E&OE...........
Thank you very Shane, my Federal Parliamentary colleagues, ladies and gentlemen. Can I start by thanking all of you, and I address my remarks particularly to the business observers and representatives who've supported this Federal Council meeting.
It';s a number of years now that we have been doing this, of having an association of this kind at our Federal Council meeting, and it';s a very important link in the communications chain between the Liberal Party and the business community of Australia. And it';s an opportunity for me at the outset to reaffirm the nature of the association between our party and the business community of Australia.
As you all know, we pride ourselves on the fact that we are a political organisation and a political party that is owned by no one particular section of the Australian community. We are a political organisation that endeavours to represent everybody and at the end of the day we try to act as free men and women in a political sense after having, hopefully, won office. But that doesn';t alter the fact in any way that many of our goals in government are consistent with the goals of the business community of Australia and indeed, with the business community of the world.
We are a government, it needs to be reaffirmed even though it may seem to have an element of fundamentalism about it at a gathering such as this. It does need to be reaffirmed that we are party that believes that the driver of national wealth is private entrepreneurial endeavour. We are a party that believes that people should be encouraged to take risks in order to make profits. That people should be encouraged to invest, and they should be encouraged to make long term investment decisions in their commercial interests which are consistent with the national interest. And whilst we are a party that believes that some elements of a regulatory framework are necessary in the public interest, and we are not so nave as to believe that on every single occasion every person who seeks to make a dollar acts with a total disregard to the self interest and the total commitment to the national interest. We nonetheless believe that overall the ethics of the business community of Australia are sound, and they are men and women who are acting broadly in the national interest.
You may think that kind of declaration is unnecessary. I never think the fundamentals of what a party stands for can be repeated too often, and in the ongoing political debate in this country our commitment to the broad goals of the business community should not be disputed. And we have endeavoured over the last six years to deliver on some of the things that the business community has thought government should deliver on for many long years.
And I think particularly of industrial relations reform, and if you asked me what policy change has made the single greatest contribution to the economic strength of Australia at the present time, over the last six years that is, I would have to say the changes that we have made to industrial relations. Because the driver of our economic success at present is very much the higher productivity that the Australian economy enjoys. Our productivity performance over the last five, six or seven years has really been the standout among industrialised countries. It has been better than the productivity performance of the United States, and her productivity performance has been very strong indeed.
And that in turn has been due in no small measure to the benefits of industrial relations reform. And that is why I said in the lead-up to the election that of all the things that would grieve me, if we lost the election that is, the one that would grieve me most would be the rolling back, dare I use that expression, the rolling back – there are good roll backs and bad roll backs – the rolling back dare I say, of the industrial relations reform, not only implemented at a Federal level, but also implemented by our colleagues at a State level over the years. And we are seeing some evidence of that at a State level, particularly but not only in Western Australia.
Though I do think that of all the things we';ve done over the last six years, none has contributed more than industrial relations reform, and if I may specifically refer also to the benefits that we have derived from waterfront reform. Of all the things that I used to be regularly assailed with when I went to boardroom lunches, I went to gatherings of businessmen and women, they would thump the table and they would say somebody';s got to have the courage to do something about the waterfront, it';s a disgrace. And it was, and something ought to have been done about it. And it will ever be to the credit of Peter Reith that he had the courage, with the support of his colleagues, to take on the maritime unions just four years ago. It';s four years ago almost to the day or to the week, that that campaign began, and as a result of that we are now achieving hourly crane-rate times on the waterfront that people wouldn';t have even dreamt were possible five or ten years ago. And it has made an enormous impact on the impression people around the world have of the Australian economy.
Right at the moment the Australian economy is performing, even our critics would admit, remarkably well. I notice the expression “gangbusters” that I was exuberant enough to use a few weeks ago to describe the Australian economy, and I have to say that the first politician I remember to use the expression “gangbusters” in the Australian context was, I have to acknowledge and my partial plagiarism, was in fact Neville Wran, who used it to describe the performance I think of his government or of - how surprising - or of the New South Wales economy.
But I think the reason why it is doing well right at the present time deserves just a couple of moments of analysis. Because when you do achieve something like that you ought to understand why it';s happened, both because it';s interesting to know why it';s happened, but also it';s a guide not to get too carried away about the inevitable continuation of it, and to remind yourself that you';ve got to do a number of things to keep it going. I think we';re doing well at the present time for a number of reasons. I think we are getting the cumulative benefits of economic reform that has taken place in this country over a period of twenty years.
