Jj>> U A.# 7A,
PRIME MINISTER
FOR MEDIA THURSDAY, 6 SEPTEMBER 1979
OPENING OF CANEGROWERS' EXECUTIVE BUILDING
INNISFAIL, QUEENSLAND
Australia is moving ahead. I would like for a moment or two
to try and put into perspective the progress that I believe
we have made over the last three to four years, because
sometimes the changes are not well understood.
Factory production is up more than four per cent over the past
year. Profitability is up right around Australia. It could be
better, but it has improved significantly over previous years.
Private foreign investment for the last year was the best since
1971-72. There are so many things to be done in Australia
that I welcome foreign investment, especially in partnership
with Australian concerns.
In the June quarter, prospective expenditure approved by the
Foreign Investment Review Board totalled $ 1,400 million of new
investment and new proposals being undertaken in this country.
That is a record for one quarter. It shows that other people
are prepared to show their confidence in the well being of
the Australian economy with their dollars. In one sense that
might be the most substantial vote of all.
0 aItn fltahte iomno meins t, d owans yaos u yoaul sok nokwn. o w Thesroem e arfeo r sogmoeo d uprewaasrodn sp reansdsures
some for bad. I think everyone wanted an increase in
beef prices.
I don't know that anyone thought they would rise quite as much
as they did. Obviously there are inflationary consequences.
No one really wanted the increase in oil prices but then
no one foresaw the political turmoil in Iran which has cut
2 million barrels a day from world oil supplies.
While there are these increasing inflationary pressures here,
they are overseas as well. Before, when inflation around
the world started to move up, Australia compounded the
inflationary problem, and our inflation rate became worse than
most OECD countries. Now we are significantly better placed.
Inflation in the United States, on the basis of the last
. six months projected onto an annual bas'is would be growing
at about 14%. In the United Kingdom it is over' 15%. The OECD
countries are just a fraction under 12%. Australia is at
around John Howard has made it quite plain that there
will be upward pressures in the last part of this calendar year;
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and, then, on the advice available to us, the downward thrust
should reassert itself throughout next year. That is the
ad'vice we were given and that is the basis of present planning.
But I do believe that Australia has contained better than most
countries, the increased inflationary pressures that are so
damaging for farmers and exporters. 1l1hereas before, our
inflation became worse than the averaccs in many other countries,
now it is significantly lower. While that remains, the
competitive position of our exporters, of our primary producers
and of our manufacturers, will continue to improve. Another
way of looking at this is by comparing the rate of price
acceleration in Australia with that in other countries. In
the United States inflation is rising at the rate of 28%;
in the United Kingdom it is 38%; in the OECD area as a
whole, 26%; Germany up to 92%; and Australia TIhat is a
better performance than most, and one that we ought
to recognise.
Farm unit costs in 1974/ 75 which I can well remember,
better as a farmer than as a politician, because they hurt
very much as a farmer increased by 30%. In 1978/ 79, in
spite of some problems, farm unit costs increased by 7%
overall, and that is the lowest increase since 1971/ 72.
As a result, the dollar has strengthened. Competitiveness
has been restored. We were able to award against Australian
and wider competition a contract to a Cairns firm for the
building of patrol boats. That is a wonderful thing.
Two years ago Defence put forward a proposal to pay $ 70 to
million for a major supply ship for the Navy, built
in France. we said, look what about Australian firms; to
which the response was that it would cost so much more and
the subsidy would be enormous. We said, well find how much
it will cost, see how much the subsidy would be, because we
would be prepared, if necessary, to give some subsidy to
0 Australian firms. A short while ago Jim Killen received the
tender price from Australian firms, from Vickers, and no
subsidy was needed. It can be built for millions of dollars
less than the world's best.
it is time we understood that we can do these things in this
country. We can compete with the best; and we can very
often beat the best competition from any nation. If we
understood that better, we might have more pride in our own
achievements the kind of pride that is exhibited by the
Canegrowers in erecting this building and showing confidence_
in the future of your own industry.
