EMBARGO: 8.00 PM
,14AUS 1A
PRIME MINISTER
FOR MEDIA FRIDAY, 7 MAY 1982
SECOND SIR CONDOR LAUCKE ORATION
I would like to congratulate the service clubs initiati. nig
this oration, which is a tribute to the esteem in which
Sir Condor Laucke is rightly held. I would also like to
thank you for inviting me to give the second in the series
following Sir-Condor's own inaugural oration on the Senate,
and the importance of Parliamentary democracy.
What I would like to discuss with you this evening are some
of the ways in which Australia needs to respond to the
dominant features of the current world situation. In
particular, I want to look at the significance for our
policies of the overall world economic situation, and of
some threats to world peace and security. I am pleased to have
this opportunity to draw together a number of themes, which
really cannot be viewed in isolation, themes which are important
in understanding Australia's situation and prospects, themes.
which provide a foundation for the const;, uctive and vigorous
policies which will meet Australian values and objectives.
Government policies must be directed to achieving., greater
prosperity and further improvement in the living standards
of Australia.. They need to increase opportunities still
further for our young people in particular; they need to be
compatible with Australia's concerns and responsbilities as
an outward looking nation. The task of welding together the
imperatives of policy formation and the hopes and aims of
people is one of the great challenges for governments. We must
never lose sight of our objectives, or the constant need to
revitalise and redefine them in terms which are relevant to
current circumstances.
But by the same token, no democratic government can serve
the community well unless it pursues policies which are based
on reality. This means policies which reflect a sound
understandirLg of what is happening in the world, and the impact
of these events on Australia. It means policies which give
full recognition to Australia's advantages, and to the great
underlying strengths of our economy. It also calls for balanced
understandin~ g of all aspects of the situation in which
Australia is placed. ./ 2
-2
Whether times are buoyant or depressed, whether prospects are
encouraging or uncertain, balance is vastly important in our
understanding of events and in the presentation of news, for
without balance, the community can be seriously misled, and
people's attitudes and expectations misdirected. At the
present tiME! Australia and other Western countries are facing
a conjunction of two events which present problems of significant
proportions, whose dimensions have not yet been fully
identified or defined.
The first arises from the profound economic difficulties
currently being experienced in the West, the other is the deployment
of unprecenctented Soviet power around the world, combined with
the aggressive stance of Soviet policy. Against the background
of the present economic, political and strategic circumstances,
two summit meetings due to take place next month in Europe,
the Versaill~ es meeting of the major economic powers, and the
Bonn meetingr of the NATO heads of government, take on a
special importance, a special meaning.
The Versaill~ es Economic Summit is the latest in a series of
meetings tha~ t have been held every year since 1975, and it
will be attended by the heads of government of the United
Kingdom, France, West Germany, Italy, Japan, Canada and the
United States, and the * President of the Commission of the European
Communities. They will discuss the economic problems faced
by the West and policies to overcome them; energy problems
faced by thE! West beyond the present downturn in world prices;
the dialogue! between developed and developing countries; and
problems anid strategies in economic relations between the
western countries and the Soviet bloc.
The NATO Summnit, on the other hand, is * a special meeting
convened against the background of growing concern among
-Western governments about the state of the Western alliance.
It will be searching for a strategy for the 1980' s and will be
attended by the same leaders attending the economic summit,
except Japan, together with smaller west European NATO members.
The conjunction of the two meetings means that economic and
security factors can both be addressed and the linkages between
them given proper emphasis.
Australia is not directly involved in these discussions, but
we and most other free peoples may be profoundly affected by
their outcomae, and for this reason I particularly value the
opportunity which I will have in a couple of weeks to discuss
some of these issues with President Reagan in Washington,
and with Prime Minister Suzuki in Tokyo. The world strategic
and political situation gives rise to many causes for concern,
especially -arising from the provocation of Soviet policies. / 3
-3
We see the effect of these policies in the occupation of
Afghanistan; we see it behind the forces for repression in
Poland; we see it in the priority which Vietnam attaches to
continued occupation of Kampuchea; we see it directly and
indirectly in central America, in Africa and in parts of the
Middle East. The Australian Government has been consistently
arguing since the mid 1970' s for a clearer perception and
adequate response by the West to the Soviet Union's
international actions, for we detected tendencies to overlook
how frequently the advantages of the policies of detente
seemed to flow one way to the Soviet Union.
