AS DELIVEREDI
PRIME MINISTER
FOR MEDIA MONDAY, 27 SEPTEM4BER 1982
ADDRESS TO THE CHAMBER OF MANUFACTURES, SYDNEY
I would like to thank you very much for asking me-to share
this evening with you. It is an important one. Manufacturing
industry is vastly important to the state of New South Wales
and to Australia. It provides a large part of our national
income and employs a very large number of people and it is going
through a fairly rugged time. I am well aware of that, but
I do not know how many of you here would like to swap with me the
last two weeks that you have had for the last two weeks I have
had. There are two good things that have happened in the last
couple of weeks, Carlton won and they were the underdogs and
they came through bec ause they had more skill and they knew
what they were about and I knew they were going to win. Then
I went out and had lunch with John Utz and John Reid yesterday
and Parrammatta won. I am not allowed to be so partisan in
Sydney about league but I thought Parrammatta did quite well.
Quite obviously you are affected very much by a number of
circumstances which make life difficult, the economic downturn
overseas and that effects output, it effects orders, it effects
your capacity to employ. You have also been very much effected
by the wage explosion of the last 18 months and the arguments
about shorter hours and this of course has been compounded in
its impact because it was coming at the very time when people
overseas were starting to realise that they had to work harder
and some were recognising that they had to work harder to
significantly less.
When the Government was forming this last Budget we were therefore
doing it in a climate which was quite different to previous
years. In earlier times we were doing it against the expectation
and reality that private business investment was going to
expand and the Government needed to draw back quite hard to
make room for that private investment, but even though private
investment on Treasury predictions is estimated to stay high
through the course of this year, by the end of the year it
will of course be running at a lower rate than at the beginning
and it is unlikely that new and significant business decisions,
investments are going to be made in the curr~ ent climate.
Against that background the Government's Budget was obviously
to an extent a compromise. It would have be en possible to
have a hair shirt budget which would have done more for
inflation, it would have done even more perhaps for interest
rates, but I suspect not much, because I think the overseas / 2
CHAMBER OF MANUF.-2
influences in relation to that are substantial, but it would
not have done anything at all to help people who were in
difficulties or families who might be in difficulties as a
result of the present circumstances and it would not have
done anything at all to help industry and to help to mitigate
some of the impact of the overseas downturn.
Instead of having a hair shirt Budget which might have been
on the advice ' of some purist economists and on the advice of
Syntac, but I don't know how many of you buy Syntac, because
I know cheaper ways of getting exactly the same advice and I
suspect a number of you do too. We did not do that; we had
an overall domestic budget surplus of about $ 200 million and
an overall deficit of about 1.6 billion, about 1% of gross
domestic product, still one of the lowest deficits in the
western world. I think that makes it an economically responsible
budget. but within that we have been able to encompass tax
cuts, especially tax cuts which are designed to help families,
families with children, family allowances, people buying off
their homes. As a consequence a family with one income
earner of say about $ 300 a week with a wife and two children
is $ 17 to $ 18 a week better off as a result of that Budget.
I believe that that makes it reasonable to argue for and expect
wage restraint because if you had to get the same amount from
an employer, what is it $ 25 or $ 30 a week and that could make
the difference between profit and loss, survival or not
through the course of this coming year. In framing the Budget
we very much had in mind something that would make it reasonable
not only to argue for but to expect wage restraint.
In addition we wanted to provide what support we could to industry
and you know there were all those terrible IAC inquiries through
last year, all sorts of nerve's were touched on the raw because
I suppose everyone knew what the IAC was going to recommend
but nobody necessarily knew what the Government was going to
decide as a consequence. The IAC in part seems to be coming
a body to which you have to refer something to make it legally
possible for a Government to make a decision which is notnecessarily
related all that closely to the IAC recommendations.
I suppose that is the only part that the newspapers tomorrow,,
which are entirely free trade in their consequences and attitudes
and which do not have any competition from overseas at all
because of the nature of the work they do, will say that
I have mercilessly and unreasonably attacked the Industries
Assistance Commission. Somebody said here, here I should have,
but it was not meant in that sense, it was a friendly sort of
comment just relating the facts.
We did want to do things that would help industry and as a
result of the IAC reports over the year we made a certain
decision as you know, not to reduce protection in current
circumstances. We also made decisions about'depreciation which
from what I have been told should over time be of substantial
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CHAMBER OF MANUF.-3
support and assistance to industry in enabling them to write
off capital equipment much more rapidly arid therefore make
sure that Australian industry is as technologically advanced
as any in the world and depreciation allowances are being
provided for buildings for the first time. In addition to that
of course there is a substantial increase in the Government's
own expenditure for capital works and that again was very
much related to the particular circumstances of this year.
