Thank you very much Vivien, distinguished guests, ladies and gentlemen. I particularly acknowledge the presence of the Australian High Commissioner to the United Kingdom Michael L'Estrange and the British High Commissioner to Australia Sir Alastair Goodlad.
On a visit to the United Kingdom which has necessarily focussed on the history, the sentiment, the emotion and the passion of the relationship over the years in the defence of our common commitment to individual liberty and political freedom, this morning is an opportunity for me to touch upon some of the other links that are very important between Australia and the United Kingdom and in a broader context between Australia and Europe.
The Government I lead in Australia has set itself three broad goals to benchmark achievement or lack of achievement in areas for which we're responsible. We seek to provide our nation with both the sense of and the reality of national security, we seek to provide Australia with economic strength, and we seek as a consequence of success in those two areas, to provide social stability to the almost 20 million citizens of our country. And it's on the second of those two areas that I want to spend a few moments this morning.
The Australian economy is a great success story. We have now enjoyed the longest unbroken economic boom that our country has had since the 1960s. I would argue that it is more soundly based than the economic prosperity of the 1960s because unlike that time, it has not been protected by high tariff walls, we no longer have a fixed exchange rate, we long ago entered the era of financial deregulation, our tariff levels in just about all areas are next to negligible, and even in the areas of textile clothing and footwear and motor vehicles, they are in the process of coming down. The economy is more open, we are more export reliant and we have been able to diversify the destination of our exports in a quite remarkable fashion. So when you contrast the economic conditions of the 1960s, and there would be quite a number of people in this room who would recall that that was a time of very strong economic growth in Australia, but it was a period of strong economic growth built upon what proved to be somewhat insubstantial foundations. And what we have tried to do, and let me as I always do acknowledge the contribution that the former Government made in a number of policy areas, particularly tariff reform and financial deregulation, which incidentally they did with our very strong support from Opposition, that the combination of those reform measures over the last 10 to 15 years has meant that we are a genuinely stronger, more open economy.
We've had a very impressive record in reducing Government debt. We now have a national debt to GDP ratio of a little under five per cent against an OECD average of about 47 per cent. We have run a succession of budget surpluses and we have no intention of returning to a deficit financing and we have no intention of abandoning the strengths of fiscal policy. One of the real differences in the management of economic policy in Australia over the last six or seven years has been that because we have run a very tight fiscal policy, because we have eliminated the budget deficits that were there when we were elected to office, we have been able thereby to take the load off monetary policy. One of the great imbalances of the Australian economy for a long period of time, and particularly during the 80s and early part of the 90s, was that because we were running a weak, what I regarded as a weak fiscal policy, we had to rely far too heavily for far too long on interest rates that were far too high. And those interest rates had a very debilitating effect, especially on small business and on our rural community.
We do have a floating exchange rate of course and we've had that since December of 1983. Indeed the existence of a floating exchange rate was one of the reasons why Australia was able to ride out the consequences of the Asian economic downturn in 1997 and 1998. We took a very heavy external adjustment on our exchange rate. We were able to divert some of the exports that otherwise would have gone to the Asian Pacific region to elsewhere and surprisingly to many, including a lot of people in Australia, including I have to confess one or two people in the Government as well, we were able to ride out the adverse effects of that Asian economic downturn.
We have, as many of you will know, endeavoured to build a diverse economic relationship. And I guess if there is one aggregate message I have tried to communicate to the British audiences I have addressed over the past few days is that the modern, self-confident, economically strong, independently minded Australia of the early part of the 21st century does not see its associations around the world in terms of choices. We see it in aggregate terms. We have, as everyone knows, a very close security alliance with the United States. The ANZUS treaty remains the ultimate guarantor of Australia's security. History reminds us that at a critical time during World War II, the intervention of the United States was decisive and any Australian who forgets that does a disservice to the history of our country and does a disservice to the generosity of the American people. And I think that sort of observation might well be made by, if I may say so, in relation to the reaction of some people within the European Union towards the United States. When you are the biggest bloke on the block, you inevitably attract an enormous amount of criticism, but perhaps the generosity of the contribution of that country to the defence and the liberation of many is too readily forgotten.
