L'S gmz rii~-
TRALIA '' 7
~ Zj K N.,
FOR MEDIA MONDAY, 25 AUGUST,
ADDRESS TO THE METAL TRADES INDUSTRY ASSOCIATION OF AUSTPALIA
SYUNEY
I am pleased to be able to address this distinguished gathering
of manufacturers. Economic debate at present is dominated by
the Budget brought down last week. Today I will try to put
that Budget in context, in terms both of the present economric
outlook and of the Government's persistent anti-inflationary
strategy. But what needs to be said at the outset is that Australia is
on the verge of what could be one of the most exciting eras
of economic develop-ment in its history. As a result, we are
facing prospects different both in kind and magnitude from
anything experienced in recent years: prospects, on the one
hand., of potential growth and increasing living standards for
all. Australians, and, on the other hand, of problems and
difficulbies in ensuring that potential is achieved. But th._ n, n,
as has been said, life wasn't meant to be easy.
On present prospects, the growth capacity of our economy for
the 80s is going to be stretched increasingly to its limits.
This will demand firm and forward looking policies from
Government to make sure that inflationary pressures are contained
and sustainable growth continues.
Australia suffered a series of major shocks during Labor's period
in office, which fundamentally distorted the workings of the
economy. As a nation, we have paid dearly for the wild and
reckless policies of that period: in terms of a lower growth
in national output and, hence, in our standard of living, as
well as in much higher unemployment.
One of the reasons wages escalated under the previous Labor
administration was that the then Government encouraged unions
and tribunals to seek excessive wage increases. Indeed, the
Commionwealth Public Service was used as a pacesetter in wage
determination. And the with organic links to the union
movement, was not in a position to withstand union pressure, even
if it had been interested in doing so.
Over the last weeks, there has been some talk of a social contCract.
Of course, the unions reject it because such a contract would
diminish their future freedom of action. The so-called " agreement"
between the A. L. P. and the unions was not a contract at all.
For the unions are still determined to get as much as they can from
the Arbitration Commission, and as much as they can on top of
that from employers. / 2
b>> AU S
2-
But in addition, A. L. P. policy, which grants immunity to
unions from penalties for strike action, would effectively
place the union movement above the law. Such an approach
would open the door to the kind of wage escalation that
occurred in the mid-70s. And the consequences of that would
be obvious to everyone here.
Mr. Hayden has demonstrated that he wants union p eace at any
price; but the price will inevitably be paid by all Australians.
The A. L. P./ union document merely creates expectations that the
Labor Party will comply with union demands. It was such a policy
on owages, agreed to by the last conference, and binding
on all members of the IPart-, that Mr. Wran calloc& " a hotclh po"-. ch",
and 14r. Hawke called " a gutless sell-out to the left". And as
one of the major newspaper editorials reminds us this morning,
Mr. Hawke let it be known " that he felt that he had been ' sold out'
and that Mr. Hayden could not be trusted".
Bill Hayden says he has a " special relationship with the trade
union movement". That is true, he has like the special
relationship that exists between a ventriloquist and his doll
a slight twist from the left wrist and Bill's head nods up
and down. / 3
it has taken time to reduce the distortions created by Labor
and beogin to restore the conditions in which the private sector
can ex~ pand with confidence. But five yerars of concie-ntCratC. ed and
persistent effort is now bcinnina to pay off. Let there be no
mistake: even today, our inflation rate gives us no grounds for
complaceflcy, but it has improved in absolute terms, having been
reduced from around 17 Der cent in 1975 to just ovr 10 per cent
als iapt~ rea iv t e tezs ' Lr om n e a rly
~ canageocits -astr than O. E. C. D. a7. verage in 1973, -to
3 percentage Points slow, er than that averag, during the past
J. 1, z 0 n n in Au str-ali. ' S jt z r jht Jofln; C0 L. i V : L
a subject with which everyone in this audience is fam-iliar.
Last year, when roost O. E. C. D. coun-tries had higher, external
tr'e deficits, Australia's was sn-arply reducedc. T'hat ex_ ternal
lrmoroverment has allow,-ed the Governm,-ent to brincr the exp~ anded1
official overseas borrow-. ing program-Me to a successfLul coclusion.
But, mo-re importantly1,, to both this audience and the count-ry as
a w., hole, the improved international competitiv\. eness of Australian
industry is now permitting increased exports over a wide range.
This is reflected in the figures.
The value of our exports last year rose by 33 per cent, and the
value of rural exports rose by ove--r 40 per cent. But the
increase in Australia' s internatienal competitiv . eness " has also
Ov -e r me~ l, 1a s: t
yeasexports of maru Factures are estimated to r'iva: crare
in real terms by no less than 23 per cent, showinc auite clearly'
that Australian manufacturing indcustry can comete successfully
against international comiipetition.
