JAUSTHRALIA
PRIME MINISTER
E. O. E. PROOF ONLY
PRESS CONFERENCE GOA AIRPORT, 25 NOVEMBER 1983
PM: What I'm going to do is just take you through what
h appened this morning generally and tell you something of
what I said. And then there is a domestic matter I'd like
to go to.
The two things that were involved this morning were the
international economics and there was a statement on Cyprus
by the President and a couple of contributions from Bangla
Desh and Guyana. I didn't have the opportunity of speaking
there, but it is going to be further discussed on the weekend
here and I will be talking about that then.
The contributions on the international economics were by
Mrs. Gandhi who made some brief introductory comments, but
was introduced by New Zealand. Other speakers were Trinidad
and Tobago. They were reporting on the outcome of the
Commonwealth finance ministers meeting. Tanzania, Sri
Lanka, Kenya and I wound it up.
I'll go through the contribution that I made. There was no
doubt about the seriousness of the problems confronting the
international community in securing long term growth and
employment and I emphasised the ultimate progress in regard
to dealing with these matters is involved in ensuring that
the measures which are adopted contribute to the long term
solution. I put it that there were four crucial pre-conditions
in achieving this.
The first one is that the domestic policies of the major
industrial countries should be compatible with the requirements
of sustained economic recovery.
Secondly, that there be a movement towards a free and open
international trading system.
Thirdly that there be firm action directed at strengthening
existing international financial institutions.
Fourthly, that appropriate domestic economic policies be
followed by all countries whether they were developing countries,
middle developed countries or fully developed countries that
there is no way in which you could expect that problems were
/ 2
going to be solved by just looking-outside yourselves. We
all have to adopt appropriate policies.
They were the four crucial pre-conditions. I said that in
the framework there seem to be five major economic policy
tasks confronting us.
Firstly, the promotion of growth in developed and developing
countries so th at from this growth we will be able to get
higher employment and better living standards.
Secondly, a revival of trade, especially through serious
efforts to promote conditions which were consistent with open
model trading system.
Third, that we have to promote the adjustment process in
debtor countries by maintaining flows of finance from official
sources which in turn would operate as a catalyst force for
simulating private growth.
Fourthly, that there had to be an encouragement of a greater
convergence in economic policies between countries so that
there could be a reduction in exchange rate fluctuations and
in that way create a better environment for trade investment.
Fifthly, that there should be a lowering facilitation of
lowered international interest rates which means particularly
a reduction in the inordinately large budget deficits that
are around and in that way improving inflationary expectations.
I said on each of those points the major industrial countries
beared particular responsibility. For example, if you look
at the high interest rate levels, they had been influenced
by size in the fiscal deficits in the major industrialised
countries and that has contributed considerably to the
uncertainty in international markets and is responsible
for large question marks that must be said to exist over the
durability of sustained international economic recovery.
I then went on to point out that a particularly significant
feature of recent experience has been the growing recognition
of the danger posed by increasing resort to protectionism and
there was an understanding develop ing of the heavy interrelationship
between trade and financial policies, both
domestically within countries and internationally.
From this I went on to speak particularly from Australia's view,
saying over recent times the aggressive use of subsidies by
the European and the United States which is threatening markets,
bringing about suppressed returns and creating price instability
and within that framework the increasing tendency amongst the
majors to settle issues between them by bilateral arrangements
don't necessarily take into account the interests of smaller
countries and I pointed out to them that Australia really had
suffered within that process. There were three bites of the
cherry, if you like, as far as we are concerned. / 3
Firstly, with the development thing, the European Community.
We had been pushed out of traditional markets there.
The second stage in the process was where the European Community
had then started to subsidise its exports in surplus production
into our traditional markets and had hit us there.
Now, thirdly the third stage is that. we've got the United
States responding to that process and I pointed out by way of
example the fact that in the traditional area of our wheat
market, was now having to build wheat silos as part of
the sale of wheat to match the sort of conditions which the
Americans are providing in their sales.
I emphasised that the sorts of solutions that are arrived at
between in these bilateral deals the majors at the expence
of third countries are not only discriminatory and
inequitable, but they involve the gradual undermining of
orderly international trading system. Therefore, one of the
things that we had to give emphasis to was the return to
creation of an open multi-lateral trading system.
I pointed out that within this context there had been some
calls for a new round of trade negotiations and I said that
our response to that would be influenced by the extent to
which these are going to address themselves to the needs of all
countries developing as well as developed and that as far
as we are concerned we would welcome a new round, providing
that there was a comprehensive approach to the problems of
international trade.
