3USINESS AND _ PP. CFSSIO17AL MEIV S DTNNMR
Speech by the Prime Minister, r'nc -It Flon. William Mcilahon, CH!, NIP.
24 July. 1972
Dir Macklin, Parliamentary Colicagues, Ge ntlemen:.
I cartehere toniciht zprimarily t'-o -talk to ' iou about a technical
subject that I know is v ry dear to most of you anai certainly
dear to my friend in. the Chamb-tr of !-. anuf-c-tures sitting inranediately
to my right. And t hat subject I wanted -to talk about wa:) s the subject
of tarif fs and its preoccupation with t;-c manuf acturing -: nd the
conuercjat industries of ti-. is country.
I also wanted to say somothIng to you a bout the state of
the economy, not too muc.. i ecause w) e have got a Budget comi ng aLong in
three or four weeks time, and I am one of the believers in the oldfashioned
British custom~ of Budget solidarity and abov" all, of Budget
secrecy. Not only bc& c~ I think that you can kc: 2r ' jour secrets
to yourse-lf and you ca-, have -the surpnris~ oiemont when the Treasurer
delivers the Budget th~ en you will got infinitely better public
reaction and public resrpanse thian ," ou will if therc-are leaks, and
when the Cday comes, the Treasure r has nothing else to do but reci. toc
the taxation proposals and the wa-y t~ o bring disapproval by those whlo
have to pay thc7, m.
Tonight, seeing that thei gatharing is as great and
distinguishf2s as it is, I still beivdI had to go along with my
irmediate intentin But af-ta ng to your President, I al! so
felt th~ at, tima wil ling anC you ar~ cir. n to be intarc-sted and my
pra'yers rz usually answered -that I might say something to you on
a mucn morc+. Lnt:: resting subje-ct and thiat is my recent visit t"-o !,, uala
Lumpur, Singaporce and Djakarta. Pocause it was a momorable triP and
believe ou-r de-: stins to a zosdrhecxtc~ nt and our future
developmont are wra-) p d up itll tho dCrvc,: br-mient of those cou. ntties. We
are the ones w'no can raost+ benof it-froti close association with them;
from, their inchastri al developmeont; and from our capaci. ty f or trade with
thM. 11T But may I nowj, Mr ' lacklin, get on with the subje-ct. The
two subjzlcts that I want to speak to you about tonight. I want to
a ' ssure you, as one who has been Treasurer for some time, and enjoyed
the nortfoi i mens. y thnit I bolieve? I had a pretty glood comm~ a-nd
of Trcasury problems arnd kept the econony reasonably healthy, prohably
as healthy as It ') as ever heen. So I have the % nowledg-e and the ability
for quick adaptation and chango Lthat I think is so essential and
imoortant to a2 Treasurer and rarticularly to a Head of Gove-rnment when
we are looking at Cur economic problems. ./ 2
I believe there are very sound grounds for thinking the
economy will significantly improve in the future, in both the short and
long term. There has never been any doubt about the long term, because
over the years we have continuously built this economy of ours on a
broader basis, much more variable, much more basically sound and with
inherent strength. And our record of two decades of growth has been
a tribute to the kind of policy that we have been able to adopt.
We are all aare that most of the problems which hav.? captured
the headlines in the past year or so have not been long term but short
term problems. It is true, too, that we have had setbacks. The unemoloyment
problems have been stubborn, somewhat too stubborn, and the oresent
level while low by standards of other countries is still certainly
not acceptable to me. As you know, and here I come back to that word
" flexible" again because we have considered it desirable since September
of last year we have taken positive measures to reduce the number of
unemployed. Even taking specific action of a kind that hitherto we had
not taken. We have also taken other measures on a broad basis, particularly
the mini-Budget and the assistance we gave to the Premiers. I
think I can say to you that as these measures work their way through
the economy, conditions most certainly will improve steadily. Encouraging
indicators are now showing.
The latest of these is the slowdown in price inflation
reflected in the consumer price index figures last weze. The increase
of point nine of one per cent is the lowest quarterly increase for
nearly two years, although I have to admit there were some special
problems or special influences that were involved thers. A little over
seven months ago we felt that in the June quarter we would be extremely
lucky if we could keep the consumer index at very much less than 2 per
cent and probably a little higher.
