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EMBARGO: 12.30pm AEST
PRIME MINISTER
FOR IMEDIA FRIDAY, 14 JANUARY 1983
ADDRESS TO YOUNG LIBERAL NATIONAL CONVENTION, ADELAIDE
The Young Liberal National Convention in mid-January is one of my most
regular and important engagements, and I am delighted to be here
today, back in harness for the first time. 1983 is obviously
going to be a critical year for Australia. It will be a year
of difficulties, but also of challenges and opportunities.
It has never been more important to have the right priorities,
the right policies, the right directions. As a Liberal Government
our overriding obligation is to address the issues of economic
management firmly and effectively, without losing sight of our
wider objectives.
We all know that in today's situation there are no short term
solutions, no instant palliatives or quick fix answers.
We need medium to long term policies, consistently applied.
People are rightly concerned about the difficulties Australia
is facing, along with other countries. But I find it enormously
encouraging that most people are expressing a determination that
issues should be addressed constructively, looking to the interests
of all Australians. A national mood of realism is imperative.
For provided we are realistic, provided we are willing to make
the best use of skills and resources, I have total confidence
Australia can look to the future with optimism.
We also need to keep today's difficulties in perspective. While
we do not have the levels of economic growth we would like,
our gross national product is continuing to plateau at or near
its highest level ever. This contrasts starkly with the
catastrophic collapses of the 1930s. At the present time, our
national stock of houses, household goods, factories, commercial
buildings, galleries, roads, schools and hospitals has never
been greater and is still grow~ ing. We live at a much higher
standard than previous generations.
I want to talk first about where Australia now stands,
especially in the'light of the world recession. Secondly,
I want to examine the importance and continuing role of the major
policy initiatives put in place during 1982. Finally, I want
to look ahead to our objectives and priorities for this year.
There is no doubt that Australia's immediate situation and
prospects are greatly affected by the world recession. We are
affected by a general world problem, which is having an impact
on every country. There are some things we can do ourselves ./ 2
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to lessen the impact of recession but because trade is our
lifeblood, the recession was bound to hit us hard. The recession
has meant less demand for -our products, lower
prices for our commodities, and more competition in the markets
where we sell. This means less incentive to invest, and a
tighter squeeze on the profitability of Australian producers.
The world recession is-proving far deeper and far more prolonged
than most people would have thought possible, and there are
few signs of sustained recovery.
It is estimated that real GNP growth for OECD countries as a
whole in 1982 was minus and in the previous year, the value
of world trade actually fell, for the first time in over
twenty years. The average level of unemployment in 1983 for the
OECD area is forecast at 35 million people, a rate of
compared to about 8 million people or 3.6% 10 years earlier. it
is worth reflecting that if someone had argued ten years ago
that OECD unemployment would rise to 35 million, no one would have
believed it. People would have said they could manage their
economies better. We now face the unhappy question of how high
unemployment must go before major countries will face the reality
of trade problems and thus take decisions to get trado moving
again and unemployment down and restore economic growth.
The world desperately needs concerted international action
to help us break out of the vicious circle where negative
influences feed upon each other. The failure of the November GATT
Ministerial Meeting to take effective steps was a serious
disapppointment to all who seek a revival of world trade and a
fall in unemployment. Australia had put forward some
proposals designed to encourage world trade by halting the
drift to increasing protectionism overseas.
In principle, our proposals were widely accepted and logically
unassailable, they would have helped renew confidence, but there
was insufficient strength of purpose to grasp the opportunity.
The Secretary-General of the OECD has summed up the seriousness
of the situation by saying " in the light of events over the last
few months, it is my considered opinion that ( the) danger of
a chain reaction of beggar-thy-neighbour policies, with
potentially disastrous consequences, is now greater than at any
time since the Second World War".
The absurdity and the danger of what is now happening is
obvious from a few examples of existing trade barriers. One
EEC country, France, has erected barriers against imports of
Japanese video-recorders by requiring that all recorders
come through one . inland customs post totally ill-equipped to handle
the volume of trade, while in Ireland the furniture industry
was protected by making it compulsory to provide instructions
for ' build-yourself' furniture in Gaelic.
