SAUSTRALIA
PRIME MINISTER
FOURTH NATIONAL CONFERENCE OF THE INSTITUTE OF DIRECTORS
SYDNEY, N. S. W. 21 JUNE 1972
Speech by the Prime Minister, the Rt. Hon. William McMahon,
CH, MP.
Mr Chairman, Gentlemen It is a pleasure to be the guest of the Institute tonight,
to have the opportunity of talking to so many distinguished visitors,
and to such a representative gathering of leaders of Australian
business and industry.
I would have liked to have sp. okn to you in a freewheeling
fashion about the recent visit I have made overseas, because not only
was it a memorable one for me, but I do believe in the presence of
some of those people whose Governments were good enough to look after
me whilst I was away that they did show their great liking for
this country and and spoke of what they saw to be the wonderful
prospects in front of us.
But I think you can take it for granted that wherever
I went they showed a disosition to look to Austraa for assistance,
they looked to Australia for comradeship and for friendship and they
had implicit trust in the belief that this country will, in their
time of need, come to their help and come to their assistance.
So for that reason, I wanted to speak to you in the
presence of so many : istinguished guests, and say something to you.
Instead not in a freewheeling. because as Prime Minister that is
impossible under certain circumstances and so therefore I will
keep pretty closely to a text I have already prepared.
I think most of you will know that I have been visiting
three of our near neighbours in South-East Asia first of all
Djakarta, then Singapore and later on Kuala Lumpur. Naturally
the events of that journey are very much in my mind, particularly
as I have here on my left-hand side a colleague whom I have learnt
to respect and who I think is just as interested in not only the
South Pacific countries but also in the countries to the countries
to the North, and who realises that the our destinies of New
Zealand and ourselves our greatest friend is New Zealand
and these other countries are inextricably bound up and that their
destinies will inevitably affect what happens in our own countries.
And, too, it was an appropriate time for me to be there
because only recently President Nixon had completed his visits to
Peking and to Moscow. Also, there is no doubt at all of the changes
that are occurring, economically, socially and politically not only
in the countries that I visited but indeed in the whole of South
East Asia and the Western Pacific as well.
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Japan and I say this, Mr Saito in your presence
as you know, has emerged as a very great power and I think in the not
too distant future, you will see its political influence ex pnding,
and particularly will see a greater attempt at rapprochement with
its nearest and big nighbour immediately to the West.
Britain, of course, will be going into the Common
Market quite soon and that must have an impact on us of the size and
of the duration that for the moment we cannot foretell.
And, of course, there are also problems of our own
stability and growth. rhu QOD
These all give us, I believe, a very significant role to
play in the South East Asian and Pacific region. I hope therefore
you will bear with me if I mention some points of importance as they
affect Australia and our relations with our Asian friends. And then
I would like to refer more particularly to trade and investment
and in truth, this is exactly what I want to speak to you about tonight.
I went to Indonesia, Singapore and Malaysia as Prime
Minister of Australia because our relationships there have a direct
bearing on our defence and security arrangements and on our economic
activities. I had no domestic arguments to export, and I think this
is one of the reasons that wherever I went and it was learnt that I
was not going to engage in political activities whilst I was overseas,
that we were able to talk so frankly and so freely together while our
relationships not only improved but I doubt whether they could have
been very much better.
I wanted simply to do what I could to strengthen our
friendships and increase our understandings on these vital matters,
and I believe the mission did exactly that. This came across very
strongly in my talks with the Heads of Government in the three countries,
with their administrations, and I believe with the people themselves.
Because you do get an impression and I speak of only
one capital and that was Djakarta.... it was unbelievable for a person
like myself who hadn't been a Prime Minister for very long, to drive
through throngs of children, probably as many as twenty or thirty
thousand, they knowing you are Australian and ready to cheer for the
fact that you have come from this wonderful country of ours.
The official and private talks just could not have been
freer and friendlier, nor more outspoken or have taken us more into
their confidence. Wherever we went, the press, radio and television
gave us a fair go, and I can impress that upon you.
I had what I felt was a good meeting of minds with
President Soeharto of Indonesia, Pr we Minister Lee Kuan Yew of
Singapore and Prime Minister Tun Razak of Malaysia. They, too and I
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can confirm this they expressed appreciation of what we were
doing and of our great interest in their countries. They wanted
that interest to develop and they kept impressing on me their
desirability that Australian businessmen should go there and should
take part in the development of their own companies and of the
companies to which they were going.
I believe that te visit has helped to strengthen the
security of Australia and generally opened up new prospects for
closer relationships in the future in all manner of ways. It was a
most encouraging and stimulating experience for me and all the members
of my party. There was between Indonesia and us a complete
understanding of how each is contributing to better security and
to better prospects for economic growth in South-East Asia. We
are co-operating very closely.
In Singapore and Malaysia we again found a complete
accord at the highest levels and in their own words, there were
no issues between us because we are of the same mind. And that,
too, was a worthwhile contribution to our own security and the
security of the region.