I then moved on to talk about the central relevance of the
effective management of the situation of the heavily indebted
countries and this has now come to be recognised as critically
important to the past in restoring a balanced global trade
and system. I said that it was important that the
adjustment process makes it possible for the heavily
indebted countries to service their debt and particularly by
way of increasing their export earnings.
Now, I went on then to say that the critically important
retail area is the role of the international financial
institutions and I went out of my way to say that it had to be
understood in discussions like this just what a critically
important role the international'financial institutions had
fulfilled. They had provided the backstop in a channel
through which arrangements can be made between debtor and
creditor nations and with the major banks. This had to be
understood if you were going to really address yourself
sensibly to the future. You had to reall~ y understand that they
have done a very significant job and that--what was important
now was to see that despite the bridging role, the major
financial institutions was facilitated so they could really
exercise their mandative role. / 4
Now, in this respect I said the early application to the
8th IMF quota increase in the large general arrangements
to borrow is important and it would still remain to be
considered whether following that ratification you still
had to consider then whether the liquidity needs of the
international financial institutions would be sufficient
for them to discharge their responsibilities and in that
context I pointed out that while you could look to a rapid
growth in international liquidity flowing from the deficit
of the United States balance of payments, it still seemed
likely that some liquidity would remain scarce and I then
said,' should it be the case that the recent sharp decline in
the balance of the IMF loan coming at the same time as
reduced opportunities for borrowing for lenders. If it
appeared in the day circumstances, that there was bound
to be a particular pressure on fund resources and that there
may be a case for supplementing those resources. I didn't
pursue the details of that but really was concerned to flag
that that was something that we may have to consider.
I then pointed out that the CHOGM is likely to be
in regard the provision of concessional finance through the
International Development Association and therefore pointed
out that it was necessary to recognise the need for the
replenishment of the IDA to be implemented to be agreed and
implemented on schedule by July of next year.
I referred to the United States tradition in that regard
because the problem there is the task confronting the United
States administration in getting Congressional agreement
to that replenishment and I pointed out that we attached
very particular importance to the American participation
replenishment should be at a level commensurate with the
historical share which the United States has had in the IDA.
I pointed out that we had in fact, in bilateral discussions
with the United States administration, stressed the importance
we attach to that.
I said that this necessity of negotiating annual bridging
arrangements was a most inefficient and unsatisfactory way
of providing funds for such a major international institution
and this would be avoided if possible.
Overall, I wanted to say two things that the international
financial institutions have done'an important job. They have
shown a flexibility and a capacity to do an important job
in difficult circumstances and it was important that they be
provided with the funds necessary to enable them to meet the
existing problems.
I then went on and said that the relationships between trade
and development in monetary issues it was now recognised that
was in dispute was the nature of the economic mixture
between trade, financial, monetary and other macro-economic
policies. What mix was necessary to address the immediate
problems and try and get a basis for long terin sustainable
economic growth.
I pointed out it wasn't surprising that the differences
should be apparent and what therefore was needed was
co-operative action which the Commonwealth was well-placed
to try and sustain to stimulate world trade and promote
international economic activity.
Now, I then went from that to say that what we've got to do
is be realistic in our approach to this and what really
the essence of the problem confronting the Commonwealth now
is to balance on the one hand that sensitivity to the
dimension of the problems that exist that on the one hand,
but on the other to be putting proposals which would get
the necessary measure of international agreement which would
be critical if you are going to get effective action.
So, what I said was needed were wide policies and approaches
and not some possibly endless wrangling about new financial
insitutions or existing ones.
So, the task at CHOGM was to show a continued readiness to
look for practical and realistic remedies to the international
situation.
So that really concludes it. On the basis of therefore
adopting the realistic approach of what is achievable I said
that we would rate very high priority to be attached to
ensuring the effective operation of the existing institutions
and that that point should be the focus of any group the
working group that was set up by the Commonwealth in this
area. I went on to say that it was particularly relevant to the work
of any such group that it should secure the co-operation of
the major developed countries and to ensure that they retain
their concern and support for the IMF and the world bank
because they were the major sources of funds for those
institutions. Therefore, any group set up should really be
directed towards this way to develop some sort of
consensus building process.
I then said finally, that subject to those sorts of conditions
being adopted by the Commonwealth that Australia would be
prepared to endorse a proposal that Commonwealth members
should take steps to explore with other countries how these
issues that I have been talking about could be effectively
addressed and solutions advanced.