And even at a Federal Council meeting of the Liberal Party I';m prepared to give credit to the former government for a number of changes that it made. I am prepared to give it credit for the deregulation of the financial system, the floating of the Australian dollar. We don';t have a low dollar, we have a super competitive exchange rate. And one of the reasons why we have a super competitive exchange rate is self-evident, that is, we now have a floating exchange rate. And it was a very sound policy decision that had of course the total support of the then Opposition, and it was a case where good policy was supported on both sides of politics.
But when you add to the changes that were made by the former government to our economic benefit, and I also include in those changes the beginning of the process of tariff reform, particularly in the late 1980';s. When you add to that the other reforms, the labour market reforms, the taxation reforms, our pro-competitive policies. When you add to all of those reforms over a period twenty years, they have created a far better and a far stronger economic climate.
I do think our success in staring down the Asian economic downturn in 1997 was, in significant measure, a function of our flexible exchange rate. If we';d not operated the flexible exchange rate system we would not have been able to so readily divert many of our exports away from the Asia Pacific region to Europe and to North America.
I also believe that one of the reasons why we have done better over the last five or six years is that we have subtly but importantly adjusted the way we look at the rest of the world. I think we ran a danger, prior to the change of government, as being increasingly seen around the world as a nation that was only interested in the Asia Pacific region, instead of a nation that should be principally, but not exclusively, interested in the Asia Pacific region. I describe that subtle change as going from an Asia-only policy to an Asia-first policy. It is self-evident that the Asia Pacific region is the most important region - economically, strategically and politically – to this country. And it will be the case for all time.
But it is also self-evident to me that we have very important linkages with other parts of the world. Only a couple of weeks ago we were reminded of the importance of the United States as a destination for Australian exports. It actually became marginally, and perhaps only for a brief period of time, an even greater buyer of Australian goods and services than Japan. And it';s a reminder of how important those links are. And we also have very important links with Europe.
And I think the experience of 1997 drove home to us that no nation like Australia that must export to survive, can ever see its export destiny in narrow geographical terms. We have to always see our export destiny in terms of grabbing an opportunity wherever it exists. People sometimes say to me when I go to different countries, do you have a bilateral or a multilateral attitude towards trade, and my response unfailingly is, it depends on what is of greater benefit to Australia in a given situation. If a bilateral arrangement is going to help this country, I';m a bilateralist. If a multilateral arrangement is going to help Australia, then I';m a multilateralist. And I think that is the only way, the only attitude that we can adopt.
And can I say that the significance of the link with the United States was driven home a few weeks ago when we were able to achieve an adjustment in relation to the decision taken by the United States Administration on steel tariffs, of the type that I don';t think any Australian government has been able to achieve in relation to an adverse American trade decision in the twenty-seven years that I have been in Federal Parliament. I think that particular outcome demonstrated the point I am making about the importance of the relationship and the significance of export markets in North America and Europe, as well as the significance of export markets in the Asia Pacific region.
I think another reason why the Australian economy is doing well at the present time is that last year we took a number of decisions, a number of expenditure decisions, which were seen then exclusively in a political context, and I would not pretend for a moment that there wasn';t dimension to some of those decisions. Of course a Prime Minister and a government has to take political considerations into account. Good statecraft is getting the right balance between the economics and the politics of a decision. You have to be in government to implement good policy. You have to have good policy to remain in government. And you have to get a judicious mix.
And last year it was necessary that we respond to community concerns in a number of areas. Areas such as fuel pricing, roads policy and other issues that were the subject of government action last year. But in the process, many of those expenditure decisions helped to put a floor under economic activity which proved to be very timely, given the circumstances of the world economy last year, and the way things have worked out.
I';d have to say to you that in terms of an economic and, dare I say it - political dividend, that the decision we took to double the home savings grant for first home buyers buying new dwellings, I think probably provided the greatest economic and political dividend of any single decision that I have been associated with in a long time. Because it was the right decision economically. The housing industry had suffered a sharper downturn than had been predicted. And may I say it, of course it was also a decision that had a great deal of political resonance and a great deal of political support.