0 Now, Mr Chairman, may I elaborate a little on my
discussions in South-East Asia on trade and investment. I had a
senior member of the Department of Trade and Industry with me, and
we had most constructive discussions in all three countries we
visited. They ranged over a wide area finance and banking,
trade and development, aid, particularly economic aid and defence
aid as well. And what struck me most in all these discussions was
the differences that there were in the various stages of development.
What they are concerned to do in each of the countries is to create
new employment opportunities for their people. This means they seek
to raise living standards progressively in the years ahead.
Unfortunately, and I say this with deep feeling, their
resources of investment capital and foreign exchange particularly
in Indonesia and Malaysia are far too limited, and they look to
us, not only for support, but understanding as well.
Increasingly, they regard Australia as a growing market
for their exports and as a source of capital funds. Trade between
the countries in thn region has been growing over recent years and
undoubtedly will continue to expand in the future. t
Many Australian firms have already taken advantage of
the special incentives provided by these countries for foreign
investment and have established operations in the South-East Asian
area. I believe that Australia has reached a stage in its economic
development which allows us to adopt a much more liberal attitude
towards overseas investment by Australian firms. This was the
subject of a statement by my colleague, the Treasurer, in the
Parliament in February. / 4
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At that time, Mr Snedden said
" Direct investment accompanied by exports of technical
know-how and managerial skills which give the Australian
enterprise a role in the conduct of an overseas venture,
is an important means by which Australia can contribute
to development and growth of other countries. This is
particularly true of countries in the Pacific and South-
East Asian region."
I fully endorse his view. And I can assure you from
my personal contacts how much Australian investment is welcomed
in the region. In Indonesia, I unveiled the foundation stone for a
new factory which will produce glass containers, probably between
to 25 per cent of their total requirements. The major partner
was an Australian company, Australian Consolidated Industries.
And if I can say this, one of the disappointing moments
I had going through Djakarta was to see branch banking systems of
the great American banks such as Chase Manhattan and First National
City and banks from the Continent and other olaces. But to my
surprise, even to my anguish, I found there wasn't a single
Australian branch bank there. Butnow we are moving to
establish representative banks, and Indonesia has closed off the
prospect of further branch bankincg systems being estabished there.
In Singapore, I visited a very successful Australian
factory Besley Pike at the Jurong Industrial Estate.
These factories are tangible examples of the role of
private Australian capital in the economic development of the area.
Arrangements have already bceen put in hand which I
believe will lead to even better trade relations and economic
co-operation. The Deputy Prime Minister and Minister for Trade
and Industry, Doug Anthony, will visit Indonesia early in July for
important trade talks including the review of our bilateral trade
agreement. Similarly, we have advised the Malaysian authorities
of our readiness to review our trade agreement with that country
when they are ready to do so. In both cases, the reviews would be
aimed at ensuring that the trade agreements reflect the current
nature of our trading relationships and cater for the high level of
interest in trade with, and investment in, Indonesia and Malaysia.
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I have also said that we are prepared to consider
additions to the list of itcms already covered by our system of
tariff preferences for developing countries.
Itis now generally recognised that it is essential to
establish a closer relationship between our respective business
leaders. An Austraian/ Indonesian Business Co-operation Committee
has already been established. It is very encouraging to note the
large number of senior Australian businessmen who have joined together
to promote this organisation.
I have suggested, in conversation with iTn Razak, that a
similar arrangement be made with Malaysia, and I hope that Australian
businessmen will become interested in it. When I raised this question
with the Malaysian Finance Minister, he mentioned they were so
anxious to get our investment and the possibility of getting a far
greater degree of investment there, that they would use their Capital
Dsvelopment Council as the vehicle for developing links with
Australian manufacturers, And whilst I am not in a position where I would be able
tc commit either the Malaysian Government or the Capital Investment
Council itself, I do believe that if Australian business interests
were prepared to have discussions with that Investment Council or
the management of that Investment Council, they would see they are
willing to provide incentives for investment opportunities there.
The private sector advisory panel of the Council might, as
Tun Razak and the Minister for finance thought, be an appropriate
mechanism by which you could, if you wished to, make contact and try
and ensure that that contact was successful.
Now, gentlemen: it is one thing for governments to
express a desire for closer economic relationships. However, at
the end of the day, the ultimate decisions on individual investment
projects or commercial transactions must be taken by the businessmen
themselves. The main purpose of these Committees will be to enable
business leaders in our respective countries to meet and review
problems and prospects relating to mutual trade and investment.
There were a number of other matters raised in the course
of our discussions. These will be pursued further through normal
diplomatic channels.
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I am wholly satisfied of the scope and need for greater
Australian participation in economic development in South-East
Asia. I think I can assure you that there is sincere goodwill
towards Australia and also that the regard for individual Australians
is very high. I have, too, taken this problem up with both the Treasury
itself and the Reserve Bank and we will shortly be as we have
recently produced a paper on international investment we will
very shortly be putting down a paper in the House that will deal
with this problem of investment by Australians overseas.