International action to revitalise the world economy would help Australia
greatly, we will contribute in any way we can to achieve
that objective, for continuing world recession ine~ vitably
means continuing difficulties for our economy. The impact
of the recession on Australia was worsened by 3
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excessive wage settlements over the last 12 to 18 months. These
wage rises came at the worst possible time, both because wages
overseas were rising at a much slower rate and because
production and profits were weakening here. over the 12 months
to the September quarter 1982 profits in Australia fell by 13%,
to their lowest level as a proportion of non-farm GDP since
at least 1959-60.
The wage rises have inevitably damaged our international
competitiveness. They have worsened inflation and unemployment.
This is not an occasion for political point-scorin'g the issues
facing Australia today are far too serious for that. But I
do say that those who pushed for higher wages and shorter
working hours must carry a good part of the responsibility for
the difficulties we are now experiencing.
The third major factor affecting Australia is one of the worst droughts
we have ever had. Most farm prices were down anyway, but
the drought is likely to cut the wheat crop almost by half,
and more than 110,000 of farms, carrying nearly 100 million
sheep and 14 million head of cattle are affected. The drought
is having effects far beyond the rural sector and is adding to the
severity of the present recession.
Throughout last year, both in our statements and in a series
of consistent and far-reaching actions, the Government showed
it was aware of the economic difficulties that were looming.
In a statement to the Parliament last March dealing with the
seriousness of the situation, I pointed to the inevitable
impact on Australia of the slackness in world demand and the
high cost of funds. I referred to the dangers of increasing
protectionism in other countries during
world recession. I highlighted the damage caused by excessive
wage rises and demands for shorter hours, and I spoke of
the importance of matching expectations with reality.
The concerns expressed in that speech were consistently reflected
in policy initiatives throughout 1982. The Government pursued
the twin objectives of helping people cope with the recession,
while working to establish the circumstances in which
private enterprise will be able to build up the Australian
economy and take advantage of opportunities as they arise.
In March we introduced a far-sighted housing package at a time
of high interest rates, real difficulty in bridging the deposit
gap, and growing problems in the housing industry. This-package
helped some 450,000 families buying their first home. We later
widened the housing interest rebate to include almost all home
loans. Commonwealth welfare housing expenditure has been greatly
increased and will build nearly 4,500 new dwellings in
1982-83, more than half as many again as last year. In all,
our decisions in 1982 have led to additional funds totalling
some $ 1.2 billion in a full year being diverted into housing
rebates and loans. Many of these measures will have a continuing
effect. Now that interest rates are starting to fall, these / 14
4
housing measures will have a greater impact on construction in
particular as the confidence of house buyers returns and
they are prepared to take out new loans.
Since last July, the Government has announced a number of
measures designed to help Australian industry. In particular,
depreciation provisions have been improved considerably so as
to ease cost pressures and assist reinvestment, especially in
new technology. An increase in the retention allowance will also
encourage reinvestment. Industry will also benefit from the
launching of the " Buy Australian" campaign, and more help for
small business through the Commonwealth Development Bank. And
industry will be given a boost by the increase of about
$ 580 million expenditure on capital works and other capital
purposes this financial year, by the $ 2.5 billion which is to be
spent on the ABRD program over the next six years, and the tax
cuts of $ 1.5 billion, effective from November, which will
generate increased spending in the economy.
The Government has been particularly concerned with the needs of
young people and we have helped them considerably this financial
year. Not only have the maximum tertiary and secondary allowances
been increased, but to help train young people to get jobs
and to contribute more effectively to building up Australia,
the Government has expanded employment and training programs,
increased work experience and apprenticeship subsidies and
the school-to-work transition program, and provided a special
three year capital program of $ 60 million for TAFE. In a
wider context, the Government has done a great deal to improve
the position of those people in need during this time of
difficulty. In addition to the measures I have mentioned already, low income
families will be helped by the family income supplement,
which will take effect from May this year, and from reductions
in charges made for pharmaceuticals. Pensioners have benefited
not only from increased pensions, but also from increases in
supplementary assistance for those pensioners paying rent, from
changes to the income test on pensions, and from a $ 250 tax
rebate for low income pensioners. The unemployed have been helped
by significant increases in unemployment benefits, and there has
been an increase of 65% in direct funding for welfare housing.
I hope Young Liberals will get out and ensure the community is
aware of these effective and innovative actions the Government
has taken to help those in need. We need to be on constant
lookout for areas-of need in our community and to continue to
provide assistance wherever practicable.