So that you can take it that we were delighted when these
figures of point nine of one per cent came about because it gave one
of the indications that inflation, one of the most difficult and intractable
nroblems that we have had to solve and one that could easily cost
us out of international markets, did show some kind of improvement. I
don't want to go overboard about them because the results affect only
one month. I will say it is pretty good, or satisfactory anyhow, and
I hope we can keep up this kind of record in the months to come.
I don't want you to think that I'm arguing that inflation
has been solved. It has not. Together, you and I as manufacturers,
people in the commercial world, and recole in the other sections of the
economy and in the Goverrment have .1l got to exercise our combined
skill and our energies to contain it.
Providing we can do this and make our contribution, and
providing only we can keep wages closer to the increases in productivity,
then the better the chance we have t First to conquer this problem;
and then to get the economy moving along at a growth rate of at least
per cent. Let me emphasise too, that c nsm. r demand has obviously
been far too subdued. I admit that and tlr'-t is the reason why we took
action at two successive Premiers' Conforeccs and in the mini-Budget,
and through the banking system to give at least the incentive and the
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intucement for consumer demand to improve. And through that means to
be able to get the order books full and when the order books became full,
for it to work back into the basic industries. So I emphasise to you
that the community has been too cautious in its spending. But with
increasing confidence and I believe confidence is improving, and
there's evidence of it; there would be greater evidence of it still,
if industrial lawlessness were reduced to a minimum, and we were able
to reduce the uncertainty that has been caused by the difficult conditions
created by some sections of the Trade Union movement; cur record
must improve. What I can say in positive terms, and it has been emphasised,
and emphasised very well in the Treasury Annual Review, is that the
goals of national growth for this year are much higher than for the
financial year just ended.
Now to achieve our growth I believe we need four ingredients.
The first one undoubtedly is confidence; a little more confidence; a
little more willingness to spend can, I believe, achieve miracles.
We can increase consumer spending and I have just mentioned that; we
need greater industrial stability and we need less industrial lawlessness.
I believe as you look at all these oroblems you must make this concession,
particularly if you understand what my Government has done; that we have
acted in both a responsible, and I believe a comprehensive way.
I know it is a Government of decision. WJhen major decisions
have to be made, we have handled them. Only a few moments ago, talking
to my colleague on my right hand side, I was able to mention to him that
never in 72 years of Federation had any government had the courage to
introduce into the civil service the rule of ho work, no pay' despite
the year after year recommendations that were made. This year we introduced
the amendment, and I don't like to be boastful because that's not
my way but at least I can say that since that time we have not had a
strike or a threat of a strike on the Commonwealth Civil Service.
Let me give you two exampls of the kind of action we have taken.
First we have introduced into conciliation and arbitration a new system
which will be proclaimed shortly if it hasn't been proclaimed today. I
believe it is the most extensive reform of the conciliation and arbitrationi
system that has been carried out for a little over a quarter of a
century. We have in that review strengthened the sanction provisions of
the conciliation and arbitration act.
The second point I want to make is that we have, and we will
continue to intervene before the arbitration commission in wage claims
whenever we have considered it to be in the public interest. Never has
a case gone by where a. sharp increase in wages is demanded by the unions,
unless I have immediately asked my colleagues to have a lpok at the problem
and to see whether in the public interest, in the interest of keeping
inflation low and demand high, we should intervene.
I now move on to the subject I really wanted to speak about
tonight and that is tariffs, and I hope to explain what we are doing,
the reasons for our actions and if I can, to remove some of the indecision
and lac of certainty that might be in the minds of manufacturers
and producers of raw materials. My Government's policy was clearly
set out by my colleague, Doug Anthony, the Minister for Trade and Industry,
in a statement that he made to Parliament in April of last year. I can
assure you that we as a Government have not, and we will not, depart
from that policy. / 4
L
Before I get on to policy explanation, may I say something
to you to put the issue in context. I want to emphasise in the strongest
terms the vitally important role that manufacturing industry and
the private enterprise system in general plays in the development and
pr-ogress of this country.