I have already been talking about what is going to work for
this country what will provide employment for this country:
becoming more competitive; being able to sell more; being able
to have our rural industry more profitable, and our manufacturing
industries being able to compete in world markets. These are
the kinds of initiatives that can provide the jobs and
* opportunities that Australia needs.
over the last twelve months, civilian employment has risen
more than 60,000, * the first increase * in civilian employment
. for a long while. There are a number of reasons for it
including major new investments.-* In coal there has been
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announced 2 billion dollars worth of investment
in the committed or final feasibility stage of
development around Australia, much of it in tLhis State. In
bauxite, alumina and aluminium there is $ 4 billion of
investment in the firmly committed or firna ;: cdibil. ity stage
with another $ 2.7 billion in the cx,:-lir. at ion stage. Now
these investment developments occurriLng right across Australia
are providing tremendous opportunities for employment for
many thousands of Australians. This again is the result of
policies which make us very competitive, which have Australia
moving forward with confidence.
But there are some undesirable aspects and dangers ahead. I
have mentioned inflation. I have mentioned the need to create
jobs of the right kind. There are some dangers that have been
caused by international developments. We did not foresee
what was going to happen in Iran. We'cannot, with any
guarantee, say that there will be continuing political stability
in oil producing and exporting countries. But I do believe
that the pressures that have occurred '.. ave been better contained
in Australia than many other places, to the advantage of
Australian exporters and primary producers. The last Budget
continues the application of these policies.
Sometimes we are accused of not restraining Government
expenditure. In the few years before 1972 it grew at just
under 5% in real terms and I thought that was too much. After
1972 it grew by an average of more than 10% in real terms
reaching 25% in 1974-75 and I am certain that was too much.
over the last three to four years it has grown by less than
one per cent a year this is all in real terms. I think it is
the first time that expenditure has been controlled by the
Commonwealth in that way maybe in the history of the
Commonwealth. It is certainly the first time in a couple of
decades. There have been staff ceilings imposed on the growth of the
0 Public service and rigid control over Government expenditure,
although in one or two important areas we have had to provide
additional funds. This year alone there is $ 280 million
more for Defence, because Defence needs more money spent on it.
Many people in North Queensland would share that view
Ten years ago, there were 176 social security beneficaries
for every 1,000 people in the workforce. Today there are
276 for every 1,000 in the workforce. That is largely a
function of an ageing population, even though we are a young
country. Nobody has suggested that the payments to those
people should be cut merely because they are a larger burden
on those who do work. Nevertheless, additional sumns have
to be found.
The Budget deficit as a percentage of the gross domestic
product is estimated to be under 2% this year. This is a
lower percentage than Japan, the United Kingdom or Canadaand
the lowest percentage for many years in Australia. It is
important for a country to live within its means. You cannot
go on borrowing excessively year after year. A4
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The reduction in the deficit, as a percentage of what we
produce the gross domestic product means that the
borrowing requirement of the Government to meet the gap
between revenue and expenditure, is less than it has been
for many years. That puts less pressure on interest rates
in the market. That is one of the reasons, I believe,
why the business and financial world has accepted the last
Budget so wholeheartedly as something that will take Australia
forward with strength. It is one of the main reasons why the
Budget has truly been accepted as an anti-inflationary Budget.
There are aspects in the Budget which are designed specifically
to support industry and to build on past years. The taxation
arrangements for small companies, for private companies, have
been modified, with the retention allowance increased over
. the period of this Government from 50% to 70%. Anyone
running a private company will not have missed the importance
of that. Export expansion grants have been vastly increased,
from $ 20 million to $ 170 million. Part of that increase is picking
up a backlog in payments. A large part of it, however, is
because of the increased competitiveness of Australian exporters
getting out into markets which earlier they had thought were
quite beyond them. These, again, are the signs of a growing
and strengthening Australia. If manufacturers can get irnto
the world markets, it means they have to produce more. If
they are going to produce more, it means they will employ more;
and that again is what we want. Many of our policies are
designed to achieve just that objective.