One of our most important objectives during 1982 was to
establish a climate for wage restraint and this is being
achieved in very large measure. Acceptance of the need for
restraint was strengthened by the Remuneration Tribunal's
decision on Parliamentarians' salaries, by the Academic Salaries
Tribunal's decision, and by a number of moderate determinations
for both Commonwealth and State public servants.
All this gave impetus to the idea of a wage pause. The agreement
which all governments reached at the December Premiers' Conference
to introduce a wages pause in the public sector, and to press
strongly for its extension into the private sector, provides
Australia with an opportunity which we must use to the fullest
advantage. The benefits of the pause are two-fold. First, substantial
Government funds can be diverted from wages to employmentrelated
programs. In the case of the Commonwealth, over
$ 300 million are being diverted over a twelve month period.
The Government has already announced that $ 100 million of that
money will be committed to welfare housing construction, an
activity which is labour intensive and which has a high
Australian content. I am also pleased to announce that at
yesterday's Cabinet meeting the Government decided that a
further $ 100 million will be used to assist the young unemployed
by offering them an opportunity to work on worthwhile community
projects rather than being unemployed. $ 100 million is also to
be spent to help the older unemployed and others disadvantaged
in the labour market. Typical projects funded by these programs
could include national parks and wildlife activities,
conservation and environment projects, national heritage, forestry
and local improvement projects. They would be run by local
councils, State Authorities and voluntary organisations. These
are constructive projects which meet very real needs, and I am
sure this convention will be particularly pleased with the
measures we are t Lking to tackle youth unemployment.
Secondly, and more importantly, benefits from the pause will
flow through to the private sector. in the short term it may not
do much more than help some employers keep employees they would
otherwise have retrenched. But in the longer term it will help
restore profitability and competitiveness more quickly,
enabling Australian firms to sell into other markets -and offer
more jobs. The pause is above all an attack on one of the major
causes of the unemployment problem.
The recognition by all eight governments that a wage pause
was needed is a significant fact, and it has sent a
significant signal to the private sector, to the union movement
and to the various wage tribunals, because all governments,
whatever their political colour, are saying that wage rises
have caused problems and that strong action is needed to counter,
these problems.
I have referred to our actions in 1982 because it is important
to realise that the Government has been responding to the
situation in a comprehensive and consistent manner. As and
when we need to build upon those measures, or take fresh
initiatives, we will do so. Australia needs stable, long
termf policies, consistently applied. The direction of our
economic policy is right and we shall maintain that direction. 6
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We shall continue to support private enterprise, and a more
competitive Australian industry. We will maintain the fight
against inflation. And as we can afford it, we will continue
to assist people and families.
There would be no point in trying to forecast specific actions,
but I want to point to some issues the Government will need
to address in 1983.
The first issue is wages. I have spoken of the opportunities
provided by the wage pause. The pause is not just something for
Governments. It is something which affects all Australians.
It is an example of what Australians can do if they are not only
realistic, but if they work together to help each other.
In the case of the wages pause, employees of the Commonwealth
will be foregoing $ 300 million in wage increases to help other
Australians out of work.
Because of the importance of the wage pause to everyone, I am
extremely pleased with the support it has received,
not just from the Premiers, but from the community as a whole.
It is disappointing that some State Premiers would only support
a six-month pause in the first instance, but they will be
reviewing their position in mid-year, and I am optimistic that
they will agree to extend the pause for the full twelve-month
period. The Arbitration Commission has granted a six-month pause, and the
Government is delighted that the Commission accepted the
arguments which we put to it. These arguments wilibe equally
strong in six months time, when the Commission reviews the
pause, and I very much hope the Commission will extend the pause
for a further six months. In the current climate Australia's
situation can only be made worse by further wage rises. It would
be a mistake, though, to see the wages pause as a solution in
itself to our economic problems. It is not.
What it does do is provide us with an opportunity. An opportunity
to improve the competitive position of our economy, to restore
profitability to our businesses and industries, to get out
into the world and sell Australian products, and to create nore jobs.