This expansion has not been confEined to the processing of our
natural resources, important thoug: h that is. The value of
eXports of machinery and transport equipment, for example, rose
by over 50 per cent in the last two years. In sho-rt, the most
effec-tive export incentive Provided by the Governrmant'has been
the imnorovement in international competitiveness 1-1ich our policies
have brought about. That improve--nnt is also contributing
imoortantly -to the upsurge in inr. 7atent in Australian industry,
including investment from overseas.
Last Lotfd rr-cn i. er. rlL n Juta. a entuorise~ s
waso ver $ 2,500 million, more than $ 500 million flagne r t-nan for
thle sameL1 Period a year b) efore, and almost double thle level ofL
two years ago. But the benefits of' reducing inflation are not
limited inmprovement in international comrpeLt2. JtJ-veness. A l oweTPr
rate off inflation, anrd particularly inflation of waeCosts, is
central to improving profitability.
There is a need for such imp rove -rent, and -the esitimated 16 per
cent increase in companies' opercau" nq surplus in 1979-80 is
w e ICo) me, 0-. I t I s n1o ncidence th a t improved pro f -iab ility hnas
gone hand in hand with both high. er employment and an, upsuroe in
expected inve-_ stment. A1
4
Those who deride higher profits would do well to remember
that without profits there can, in the end, be no jobs. In July
this year, on figures released at noon today, 212,000 more people
were . in employment than was the case a year ago. And this is a
record increase over a twelve month period. And prospects are
good for a further rise in employment this year.
That will come partly from investment in the major resource-
, ased projects now. in tra-in, including their call upon other
Australian industries for supplies of materials and equipment
and not least the industries chiefly represented here today.
Fut the prospective inves'ment surge is not confined to resource
eviopn en t projects.
The statistician's recent survey of expectations of business
fixed investment in 1980-81 suggests strong growth, in real
terms, more or less across the board, with nearly every section
of manufacturing and tertiary industry expecting a strong
investment rise as, of course, does the mining industry. This
is consistent with the very strong outlook for investment
reflected in other surveys of investment intentions that are less
specific as to timing, but which in a more diffused way indicate
that the expected strong increase in investment in 1980-81 is
likely to be only the beginning of what we must now call the
decade of development.
But we must not jeopardise our chances. We must not fritter
away our opportunities through the illusion of ' quick-fixes'
offered by irresponsible policies. The realisation of our
te: nticl1 as a nation is dependen, upon continuing fir. fisc. l
d monetary policies. And without appropriate resistance to
growing pressures for excessive increases in hourly wages, this
potential could be squandered. For it is not additions to money
wages, but increases in the nation's productive capacity that
allow us to raise living standards in any continuing sense.
So far as the immediate outlook is concerned, it is not merely
investment that is on the rise. Looking at the economy as a
whole, there is a major contrast with last year, when, particularly
in the first half, external trade contributed most to the improved
level of activity.
This year, domestic demand is set to provide most of our growth,
which the Treasury predicts, will be somewhat faster than in
1979-80, making it the third year in a row when growth in real
noi-farm-cut-ou has improved. All this is coming at a. time of
liitle or no grow. th in the O. E. C. D. area as a whole, and iwhen
two. of the major industrialised economies of the world, the U. S. A.
and Britain, are in the grip of recession and when most other
Western economies are seriously flagging.
Why is it that, in these difficult times, with the exception of
the motor vehicle industry, the Australian economy is experiencing
a strengthening in business activity, more or less across the
board? I put it to you that Government policies provide much of
the answer.
The consistent application of respon sible policies has reduced
Lne unce rtain ty attached -to pvaedecis ion-makinc and
i7-2rovac-: i sicinificantly the underlying conditions in hihthe
Drivate sector operaltes. We recognised the need for-. su:: h Policies
ficveers ago-This is no--a beginninc to be recognised world wido.
The economic survey of Aus-tralia, published by the O. E. C. D. last
ncnh, 3O~ L~ r-, Ut+ t1hat,
Mmahcai g ement of the Alustralian economym has re-ained
broadly1 unchang~ ed since late 19715, when the authorilties
cmnzdon a scayplcyL: ec hih hog
cc muvncthe imbalance2s impedirie a ret. no
su s L i i~ Thti: or: ary go. tovr tne t-arimu "
The O. E. C. D. went on: to say that the,
of coIoeitveF is no-i much higher anC; re -al
uni t labour costL-s slightly lowe-cr than in 1975, and these
condi -tions seem-i to be reflected in the recent strengtheningr
ofr mi-nuafacturin; outnut investment and epo enovrthe
lasc. 18 months or so".
