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ADDRESS BY THE PRIME MINISTER
BUSINESS LUNCH
ADELAIDE 20 NOVEMBER 1984
HAKYOU FOR THE OPPORTUNITY TO SPEAK TO YOU TODAY ABOUT
THE ECONOMY AND ABOUT ECONOMIC MANAGEMENT.
THIS GOVERNMENT CONSIDERS EFFECTIVE ECONOMIC MANAGEMENT TO BE
THE LYNCHPIN UPON WHICH ALL OUR OTHER ASPIRATIONS DEPEND,
IN A VERY FUNDAMENTAL SENSE, A MORE RAPIDLY GROWING
ECONOMIC CAKE PROVIDES MUCH GREATER OPPORTUNITY FOR ACHIEVING
THE TYPE OF SOCIAL AND ECONOMIC CHANGES THAT SO MANY OF US
WANT TO SEE.
ECONOMIC GROWTH IS NOT IN SOME WAY AT ODDS WITH ACHIEVING
A FAIRER AND MORE EQUITABLE SOCIETY. RATHER IT IS CRUCIAL
TO ACHIEVING IT. OUR CAPACITY TO REDUCE THE NUMBER OF
AUSTRALIANS WHO ARE UNEMPLOYED AND TO IMPROVE THE LIVING
STANDARDS OF THOSE NOT FORTUNATE ENOUGH TO BE DIRECT BENEFICIARIES
OF ECONOMIC RECOVERY BOTH GOALS OF THE HIGHEST PRIORITY IS
DIRECTLY RELATED TO OUR ECONOMIC PERFORMANCE,
WHEN THIS GOVERNMENT WAS ELECTED TWENTY MONTHS AGO, WE RECEIVED
A MANDATE FROM THE AUSTRALIAN PEOPLE TO CARRY THROUGH A NEW
APPROACH TO THE PROBLEMS THAT AFFLICTED OUR ECONOMY AND OUR
NATION. WE UNDERTOOK AN APPROACH THAT MEANT THAT INFLATION AND
UNEMPLOYMENT COULD BE SUCCESSFULLY TACKLED SIMULTANEOUSLY AND
THAT MEANT THAT THE DEEP DIVISIONS IN OUR ECONOMIC AND SOCIAL
FABRIC COULD BE HEALED.
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2.
LAST YEAR'S NATIONAL ECONOMIC SUMMIT WAS A WATERSHED IN THIS
NEW APPROACH. IN THAT UNIQUE FORUM, WE OBTAINED THE SUPPORT
OF THE COMMUNITY AS A WHOLE INCLUDING BO0TH THE TRADE UNION
MOVEMENT AND BUSINESS.
FROM BUSINESS PEOPLE I SOUGHT CO-OPERATION IN AN ATTEMPT TO
MAKE THE PRICES AND INCOMES ACCORD WOR(, I PROMISED
BUSINESS NOT JUST THE RESULTS OF A TEMPORARY ECONOMIC RECOVERY,
BUT ALSO A FIRM BASIS ON WHICH A LASTING RECOVERY COULD BE BUILT.
My GOVERNMENT COMMITTED ITSELF TO PROVIDE BUSINESS WITH STABLE,
PREDICTABLE, COHERENT GOVERNMENT POLICIES AND CONTINUED
EFFORTS TO MAKE THE BUSINESS ENVIRONMENT MORE CONDUCIVE TO
INNOVATION, ENTERPRISE AND ECONOMIC GROWTH.
THESE UNDERTAKINGS REFLECT THE BASIC ECONOMIC REALITY THAT
IN OUR MIXED ECONOMY THE PRIVATE SECTOR PROVIDES THREE
OUT OF EVERY FOUR JOBS. THEY MEANT THAT THE FOCUS OF OUR ECONOMIC
POLICY WAS TO CREATE TOIE CONDITIONS FOR A PROFITABLE AND
DYNAMIC BUSINESS SECTOR. THEY MEANT SETTING IN TRAIN POLICIES
THAT WOULD REDUCE INTEREST RATES, CONTAIN BUSINESS COSTS,
RESTORE OUR INTERNATIONAL COMPETITIVENESS, AND BOOST DEMAND
WHILE. PRIVATE SECTOR ACTIVITY WAS WEAK. ONLY IN THIS WAY
WOULD BUSINESS CONFIDENCE BE RESTORED AND THE NECESSARY
BROADENING OF THE RECOVERY TAKE PLACE.
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3.
NOW NINETEEN MONTHS AFTER THE SUMMIT CONFERENCE ALL THAT HAS
BEEN ACHIEVED.
THOSE OF YOU IN THE BUSINESS COMMUNITY t-MOST OF THIS
AUDIENCE HARDLY NEED REMINDING OF THE DRAMATIC TURNAROUND
IN THE ECONOMY SINCE THE MIDDLE OF LAST YEAR.