That was it.
JOURNALIST: How does it look as though this debate is panning
out. I mean I just want to get some sort of context. To what
extent so far has there been a lot of support for this group
to look at new financial institutions? / 6
PM: The interesting point to make there is that in his
presentation Muldoon was, I think, much more cautious
in his approach. He was not pushing aggressively for a new
Bretton Woods conference. He was stressing the need to
move cautiously to try and get agreement and interestingly
Mrs. Gandhi also, in her intervention made the point that
if you could get existing institutions to work effectively
then there was -no need to create something else. So, I
think the exposition that I gave and which was prepared
in advance is consonant with the type of approach which seems
to be coming. In other words, before hand there seemed to
be a sort of rush towards a brand new Bretton Woods conference.
They went straight to that and were going to solve the problems.
Now, there seems to be a recognition that that is not the
appropriate approach and I welcome that because my view has
been, and not only expressed here, but I gave some indications
beforehand that you have got to recognise that the existing
institutions have done a considerable job and it is much more
likely that the major industrial countries are going to be
prepared to work through a strengthening of the existing
institutions than be responsive to some excessively optimistic
concept about, as I say, some radical new approach.
JOURNALIST: Does it look at this stage as though there will
be this group set up
PM: It's too early to say because the only speakers so far,
as I say, have been Muldoon and Trinidad and Tobago reporting
on the Commonwealth finance ministers meeting. Then we had
Kenya. We had Tanzania and Sri Lanka and myself. So this
matter will be resumed. We are not going to talk about this
over the weekend. Basically well, not in a structured way.
It looks as though the main topics over the weekend will be
Cyprus and Southern Africa, although there will be probably
some discussions about where they may be able to go in general
statements on the international security area, but the detailed
debate on this will be picked up on Monday.
I would guess that this sort of approach. that I have formulated
there and it got a very good reception. I think that if those
sorts of qualifications are embraced that probably there would
be no significant opposition to that sort of step, if you
like. JOURNALIST: And that basically is where Muldoon is at the
moment. Do you think Muldoon will accept something like that?
PM: Let me put it this way. His introduction was not
inconsistent with what I'm saying. He has observably moved
to a more cautious, I think I would say, and more realistic
expectation about how you can go about this.
JOURNALIST: Mrs. Thatcher, though, seems to be / 7
PM: Mrs. Thatcher is yet to speak and so I can't indicate-
I just don't know, but I think that in broad terms she
would see than the sort of approach I've made.
JOURNALIST: Had you done much brief chatting and talking to
heads of government about this particular issue before the
debate started?
PM: No, not a -great deal. In the meeting with Mrs. Thatcher
on the first morning we did traverse it slightly, but no,
up to this point the other issues have been very much more
on peoples' minds.
JOURNALIST: Could I just check. I think you mentioned at
the start there being some domestic matter you wanted to
raise. PM: Well, let's be quite straightforward. Are you aware of
w; hat's come out of this Business Review Weekly by
Stuart Simpson?
JOURNALIST: I'm not aware of it.
PM: Well, it's something that by the time we meet on Sunday
you may be.
JOURNALIST: Inaudible
PM: I'm sure it's for the best
JOURNALIST: Well anything you say now can get in our main
editions, so if you would like to say something, by all
means do so.
PM: Well, what's happened is that Stuart Simpson has used
sgome revised Summit projections that were circulated to
participants at the last EPAC meeting. And he is making
some suggestions that this may tend to undermine the
Government's case on indexation and so on and I believe that
Peacock and Howard are calling some press conference to
carry on with this matter. Well, I would certainly like to
say something about that. These matters are relevant.
The first, that the revised projections that were put at the
meeting. They had no official status and they were not
accepted by EPAC. At the meeting there was discussion about
technical problems that were in fact involved and the
shortcomings were recognised and specifically it was said
that it would be some time before we would be in a position
to have reasonably reliable medium term forecasts. The
authors of these projections emphasised that they were
projections and not forecasts and you will appreciate the
difference. Really, their main value is for testing outcomes
from various policy assumptions.
The second point that I would make is that in any case the
revised projection one was broa~ dly consistent with the Budget
forecasts and the general. observations that both the
Treasurer and I have been making about growth througih the
year of the order of 5-6%
Now, the next point I would make is that if you looked at the
economic indications that are in fact available to us now,
they do show that the economy is performing considerably
better than is suggested in the revised projection one.