So when I look back over the last year, and I look at the state of the Australian economy at the present time, can I say to you that the decisions we took to support those areas, particularly of government spending, those decisions added to the economic strength that we now have. And if we hadn';t taken those decisions I don';t believe our economy would have been as strong now as it is. And we';re in the fortunate position that we had built up a very healthy budget position.
We have one of the lowest, if not the lowest, debt to GDP ratios of any country in the world. It is quite extraordinary when you look, that the OECD average is 35 to 40 per cent. Government debt to GDP, our figure is about 6. You look at Japan, I think it';s 120 per cent or thereabouts of GDP. The United States something in the order of 45 per cent. They';re the broad orders of magnitude, the figures may not be exactly right, and ours is down to 6 per cent. It meant that the cumulative affect of the decisions we';ve taken from 1996 onwards to reduce the deficit and pay back debt had put us in a position where when we needed to spend a little more in a number of areas, all of which had a crucial national significance such as roads and defence, we were in a position to do so.
When you look at the history of last year, you look at the reasons why we are where we are, don';t lose sight for a moment of the value, economically as well as, dare I say it, politically, of the decisions that we took in those areas.
But as always, what you have achieved is something that people perhaps not in appreciation of on the way through to what is going to happen in the future. There is every reason to believe that the economic growth that we have at the present time can go on. One of the reasons is that we have removed many of the fundamental speed limits on growth. We set ourselves the goal when we came into office, of removing speed limits on growth. The problem, a generational problem of the Australian economy had always been that we';d have a burst of activity and things would look good, but they it would overheat and then we';d have to slam on the brakes by a tougher fiscal policy or higher interest rates to slow things down. That inevitably caused an over-reaction and the economy went into a slump.
Now I';m not so foolish as to say that we have abolished the business cycle. I';m not so foolish as to say that this country won';t ever again in the future have a severe economic downturn. I can';t make that claim. I wish I could, but I';m not going to be so foolish as to make that claim. But I do think that we have removed many of the historical speed limits on economic growth in this country. We now have a far better balance between our fiscal and monetary policy than we';ve had in the twenty-seven years that I';ve been in Parliament. We no longer have to look to monetary policy as the main item of economic adjustment, and the reason for that is that we have got rid of our accumulated government debt. And that has made a tremendous different, and it does give us a greater freedom of movement. It does mean that we can be in a situation as we are now, of having gone through what experience the backlash of what the world had last year, but to see hopefully our unemployment rate continue to fall, and levels of 4 per cent or thereabouts economic growth being in prospect.
We do need to maintain a sensible budget position. I';m not going to speculate about levels of surpluses or the like in the upcoming Budget except to make the point that we don';t have a capacity to embrace large additional expenditures.
We will as a nation have to spend more on defence for some years into the future. That is undeniable and may I say to you that one of the strong commitments I made in 1996, and I remember making the commitment when I went to the Lavarack Barracks in Townsville in the lead-up to the 1996 election campaign, I said that the one area of government expenditure that would be quarantined from any reductions was defence expenditure. And it';s a commitment that I have held to tenaciously as a matter of strong personal belief and as an important element of government commitment. And we put down a White Paper that involved additional expenditure over the next ten years. That White Paper was put down before September 11th 2001, and it was put down before it became necessary for us to spend a great deal more on border protection policy.
So inevitably we have to find more resources for defence and that inevitably has consequences for expenditure in other areas. Not consequences that will be those that produce any social dislocation, or unfairness, or difficulty. We are going to maintain the full integrity of the social security safety net. We are not a government that is going to push the vulnerable around. We';re not a government that is going to be insensitive to people in the community who genuinely need assistance.
So keeping a balanced fiscal policy remains very important. We have to continue, difficult though it is, with the state of the Senate. We have to continue the process of industrial relations reform. There is still more to be done on that front. Our labour markets are freer now than they were, but they could be a lot freer. We need to continue to reform our savings and superannuation policies. And one of the commitments that I made in the leadup to the election was in the area of significant changes to encourage greater savings. Now this is an issue that will continue to attract a great deal of attention and a great deal of debate. But it is an area were ongoing reform remains important.
We need to examine whether our competition laws strike the right balance, and one of the things I hope we will be announcing very shortly is the composition of the enquiry into the reform of the Trade Practices Act, because that is an important commitment. This country has now had trade practices legislation for something like a period of twenty-eight or thirty years of the type that was put in place by the Whitlam Government in 1975, and it has been changed on a number of occasions and there continues to be, I think, a need to examine whether some further adjustment in that area to see whether we';re striking the right balance between the needs of an economy as small yet as global as the Australian economy to consolidate where necessary to achieve an export advantage, as to whether the rules relating to that strike the right balance.
