PM Transcripts

Transcripts from the Prime Ministers of Australia

Transcript 6983

SESQUI CENTERNARY SEMINAR SOUTH AUSTRALIAN EXPORTERS ASSOCIATION ADELAIDE - 13 AUGUST 1986

Photo of Hawke, Robert

Hawke, Robert

Period of Service: 11/03/1983 to 20/12/1991

More information about Hawke, Robert on The National Archive website.

Release Date: 13/08/1986

Release Type: Speech

Transcript ID: 6983

PRIIMNE ISTE
EMBARGOED UNTIL DELIVERY CHECK AGAINST DELIVERY
SESQUI CENTENARY SEMINAR0
SOUTH AUSTRlALIAN EXPORTERS ASSOCIATION
ADELAIDE 13 AUGUST 1986
I an indeed pleased to be able to address you today and to
open this sesqui-contenary seminar.
ThiG address is particularly significant because it occurs
at time when Australia will necd to rely more than ever on
the pgoductiveness and inventiveness of our exporters and
thocco competing against imports.
The tliame of your seminar is well chosen: " Australian
Expo: ers where But with just a little reflection I
thin" that the answer will be simple enough: " Just about
everrp; herel".
I cay that because Australia's current combination of unit
labour costs and exchange rate means that Australian.
exporters are highly competitive in virtually all of our
major7 markets indeed more competitive, on average, than we
have been for at least twenty years.
Labor intends to preserve that competitive edge. Labor has
been putting policies in place over the past three and a
halfr years to wake up complacent Australian industry and
give it the chance denied it by the Coalition. Labor's
policies provide a timely foundation on which to build a
reo:;-onse to the new demands of world trade.
in many ways this group is the one most aware of both the
reasons for Australia's improved competitiveness and of the
reacons behind our present straitened national economic
circumstances. Exporters, in particular, have benefited from the dramatic
decline in the real cost of employing labour which has
occurred under the Accord. Real unit labour costs have
fallen by 7 per cent during the past three years an
achievement which few industrialised countries have matched
at any time.

Exporters too, have appreciated the benefits of the more
harmonious industrial relations environment achieved under
the Accoird an environment which has produced the lowest
levels of indus~ trial disputation in 18 years and has
significantly enhanced our reliability as a supplier. This
fact wao readily acknowledged by Japanese political and
industrial leaders during my recent visit.
Exporters stand also to benefit greatly from our clear
sighted decision to free the exchange rate from artificial
restraints, to eschew the Coalition's policy to hold the
dollar artificially high and instead to let exporters
compete fairly on world markets.
But expo., ters are only too painfully aware of the sharp
falls in the international prices paid for some of our major
commodities over the past year or so,
Measured against a basket of world currencies metals prices,
on average, fell 17 per cent over 1985-86, and non-food
agricultural products by 15 per cent. In just the June
quarter wheat prices fell 23 per cent in US dollar terms,
and have fallen still further since.
As you know Australia's exports are dominated by
agricultuz-al commodities, minerals and metals.
Over the long term, the real prices which we receive for
these products have been declining, especially relative to
the prices we pay for imports.
From time to time prices for one or other of these commodity
groups have fallen sharply.
But rarely in Australia's recent hi story have the prices for
virtually all major commodity groups fallen sharply
together.
Now is such a time.
The goods that we export now purchase far fewer imports. To
cover the gap we have been borrowing heavily from overseas.
We simply cannot go on living on even more credit.
That is just another way of saying that Australia's capacity
to maintain living standards has declined, temporarily at
least. In the year to March, 3 per cent was cut from the growth of
our national economic capacity because of adverse movements
in the terms of trade. In money terms Australia has lost
$ 6500 million of its national income since late 1984. There
has been a further fall since.
It would be heartening to think that, in fairly quick time,
prices will move back in our favour and the problem solve
itself.

