E&OE………………………………………………………………………………………
Well, Mark, I thank you and all of your colleagues at the Macquarie Bank for organising this event, and I particularly acknowledge the presence of Bob Carr, the Premier of New South Wales and Philip Flood, the High Commissioner, and Michael L’Estrange, the High Commissioner Designate.
As you know, I am here along with others to mark the centenary of the passage through the British Parliament of the Act to which was annexed as a schedule the Constitution of the then to be formed Commonwealth of Australia. But this morning, I wish to address my remarks most particularly to the economic state in Australia, the relevance of that to investors in the United Kingdom. But I also in the process want to pay tribute to the contribution that the Macquarie Bank has made to the financial life of Australia and indeed the financial life of nations beyond Australia. As you know, I’m sure all of you know, the Bank is named after the man who is often called the father of Australia, Governor Lachlan Macquarie, who had a profound influence on the early years of the colony of New South Wales and hence in a long term sense the development of the Commonwealth of Australia. And the Macquarie Bank has done a lot to promote the memory of Governor Macquarie, and I’m pleased in particular to recognise today, the assistance that the Macquarie Bank has given to preserve the memory of Governor Macquarie it has generously donated $70,000 to the Australian Heritage Commission for urgent conservation work on Governor Macquarie’s Mausoleum on the Isle of Mull in Scotland. And I know that Peter King, the Chairman of the Heritage Commission who’s here today, along with the government, is very grateful for that very generous philanthropic gesture by Macquarie Bank.
I can honestly say that I was present at the dinner that launched the Macquarie Bank, way back, I think, in 1984. It was presided over by my then predecessor as Treasurer, Mr Keating, and also of course my predecessor as Prime Minister. As political lore in Australia has it our careers have followed each other fairly closely. But I don’t dwell on that, but I do remember the sense of optimism that surrounded that launch and the sense of hope and involvement in the opening up of the Australian financial system. And Macquarie Bank has played a very conspicuous part in involving itself and contributing to the burgeoning and opening up of the Australian financial system.
Mark was kind enough to talk about the strength of the Australian economy. And of course one of the great values of a visit such as this by me and my colleagues, and I have with me today the Deputy Prime Minister of Australia, John Anderson, who is not only the Leader of the National Party in the Coalition government, but also the Minister for Transport and Regional Services. And it’s an opportunity for both of us to reinforce to the British Financial community and I know that the Premier joins with me in doing this the importance of steady, consistent, orthodox economic policies which deliver strong growth, transparent corporate governance and also the prospect of ongoing economic reform.
And many of the things that we have tried to do over the last four years have really had in mind the belief that if you provide a predictable, stable, transparent climate for investment, there is really nothing you can do that beats that. It’s not to say you shouldn’t in particular areas make particular changes. But I find as I move around the world that more and more investors are looking for that kind of environment, they’re looking for a transparent corporate system, they’re looking for predictability in relations between the government and the corporate sector.
We set out very soon after we came into government to really update the financial deregulation that had been undertaken in the 1980s. Much of it by the former government with our very strong support from Opposition. And the Wallis inquiry recommended a number of changes, and those changes almost with one significant exception relating to further consolidation of the banking sector were implemented. And they have been very effective in further opening up the financial sector in Australia.
But we also set about fixing the fundamentals. We did inherit a very chaotic budget position. And we are very proud of the fact that over the last five years we have repayed $40 billion of federal government debt. And if we are successful in selling the remainder of Telstra by the year 2003 or 4 we can be free of net Commonwealth debt. And our net debt position is in fact far in excess of the best that the OECD can offer in relation to other countries. Retiring debt has been something of a preoccupation of the government because we do hold fairly strongly to the view that if you can provide a very stable fiscal base you do buttress yourself against budget and economic adversity if it may come along in the future.
We’ve also been very strongly committed to fundamental changes to our industrial relations system. It’s been my personal belief and the belief of the government for a long time that one of the things that was needed in Australia was fundamental change to our industrial relations system. Australia essentially inherited the craft union system from the United Kingdom. I spoke with some feeling on Wednesday night of things that we inherited from Britain that were of value. There were some things that Britain gave us that we would have not been so happy to receive, and the craft union system is one of them. And we’ve worked fairly hard to sort of smooth the edges of it. And in the process, great change has occurred. We have no quarrel with unionism in Australia. Membership of trade unions in Australia is something of personal choice and personal option. But we have sought to have a freer industrial relations environment. And we have achieved a great deal. We would have liked to achieve more, but we have been unable to get those further changes through the Senate. But we will keep trying, because they remain very important objectives of the government.