But not withstanding that, we have sought to build a very close association with the countries of our own region. A couple of weeks ago, as you know, we had the great symbolic as well as in hard outcome terms, presence in Canberra of President Bush on one day and the next day President Hu Jintao of China. And I count it as one of the real foreign policy successes of my Government over the last seven and a half years that we have built such a close relationship with the most populous country in the world whose appetite for economic growth builds almost daily, whose willingness to buy Australia's products, particularly in the resource area, is a source of very great benefit to our country. And I think our exports to China have gone up two to three hundred per cent - I'm not quite sure of the precise figure over the last five to six years. But having worked very hard on that relationship, and not just on China, because once again as so many of you will know, Japan still remains Australia's best individual customer, and the largest single private sector purchaser of Australian products is a Korean company. So our links with North Asia are enormous and they remind audiences in Europe and they remind Australians that the future for our country lies not in making choices, but rather aggregating the opportunities that the world gives us. And one of the opportunities we have is to further build our economic relationship with the United Kingdom.
This morning I do not need to enumerate the other links that we have with Great Britain, but in the economic area it does serve the debate to remind ourselves that Britain is only just pipped by the United States as the major foreign investor in Australia, that Great Britain is the second largest destination for direct foreign investment from Australia, that notwithstanding the unacceptably restrictive policies of the European Union when it comes to our exports in the agricultural area, we have been able to achieve a remarkable penetration, particularly of the British market, with one of our great export success products over the last few years, and that is Australian wine. And just think what we could achieve if the mandarins of Brussels had a more accommodating view of the justice of our cause in that area.
But could I say ladies and gentlemen on that issue, it is important that the developed countries understand that if the breakdown at the Cancun meeting is maintained and the Doha round of World Trade Organisation negotiations turns into a total failure, that there are very serious long-term consequences. And sooner or later, and we would argue sooner, the issue of high protective barriers and high export subsidies for agriculture, particularly given their debilitating effect on developing countries, that that issue does have to be faced. Now that doesn't mean there can't, as the European Union will argue, as Pascal Lamy will argue very passionately on behalf of the European Union, it doesn't mean to say others shouldn't look to some of their restrictive practices.
But if I from an Australian perspective can simply remind you that the level of subsidy to agriculture in Australia is four per cent of the annual wealth generated by that industry. In the United States, it's 22 per cent. The European Union figure is 35 per cent. Now that's just a simple statement of the comparison and obviously it's something that remains on our trade agenda, but leaving for a moment that aside, if we as developed countries could reduce trade restrictions for agricultural export from developing countries, then the value of that would be many times greater than the value of the existing level of overseas aid provided by developed countries. We frequently hear from many of the non-government organisations that what we should do is to increase the level of official development assistance to the poorer countries, and there is obviously a case for doing that, but we hear almost in the same breath a plea from some of those organisations that globalisation is an evil. The reality is that the long-term growth of developing countries can only be delivered if they are given a share of globalisation. Globalisation is not going to stop. It's not going to go away. It's a question of who is going to share in it. And the case for opening up trade is really a case for making sure that those countries that are now locked out of the process of growth and development, are given a fairer go.
So ladies and gentlemen, I speak on behalf of the Government of a country which is, as I said, economically strong and very self-confident, but a country that also understands that it has to maintain the momentum of economic reform and economic change if we are to retain the benefits that we have achieved through that reform over the last 10 to 15 years. The competition in the globalised economy of the 21st century is a never-ending race. There is no finishing line. It's really very much a question of remaining in front or at least equal with your competitors as the race goes on. And we have sought to do that. We have sought to do it by opening up our economy. We have been able to sustain a much higher rate of economic growth and very low levels of inflation over the years because of the structural changes that have been made.