3
But while prospects are looking better for some commodities,
that is not likely to be true generally.
The world's agricultural surpluses and the subsidy practices
of the US and the EEC hang like a pall over those markets,
probably for years to come.
Many minerals and metals are in chronic oversupply partly
because of the induced expansion of capacity during the last
abortive Go called " resources boom" and partly because of
the changjing technology of production of manufactures.
Australia has not caused these world-wide conditions.
Australia, under Labor, is far better equipped now to
respond tc, those conditions than three years ago.
But Austiralians have a major task ahead.
We need to renew our efforts to secure markets for our
traditioaial exports. We need dramatically to improve our
share of world trade in manufactures and services. Of
course, wo also need to obtain a larger share of our home
market. The trick will be to secure those adjustments at least cost
and to mia: imize the long-term gains.
Next vieoh~ s Budget is an investment in our future and that
of our children.
it gives me no joy to have to foreshadow a tough Budget.
But there is no other responsible or fair course open to a
Government dedicated to maximising long-term job prospects.
Mlaximum expenditure restraint is necessary and will be
delivered2. A reduction in the Budget deficit is necessary
and will, be delivered.
Meeting these commitments may to cost us political
popularity in the short term. When you inherit a budget
framework within which 70 per cent of outlays are locked in
by indexation and similar arrangements obviously your range
of savings options is limited. By contrast, at the start of
the Fraser Government the " lock-in" factor was only 59 per
cent. As a result of our inheritance we have had to take decisions
that in better times we would not have been forced to make.
It would have been simpler to have dodged those decisions.
It would also have jeopardized the long-term economic health
of this country and the ultimate well-being of thousands of
ordinary Australians.
We have taken these decisions because we believe they are
the right decisions. But in doing so we have also ensured
that no section of the community has had to carry an unfair
share of the necessary sacrifices.

4
without those collective sacrifices Australia could only
begin to pay its way again in the world by massively lower
investment and massively increasing unemployment.
A lower Sudget deficit directly reduces the need of the
economy as a whole to borrow abroad.
It eases r.' essures for an upward spiral of interest rates
and helps to create an environment for greater exchange rate
stability.
It thus holips to underpin investor confidence and encourages
the employmient creating investment which ultimately has' to
provide tho basis of the revival of our trading performance.
There is na doubt that the growth of economic activity and
employmcn will be slower, for a time, because of the need
to cope with our new external circumstances.
Few would doubt, too, that it will take a little time for
the benefits of the measures which we have to take to become
apparont.
But there is also no doubt that the course which we have
charted for Australia will bear fruit.
one reanon for my optimism is my faith in the talents,
dedication and inventiveness of Australians working together
in common cause.
For that I have, not least, the evidence of the past three
years. Australians working together have transformed our
economy from the depths of recession to growth sufficient to
provide new jobs for 630,000 Australians.
But, just as fundamentally, I have the evidence of the basic
restructuring of the Australian economy which Labor began
three years ago.
From th3 start Labor has encouraged a more outward-looking
manufacturing sector.
Labor introduced the 150 per cent tax write-off for
industrial research and development and the Grants for
Industry Research and Development Scheme.
Labor reformed our national export marketing effort and
instituted Austrade.
In sharp contrast to the rhetoric of our predecessors, Labor
has begun to reduce the regulatory burden on business.
More recently, of course, Labor has announced a further
package of measures to promote exports. Importantly for
exporters in this State, this package includes a number of
studies into transport handling and related infrastructure
costs.

And these measures have gone hand in hand with an
outstanding record in reducing business costs, boosting
business profitability and providing Jobs.
Where would Australia be now if Labor's policieG had not
prepared the ground so well?
As to the maintenance of Australia's enhanced
competitiveness, the sheer size of the depreciation of the
Australian dollar since January 1985, together with the wage
restraint achieved over the past three years, provide solid
groundG for confidence on this score. 0
But tho depreciation itself has become a source of inflation
in Australia, with our inflation rate standing at nearly
three times the OECD average.
The Accord has delivered a truly remarkable degree of
aggreg:-ate wage flexibility over the past three years.
Compliance with the centralised system of wages fixation has
been outstanding. in fact, the latest statistics put
earnings drift over the year to M'ay at a meagre 1 1/ 4 per
cent, a truly remarkable result at a time of rapid
employment growth.
Award wac~ es will increase by only 2.3 per cent in 1986.
This includes acceptance of a 2 per cent discount for the
effectc of depreciation in 1985 and some deferral until next
year of the wage adjustment which would otherwise have
occurred in the second half of 1986.
Labor wiill continue to seek wages outcomes appropriate to
the economic circumstances.
It is inevitable that this will require in 1987 wage rises
significantly less than inflation.
I would like to spend a little time contrasting Labor's
strategy for economic adjustment with the snake oil being
peddled by Mr Howard and his colleagues. Mr Howard has
promised zero Commonwealth outlays growth for 3 years and a
balanced Budget in the third year.
How does he intend to deliver on these promises? Very
badly, if his other promises are any guide.
He has promised a veritable litany of tax relief measures
which would cost the Budget around $ 1.8 billion: and this
does not include the cost of income splitting, which could
add $ 2.7 billion.
Nor has Mr Howard been backward in coming forward with extra
spending promises.
He is an ardent critic of the level of welfare spending, but
has repeated his promise to repeal the Assets Test. The
Coalition has made specific promises of additional defence
spending, a $ 500 million rural package, construction of an
Alice Springs t~ o Darwin railway and a pork barrel full of
other spending promises. Conservatively the cost of these
promises is $ 1.2 billion.