In the process of freeing our industrial relations system, we have in fact contributed to something that is very important for any community and that is real income gains. And if people say to me what is the thing that you are most particularly proud of so far as it effects the average man and women in the street in Australia and I would say the fact that we have actually increased their take home pay, their real income position through a combination of through higher productivity, nominal wage gains have run ahead of inflation, but they have not had a deleterious impact because we have had productivity improvements. And real wages have therefore gone up in a non-inflationary environment. And in addition to that, of course, we have seen significant reductions in personal home mortgage interest rates, something always very sensitive and important in Australia, which for most of the last thirty or forty years has boasted the largest level of private home ownership in the western world, a legacy of the immediate post war year period under the Menzies Government.
So I paint, you will think, an optimistic picture of the Australian economy. And I do so because there are many reasons to be optimistic and positive, economically about Australia. There are differences, there are political divides on issues like tax reform, I don’t dwell on the politics of that divide at a gathering such as this this morning. But I do want to say that tax reform represents of course the single biggest economic reform that this or indeed any other government has carried out in Australia probably since World War II. Most people have known in their hearts, sometimes not wanting to say it publicly, but nonetheless knowing it, that we have needed to reform Australia’s taxation system for at least the last twenty five years. And those in the audience who are Australians and others who are familiar with Australia, and that probably gathers up most of you, will know that that’s true. And there have been various attempts made in the past to bring it about, but none of them successful. And it finally came into being last Saturday. Now, I don’t take anything for granted in politics, I’m a cautious bloke by nature, but I do think it’s implementation has gone rather more smoothly than some predicted, and indeed I might almost say in a stage whisper some might have hoped.
Nonetheless, ladies and gentlemen, it is a huge reform. It is not just restricted to getting rid of an old out of date indirect tax and replacing it with a more contemporary one, but it also involves very significant reductions in personal income tax. It involves a restructuring of the capital gains tax system, effectively halving it. It reduces the corporate company, the corporate tax rate from 36 cents in the dollar to 34 this year, going to 30 cents in the dollar next year. It also contains a number of other changes such as effecting pension, tax exempt pension funds which will make investment in Australia hugely more attractive.
Now this reform, can I say to you, is important in its own right. But can I say it is also important in another sense; I think if a nation, a government and a nation, can embrace a reform of this kind, and if as I hope and believe that it will be, embrace it successfully, it must give to that government and that nation greater confidence in their capacity to embrace other reforms in other areas that are necessary. We hear a lot of debate in the world about reform fatigue. You have no doubt heard it here in Britain, I hear it in Europe, I hear it in the United States. And I can understand why people say that. And I know as a serving political leader that communities don’t like too much change. We are all by nature comfortable with what we have now, particularly if it’s reasonably good. And the natural instinct is when you are undertaking certain change to say, well, that’s enough for a while, we’ll just let everything settle down for a while and then we’ll have a look at some more change in a couple of years time. And it sounds seductive and it sounds logical, but of course it never works that way. You can’t do that when you’re running a corporation and you can’t do that when you’re running a government. And if you live in a globalised world you really don’t have the option of marking time. It’s a point I tried to make when I gave an address to the Australian people on the eve of the introduction of the tax system. That in the world in which Australia now lives we really have a choice. And the choice is not between marking time and just enjoying everything we have now, the choice is really between undertaking further reforms or sliding backwards. It’s that kind of world, and it’s the sort of thing that you have to face and it’s the sort of thing that governments have to face.