For small companies an. increase in the rentention allowance,
fulfilling an election policy pledge from the last election..
Tax relief on the first thousand dollars of dividend income
may be small in its consequences, but important for small
investors and important as a statement of philosophy, as
a statement of attitude. I hope it can be regarded as a
significant and useful start and also changes that would
encourage employees to invest in shares of a corporation
for which they work, again something that might be small in
its cost but important from a philosphical point of view and
from the breadth of support which might be available to the
private enterprise system.
I think there have been some positive results from the Budget
starting with the Remuneration Tribunal which in case you
do not know effects politicians, and public servants and judges,
Commonwealth judges not state judges because state judges do
much better than ours I think or so I am told by Commonwealth
judges. They have arguments between themselves too about some
basic matters but the Remuneration Tribunal came in with
a recommnendation for the Acadamic Salaries Tribunal-immediately
followed with the South Australian, West Australian, and
Northern Territory public services the Commonwealth public
service 6 to The Australian editorials might say this is
all 6 to 6 or 7% too much, but it is very, very much better
indeed than 13% or 14% which would have been disastrous for
Australian industry and for Australian employment.
I believe the members of the Parliamentary Remuneration Tribunal
who responded to arguments which said don't ask yourselves
what you think politicians are worth, you might all say that,
is absolutely nothing, but ask yourselves in this instance
what Australia can afford not just for politicians, or ministers
or Prime Ministers or judges and public servants, but imagine
the percentage that you are going to . put. flows right across the
board. That was the first tribunal which r-ame down with a
decision which was but delayed three mor-ths so that made
it a little les s than that, but without that I do niot bp. lieve
that the other t-ibunals would come down with the same decisions
and so I hope the members of the Remuneration Tribunal can
take some pleasure From the fact that they have set by their
recommendations a national lead which I believe is vastly important
for all of us in the period ahead, becau-e wage restraint is
going to be absolutely vital in re-establishing in an appropriate
way, the competitive base of Australian induistry and then in
making it possible for Australian industry to employ more people
a. q of course it must if unemployment levels are to fall. / 4
3
CHAMBER OF MAJNUF.--
Other things have happened which again I hope providing some
assistance. The exchange rate is down about 15% against
the United States dollar since the end of 1981 and by 11-12%
against the trade weighted index over the last year. That
obviously is important . again in the competitive base from
which Australian industry must get out and compete.
There are some other positive signs. There have been falling
interest rates in the United States. There is now over the last
week or so, asia result of a thoroughly successful tender
for Commonwealth paper some falls in interest rates in Australia.
Bob White has not given me any particular indications as to what
is going to happen in the future, but I am certainly not going
to give my political opponents any mileage to fly with by
making some predictions about the future. I did that once
and even though the predictions came true, they keep on saying
it did not. That just leads to a very unnecessary argument,.
but at least the omens in that front are a little bit better than
they might have been some time ago.
I would like to point out in particular to those purist economiqts
who wanted u-s to wear a hair shirt during this Budget and who
as a consequence of the Budget said that is going to be bad
for interest rates and bad for this and bad for everything else,
in spite of in their view the Budget being bad for these
things, the Commonwealth bond rate is down about 2% since the
6th of Auqust.. So, maybe it is just as well we did not accept
that hair shirted advice.
Industrial relations or the figures of strikes, the June figures
have been the best for 13 or 14 years and that at least must
be pleasing from one point of view, but I think it is a very
sad thing indeed that we seem to need, not need, because
nobody wants it and everyone would seek to avoid it, but it
seems to be only in circumstances of significant unemployment
that that kind of situation can be achieved. That is somethi-ng
that establishes a challenge for all of you here and for
Barry Unsworth and his colleagues because we ought to be able
by management and labour getting together much better than we
ever have to establish the circumstance in which it is possible
to have a good industrial relations record even with much
better levels of employment.
At least we seem to be starting to learn the lesson much quir. ker
than it was learnt in Britain. Thp~ ir unemployment rate is now
about 14% and it was well over 10% approaching 12% before they
had to learn that continual strikes and difficulties are just
going to harm people and cause a great deal of divisivness
and difficulty.