Now, Mr Chairman, these activities, of course, have to be
locked at in the context of our overall trade and investment
position, and I will conclude with some general observations about
that. In all external economic transactions, the balance of
payments is maintaining a very strong position with record performances
developing in a number of areas in the current year. In the first
nine months of 1971/ 72; exports rose more than $ 403 million above
S the level in the corresponding neriod of 1970/ 71. The more recent
figuces for May indicate that this trend has been accelerating.
For 1971/ 72 as a whole, exports could well be about $ 4,800 million.
I remember when I was Treasurer and we got to a figure
of somewhere about $ 2,400 million, we thought it was an occasion
for celebration, Now this was achieved despite some slowdown in the growth
of exports of mining products ( turning to Mr Saito)... I won't
continue because he knows the answer and you know the answer too.
I believe myself it is only a temporary slowdown in our exports to
one of the great countries to our north.
Firmer prices overseas for a number of rural products have
led to a substantial growth of rural exports, and exports of
S manufacturers have grown very rapidly this year. In contrast,
imports, reflecting the slower rate of growth in the level of domestic
activity, have risen much less than exports.
In consequence, the balance of trade surplus ie currently
running at more than double the level at this time last year, and
looks like achieving a record level around $ 100 million for 1971/ 72.
On the invisibles transactions, the net deficit has continued to
increase, but at a slower rate than in recent years. This improvement,
combined with the arger trade surplus, has made a significant reduction
in the current account deficit, which may be less than $ 400 million
in 1971/ 72 as a whole. This is the smallest current account deficit
for almost a decade. / 7
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If I can go back a little, I can well remember in the
time of the Menzies Government, when we used to think of having
current account deficits not of $ 400 million but we would talk
of them in the thousands and probably the two thousands.
So what it does indicate to me is the ability of the
Australian, not only to produce, but to got out and sell, and to
get out and compete and to win in international company.
But I believe when I read of recent exploits of the
Broken Hill Pty. Co. Ltd., in winning the contracts it did in the
Eurcpean markets, again it confirmed my belief in the Australian
manufacturer and the Australian producer, and their ability to do
the job when they have the opportunity and the will to do so.
We have also had a very strong increase in caoital inflow.
This brings with it certain problems which we are examining. The
overall balance of payments outcome in 1971/ 72 will thus be one of
substantial surplus, perhaps of the order of $ 1,500 million. This
surplus on external account places us well to meet the various
challenges and uncertainties which lie ahead.
In particular, the international monetary situation,
although it has settled down in recent months from the turmoil of the
second half of 1971, still has some way to go before we can have
Scomplete confidence in its viability. Discussions on possible long
term changes in the system could begin later this year.
If I can now say this. In some of the visits we have
had in recent weeks, particularly by Governor Connally, and some
of the talks I have had with my colleagues, as for example, with
my colleagues, the New Zealanders, have all indicated to me how
desirable it is that the sooner we can come to grips with this
problem of foreign exchanges to try and get them more stable, the
better it will be for us. And I do hope, Mr Prime Minister, and
I express this in your presence, that you will be thinking of
entering the OECD and Working Party No. 3, and when that happens,
if there has to be a group of 20, that you will join with us in
seeing that multilateral exchanges and multilateral trade are for
the benefit of our two countries.
So discussions on possible long-term changes in the
system will go on and I hope we can start very soon. As well,
a very important round of multilateral trade negotiations is scheduled
to begin in 1973, equivalent to the Kennedy Round negotiations which
are so beneficial to world trade. On the domestic front a review of
the tariff is in progress.
These developments in the monetary and trade fields could
have important implications for our external economic position.
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In the shorter term, the Government h * as in recent
months acted to stimulate the level of demand and economic
activity. Nevertheless, on present indications we can expect the
balance of payments to continuc in strong surplus in 1972/ 73.
These large and continuing balance of payments surpluses
can bring their own problems, just6 as balance of payments deficits
can. The Government will therefore be watching closely developments
on the external account in the months ahead.
If I can just make an interpolation to what I have
just said, fortunately for us now as the development of the work
of the Government Statistician, and the private and Commonwealth
banking system, we can now identify in a way that we have never
been able to do not only the source but the first use of the funds
that are coming to Australia. And this I can to you, . the
very largest proportion of the money that is coming in is for
direct investment, and is therefore making its contribution to the
growth and development of this community.
I am confident, therefore, that by maintaining the
flexibility which has been a characteristic of our economic
management, we can deal with new situations as they arise, and
justify the confidence which I believe is now beginning to flow
quite strongly from the business community.
Our neighbours in South-East Asia made it clear to me
that they regard Australia as a country making a considerable
contribution to stability in the region. We must continue to
justify that confidence by our performance at home and by our
readiness to explore new prospects abroad.
I hope everyone of you as a businessman here will
have the opportunity to visit each of the countries I visited.
You will get a reception of a kind that you will find unexpected
but generous and warm. But above all things I believe that if
you do go, end you go with enthusiasm, you will find that not only
can you do much to get expansion of trade on behalf of your
own companies, but also you will be able to make your contribution
to inter-country development prospects, inter-country trade
developments, and by this means, you can make the four of us
much more wealthy, and our prospects much brighter that I gather,
Sir Robert, was conveyed to you by some of the speakers this
morning, and later on this afternoon..