthusiasm about the state
of the Australian economy. It is better now than I have experienced at any
time in the 25 years that I have been in politics. I think the strength
of the Australian economy now is more soundly based than what is was in
the late 1960s because many of the artificial protectors and stabilisers
that existed in the 1960s were as the adjectives suggest they were artificial
and they had to be at some stage removed.
We are living more realistically now than what we were 35 years ago. We
are more capable of responding to a global economic climate than we were
then. We, I think, are enjoying the benefits of the various contributions
that have been made to our society from the combination of our western inheritance,
our Asian geography and our North American affiliations. And the contribution
being made by those three influences have, I think, never been more evident
and never been more positively available to the Australian community.
So I do conclude my remarks on an incredibly optimistic and hopeful note.
We still have reform challenges ahead of us. We have, as I have tried to
outline in my remarks, a number of internal, social and economic challenges
particularly the divide between what might loosely be called those in rural
Australia who are falling behind and the rest of the Australian community.
And we do have a social, national, even patriotic, obligation, if I can
be allowed to use that word, of gathering up those people because they are
not only part of our society and part of us but they are part of how we
think of ourselves.
And the sort of Australia that I grew up in is one that always saw rural
and Australia in the bush as being an integral part of the Australian identity.
And to lose it would be to lose part of ourselves and we have a very strong
obligation to do something about it. And it will be one of the priorities
of Government, difficult though it is, over the months and the years ahead.
But thank you for having me here tonight. I'll be very happy after the main
course to try and answer your questions. Thanks a lot.
[ends]
E&OE..................
[tape starts]
QUESTION:
..spend enough on those people in Australia who can't help themselves. I
also believe ??? that we spend far too much on those people who could but
won't help themselves. Your comments please.
PRIME MINISTER:
Well I broadly agree with that and I would hope that our policy of mutual
obligation, best expressed in work for the dole, is an attempt to capture
the tension between those two things. It's interesting how it's been accepted
when, and we're talking about twenty years ago a lot tonight, but it was
interesting when as a member of the former Coalition Government back in
the late 1970s early 80s, the idea of work for the dole was raised and the
stock response then of our advisers was oh you can't do that. It will be
in breach of some Geneva convention. And anyway, the unions in any event,
the unions won't wear it and it's absolutely unacceptable to the Australian
community. Now that's interesting how that's changed. I think people in
Australia do accept that if people are without means of support we have
a moral obligation to help them. But they have an obligation, a civic obligation
if they're able to do so to give something in return for that help. I think
we've actually established that principle quite well in this country and