Whether we take that opportunity will depend on attitudes as
we approach the end of the pause. If we just put but our hands at the
end of the pause and demand they be filled no matter what the
consequences then. that opportunity will be lost and the benefits
of the pause will be lost. Australia will be submerged in
mediocrity. If we rise to meet the challenges and opportunities offered
by the pause, and if we are realistic about our position when the
pause ends, then we can use the great strengths Australia has to
regenerate this nation. / 7
The second issue I want to mention, which is directly related to
the end of the wages pause, is the method of fixing wages. It
is one of the most important issues Australians need to address
and it will be of critical importance to industry.
During the year the Government with employers and employees,
will be examining the wage fixing system to find the most
effective way of determining wage levels to meet our social
and economic objectives. No matter what the outcome, it is
imperative that we have a stable and predictable system.
A third issue I want to mention is the calls for higher
levels of protection. It is inevitable that during times of high
unemployment and falling demand some people will call for
increased protection. But we have to be clear-eyed about the
consequences of higher protection.
The first point I would make is that demands for significantly
higher protection must be seen against the background of the
support over the last year the Government has given to industry.
I have already referred to the improved depreciation provisions
and a number of other initiatives which have helped industry.
The Minister for Industry and Commerce recently announced steps
to speed up and strengthen our procedures against dumping. He
has also announced steps to improve the temporary assistance
mechanism. And industry will benefit enormously from the
wage pause because it will help reduce cost increases.
The 10% devaluation of the Australian dollar against the
trade weighted basket over the last 18 months 13.5% against
the US dollar has also helped domestic industries by raising
the landed cost of imports and by lowering the prices of our
exports in foreign markets it has helped our exporting industries
in difficult overseas markets.
The Government recognises that protection will remain necessary
in Australia, and in July last year we decided against a programme
of further general reductions in protection, but significantly
higher protection would do very real harm to the Australian
economy. The most serious consequence of too much protection is
that it has counterproductive effects and damages industries
which are strong, and export oriented.
It is imperative that we do not take decisions which would make
it even more difficult to sell Australian goods on the world
market. Higher levels of protection tend to give the
greatest support, and therefore the greatest advantage, to
non-exporting industries, and this is not Jinthe long-term interests
of Australia.
Too much protection means higher costs, so it is harmful to our
growing often export oriented industries. Last year, for example,
in responding to the application for temporary assistance for the
steel industry, the Government was acutely conscious that too
large an increase in protection for Australian steel would have ./ 8
meant higher costs for many downstream industries, including
manufacturing industries, which use steel in their products.
This would have made it harder for these industries to sell
their products in Australia as well as overseas. Indeed, some of
these industries might well have asked for more protection for
themselves because there had been more protection up the line.
And because higher protection means that consumers have to pay
more, they have le's s to spend on other things.
Higher protection may protect jobs inthose industries protected,
but it would mean less employment in those industries not
protected. It would mean a concentration of economic resources
in industries which are less efficient. With too much
protection, we would build an economic wall around Australia which
would not only be harder for imports to scale; it would also
be harder for exporters to get out because in many cases their
costs had been increased by a higher price for their inputs.
Denying access to our markets would invite retaliatory action
by other countries, shutting Australia out of markets around the
world. That way lies disaster. Protectionist measures
overseas at our expense could cost us tens of thousands of
jobs. Would we want to run the risk of that happening to the
Pilbara region of Western Australia or in coal mining towns
like Blackwater and Collinsville in Queensland, or
Muswellbrook and Singleton in NSW all of which depend almost
entirely on export markets?
We need to remember that approaching three quarters of a million
Australian jobs depend directly on exports. Even more jobs
depend on exports indirectly. By preventing efficient
industries from prospering as they should, too much protection
would deny us the general improvements in living standards
which we would all like to see and in the process would
undermine our ability to provide secure and sustainable
jobs in the longer term. And if there was substantially
increased protection, what guarantee would there be that the
short-term advantage conferred on those industries would not be
whittled away by price and wage increases, just as the living
standards of people who have become unemployed have been whittled
away by the wage increases of others?
The fourth issue I want to mention is the importance of introducing
new technology. It is essential that Australian industry
adopts new technology if it is to become more competitive.
our industries cannot afford to be frightened of new technology
or fall behind in its development because without it we will
not be able to compete with our neighbours and our opportunities
for economic growth and, in the longer run, more jobs will be lost.