On a mild note, because I Am told this is a non-political
occasion I would like to make the point that Mr Cain's Budget
in Victoria was a curious one becauqe it follows almost exactly
Mr Whitlam's first Budget. I suppose that makes all Victorians
very happy just at the moment. Taxes were up 23 point something
per cent, expenditure was up 24% and I do not know if Victorians
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CHAMBER OF MANUF.
are going to be enthralled to learn that if Mr Cain'follows
Mr Whitlam's Budget, in his second Budget he will be spending
24% more. That seems rather lot in slightly difficult
circumstances. It is worth noting that that kind of increase,
in expenditure comes out not far apart from the kind of
budget that Mr Hayden said he would introduce in response
to John Howard's Budget speech. He never put figures on it,
but it was analysed very closely and the analysis is available
for anyone to see and read if they want it, but it comes out an
an overall deficit of something between $ 4.7 and 5.7 billion,
a figure on which Bob Hawke and Bill Hayden seem to be
unanimous because Mr Hawke on the Sunday after the Budget said
that all the countries overseas have budget deficits of 4%
of gross domestic product that is obviously therefore responsible
and riqht and that comes out at something like 6 billion
which is at the upper reaches of what Mr Hayden apparantly had
in mind. * I think it is worth keeping that in mind. The political
Opposition I don't believe have learnt very much from the
lessons of the past, that you cannot spend your way as a
government out of economic problems and difficulties.
There is one other thing that I would like to speak about
and. I believe that the great bulk of the business and commercial
world needs to get its act together to make sure that the broader,
the total Australian public understand that the great bulk of
the business and commercial world behave not only legally
but with a sense of ethics, with a sense of understanding
of the needs and of their responsibilities of the broader
Australian public. I know that that is what most of the business
and commercial world does, but everyone out in the street kno~ w
that that is what most of the business and commercial world
does because there have been some actions in recent times which
have done a. great deal to the fabric of Austra * lian society.
which have led many average Australians to believe that the
system is unfair and stacked against them and they get a bit
annoyed about it as a result and I they are justified at some
of the things-that go on and I am sure that many of you are also.
John Howard has done more to overcome tax evasion than any other
Treasurer in the whole history of the Commonwealth and that
I think ought to be recognised. There has been legislation
against over fifty schemes and a new Part 4A of the general
anti-evasion, anti-avoidance legislation that was introduced
18 months or so ago, but still the fight goes on. Over the
last few weeks, largely as a result I suppose of the publication
of the McCabe-Lafranchie Report and largely as a result of the
publication of the Costigan Report, these matters seem to have
come much more to public notice. Incidentally with all the
wisdom of hindsight' it is not very difficult to see how the
Painters and Dockers became embroiled in tax evasion because
if there were promoters who wanted somebody with no name ' and
no position or who could be given a new name and a new position
a different identity and if they wanted somebody who belonged
to a closed secret society which in the words: of the
Royal Commisioner is not a union, but a criminal society, then
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CHAMBER OF MANUF.-6
and one that can enforce its own laws there have been 22 murders
associated with the union and only 2 prosecutions and that is
not a bad record for Australia then of course you go to the
Painters and Dockers and it is not surprising that some
promoters of certain schemes also had people who were going
to recruit Painters and Dockers who would end up signing bits
of paper which I suppose would end up at the bottom of one or
other of the harbours-around Australia. That is as I understand
it how the term bottom of the harbour came to be formed.
We have stopped the worst of the schemes through the Crimes
Taxation Of fences. Act of 1980 which because it could not
be stopped in any other way put in criminal penalties against
the device and all the evidence before the Tax Commissioner
is that the particular piece of legislation has been remarkably
successful. That has left the problem which has become very
evident, what happens about the tax that was not paid and so
John Howard introduced legislation last week which is designed
to recoup the tax that had not been paid, but ought to be paid
from those who benefited from the device. It is not criminal
legislation, there are no criminal penalties attached to it.
It'is taxation legislation and it will result in taxation
assessments being issued.
I do not know how widely the so called bottom of the harbour
scheme is understood, but in my understanding it is one in which
a company with significant current year profit is sold at a
price that makes it perfectly plain that neither the seller nor
the purchaser has any intention of paying any tax. In other
words -the vendor-shareholder gets a price for his shares which
is much greater tha.-he could get if he was going to pay tax
or if the purchaser was going to pay tax. I am told there
are a cirucmstances in which the vendor-shareholder did not
know that the purchaser was going to pay tax and that therefore
he did not know that the tax was not going to be paid. I might
at times find it difficult that he did not know because
the test, and this is part of the test of the legislation, is
that on the basis on the price he gets for the shares, which
is of course a capital price, there is not enough money left
in the company to pay the tax. If you add the fee of the
promoter together with the price of the vendor-shareholders,
there was generally nothing left and so how was the tax going to be
paid. -obviously in many cases it was not.