This, of course, includes transport and other areas of
commerce. I want to emphasise this because we are a great country
with a great performance per head of population. Those who travel
overseas as I do, come back delighted with the respect and admiration
that there is for us and the performance of the Australian people. And
a. Ll those achievements, or mcit of them anyhow, are by private enterp3ise.
The manufacturing and mining industries particularly are now
playing a magnificent part in development, and in our ability to expand
our trade and to play our part and make our contribution to the development
of the countries immediately to our North.
We, as a Government, do recognise that a sound, profitable
and growing manufacturing sector is of fundamental importance. Its
g:: owth must be fostered and the economic climate created to ensure that
manufacturing industry assumes an even greater and more important role
in our eeonomy as it does in the other higher industrialised communities.
In this context, I want to discuss tariff policy and I want
to make three points. As an essential condition of growth and progress,
we must encourage the best and the most efficient allocation and use of
our resources whether Australian, or those which are attracted here
by the inducements of the ratural resources and the economic climate of
tills country. Historically, in the two decades after the war, successive
governments consciously pursued policies directed towards a high and
sustained growth rate and the optimum employmentcf resources. This,
as I said, but I repeat it now in somewhat different language this
d: iversification of industry turned us into the broadly based industrial
economy that we have today. In more recent years, as our economy has
become more sophisticated, the need for greater selectivity in industrial
development has become more desirable. To achieve this we needed policies
designed and attuned to the times.
As I said last year, to the Chamber of Manufactures of New
South Wales, we cannot accept uncritically and without reservations the
use of our national re. urces in activities which require very high
levels of protection, because, prima facie, such activities are less
suited to the Australian economic cnvironm~ it than industries requiring
more moderate levels of protection.
The second main pQint I want to stress is that low tariffs
b:: ing benefits as well as costs. The benefits to the community which a
government must consider in making a judgment on the level of protection
include the direct marketing relationships which one Australian industry
may have withaiother, and the effect of one industry's costs on another
industry's prices. I assure you they go wider than that. For example,
an industry may be employing special classes of labour, which we what
to encourage. It may also be developing special skills and technology.
In the same way, there can be highly significant non-economic benefits
for us such as defence.
You will see, therefore, that when these factors are involved
in tariff decisions, the Government and I want to emphasise those
words must play a crucial role. I personally assure you my Government
gives and will continue togive very close attention to these aspects of
tariff administration when Tariff Board reports are before us.
The third point I want to make! is that decisions are made
only after considering the capital investment in the industry concerned
and the employment which that industry creates. I want to emphasise
these ingredients of policy and also one other points.
In cases where, according to the recommendatbn of the Tariff
Board, it has been considered desirable to encourage the transfer of
resources from one industry to another, the Government has frequently
decided that the transfer should be a gradual process. And I can assure
you that in the implementation of this policy of gradualness, I have
taken an interested, and I believe on occasions, a decisive role. We
have done this, for example, in the case of woven and knitted shirts.
We did this to achieve an orderly transition to a lower level of protection.
We decided that the existing level would be maintained for a
longer, much longer period than recommended by the Board.
In the meantime, the Government is negotiating for voluntary
restraint arrangements with low-cost overseas countries in order to
ensure protection to Australian manufacturers.
Today, one of the greatest leaders in Australian industry
is in Japan, trying to and he will undoubtedly succeed ensum
some kind of restriction is imposed voluntarily by the countries that
are exporting to Australia. In the same way, protection given to
malleable cast iron pipe fittings is being reduced in three stages over
five years. More recently, as uith another case in which I was deeply
involved, the Government has provided the local shipbuilding industry
with a longer period for gradual change than the Board recommended.
So let me say to you now without reservation that if tariff action
ware considered likely to lead to phasing out of any segment of
manufacturing industry firms would not be expected to adjust overnight
anid, of course, the interest of manufacturers and emikbyees would be
protected. I emphasise again to you that special care will be taken
relating to changes that might have the effect of putting job opportunities
for Australia at risk.
Turning to another aspect of tariffs, as you know, a compreheansive
review of the tariff is now taking place. I have learnt a great
deal about it from my friend, Mr Pascoe, during the course of the last
hour. In fact it has been one of the most informative lectures I
have had since my university days.