The persistence of the Soviet Union in continuing to devote
some 13% of its national product to military processes cannot
be taken lightly, especially against the comparable United
States figure of no more than 6% even with the present efforts
to increase US defence capability. We have been greatly
encouraged by the determination of President Reagan to revive
western power, but that revival, and the restoration of a
desirable balance, cannot take place overnight, and continued
Western resolve in the face of the Soviet Union's advantages
will be a critical factor in the next few years.
The responsibility of Western nations in relation to world
peace and security is made no easier as the war in Vietnam
showed, by the need for democratic governments to sustain
public support for the kind of policies on which these
objectives depend, especially as many people are tempted
to attach a greater immediacy to competing priorities.
Let me say that here in Australia, the government stands
without hesitation or reserve behind its commitment and
obligation to keep building up that strong defence force,
tailored to meet the threats and challenges of the times which
Australia needs. Despite budgetary restraint in recent years,
Australia's defence spending has been increasing substantially,
bringing with it significant real improvement in our
defence capability.
Defence outlays this financial year have increased by almost
over last year, well above general price increases of
something just over 10%, and without anticipating details of
the Budget, there will be a further substantial increase in
the defence vote next year. We will continue to maintain
and develop all our defence capabilities. Last year's
increases in service pay and allowances are a~ lready having
benefits in terms of more service personnel staying with
the forces, and the importance'of attracting the right
people to the defence forces cannot be over estimated.
The recent rescheduling of some parts of the defence programmne
which has involved bringing forward the acquisition of the new
carrier and of 10 new Orion aircraft has enabled us to take
advantage of opportunities which could not have been repeated.
-4
As well as the new aircraft carrier and the 10 extra P3C
Orion aircraft, the Government last year made the decision
to buy 75 FA-18 fighter aircraft; two new frigates have
entered service, and a further two will do so over the next
couple of years; our existing destroyers are being modernised;
and our defence industries are being upgraded.
A high quality, independent defence force is a high
priority for Australia. We cannot assume that our own
region will be free of trouble spots, especially in the
uncertain and threatening situation which currently prevails.
Let me turn to the world economic situation where predictions
of an imminent up-turn in growth and activity are repeatedly
made but where that predicted recovery repeatedly fails to
materialise. Last year, for the first time in over 20 years,
it is estimated that the value of world trade actually fell.
Moreover, following average real growth rates of output of
about 5% in the 1960s, and over 3% in the l970s, the Western
industrialised countries have produced growth rates of output
only a little over 1% in each of the last two years.
Indeed, in the final quarter of 1981 real GDP fell in West
Germany, the United States, and even in Japan, and on
preliminary figures a further fall in real GDP occurred in the
USA in the first quarter of 1982. It is little wonder that
unemployment rates in the major industrialised countries
are high and rising. On the latest figures, the unemployment
rate in West Germany is over in France, the USA and Canada
it is about in the United Kingdom it is approaching 12%,
and on some projections total unemployment in the OECD countries
will reach 30 million people during thirs year.
On top of all this, real interest rates world-wide have reached
historically high levels, making the investment that is so
essential to building a basis for economic recovery unprofitable
in many cases. Not only are the problems immense, but agreement
on solutions is far from being reached, and democratic
governments face the added difficulty of having to sustain
public support for the sorts of policies that are required.
The temptation for countries to resort to beggar-thy-neighbour
policies of increased protectionism has enormously increased.
The European community, for example, has continued its policy
of virtually excluding imports of agricultural products except
in limited cases where the community's production cannot meet
its needs, arnd it has extended its policies to subsidise
exports of suirplus agricultural production to third markets.
And there is an increasing and very disturbing tendency for
countries to resort to bilateral trade agreements, cutting
off the forces of multilateral competition in trade that
have contribited so significantly to the growth of living
standards fo~ r most of the post-war period.