Just for example, it referred to a 3% growth in dwellings
investment, which is obviously considerably understated.
14% growth in farm output, which again, I think, is considerably
understated and also the employment and unemployment elements
in it were, I believe, an understatement of the outcome that we
can reasonably expect.
Now, that is for comments in regard to 1983/ 84 on the
projections. Now, of course, beyond 83/ 84, as I have been
stressing in recent speeches in Australia, it is too early to
be making judgements about that. But what I have been saying
what is fundamentally important is that we've got to make sure
that the business community and the trade unions have got the
right sort of attitudes and approaches if we are going to
sustain beyond 83/ 84 the significant improvement that is clearly
coming into place now, as a result of the policies that we have
adopted. I would think we would make the observation that
as far as beyond 83/ 84 is concerned, I remain confident that
we will be able to make the sorts of decisions that are
necessary to deal with that clearly.
JOURNALIST: Could I just clarify that. The point is that
these revisions were not accepted by EPAC.
PM: Well, let me make it clear. They were projections that
were put up. They were not accepted by EPAC as in any sense
definitive. The authors pointed out the difficulties
involved in their construction, the assumptions that were
involved and the only way in which they were in any sense
regarded as being immediately useful, was for conferring
alternative policy assumptions and that they were quite
unreliable about actual outcome. As I pointed out in several
observations, if you look at what we built in for 83/ 84 like,
as I say, in regard to dwellings investment 3% in 83/ 84,
obviously it's going to be very, very much better than that.
Obviously the farm output figures are going to be very much
better than the 14% that was built in. So, any attempt to
suggest that that sort of information which wasn't accepted for
any other purpose by EPAC than for testing possible alternative
assumptions, that that indicates-any problems as far as what
is happening and it was an absurdity. It is just completely
unsoundly based because I would make the fairly obvious
observation as far as Messrs. Peacock and Howard are concerned
it is quite understandable that they would be clutching at the
odd straw like this, in the light of the avalanche of
statistical information that is becoming available about how
well the economy is going. I mean, since we'vye left you would
have seen the reference to the Melbourne Institute consumer
confidence survey, which shows the best figure, I think, for
12 years. When you take all that evidence with the other that
was there before we left, you certainly understand Peacock
and Howard trying to grab hold of something.
JOURNALIST: Is it the Government's intention subsequently to
do what it did at the Summit and that is make public these
sort of projections?
PM! What is done with the material of EPAC is a matter for
decision by EPAC. There would be a whole range of material
which just simply wouldn't be appropriate to distribute beyond
EPAC where it was there simply for the purposes of comparing
with possibilities of determining outcomes tape ends
if there was some material which would be useful in
stimulating a general debate and EPAC regarded it as appropriate,
well then, that would be done. EPAC will be the master of its
own destiny in that respect.
JOUR~ NALIST: Just to follow up on an earlier point. you
obviously are very concerned at the trading situation in terms
of our products, particularly agricultural products the
EEC and the United States. Is there any specific action we can
take on this approach in the near future and is this something
which you will be taking up yourself with these countries?
PM: Well, there are three points to be made about it.
W e raised it here at CHOGM which collectively the Commonwealth
ought to take up and use its influence in relevant international
fora to try and increase the proportion of international
trade which is part of a free open multi-lateral trading system
because the sort of evidence now suggested about 50% of
international trade is in fact not in that category. The
second thing is that we have already made representations to,
for instance, the United States and Japan in this area where we
are concerned that the discussions between the United States
and Japan may be to our disadvantage. So, we have already
made representations. I have made them and so has Lionel Bowen.
The third point, yes, we will continue to make these
representations in our bilateral relations with various countries
and we will continue to make them in relevant international
fora.
JOURNALIST: Can I just ask you how do you think Grenada is
going to go? Do you think it is likely to reach an accord
during the formal talks here?
PM: No, I don't think there is any possibility of an accord
on this.
JOURNALIST: If there are discussions of any assistance to
Grenada, as far as policing and that sort: of thing, would
Australia be willing to contribute?
PM: I don't want to say anything about that at this stage. You
k now from the report of what I sai~ d yesterday that if there
were a position where the Commonwealth and the countries
concerned wanted some sort of training assistance for police
there. That was one thing that was specifically mentioned by
some of them. Obviously that is something that we would take / 11
into account. We would consider it. But let's be clear that
that is a quite hypothetical position. There is no suggestion
at this stage that even that minimal sort of request would
be made.