Mr Howard's hypocrisy and sheer dishonesty is most clearly
demonstrated in the cost of these promises: a doficit
blowout of $ 3 billion, even without income splitting.
Where vill Mr Howard get the $ 3 billion needed just to hold
the deficit at last year's level? And where will he get the
extra $ 5750 million needed to bring down a balanced Budget
in 3 years' time?
Mr Howazd is suffering from a $ 9 billion credibility gap.
There ic a certain symmetry between that and the $ 9.6
billion budget deficit legacy which he handed over to Labor
in 1983.
Mr Howard's wages policy is no less deceitfurl than his
fiscal policy. He wants to deregulate the labour market
allegedly to give Australia greater real wage flexibility.
I am astonished by Mr Howard's ignorance of recent economic
history, in which he was a key player. As Treasurer in the
early 2.980s, he presided over a system of decentralised wage
fixing. The result was industrial chaos and double digit
wages growth during a time when the economy could scarcely
afford it.
The Accord has delivered the lowest real unit labour costs
and the lowest level of industrial disputation for nearly
two decades. it has manifestly delivered both real wiage
flexibility and jobs growth.
For a present-day experiment with a deregulated labour
market wie need only look at the UK. In spite of
unemployment in excess of 13 per cent, and in spite of Mrs
Thatcher's anti-union campaign, British unions have secured
real wage increases averaging 3.5 per cent per annum over
the past 3 years.
Contrast that with an average annual fall in real wages in
Australia of 1.7 per cent over the same period. Instead of
learning from these experiments, Mr Howard has promised
Australia a thousand Mudginberri's a return to the
confrontation and divisiveness that marked his in auspicious
stint in Government.
Mr Howard has dishonest and empty rhetoric.
Labor has the policies to lead Australia through the
external difficulties imposed upon us. And I am pleased to
note the growing number of companies taking up the export
challenge in response to the boost in Australia's
competitiveness.
My colleague John Brown recently attended the ceremony
marking the completion of the White Industries Construction
Project in Singapore involving the building of some 15,000
home units.

7
In the development and project management field, the
Adelaide based enterprise Pak Poy and Kneebone is involved
in several c-a~ or overseas projects including the Manila
Light Rail ~ iransit System and the $ 3 billion Bintulu
Regional Centre in Malaysia. This company has formed a
joint venture partnership with a US company in order to
increase its activities in the US urban and resort
development narket.
I see that enother of your local companies here in Adelaide,
Visions SyStems Limited, has won a contract to supply an
electronic surveillance system as part of the United States
space shuttle program.
Several coapanies which have broken into the difficult
Japanese mart; et include Dunlop Sheridan with their bed
lines, Solahart with hot water services, and each of Raml,
Tessa and Sabel in furniture products.
I recently had the pleasure of visiting N~ ucleus LiQited in
Sydney a company which has carved out for itself a niche
in international markets, where it has been able to
successfully market high technology medical equipment, heart
pacemakerG and the so-called " bionic ear". Last year this
company exported around 90 per cent of its production.
And Neville Wran's favourite wine Rosemount Chardonnay
is set to make it big with other Rosemount varieties on the
US West Coast. The first shipment left for San Francisco
just last wieek.
There are many other examples I could cite covering a broad
range of products and services from Pop Art sculptures to
computer hardware and software, to laser technology and
pharmaceutical products. Perhaps one of the most unusual
examples I have heard of recently is the success of a Sydney
company, Dinkum Dogs, in exporting hot dog heating machines
to the US.
As diverse and unusual as these examples might be, I suggest
they all have one factor in common a dedicated and dynamic
management and staff, committed to seeking out new
challenges and successes.
Already there are signs that these individual efforts are
beginning to have the desired aggregrate impact. Real
exports 7ose 14 per cent in the year to March 1986 and the
real growth of imports slowed to less than 1 per cent. Most
significantly real imports seem actually to have declined in
the early part of 1986. Unfortunately the impact of this on
our balance of payments has been masked by the continued
deterioration in our terms of trade over the period.
Australians have repeatedly demonstrated a capacity to work
together during difficult times. The great economic
recovery and national reconciliation that pulled this
country out of the deep recession of the early 1980s is
recent testimony to that capacity.

8
The difficulties we face today are different to those of a
few years ago. But our sense of national purpose is
undiminished. My Governmant's policies will ensure that the large boost to
the international competitiveness of Australian industry is
maintained. I am confident that you, as exporters, will
take full advantage of the opportunities to build on our
existing successes on world markets and thereby help
Australia to trade its way out of its current difficulties.

Transcript 6983