I am aware that some sectors of manufacturers are feeling
apprehensive about the outcome of this review. I want to assure you
that the review is not in any sense an exercise against a policy of
adequate protection for economic, efficient and desirable Australian
industry. On the contrary, the Government's intention is that it should
work in the long run, for the benefit of our manufacturing industries.
The review will be completed in about six years. And, of
course, I want to emphasise that if ever you feel you are having unexpectac
difficulties which have to be solved immediately, then you have recourse
a~ s an immediate court of appeal to the Special Advisory Body.
There is a second point that I want to teake and I want to
make it now again because of the discussion I have been having with
y' colleague on my right hand side, Mr Pascoe. He has mentioned that
in this large-scale revie'w, there should be some kind of a timetable
drawn up so that industry itself will have a degree of certainty reintroduced
into the manufacturing industries and a degree of predictability
that they do not have at the moment. ./ 6
I can assure you that when I go back tc Canberra tomorrow
night or when I arrive there on Wednesday, it will be one of the first
problems I will take up either with Mr MacKay of the Department of Trade
and Industry or, if necessary, with Mr Anthony. I can assure you that
it is one of the problems that has worried me and I am glad that you
have driven home this point effectively tonight.
As each review report is reviewed, it will be considered by
the Government, and we and here I want to emphasise this point and
keep on emphasising it if I can we, as a Government, and no-one else,
will decide what action should be taken. The Government needs and expects
the Tariff Board in its report to give as clear and comprehensive advice
as it can on both the reasons for its recommendations and the likely
consequence of adopting them. The fact is, however, that there are
larger areas of the tariff which have not been looked at for very many
years and some tariffs have never been reviewed since their inception.
In these circumstances-there are bound to be some tariffs which provide
protection far in excess of the amount required. Of course excess
protection of this kind adds unnecessarily to our cost structure, and
cost inflation. And you must know this is not in the interests either
of the manufacturing industry or of the community.
The existing economic climate and timing are, of course,
also imporant and must increasingly be taken into consideration in the
decision-making process. We also take note of the protection policies
of other countries where, in addition to tariffs arrangements or other
devices like quotas, import licensing and export schemes are used. We
are concerned entirely with the practical and beneficial effects of
tariff changes on individual industries and the economy as a whole.
So you will see and I hope I can convince you on this point we are not
and we will never be influenced by abstract theories.
Particularly, Mr Chairman, I want to emphasise that the
Government makes the decisions in all cases on tariff matters. We have
a very strong tariff committee of the Cabinet, and in major cases such
as the chemicals review or the shipbuilding industrv or of woven garments,
we take those into the Cabinet itself and if variations have to be made
based on the grounds that I have mentioned, we are not only willing but
happy to make changes we believe desirable in the interest of Australian
manufacturing industry and above all, the country itself. Now, the
Board is a highly exoert body but it is an advisory one only, and its
recommendations are not automatically accented by the Government ( as I
have already pointed out).
Gentlemen, tariff nolicy is -art of our overall policy
towards manufacturing industry and the free enterprise economy. That
rolicy I want to repeat is to give all the support we can towards the
development of a soundly growing and confident manufacturing industry
in Australia. I want to sum un to you in this way:-Confidence is
catching If we all . have confidence, talk with confidence, and above
all, act with confidence, we will, I am sure, and of this I can give you
great reassurance, get ahead faster and much futther this year than we
did last year. This must give our longer-term development programmes an
added stimulus for the good of the country, for iegood of manufacturers
and for the benefit of the consumers of all kinds. If we can give
these benefits to the consumers, I believe we inspire confidence to get
back in the market place and buy to let those who sell to the market
place get their order books full, and in time, as it works back to the
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manufacturers and the producers of base materials, to ensure that they
are fully employed, that our growth rate continues and each and everyone
of us can make our contribution to the development and to the standards
of living and the values of life that I believe every person here tonight
holds dear. Mr Chairman, that was what I wanted to say to you on an cfficial
level. As time is passing and as you wanted me to speak for a somewhat
longer period than I intended, I thought I'd say something to you about
my recent mission overseas to Indonesia, Singapore and Malaysia. I
must confess that I went with some trepidation based on advice given
to me that there might be perhaps some doubt or disenchantment in these
countries with Australia. As Foreign Minister I had the good fortune
to make the acquaintance more than that a valuable friendship with
Lee Kuan Yew, the Prime Minister of Singapore, and Tun Razak, the Prime
Minister of Malaysia.