We believe very strongly in the World Trade Organisation process, but quite consistent with that we are willing in the Australian national interest to negotiate bilateral free trade agreements. We signed one with Singapore some months ago and when I was in Bangkok for the APEC meeting only a few weeks ago, the Prime Minister of Thailand and I agreed on a free trade agreement between Australia and Thailand, and that agreement will be signed when the Prime Minister comes to Australia in the first half of next year. Thailand is the fastest growing of the ASEAN economies and that particular agreement will be of very great benefit. And as also you will know, we are negotiating with the United States for a free trade agreement. It will be difficult and unless there is a significant contribution made on the agricultural front by the Americans, it will become very difficult. But I continue to believe that we can achieve a positive outcome and there is a very strong political commitment from the top in the United States towards the successful conclusion of that.
But our economic relationship with the United Kingdom is not only tried and tested, but it's also very contemporary. It's so important in a relationship between very old friends, as Britain and Australia are, not to see it in retrospective terms, not to see it just as the, in an economic sense, those long-standing patterns of investment, but to understand that in many of the high-tech areas, in many of the more contemporary areas of economic activity, the links between our two countries are growing. It's important for us to see Britain as a valuable additional link to our relations with Europe and likewise Australia in British eyes as a link to their relations with Asia. But I think it's also important not to push that comparison too far. Australia has very longstanding links with a number of the countries of the European Union in our own right, just as the knowledge and understanding of many Asian countries by the United Kingdom is very extensive, and the economic and political links are very strong in their own right.
But in coming here at a time when we have had quite a focus on our relations with the United States and our relations with some of the very powerful countries of Asia, it does serve to remind our British friends and to remind the Australian public, and to remind the business communities of our two countries, that we do seek to aggregate our advantages around the world. We do not seek to choose between different destinations for our exports. We seek to take advantage of economic opportunity and economic advantage wherever it may arise. And in that context I can see very great further opportunity between Australia and the United Kingdom in particular, but also Australia and the European Union in general. And I have welcomed very much the opportunity of giving you some of my thoughts on that issue this morning.
Thank you so much for listening.
QUESTION & ANSWER SESSION
QUESTION:
Mr Howard, thank you for those comments. You spoke very movingly yesterday about the shared values between Australia and Britain at the dedication ceremony, and might I say by the way that every Australian in this room should make a point of visiting the Australian War Memorial at Hyde Park Corner. It's a splendid and very moving monument. This morning you also spoke of those shared values in relation to our economic relationship, and I very much share the views that you have given to us this morning on that. I have concerns though that we don't necessarily share the same values with our other very large trading partner, the United States, possibly... certainly in economic terms, in terms of the World Trade Organisation for example, but possibly also in terms of American foreign policy. And I wonder if you could perhaps talk, say something about your view of that, as to whether our relationship with Britain makes us stronger in our relationship with the United States and may help us to at least influence their values as well.
PRIME MINISTER:
Well my starting point may be a little different from yours. I think there is a remarkable commonality in values between Australia, Britain and the United States. Our cultures are a little more different than we sometimes admit and I think sometimes we can exaggerate the extent of the similarities between America and Australia. Each country has its own nuances. But as far as economics are concerned, I guess you're talking, and I may have misunderstood your question, I guess you were talking about the attitude of the United States towards restrictive trade policies and, I see you nodding your head. I of course share the European and Asian reaction to the imposition of the steel tariffs.
We were rather fortunate that there were some exemptions made in relation to the steel product coming out of Australia. We think there is an obligation on the United States to modernise its steel industry and many of the plants in the United States that sought the protection of that tariff are years behind the changes that have been made in places like Port Kembla and elsewhere in Australia to modernise our steel industry and we were rather aghast when we got into the detail of it at just how, primitive is the wrong word, but how lacking in progress so many of them were. But I have got to say though that the restrictive trade practices that we object to most as Australians are of course in the agricultural area and it would be hard to persuade me that the Americans are worse than the Europeans on that. I think the practices of the Europeans in that area are more restrictive and they are more damaging and they've had a more deleterious effect on Australia that the United States.
In a sense the only country in the world that can take the Europeans on and force them to change their ways in this area is the United States. At the moment I don't see that occurring and one of the reasons I mentioned the Cancun meeting was that I am a little pessimistic about whether we are going to make progress in that area.