But in the process, of course, we have a responsibility as a government to communicate to the people the social and personal benefits of economic reform. Economic reform is not some kind of you know, spiritual end in itself, it’s anything but. It is simply a mechanism to deliver higher living standards and greater social contentment. We hear a lot from time to time about the peace dividend. People say now that there is no longer a cold war we shouldn’t have to spend as much money on defence. The reality, of course, is that in some parts of the world the end of the cold war has produced a somewhat less stable situation than a more stable situation, but that’s another matter. But I would like to see governments talking more about, not only here in Australia but I guess around the world, particularly those governments that follow the same broad approach to managing the economy as we in Australia do, we should talk about the social dividends of strong economic growth. The four per cent that we have had for the last five years is an impressive figure and it has a particular resonance in an audience such as this. But the more important social statistic is that we have 710,000 more people in work in Australia now than we had four years ago. That we have larger take home pay cheques. That we have a lower level of youth unemployment, a much lower level of youth unemployment. That we now have a method of matching the jobless with the available jobs largely run by the private sector which is working infinitely better than the old government run and government monopolised system that it replaced. Now, they are some of the social dividends that you get from very strong economic growth.
Now, can I say to all of you, ladies and gentlemen, that as you turn your gaze towards Australia, particularly, but not only, as a potential world financial centre it offers attractions, I think, without parallel around the world. It is clearly a stable democracy. One of only fewer than ten that have remained continually democratic through the 20th century. It has a highly skilled workforce. It has a very multilingual workforce. There are 800,000 Australians who speak an Asian language. Teaching of Japanese is particularly widespread in Australian schools. And the way in which Australians of an Asian Heritage have contributed in a very positive way and have nourished the social life and the business life of Australia, and most particularly the city of Sydney, been one of those things that have made a profoundly positive impact on our community. So we do have in that personal sense a lot of assets that perhaps some of you may not be as well aware of. We of course have a very stable legal system. We have well supervised banking institutions, the level of prudential regulation is appropriate and reliable. We have clear rules of corporate governance. And of course we have a government and a business community and I believe many other opinion formers in Australia very strongly committed to the process of further economic reform to deliver further social dividends to our people.
The cost of living in the major cities in Australia compares more than favourably with the cost of living in many of the major cities of Asia against which we must compete. And of course you wouldn’t expect me to end a sales pitch about the appeal and the beauty and the attractiveness, not only as I look at Mr Carr, the city of Sydney, which of course happens to by my own home city as well, but also of course all the other capital cities of Australia, the enviable, absolutely the enviable lifestyle that Australia has.
Now, if that is a sales pitch from a prejudiced Prime Minister, then of course I plead guilty on every count. But it is also not an exaggeration, because when you add it all up, there aren’t many countries in the world of which those things could be said without serious fear of contradiction.
So as I come to the end of this quite remarkable week here in London in which we have had as a group an opportunity of not only the wonderful hospitality of our British hosts but also in so many other ways to present, perhaps for the first time for some, represent to other who know us well and perhaps change the views of still others who thought they knew us well but didn’t really, been able to present Australia in a very positive and forward looking light. It is a country which values its history. It is a country which is proud of those things of value that is has inherited, particularly from Britain and Ireland but also from other nations in Europe. But it is equally a country which is very much of the world of the 21st century and a country in a quite remarkable way brings together those European connections with an Asian Pacific environment. And those things together make it a remarkably attractive country with which to do business and it is lead by a government that is very much in the business of seeking business investment in Australia. British capital has always been welcome in Australia, it always will be. It has contributed marvellously to our development in the past. And we hope that will long prove to be the case in the future.
Thank you.
MASTER OF CEREMONIES:
I think the Prime Minister, in a sprit of openness and transparency is happy to take a few questions from you before he has to leave. Is there anybody who would like to follow anything up in particular?
QUESTION:
Prime Minister, Charles Nelson, Macquarie Equities. I think a lot of people were very surprised a couple of years ago in the Asian crisis when Australia proved itself to be so fleet of foot in the flexibility of its economy. The question I’ve got is how did that, what did that do to your standing within the Asian region, in terms of how do they see you now? Do they see you as part of their region, or as a kind of swing economy, which is more aligned maybe to the European or North American area?