We';ll need as a community to continue particularly looking at the international side of things continue the process of taxation reform. The major work in taxation reform has been done, but there are still elements about our taxation system that disadvantage the international face of the Australian economy, and that';s one of the things that the Treasurer and I have committed ourselves to do over the next twelve months.
We also need to continue to ensure that we have effective competition laws in all parts of the Australian economy, not just in relation to what I alluded to a moment ago, the merger laws, but also other aspects of the operation of our competition laws. We need to ensure that we operate effectively our cooperative Federal arrangements. We had a good example a few days ago of cooperation between State and Federal Governments in an important area of scientific and medical and social policy. We need to ensure that to the extent that it is possible, those cooperative arrangements work well to the overall benefit of the Australian economy.
And finally we need, as I alluded to a moment ago, we need to make absolutely certain that the trading policies of this country are always attuned to the national interest. We are at the present time a nation that continues to be severely disadvantaged by the predatory trading policies of a number of the world';s trading blocs. We seek to negotiate free trade agreements with countries where there is a benefit for Australia. Negotiating a free trade agreement with the United States is going to be very difficult. But the benefits if it were to be achieved are significant and therefore it';s an enterprise that ought to be undertaken with vigour. I don';t promise you it can be successfully concluded, it is going to be a very long process, but the benefits are great. We are also at present in the process of negotiating free trade agreements with both Singapore and Thailand. And if they can be concluded to the mutual benefit of Australia that will also strength the international face of the Australian economy.
Now ladies and gentlemen, can I conclude by saying that I don';t report to you this morning with any sense of smugness or complacency. Yes, it is a source of quiet pride to me that the Australian economy is the strongest growing in the industrialised world. It was a source or satisfaction a few weeks ago to call on the British Chancellor of the Exchequer and to be told by him that the British economy was growing very strongly and then it to be acknowledged that our was growing even more strongly. And for enquiries to be made as to what additional changes I might suggest. I was not so presumptuous. Might I say I was not presumptuous enough to give any advice, I always think Prime Ministers who go around the world giving other people advice are, sort of doomed to be shortly denied the opportunity of continuing the habit. So I don';t address you in any sense of smug complacency, but I do think our experience, the Australian experience, has been instructive.
I really do want to end on that note. And this is something I feel not only about economic policy, but also about policy in many other areas, that there is discernibly I believe an Australian way and an Australian balance. Whenever you look at the performance of an economy, there is always a tendency to compare it, to say well we are like America, we';re like Europe, we';re not like Europe, we';re not like Europe, or we';re like the Asian Pacific region. The reality is that we';re not quite like any other economy in the world. And one of the things that I believe Australia has done better than just about any other economy in the world, certainly the economies with which it is fair to draw comparisons, and that is I think we get the balance between the public and the private sector particularly in the provision of many services, better than most other countries do.
Let';s take, I see Brendan Nelson there who I think is doing a fantastic job as our new Education Minister. And I say in an area like education we actually have the balance between the public sector and the private sector better than any other country in the world. We have a healthier and stronger private sector education at the schools level than exists in most other countries, yet we also have a very strong public sector which provides strong educational opportunities for people irrespective of their means. If you go to the more depressed areas of the United States the quality of public education there is appalling compared with the quality of public education in this country. And the opportunities that are available for people from all socio-economic backgrounds in Australia, despite obvious areas for improvement, are much greater. So I think one of the things that Australia has been better at than most and perhaps it';s because we have this capacity given our history and our geography to sit back and eclectically gather experiences and patterns and paradigms from other parts of the world, but produce a particularly Australian methodology. I think we have been rather better at mixing the public and private approaches.
But that is something of a penultimate diversion from what I was about to say. We are doing well economically but that success is always a combination of some good fortune, a lot of good policy, but overwhelmingly the entrepreneurial flair and the commitment of the Australian people. I think the business culture in this country is better and stronger and less averse to caution that it used to be. I think the businessmen and women of Australia are thinking globally, they have changed enormously, they are a lot less cautious, they are far more willing to adapt and to change than they used to be even ten years ago. And I think that has played an enormous part in the economic success of Australia, and long may it continue.
Thank you.
[ends]