It is interEsting to note in this connection that the
countries that have done best in the difficult world
environment in recent years have been the newly industrialising
countries of: South East Asia, countries which have adopted
outward looking policies and not expected the world to
stand still for them. It must be said, however, that despite
the difficul. ties, there are some indicators that offer hope.
* For example, inflation rates in Europe and North America
have been dE! clining over the last two years. Indeed, they
have virtual. ly been halved in the USA and the UK since early
1980, For the OECD as a whole they have fallen by about
a third, and along with these trends h ave gone greatly
reduced wage s pressures, including acceptance of real wage
cuts in SOME! countries.
Of course, t~ o some extent this reflects declining production
and increasing unemployment, but it is nonetheless hel. pful.
in providing~ a basis for restored business confidence overseas,
and the effe! cts Of falling oil prices. To the extent that
they are sustained for a time must also contribute to the
prospects for some recovery. But for all of the hopeful
signs, it wo~ uld be a brave if not a foolhardy man who
predicted when a sustained and sustainable upturn in the
major economies was likely to occur.
The impact. of the current world downturn is serious indeed.
It not only threatens the rising living standards which
people in the West have come to expect, it is particularly
damaging to the prospects of the countries which are
economically weak. In so many of these Third World countries
which suffer from extreme poverty, the need for economic
growth is desperate but harder to achteve than ever in
circumstances of world recession. And i'n such circumstances,
the more prosperous Western countries themselves are likely
to find it more difficult to pursue the kind of policies
which will help them.
World econom,, ic downturn inevitably has an impact on Australia,
on our prospects for continuing growth, and on the sort of
expectations which we can realistically hope to achieve.
No matter how effective the Government's actions to insulate
Australia f: rom adverse effects, we are a trading nation,
and falling commodity prices and depressed markets for
our exports inevitably affect our economy. But while we are
inevitably a) ffected, the Government is determined to maintain
the kind of positive policies which will protect the well-being
of Australia's families, and which will enable us to
take advantage of world economic recovery when it eventually
comes. In terms of the Government's overall strategy to cope with
the present world economic situation, the maintenance of
economic strength in this country is basic and fundamental.
Unless Australia maintains a strong economy, the potential
to support and improve living standards will be reduced,
our capacity to provide and create the opportunities people
want, especially in terms of jobs, will be threateied. / 6
6-
Indeed, without economic strength, the continuing efforts
to build up our defence capability which I have referred
to could become impossible to sustain and Australia's
capacity to make the effective contributions which are within
our power to'wards dealing with problems of world poverty
would be substantially reduced.
Economic strength and growth may not be an end in itself,
but it is plaiinly a vital precondition of almost every
other major objective which the Australian community seeks.
When we look on Australia's economy, it is vastly important
to recognise! that it not only faces a number of problems
but that it also has very great strengths. Any tendencies
to over look or underrate these strengths, and there
have been su~ ch tendencies in some quarters, does Australia
considerable disservice, for it damages confidence, and can
distort people's attitudes inways which can themselves have
an adverse effect on the economy and its development.
We must never forget that in recent years Australia has
gone against: the tide. Growth has been achieved, at rates
substantially above the average of Western countries. Indeed
in the calendar year 1981, Australia's overall growth rate
was some about four times the current estimates of
growth in the OECD area as a whole in the same period.
And while the outlook for the current year may be flatter
than we would have wished, on current projections a higher
than average growth rate should be maintained.
Underpinning Australia's future economic prospects, there is
the continuing growth in business inves'tment in this country.
In 1980/ 81, there was a 30 year record increase in the rate
of business investment in real terms, and a continuing
high rate of real growth is being maintained this year.
Increases in investment at these rates mean that people do
have confidence in our economy, and the fact that these
increases are occurring itself provides solid grounds for
that confidence.
If investment and growth are the great underlying foundations
of Australia's economic strength, there are also some recent
indicators which demonstrate the absurdity of so much of the
talk of gloom and doom which has taken place in lmcent weeks
and months. For example, in the March quarter this year the
CPI increase was the lowest quarterly increase since 1979;
new motor vehicle registrations on a seasonally adjusted
basis were t~ he highest ever recorded; and retail sales
continued to show real growth.
Government cannot of itself produce economic growth.
But governments can have a major impact in establishing the
conditions under which economic growth can occur and will occur.