For the rural community, the anti-inflationary thrust of the
Budget is one of its most important aspects. But it does also
provide additional support for rural industries. It is worth
noting that in effect the special depreciation allowance for
storage facilities for grain, hay or fodder has been
re-introduced and farmers will understand what that means.
I well know that rural industries w~ ould want those special
0 depreciation allowances re-introduced to cover the wider range
of investments that were possible on previouqs occasions. But
on. top of what we have done through
tax averaging, through income equalisation deposits, through
the Primary Industry Bank that has been operating so
successfully we have provided the speciall depreciation
allowance in the limited area which I mentioned. The water
resource programme is being expanded this year and that is
important.
Energy and the problem of oil and oil pricing has been mentioned
today. Because it is so important, and because I am also
a primary producer and I do understand what it means, I want to
take a moment or two to explain why I believe that we are
following the only policy that is possible. I do not withdraw
from my invitation at the outset; if there are views that you
and this industry want to put to us, I would want to listen
to those views.
But there is a reason, there is a purpose, an objective behind
the energy policy, which we are certain is in the best interests
of Australia and of Australials energy users. There are three
main aspects of this policy: Conservation, the development of
alternative sources of energy and exploration and development
of oil and gas reserves. Whether we like it or not, the decision
to go on to import parity pricing was a major element in this
policy. Conservation without a pricing policy to go with it
would not mean very much. I don't think anyone wants to go back
to the days of ration tickets and the associated black market.
Price is the only way that will lead to the conservation of
scarce energy sources without rationing.
I believe the most effective way to encourage the development
of alternative sources of energy, is to give a price incentive
to do so. If you want greater exploration and development,
then securing adequate returns for the explorers and developers
may be the only way. Since the introduction of our pricing
policy, Esso and BHP have committed upwards of $ 1,000 million
to a programme of oil exploration and development. That would
not have happened without the pricing policies that we
introduced. We are encouraging conversion to other forms of energy. The
Budget continues this thrust by extending the share capital
rebate to apply to on-shore petroleum exploration as it has
applied to off-shore exploration. That should encourage and
also be a great incentive to greater oil search. The conversion
of industrial equipment from oil to other forms of energy is
also fostered in the Budget by allowance for accelerated
write off.
I know that the sugar industry is highly mechanised, and that
fuel supply is vital, and an important element in costs. I also
know that there have been some problems with stocks, and with
distribution, but as I am advised, little disruption to
harvesting. The 1979 fuel demand has been well above normal levels-That
may have contributed to the difficulties.. Demand for distillate
in Queensland was up by over 17% in the first half of the
year compared with the first half of 1978. That might be due
to rural industries doing better, and to the demand just growing,
but it is a substantial increase.
The difficulties were exacerbated by the breakdown of a ship,
and some problems at the Ampol refinery in Brisbane. The Navy
therefore, released a further 2,300 tonnes of distillate to ease
the problem. 100,000 tonnes will be brought into Queensland,
north of Gladstone,' between now and the end of the year. / 6
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There have also been problems with avgas. In Queensland, and
I don't think many people would knowthis, demand has increased
26% in the first half of this year compared with the first
half of last year. That 26% extra fuel was actually delivered.
It has been used. There has been a distribution problem and some
severe shortages in certain areas. But 4,500 tonnes has
arrived in Queensland over the last week. We are hopeful that
the position is containable and will be eased.
We are particularly concerned about the special needs of farmers
during crucial times of the year harvesting, spraying, sowing.
If people want distillate and cannot get it, that is not good.
We cannot have a situation where an industry, a vital industry,
is held up because of lack of fuel supplies at a particular
time of the year. That is well understood. The agricultural
sector therefore will be amongst our highest priority, if any
form of allocation should become necessary. But our objective
is to try to see that an allocation system as such is not
necessary, by being able to match supplies to the demand.