PRIME MINISTER:
Well, I would hope that they and I believe they see us as really being a bit of each. One of the things I tried to do when I became Prime Minister was not in any way to shift our focus away from Asia, but to make the point that this country has always had important economic and other linkages with the rest of the world. Perhaps I can explain it by illustration. Japan is Australia’s best customer. Over the last few years, Korea has been of our very best customers. And those two countries together take a powerful amount of export product from Australia. Yet, our outward investment, 70 per cent of Australia’s outward investment goes to Britain and the United States. Fifty three per cent of our trade goes to East Asia, yet when the Asian economic collapse you are speaking of hit us, it was our capacities, particularly through a flexible exchange rate to shift a lot of our exports to North America and the United States, North America and Europe that helped carry us through that Asian downturn. I think that experience illustrated better than perhaps any speech could, the point I try to make is that it is a mistake to pigeon hole Australia. This idea that you choose between your history and your geography in making your linkages with the rest of the world is quite misplaced. A European association does not diminish the value of our association with Asia, I think it adds value to it. The reality is that we can talk and deal with the countries of Asia in a way that perhaps the British and other Europeans and the Americans can’t because we are not, although we are seen as having close connections we are Australian and therefore we are seen as different. I’m not saying better I’m just saying different. And I think that multiplicity of connection adds value to what we bring to Asia, rather than diminishing it. And I think the way that we have been able to slightly re-balance, somewhat re-balance our relationships with the world I think are important. But it is very, very wrong from an Australian interest perspective to always see these things in terms of choice. I mean you can be involved in the Asian Pacific region and still preserve links with other parts of the world, that’s the point I seek to make. And those linkages will add value to that Asian involvement. Just as our Asian involvement will add value to those linkages. They are mutually reinforcing they are not competing.
QUESTION:
Euan Harkness, Barclay’s Bank. I mean this is following on from your last statement. Is what we saw where Australia was able to grow at the time of a crisis, which, traditionally in the [inaudible], is it a product of the net, you know that we have had sustained growth in the States, and that Australia benefit from the net, as you say from a weaker currency so, in the States and in the UK that they were able to identify suppliers, reliable suppliers at a cheaper price. Is this what we are seeing and is this if we ever got into a horrendous situation of inflation again the world that the net would act as an extremely efficient conductor of information. And consequently, where you have been to cut down your debt exposure that that would pay dividends in that environment. Hopefully we won’t be there. But don’t you think that we have seen the first effect of the net where Australia really benefited?
PRIME MINISTER:
That’s, I think that played a part. I mean the message out of that experience with the Asian downturn was that our interaction, or the way in which we interacted with the rest of the world was a lot more flexible and effective than many of us would have expected. I have to say that I was very agreeably surprised with the extent to which we were able to sidestep it. I mean I believe quiet legitimately that a lot of the changes we have made gave the rest of the world confidence in the stability of Australia, side by side with other countries that weren’t so economically stable. I think all of those things did help. But the speed with which we were able, and I think the net played a major role. I think that is a very fair observation.
QUESTION:
Scott McCloch from Jade Absolute. You mentioned economic reform repeatedly. Following the very major tax changes, what items are next on the agenda in terms of economic reform?
PRIME MINISTER:
Well, we do need, in my view, to persevere with further reform of the industrial relations system and we will do that. We will continue, we’re in receipt very shortly of a major report led by a number of people outside the government in the field of Australia’s social welfare system. We have a well established and bi-partisan view that Australia must have a social security safety net. There is no serious debate in Australia any more about that, and that’s a very good thing. But there are always better ways of delivering the social security safety net, not involving any withdrawal of the government from the basic obligation of providing help for those who are deserving and merit assistance. They are two areas. We of course intend to persevere with our plans to fully privatise Telstra. It remains, in my view, inappropriate that a government should own 50.1% of a major telecommunications asset. I think it is a misapplication of public sector investment worth more than $50 billion. I think that is how we have to explain it and translate it to the Australian public, especially I can’t imagine I need to debate very strongly in an audience such as this the merit of the further privatisation of Telstra. I mean it really is a choice as to whether you put $50 plus billion of public money in a telephone company, perhaps that’s a little facetious, but only a little, into a telecommunications, a great telecommunications asset. Are you going to put it in that or are you going to put it into something else. And I think it’s infinitely preferable to put it into something else. And I’m sure that those who have invested in that great company would feel the same way. I mean, I think it’s a very good company. It’s extremely well run at both Chief Executive and Director level. And I think the logical next step is for its full privatisation.
Now I mentioned a few things. There are some other things that I’ve got in mind but I don’t think now is quite the time to announce them. But I will in due course, because once you, returning to the theme of my speech, you keep moving on to the next. You don’t, you can’t mark time. You either go forward or you go backwards. And the fact that we have been able to get tax reform up gives the government and I believe the community the confidence to continue the reform process.
[Ends]