YOU KNOW THAT FR~ OM A PERIOD OF RECESSION, FALLING EMPLOYMENT,
HIGH INFLATION AND A STAGNATING BUSINESS SECTOR, WE NOW
HAVE A STRONG AND INCREASINGLY BROADLY BASED RECOVERY IN
OUTPUT AND EMPLOYMENT, INDEED NO-ONE COULD
REASONABLY EXPECT ECONOMIC IND) ICATORS TO TESTIFY MORE
CONSISTENTLY TO THE SUCCESS OF THE CO-OPERATIVE APPROACH
WHICH WE HAVE FOSTERED. NOR COULD ANYONE HOPE FOR A SET
OF INDICATORS WHICH DEMONSTRATED MORE CONVINCINGLY THAT,
IN ARRIVING AT OUR POLICY CHOICES, WE HAVE STRUCK THE
RIGHT BALANCE BETWEEN, ON THE ONE HAND, THE NEED FOR
ECONOMIC STIMULUS WHILE PRIVATE SECTOR ACTIVITY WAS WEAK
WHILE, ON THE OTHER HAND,#( THE NEED THEREAFTER TO PROGRESSIVELY
CUT BACK ON FISCAL STIMULUS SO AS TO ALLOW RECOVERY TO BECOME
SELF SUSTAINED. s o m4/ 1
' 4.
IHIGHLIGHTED JUST SOME OF THOSE INDICATORS IN MY POLICY
SPEECH, EMPLOYMENT IS UP; INFLATION IS DOWN; INT REST*
RATES HAVE DECLINED; CONSUMER CONFIDENCE IS AT RECORD
LEVELS; BUSINESS CONFIDENCE HAS BEEN-RESTORED; BUSINESS
INVESTMENT IS GROWING BY THE MONTH; THE HOUSING INDUSTRY
IS BUOYANT; MANUFACTURING PRODUCTION IS RISING, BUSINESS
PROFITS ARE UP AND LABOUR COSTS CONTROLLED; INDUSTRIAL
DISPUTES ARE DRAMATICALLY DOWNi AND THE PUBLIC SECTOR
BORROWING REQUIREMENT AS A RATIO To GROSS DOMESTIC PRODUCT
Wll FALL SUBSTANTIALLY, THIS FINANCIAL YEAR,
TODAY NOBODY ANY LONGER QUESTIONS THAT THE ECONOMIC RECOVERY
IS WELL AND TRULY UNDERWAY. BUT THERE ARE MOIRE
PROMI SING DEVELOPMENTS.
I POINTED OUT YESTERDAY IN COLLIE IN WESTERN AUSTRALIA
THAT OUR ECONOMIC PERFORMANCE NEXT YEAR WILL BE STRENGTHENED
BY THE RETURN OF GROWTH IN RESOURCES INVESTMENT, WHICH HAS
REMAINED DEPRESSED SO EAR IN THE RECOVERY. IPOINTED OUT THAT
OVEn TIlC PA3T THREE MONTHS, SIrq~. t WL H-NISHED WORK ON THE
BUDGET, MAJOR RESOURCE DEVELOPMENTS TO THE VALUE OF ABOUT
BILLION HAVE MOVED FROM BEING " GOOD IDEAS" TO BEING
CONSIDERED BY THEIR PRIVATE SPONSORS AS CERTAIN TO PROCEED
THROUGH 1985. 5/
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THIS NEW RESOURCE INVESTMENT WILL BE ON TOP OF INVESTMENT
THAT IS STRONGLY GROWING IN OTHER SECTORS OF THE ECONOMY,
IT IS NOW CLEAR THAT THE BUDGET ESTIMATE OF 5 PER CENT.
REAL GROWTH IN PRIVATE INVESTMENT THIS FINANCIAL YEAR
WILL BE EASILY EXCEEDED.
MOREOVER, THE RESOURCE PROJECTS WHICH NOW SEEM CERTAIN
TO PROCEED DURING 1985 ARE ONLY THE BEGINNING. A RANGE
OF OTHER PROJECTS, INCLUDING THE RE-OPENING OF THE
KWINANA BLAST FURNACE FOR PRODUCTION OF PIG IRON FOR
CHINA, ARE AT A PROMISING STAGE OF NEGOTIATION.
THESE DEVELOPMENTS ARE OCCURRING IN AN ECONOMIC CLIMATE
WHICH, EVEN WITHOUT NEW RESOURCES INVESTMENT, WOULD LOOK
VERY PROMISING INDEED. THE ECONOMIC RECOVERY IS ALREADY
WIDELY BASED, AND SOUTHi AUSTRALIA IS FULLY SHARING IN
THAT RECOVERY.