A key element in our policies has been the restrairt on public
sec or siuending, and on public sector calls on financial markets,*
e:. erci sed th rougrh the Cornmonwea lt>-Budge.
Beteen1975-76 and last year, Com onwelth Budget outlay-, were
: v'm ~ b3o0 cnt ) F 1 P. to about 2 3e c
7 frm ner>: 5 pe r cent of t~ o unO~
2 prcent. The Bud,' get presented-' Last Tuesday is framed arou-nd
a frersignificant reduct'ion in-the total budget defEicit to
a i t tlIe a,-re r 1 p er ce nt o f G . D a nd t.: o a Po0i nt Er e t he-a
deficit on domestic transactions ill be eliminated in the curr-~ nt
financi al year.
This conrfirms the ability of the GCovernmen-t to back: its economic
; Drescriiutions with action. We ara-paying our way again. zh is
respresents a signi-ficant achievem-ent in fiscal responsibilit.-y.
Low~ er bu)--dget deficits are a g oal w. 7hich is embraced almost4
uniformly by the govern-ments of in-dustrialised count-ries. B utfew
count'Cries havi. e achieved as much in this respec-t as Australia.
Of cuecentral to achievina this is the ex: 7 ICise of re--stra-in-t
-Dn C, C-tse1 ou~ l~: at
m es* ra :ñ crcngrowtr
h of over 3 per ccnt in non-farm product,. demonstra-Linr
cierlv, to those w,. ho still need2 any such demonstration -ta
the economny is quite capable of gaining . strength , ithout a soc)-
called stim-, ulus' from t'he Public sector.
Of cour our political opponents still pursue the discredite~ d
line of arguing f~ or rapid ex:-pansion of the public sector-Un
until last week, they were commodtted to $ 2,000 mllion in fiv
areas of ex-penditure alone, and thI-is figure does nottk intco
ac-coun-t 1more than 250 other unco:; te2d e::, Penditu-re p~ rogjramm-, es;.
6
But then Mr. Hayden went on the ABC programme, and made a
further commitment to raise pensions to 25 per cent of average
weekly earnings. Even though pensions, as a proportion of average
weekly earninas are now almost the highest they have ever been,
the c mmitn tn by Mr. Hayden to lift them to 25 per cent of
average weekly earnings would cost as much as $ 500 million. And
the further commitment, which he gave, to raise them in the longterm
to 30 per cent of average weekly earnings would represent,
a furtiher cost of more than $ 1,400 million. This is lv a
recycling of past Labor failures.
Labor spending proposals could only be funded through massive
increases in taxation, and Labor have already threatened us
with that; or a massive increase in the size of the deficit.
And we can only judge them by their record. In the year to
March 1975, award wages for males rose by almost 35% and for
females bv over 40% increases that would normally take many
years to earn through increased productivity. In one year,
under Labor, Commonwealth Budget outlays rose by 46%; an increase
which exceeds the total increase in Commonwealth Budget outlays
of the first four Liberal Budgets. It takes a long time to pay
off debts, but we have managed to balance the Budget on the
domestic side. In today's conditions, reducing the demands made
by the public sector is essential to the growth of the economy
as a whole. It is because of this growth that the Government has
been able to increase its assistance to business, and meet its
commitment to those in the community who, through no fault of
their own, need our help.
The challenges of the 80s will call for new responses from the
business community. That is why this Budget provides for: a
loading to existing depreciation rates, an increase of
in-the funds for the export expansion and market development
programmes, an increase of 55% in funds available for industrial
research and development; which includes an increase of over
i1 co-encement grants which ,7iil encourage small and
medium-sized firms to develop a research capability.
A major initiative, designed not just to assist small business
but for the benefit of all self-employed, is the new tax concession
for superannuation. It applies to the self-employed, and to any
employee who is not covered by a superannuation scheme funded
by an employer. And contributions up to a limit of $ 1200 will be
deductible from assessable income. / 7
7
New initiatives in last week's Budget reflect the concern of the
Government for the paradox of high youth unemployment co-existing
with the growing shortage of skilled labour. Because of this,
we announced in December 1979 a five year, $ 250 million
school-to-work transition programme, in conjunction with the
States. The Budget provides a 22% increase in funds for
apprenticeship and emplo-ment training programmes, and we have
also introduced a tapered income test for unemployment benefits
in order to provide more incentive for unemployed_ people to
part-time work.