It is not surprising that a good many people get annoyed about
this and expect that something should be done about it. There
is an argument about retrospectivity and nobody likes retrospective
legislation, but I would like to make a point. about that because
some considerable time ago a-conservative government in the United
Kingdom in somewhat similar circumstances the same kind of
legislation was introduced. It is worth noting I think that
when the particular legislation was on appeal in the court of
appeal in the United Kingdom, the senior judge of that court
made one or two significant comments and he said
" For y ears a battle of manoeuvre has been waged~ between the
legislature and those who are minded to throw the burden of
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CHAMBER OF MANUF. 7-
taxation of f their own shoulders onto those of their fellow
subjects. In that battle the legislature hWas often been
worsted by the skill, determination, and resourcefulness of its
opponents of whom the present appellant I do not know who
he was has not been the least successful. It would not shock
us in the least to find that the legislature has determined to
put an end to the struggle by imposing the severest of penalties.
It scarcely lies in the mouth of the taxpayer who plays with
fire to complain about burnt fingers."
He also said, " The fact that the section has to some extend a
retroactive effect acaain appears to us of no importance when it
is realised that the legislation is a move in a long and
fiercely contested battle with individials who well understand
the rigour of the contest."
That was said in 1942. Then again the Lord Chancellor, Viscount
Simon, who I understand was a somewhat distinguished jurist
in the United Kingdom had this to say about a similar case and
the same piece of legislation: " Judicial dicta ma . y be cited
which point out that, however elaborate and artificial such
methods may be, those who adopted them are ' entitled' to do so.
There is, of course, no doubt that they are within the4r legal.
rights. but that is no reason why their efforts, or those of the
professional gentlemen who assist 1them ( the British are always
so polite) in the matter should be regarded as a commendable
exercise of ingenuity or ais a discharge of the duti-s of good
ctizienship." He also upheld the legislation.
He continued, " rTh the contrary, one result of such methods, if
they succeed, is nf course to increase pro tanto the load of
tax on the shoulders of the great bodT of good citizens who
do not desire, or do not know ' now, to adopt these manoeuvres".
That was said ; n 1943 as a result of conservative leqislation
introduced in the 1930s.
A Government as mine does not, does not like retrospective
legislation, but in this instance and in relation to bottom of
the habour schemes alone has introduced retrospective legislation
to recoup the tax that should have been paid from people who
profited from the device. That is not the only principle that
governments govern by. I believe my Party and I hope my
Government as a whole, has another principle which I believe is
enormously, the principle to govern fairly and honestly for
all Australians. It is a question therefore of competing
principles. ' It is not fair to let people get away with
the profits of bottom of. the harbour schemes. Are we going
to place retrospectivity of fairness first in this particular
contest and the Government has made the decision that fairness
must be given greater weight than our abhorrence of retrospectivity
in relation to this particular contest because what has happenead
is patently unfair, has patently placed a greater burdea on
certain citizens right across the Commonwealth and we need to
understand that this cannot be tolerated and will not be
allowed to continue. / 8
CHAMBER OF MANUF.-8
I think it is going to be terribly important, not only as
a Government to establish the circumstances in which this
situation is seen to he fair, but I also think it is going to
be terribly important for the business of the industrial world,
for the financial world, for them also to demonstrate that they
regard the mere performance of a legal obligation
is not sufficient -and that there
needs to be an ethical base to business activities and to
financial transactions. It is the law together with an-ethical
attitude of society to the people with whom one does business,
that makes this country and if we have to legislate fbr every
wrongful act that people might have in mind, then we will be
so subsumed in legislation of every kind Sir Lawrence Street
and ever Judge in the land will have to work overtime and
never get a Sunday off because so much would have to go the
courts.
What happens, what kind of country this is, does not just
depend upon laws and a strict observance of the law, it also
depends very much on the attitudes it has to each other, the
way in which people do business with each other, the relationships
which are conducted between companies and corporations and
financial instititutions. If Australia wants to say to me
that there is no ethical base in that, that it all has to
be governed by law, then that is not the country that I know
and it is not the country that I love.
So ladies and gent'lemen in a mild way I offer a challenge,
let all the good, and I know that that is overwhelmingly the
majority all the good and honourable industrialists, businessmenand
financiers and in this city and around this nation, rise up
and join in the condem-nation of practices that are unethical
that ought to be repudiated, that are being outlawed by the
law and which drag this nation into disrepute.
8