Through the various arms of economic policy,-especially fiscal
and monetarN policy, together with continuing restraint on
government spending, we will continue to promote the circumstances
in which people can have the confidence and the incentive
to keep building Australia up.
The Government has been energetic in carrying forward initiatives
such as the housing package which are needed to take account
of particula~ r economic circumstances and we shall continue to
adapt flexibly to circumstances in the light of Australia's
needs and objectives. Quite obviously, however, the maintenance
and development of economic strength in Australia with all
the benefits which flow from it, does not depend just on
government, but on the energy, the initiative and the work
of individual Australians.
It depends also on what we do as a nation-on our will~ ingness
to co-operate and work together as one people in pursuit of
our common : nterests and I would like to take this opportunity,
to say that the characteristics of Sir Condor Laucke himself
typify the attitude of hard work, and willingness to work
with others in the community, which Australia desperately
needs at the present time. Australia's economic strength
also depends on effective management of our affairs, on the
willingness of groups within the community to share the
benefits of growth, and leave something over for future
investment and development, on the practical recognition
that unless we maintain our competitiveness in a world
in which rival producers are cutting their costs, then we
will be unable to sell our products around the markets of
the world.
We really do need to recognise as a nation the damage which
Australians can do to Australia. It is not just a matter of
strikes and unrealistic wage demands but also too often of
bad planning and mismanagement, of failure to assess Australia's
situation realistically, of attempts t, 9 anticipate the
benefits of growth before they have been fully achieved,
and of attitudes which can work to undermine the advantages
we have.
It is vital that we recognise the importance of staying on
the growth path we have worked so hard to achieve, because
without growth, there can be no advancing prosperity for
our families. We also need to realise that, for most people,
real increases in living standards depend far more upon
growth in the economy than on benefits or concessions that
can be provided through budgets.
Last year, for example, as a result of growth in the
economy, real household disposable incomes increased by
about 3h%. But to have achieved that same real increase
through tax cuts rather than through growth would have
required income tax cuts of almost 18%, and this would
have meant a reduction in revenue larger than the Commonwealth's
outlays on education, almost as large as our expenditure
on defence, or approaching one third of our outlays on
social security and welfare.
And while the Government's commitment to sustainable and
responsible: tax cuts stands, while we recognise that the
well-being of some people does depend in a very direct way
on budgets, the main contribution of budgets is, and must
be, to growth itself. i / 13
-8-
I want to emphasise that giving priority to economic growth
does not mean that Australia is committed only to advancement
of our own material living standards. Australia is known
for broader concerns as a responsible member of the international
community, and although we are only a nation of 15 million
people, we have demonstrated those concerns in many areas.
our concerns can be seen in our continuing commitment to
promoting peace world wide, particularly in our willingness
to participate in peacekeeping operations, the latest of
which commenced in the Sinai just last week.
They can be seen in our contribution, through the Commonwealth, in the
settlement cf Zimbabwe. They can be seen in our sustained
efforts to revitalise dialogue on problems of world poverty
including through the Melbourne Declaration, and through
the study groups on obstacles to progress in North/ South
negotiations, and on the impact of protectionism on
developing countries, which we promoted at the Melbourne
CHOGM, and which should complete their work later this year.
And they cart be seen in our creation of the Australian Centre
for International Agricultural Research which will contribute
to the solution of agricultural problems in developing countries.
In the currEnt conjunction of world events which I discussed
earlier, andlespecially in the lead-up to the June summits in
Europe, I believe Australia has a role in bringing forward
a perspective from outside Europe and the United States.
Such a perspective can be of particular value in a situation
where the iSsues involved are not fully identified, and where
their implications for all peoples are not fLully grasped.
In these matters, Australia not only has its own distinctive
contribution to offer, we also have a positive responsibility
to bring ourc concerns and interests into the discussion which
will be takiLng place. While we are living in an environment
which is in many ways difficult and volatile, there are
opportunities for Australia.
As a nation, we must make certain that our policies, our
expectations and our attitudes enable us to grasp these
opportunities, so that we can capitalise -fully on our
advantages, and so make sure that the great fEuture which
lies ahead for Australia is fully achieved.