We have established a National Petroleum Advisory Committee
to advise the Government on allocation, if that is forced upon
us if there are further political difficulties in the Middle
East. I don't think anyone could avoid that situation. If
another 2 million barrels were taken out of supply by political
acts of some kind then that is obviously going to pose
difficulties to Australia and many countries. We don't expect
that, we don't foresee it, but I just make the point that it
happened once before. If that kind of instability occurs again
there will be real problems. Don Eckersley, the National
President of the National Farmers' Federation, will represent
rural industries on that Advisory Committee.
If we tried to have a situation in which you had a different price
for the same product it would lead to enormous difficulties
and would plainly lead to problems of identification and problems
of black marketing, from one industry to another. A two price
system could be very difficult to sustain.
It is also worth pointing out that a year ago we introduced a
fuel price equalisation scheme. The first stage of that
scheme has equalised freight to within four cents a gallon.
The commitment is to reduce the freight differential to two
cents a gallon. The present system costs us about $ 50 million
a year. To take it to the next step as we are committed to do
during the course of this Parliament would crkst about an
additional $ 100 million a year, or something ctlo-se to that.
That, therefore is a significant effort to try to equalise the
high cost of freight to people in the remoter parts of Australia.
We . don't have within our control the retailers' margins in those
areas of Australia. You will often find that petrol and distillate
prices are much higher in remote areas because a retailer's
margin is very much higher. If you wanted to do something about
that you would have to go to Brisbane and not to Canberra. 17
The sugar'industry I know has been through some difficulties.
There are always risks from weather, from international prices
and in particular the dumping policies of certain countries.
But there are encouraging signs. The Korean long-term contract
of 1.2 million tonnes is better than the previous one; 9pand in
1979/ 80 some reduction in world stocks is expected. Indeed
this year is the first time in many years in which production
is expected to be less than consumption. So perhaps the
industry is going to achieve a long term balance of the kind
that is very much needed.
The International Sugar Agreement, we agree, is of great
importance to the industry. Australia will be persevering
with this to try to make sure that not only the United States but
also the European Community will ultimately join. You might be
interested to know that a Bill providing for United States'
ratification and for a domestic support programme has now
passed the necessary preliminary stages of the United States'
Congress. Congress is in recess at the moment and it has not yet
been introduced into the House of Representatives.
If the United States' processes are grinding forth too slowly,.
they are at least moving in the right direction. Mr. Gundelach
with whom we have been negotiating in the Multilateral Trade
Negotiations said to us privately, and has since said publicly,
that if the United States joins the International Sugar Agreement,
then in his view the European Economic Community will also
join the Agreement. That, of course, would be of enormous
advantage to the sugar industry in this State.
You know better than I that Europe spends $ 800 million in export
subsidies on sugar about $ 350 a tonne.
All in all, they have spent $ 12,000 million in subsidies of
one kind or another, about $ 4,000 or $ 5,000 million subsidising
the export of commodities that compete quite directly with
exports from Australia. That just shows
I how important our trade offensive into Europe has been. Some
have said we should forget it. But it is too important to us.
It is not something that we can, should or will put aside.
Until we can get Europe to participate with greater
responsibility in international trade we will keep up the
pressure wherever we can.
As a result of what we have done over the last three years the
problems of the European policies are now better understood in
Europe and much more criticised in Europe than they have ever
been. I think that inevitably at some stage there will have to
be a change. With sugar, what we have to try to do is to get
America and then Europe to join the International Sugar Agreement.
Ethanol has sometimes been suggested as a fuel substitute and
there could well be long-term prospects for that if fuel prices
continue to rise. We are spending nearly million on research
at the present time. in about 18 months it will be possible
to make a better assessment of ethanol production in Australia.
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The sugar industry is of enormous importance to the future
of Australia. It plays a significant part in this district
and obviously this district is vastly dependent on a
profitable sugar industry. It is of great importance
to Queensland.
I am honoured to have been asked to be here at the opening
of this building with you. I have very great confidence both
in the future of this industry and in the future of Australia.
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