INDEED YOUR STATE IS A LEADER IN THE NATIONAL HOUSING
RECOVERY WITH DWELLING COMMENCEMENTS INCREASING BY MORE
THAN 50 PER CENT LAST FINANCIAL YEAR. EMPLOYMENT IN
SOUTH AUSTRALIA HAS SHOWN A WELCOME GROWTH OF MORE THAN
3 PER CENT OVER THE YEAR TO THE THREE MONTHS ENDING
IN OCTOBER. WE WANT TO SEE THAT CONTINUE.
ONE OF THE ENCOURAGING FEATURES OF OUR PERIOD IN OFFICE
SO FAR HAS BEEN THE SUCCESS WE HAVE HAD IN REDUCING
INTEREST RATES FROM THE RECORD LEVELS OF OUR PREDECESSORS. 0 6
s / 6#
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6.
IN THE CASE OF HOUSING INTEREST RATES THE FALLS HAVE
GENERALLY BEEN AROUND ONE PERCENTAGE POINT. IN THE
CASE OF MOST OTHER INTEREST RATES THE FALLS HAVE, BEEN'
MUCH LARGER. AND, THE BEST IS STILL AHEAD OF US,
AUSTRALIA AND AUSTRALIANS WILL DURING 19a5 REAP THEC
INTEREST RATE REWARDS THAT ARE FLOWING FROM THE
SUCCESSFUL POLICIES OF THE PAST 20 MONTHS. WE'VE
PLOUGHED THE FIELDS AND SOWN THE SEEDS. IN THE VERY
NEW FUTURE, WE WILL HARVEST THE CROP.
BUT, OF COURSE, WE MUST CONTINUE THE POLICIES THAT ARE
STARTING TO HAVE SUCH PRODUCTIVE EFFECT.
THAT REQUIRES, FIRST OF ALL, THAT INFLATION BE KEPT
UNDER CONTROL BECAUSE WITHOUT CONTROL OF INFLATIONARY
PRESSURES AND INFLATIONARY EXPECTATIONS INTEREST RATES
CANNOT ' BE B3ROUGHT DOWN OR KEPT DOWN. WE HAVE ALREADY
HALVED INFLATION. WE EXPECT INFLATION WILL BE LESS THAN
FIVE PER CENT IN THE Y'EAR AHEAD AND WE ARE DETERMINED
TO KEEP IT BELOW FIVE PER CENT.
CONTINUED MODERATION IN INTEREST RATES WILL ALSO REQUIRE
RENEWED EFFORTS TO REDUCE THE BURDEN WHICH THE GOVERNMENT
SECTOR PLACES ON FINANCIAL MARKETS. WE HAVE ALREADY
MADE EXCELLENT PROGRESS IN OUR FIRST TERM. AND ONCE AGAIN
ICAN ASSURE THE COMMUNITY THAT WE WILL CONTINUE OUR
WORK OF PUTTING THE PUBLIC FINANCES OF THIS NATION BACK
IN ORDER'At.' D CREATING THE CONDITIONS WHERE FURTHER INTEREST
RATE REDUCTIONS CAN OCCUR.
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7.
IN OTHER WORDS, AT PRESENT, THE OUTLOOK FOR INTEREST
RATES IS AS BRIGHT AS IT HAS BEEN FOR MORE THAN A
DECADE,
BY CONTRAST, THE OUTLOOK FOR INTEREST RATES WOULD BE
BLEAK IF THE COALITION POLICIES WERE PUT-IN AFFECT
AFTER DECEMBER 1. THE OPPOSITION'S ECONOMIC POLICIES
ARE, QUITE SIMPLY, A GUARANTEED RECIPE FOR HIGHER
INTEREST RATES. RISING INTEREST RATES WOULD, FOR A
STARTr, BE THE INEVITABLE CONSEQUENCE OF THE INFLATIONARY
WAGE-PRICE SPIRAL THAT WOULD BE CREATED BY THE OPPOSITION'S
WAGES POLICY WHICH PROPOSES THE DISMANTLING OF THE
CENTRALISED WAGES SYSTEM UNDER THE UMBRELLA OF THE
PRICES AND INCOMES ACCORD, WHICH PROPOSES THE UNDERMINING
OF THE ARBITRATION SYSTEM AND WHICH INVITES TRADE UNIONS
TO GO OUT INTO THE MARKET PLACE AND ACHIEVE WHATEVER
WAGE INCREASES THEY CAN THROUGH THE UNFETTERED EXERCISE
OF INDUSTRIAL MUSCLE.