At present the Government encourages the introduction of new
technology through depreciation allowances, the Australian
Industrial Research and Development Scheme, the CSIRO, the
Rural Research Programme and the National Energy Research
Development and Demonstration Programme. Total Government
spending on all forms of research and development as a proportion
of GDP is the fifth highest in the O. E. C. D. but our level of
research and development by the private sector is noticeably low.
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our broad policy for encouraging new technology is not
industry specific: rather, we have allowed industries to make
their own decisions and to determine the direction of expenditure
on new technology. I have discussed with the Minister for
Industry and Commerce whether or not this policy should be
maintained or whether specific policies for specific industries
and technologies should be introduced. He will be considering
this question early this year. we will also need to examine
whether Australia spends enough on research and development
and -the application of new technology and to see if there is more
we can do.
The fifth question that clearly needs examining is the
response of Government to changing levels of investment. We
have been saying in past years that public investment should be
held back to make room for rapidly rising private investment.
But the situation has now changed, and private investment is
falling under the impact of the recession. When private
investment is down it is appropriate for governments to examine
the levels of-their own investment. We have already moved in
this direction, expecially through increased capital works,
including the new airport programmes and the A. B. R. D. Governments
can do a great deal, operating in partnership, to build the basic
infrastructure for the future and assist private enterprise when
opportunities occur.
In this context I am pleased to announce that at yesterday's
Cabinet meeting the Government decided that the Alice Springs
to Darwin railway will be completed by 1988 Australia's
bicentonnial year. The rail link will be of tremendous economic,
social and defence significance to Australia and will be the
largest current railway development project in the world. It
will cost a total of $ 545 million. During construction the railway
will provide employment both directly and indirectly for over
1250 people. one of our election promises in 1980 was to complete
this project by 1990: the project will in fact be completed two
years earlier.
The sixth matter which needs to be addressed is water resources.
We are now in the middle of what could turn out to be the
worst drought this century. The drought has highlighted in the
starkest way the problem of adequate water supplies. Australia
is often described as the world's driest continent and water
has always been of critical concern. Millions of people in
cities and on the land in NSW, Victoria and South Australia,
depend on the Murray Basin for their livelihood. Much has been
done already to improve the quality of River Murray water but
in the present circumstances we will need to see what else
ought to be done.-Also our dams are dangerously low and major
cities are facing severe water restrictions.
In 1981 the Commonwealth set up a forward looking investigative
study to develop a perspective on Australia's total water resource
needs through to the year 2000. The States are co-operating
with us in this exercise. But there is an urgent need for us to
consider whether our current programmes and policies are
adequate and whether the scale of our thinking has kept pace
with that of cnur nredecessors when the Snowy Mountains Scheme
was developed and carried through. We need to consider an
imaginative approach which recognises that water will always
be scarce in Australia and that it should be conserved wherever
possible. 1983 will be a year of immense challenge to Australia, but will
also be a year of opportunities. We must learn from what has
happened, and make sure we emerge from the recession stronger,
more competent and more competitive than we have ever been.
We need a total effort from every part of the Australian
community. The challenge for Government is to guide Australia
through the recession, with a clear perception of our long
term objectives. Coping with the recession realistically is
not a matter of throwing up our hands in despair and saying
there is nothing we can do to help ourselves.
We cannot just rely on economic recovery in the United States
to regenerate Australia. Rather, we need two things. We need
the right policies to enable our businesses and industries to
go out and get a larger share of markets, to become more competitive
and to be more profitable. Without the right policies, economic
recovery in America won't help us at all. But in addition to
the right policies we also need the energy, innovation and
determination to get out and get a bigger share of the action
even if world economic recovery doesn't come for a very long time.
I know Australians can and will do just that. This is what
faith in Australia is all about. It is what our commitment
to freedom and private enterprise means, it is the path which
realism dictates for 1983 and it will make our nation stronger
and more self-reliant than ever.
Socially, we must continue to build on Australia's excellent
record as a genuinely liberal society. A society which
rejects uniformity and which has what someone recently described
as a " zest for differences" which generate innovation, ideas and
progress. The differences between us as individuals, the variety
that different and distinctive cultures and attitudes give to
Australia, are an essential part of the community's driving
force. Tolerance of differences and their encouragement also
engenders in individuals respect for their own community and
social system. By creating a liberal, dynamic society we can
make Australia really great and set an example to the rest
of the world.