I had also been able to establish a valuable friendship with
President Seeharto of Indonesia. What did interest me was the fact that
these people trust us; they hnow that we want to trade with them; they
know we want to make our contiibution to their duvelopment; they know
wevent to help them remove poverty and to assist them with the development
of their abundant natural resources. They believe that as a people
they can rely on the people of this country in whom they have the
greatest confidence. I addressed their Parliament. The welcome was
outstanding. And I can express this with certainty as they grow
wealthier and I know they will we will be the beneficiary, the main
beneficiary because they will want the kind of materials and the
finished products, the manufactured products, that we in Australia by
that time will be able to produce.
So it was not only a mission of goodwill but it was educational
in this sense. I realise the many opportunities that are open for
us and the way in which we can trade with them. This must be to our
mutual development. Particularly as they develop and we develop economically,
so too will our ability to ensure peace in this area, and in the
long run, if I can repeat those words again to be able to make our
contribution to the peace of the whole of the South-East Asian area.
Indonesia is a wonderful country! it is well worthwhile visiting; they
like us and I believe Australians should go there more frequently and
find out what the trading p:--ssbi1. ities are.
I then went to Singa~ oe to talk to the Prime Minister, Lee Kuan
Yew, who is a friend of ours. Of course, Singapore is developing quickly.
It is now trying to change its economy from a cottage economy or the
development of fabrics and textiles and things of that kind, into a
manufacturing industry that will produce the medium range, high quality
products such as television sets, radios and consumer durables of a
similar kind. Here you find a dynamic wholesome society. Again you found that
they trusted us and I think the spoech Lee Kuan Yew made on the night
that he gave me a dinner was memorable in the sense that while I left
Australia feeling a degree of hesitation and doubt, after hearing his
speech I realised how much he valuod us as partners and friends and how
much he wanted us to retain our armed forces in Singanore. Not only
because, as he put it in his own inimitable way, it was of benefit to
him, but it brought a feeling of confidonce and filled a vacuum which
if we were not there would be filed by somebody else, probably more
powerful and more intimidatory than we or they would want.ΓΈ. 48.
Then on to Kuala Lump~ ur to meet an old friend, Prime Minister
Tun Razak. I was able to go up to Butterworth and see our Air Force
at the airfield which we've made a c-ontribution towards doveloping.
We provided Miragcs and other tV,. es of aircraft for the integrated
air-defence system there. Again, I believc we have stationcd something
like two squadrons of Mirages to be part of the Commonwealth Air Defence
System in the aroa. If you want to see efficiency developed over a
period of little less than two years if you want to feel proud of our
ability to make our contribution to the. welfare and the defence of othersthen
you should find out a little more about Butterworth. It was really
heartening to see the way in which their air defence system was working.
Not so long ago the Malaysians had little or no knowledge of the vast
techniques of direction-finding, of radar detection and the other
components of air defence systems. I think you. can now take it that thy
are pretty compotent and effective, and making a significant contribution
to the defence arrangements.
Up there and I want to drive this home because it's not
always adequately reported in the pre-ss not only are the trade
opportunities great because of incroasing stability, and they will
expand as the time goes by, but each of these realises that if
South-East Asia is to remain free, then it is desirable that we should
keep our forces, our armed forces of the three Services in Singapore
and the Air Defence System in Malaysia. We should be able to assist
Indonesia to build up a capacity tc develop a more ef f~ ctive Army, and
a more effective way of ensuring that if a threat does emerge from
outside, they will, with our help, and probably Ait help from other
countries, be able not only to defend themselves but also to make
their contribution to the defence of other South-East Asian countries.
The point I want to make and drive home is that if eva'r there
is a country that ought to be proud of what it is capable of doin~ g,
and in fact does do, it is ours. For that reason, thank you Mr
Chairman, forasking me to come. Above all, I have, come and I can,-
assure you it has givon me an enormous amount of pleasure to be with
Australians, to know what you are capable of doing.
May I express the hope that I will have the good fortune to
be qiven the chance to provide continued leadership. There could be
no greater honour than providing leadership to the kind of people I
see sitting in front of me tonight.