HIGHER INTEREST RATES. WOULD ALSO BE THE INEVITABLE
CONSEQUENCE OF THE MASSIVE INDIRECT TAX SLUG THE OPPOSITION
IS PROPOSING AS PART OF ITS TAX POLICY. THAT CUMULATIVE
INDIRECT TAX SLUG WOULD DIRECTLY AND SHARPLY LIFT THE
CONSUMER PRICE INDEX, FEED INTO. THE WAGES PRICES SPRIAL
AND CREATE ADDITIONAL INFLATIONARY PRESSURES THAT WOULD
PUT IRRESISTIBLE PRESSURE ON INTEREST RATES. NOT ONLY
WOULD WE NOT YET HAVE THE REDUCTIONS THAT WE EXPECT NEXT
YEAR BUT THERE WOULD BE EVERY REASON TO EXPECT AN INCREASE
Of ABOUT 2 PER CENT IN THE NEXT 12 MONTHS.
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8.
THE BUSINESS COMIMUNITY WOULD SUFFER AND AUSTRALIAN
FAMILIES WOULD SUFFER. FOR EXAMPLE, A TWO PER CENT
INCREASE IN HOUSING LOAN INTEREST RATES WOULD ADD'AROUND
$ 44L TO THE MONTHLY REPAYMENT OF AN AVERAGE FAMILY
PAYING OFF ITS OWN HOME.
CORRESPONDING INTEREST RATE INCREASES IN OTHER AREAS
WOULD SERIOUSLY WEAKEN INVESTMENT, RISK THE POSTPONEMENT
OR CANCELLATION OF NEW DEVELOPMENT PROJECTS, DAMAGE
CONSUMER CONFIDENCE AND UNDERMINE JOB PROSPECTS.
THAT IS THE STARK CONTRAST THE AVERAGE AUSTRALIAN AND
THE BUSINESS COMMUNITY IS CONFRONTED WITH. THE CERTAINTY
OF FURTHER REDUCTIONS IN INTEREST RATES UNDER THE PROVEN,.
INTEGRATED ECONOMIC POLICIES OF my GOVERNMENT, AND
AGAINST THAT, THE INEVITABILITY OF A RETURN TO RECORD
HIGH INTEREST RATES UNDER THE SAME IRRESPONSIBLE,
UNCOORDINATED HOTCH-POTCH POLICIES OF OUR OPPONENTS
POLICIES WHICH PRODUCED THOSE DISASTROUS RESULTS IN THE
PAST AND WHICH WOULD.. 4AS I SAY, INEVITABLY DO THE SAME
AGAIN. THE TASK WE WILL FACE IN OUR NEXT TERM OF OFFICE IS TO
TURN--THE RECOVERY NOW UNDERWAY INTO SUSTAINED STRONG
GROWTH WITH LOW INFLATION, AND TO ENSURE THAT THE
BUSINESS CLIMATE REMAINS FAVOURABLE FOR NEW INVESTMENT
AND FOR NEW JOBS, .6/ 9, .09
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9.
IN ORDER TO MEET OUR OBJECTIVES FOR GROWTH, EMPLOYMENT AND
INFLATION DURING OUR SECOND TERM, I HAVE MADE FIRM COMITMENTS
IN THE VITAL AREA OF FISCAL POLICY.
THOSE COMMITMENTS ARE ON THREE SPECIFIC MATTERS THE BURDEN
OF TAXATIONj THE SIZE OF THE BUDGET DEFICIT AND THE GROWTH
OF GOVERNMENT EXPENDITURE. OVER THE NEXT TERM OF THIS
GOVERNMENT THERE WILL BE NO OVERALL INCREASE IN THE BURDEN
OF TAXATION, THERE WILL BE A REDUCTION OF THlE DEFICIT AS A
PROPORTION OF GDP AND EXPENDITURE GROWTH WILL NOT BE AS
FAST AS GROWTH IN THE ECONOMY.
THESE COMMITMENTS REFLECT THE FUNDAMENTAL IMPORTANCE THIS
GOVERNMENT ATTACHES TO SUSTAINING ECONOMIC GROWTH. THEY
REFLECT OUR BELIEF THAT WHAT THE ECONOMIY AND BUSINESS IN
PARTICULAR, NEED FROM GOVERNMENT IS A STABLE AND PREDICTABLE
POLICY ENVIRONMENT. THEY PROVIDE ASSURANCE TO BUSINESS OF A
LONG TERM ENVIRONMENT FAVOURABLE TO INVESTMENT AND TO GROWTH.
WITH THE POLICIES WE ARE PURSUING, BUSINESS CAN BFE CONFIDENT
THAT THE TIME IS RIPE FOR MEASURED EXPANSION AND GROWTH
AND FOR FURTHER INVESTMENT IN THEIR OWN BUSINESSi IN THEIR
OWN F UTURES AND IN AUSTRALIA'S FUTURE.