The Biu-. t's initiatives under the Comionwealth Mapower, Traini. n
and Youth Support Programmes mean that by th end of this
financial year, about 800,000 people will hae been assisted, since
we came to office, through the range of Government schemes.
Regrettably, many of the young people for whom these programmes
exist are products of an education system which, for too long,
has plc too -mucehm -h asis on academic cualities. It has
ignored the needs of those whose talens lie in different
vocational directions, especially those requiring trade training
and manual skills. It is essentially the responsibility of
Au stra. lian schools develop the cualities and talents of all
Australi an stud. ent; to find som. ething that each student can do
'. weli, with enthsi a m.
I doubt very much whether many of our schools are meeting that
standard now. To the extent that they are not, I -regard the school
system as failing many thousands of young Australians. I think
w. cg-gt a b c. r: result fro:.~ our sc: hoo! inof
saying, ' these young people have failed in school', we put it
correctly that school. has failed these young Australians because
it has not found something that each can do well something to
give each of them a satisfying and rewarding life when they leave
school. The Government is dedicated to minimising the difficulties faced
by yo'ung people in seeking employment. And, . in this and other
areas, the Budget provides significant reforms to assist those in
need. These include, an increase in the handicapped child's allowance,
which will provide improved assistance to 27,000 handicapped
children; a national employment strategy for the handicapped.
In our first Budget, we introduced triennial funding to eligible
organisations to provide more certain and effective help for
handicapped persons. In the last three years, the funds that we have
made available through this programme have increased by almost
in real terms, over the levels that operated in the three
Labor years.
Other initiatives in this Budget provide for an increase in the
allowance for dependent children of pensioners and beneficiaries,
which will assist 560,000 children, the removal of the six month
waiting period for supporting parent's benefit, an increase in
the mother's/ guardian's allowance which will benefit about 190,000
single parent families, and the extension of the right to
pensioner health benefits to eligible sickness beneficiaries. / 8
8
These initiatives demonstrate that the hard decisions require,.
in the last four years, to secure sustainable economic growth
have not compromised our commitment to the disadvantaged. But this
commitment can only be maintained in an economic environment in which
the private sector is encouraged to expand. That is why the
Government is concerned to see that this expansion is not frustrated
by inappropriate wage structures. This is especially so because
the wage tribunals have continued to hand down decisions
inconsistent with the needs of the economy, as well' as harmful
to the needs of those who are seeking jobs.
Through the wage indexation process, and the continued spread
of so-called " w. ork value" determinations, wage tribunals have
brought us to the point where accel. erating wage inflation begins
to constitute a major threat to the economy. In resisting these,
wage inflation pressures, the Government is playing its part,
and will continue to do so. But employers also have an important
responsibility to resist such pressures.
I therefore wholeheartedly endorse the IN. T. I. A's campaiqn
against the NMetal Industries Unions' destructive claim. rfor
a 35-hour week. The metal industries have already suffered
sharply increased labour costs as a result of the " work value"
round and two sizeable national wage increases in January and
July this year; decisions which have added more than 14 per
cent to the award rates of pay in these industries in the space
or ins_: ie~ rt
A reduction in the standard working week to 35 hours would . add
to hourly rates o-f nay and raise abour cots still frt-r.
Even Mr. Hayden ear i. er in the yeer ocveas the nrc 0. Ir 2
-w-Ce B 3ut iuicLO soon revursed this spar: o.
responsibility, and Mr. Hayden supported the proposal in
a-he proponents of the shorter working week are dishonestly
aradi: i. n it as an unemployment relief scheme. It is nlablI
nonsense to say that a -measure which would raise labour cost-s
would reduce unemployment. On the contrary, by undearminingc the
profitability and international competitiveness of industry, it
would put more people out of wor?, and I am tempted to assert
that this. is indeed an objective of some of its morc pro:.. inent
advocates, who are much more interested in fosteringc disruption
in our econofmy anrd our society than in working for the good of
those they purport to represent.
Ausbtrai has entered a decade which has a potentia:. for economic
deveorment unparalleled in ou-history. Th2e d . lomen that
is in prospect-demonstrates the faith the private sector has in
the future of the Australian economy. That faith depends, to a
large degree, on the belief that we will continue to implement
our economic strategy. And beating inflation is still the key
to that strategy.
The Government will not allow a small and disaffected minority
to de: troy our prospects.. The 1980-81 Budget, in association
w: i. th an appropriate monetary policy, and with the co-operation of
the vast majority of Australians, employers and employees, is
directed to ensuring that those prospects are realised. Against
that background, I commend it to you.
000----