I think Australia does have influence on the United States just as obviously Britain has and you should never underestimate the value of a very warm personal relationship between current leaders of countries. It does have an influence. In the longer term of course all countries look to their self-interest. My first responsibility is the Australian national interest. That normally and properly includes a stable open world trading environment and I think we have an interest as a major exporter in a more liberal trading environment. We are not big enough to run the protection thing. It's in our advantage to open it up and the stronger, the more Australia has opened up her economy the stronger we have become. But as to who is the bigger protector, I'm not sure that I would accept the view in areas that matter to us that it is the United States.
QUESTION:
We are encouraged to see Britain as part of Europe and Australia as part of the Asia Pacific, but doesn't recent events and this week in particular show that the cultural and psychological links between Britain and Australia are stronger and closer than ever?
PRIME MINISTER:
Well they are. I mean I had never subscribed to this idea. We went through a period in recent years in Australia, some years ago, where it was almost as if we were being told we had to make a choice and I always regarded that as absolutely absurd and I said a few weeks ago that when I was asked about how I saw Australia's place in the world, I said that Australians would as far as I was concerned only ever deport themselves for what they were and that was Australians. We are not Asians, we are not Europeans, we are Australians and this idea that you have to sort of keep pigeon holing yourself is ludicrous and what the last few weeks, I hope in a symbolic way, have brought home to people is the truth of that proposition, that of course we have very close links with Asia. I mean it's our part of the world and I have worked very hard to build those links. But I haven't tried to build those links at the expense of links with Britain and Ireland which of course in a sentimental way are the two countries and historically the two countries that have had the biggest impact on Australia, but I mean we have very close links with nations such as Italy and Greece. We should never lose sight of the fact that about a million Australians are of Italian descent and just under that number of Greek descent.
So this relationship with Britain and the rest of Europe is a very deep and strong one and I have never seen these things in terms of choices. I use the expression we should aggregate our advantages and our opportunities and I have found it entirely counter-productive to have seen my country go through a process of saying well in order to make yourself more welcome in one part of the world you had to be ruder to the other part of the world and you had to somehow or other cut umbilical cords and do all sorts of things. I mean that is all nonsense and nobody doubts that Australia will decide her future without reference to anybody else and I think we should get on with the business of building the links we have in all parts of the world and not naval gaze about which we should put first.
QUESTION:
Prime Minister it was pleasing during your speech that you touched on the subject of the economic tariff protections here in Europe. They remain a real barrier to Australian companies exporting in here. It is pleasing to see that the Australian Government is taking a number of initiatives to try and break that system down. However, the European Union is also characterised today as having a very heavy bureaucracy on business and also an enormous amount of regulation. In fact the regulations here seem to be increasing almost week by week and it seems that as tariff barriers could come down the regulatory barriers are increasing and I'm interested to know whether your government is taking some initiatives to influence the EU to reduce these burdens on business?
PRIME MINISTER:
Well, I'd have to say that it is an inevitable consequence of creating a supra-national bureaucracy that you get this occurring because bureaucracies of that kind have to do something to justify their existence and they generate new rules. I mean I think it is harmful but I mean it effects Australia in an external way but this obviously, and let me make it very clear, the question of Britain's association with Europe is a matter for Britain and I don't come here for a moment giving any advice about that or expressing any view. That is a matter for domestic debate in the United Kingdom and I follow that domestic debate with great interest but as somebody who is not part of it but merely an observer. But it does have an effect in all sorts of areas and I mentioned the wine industry earlier. We have had some unwelcome evidence already of the determination of the European Union to use all sorts of requirements strictly unrelated to the product to influence patterns of trade and there are suggestions in the wings that other regulations might be invoked.
Well that will cause a very strong reaction from a major wine exporter such as Australia, but I think it's a function of supra-national organisations and bureaucracies and it's a challenge that they will face particularly with the expansion of the European Union. But as I said on several occasions that is really a matter for the participant countries. We will complain and do what we can where it affects us but not being a member of the European Union we don't have a capacity to alter it but we watch it with interest and we will just see what develops. But it is a law of political behaviour. You give regulation-making authority to a supra-national bureaucracy which is effectively accountable to nobody you get a lot of extra regulations.
[ends]