PRIME MINISTER
EMBARGOED UNTIL DELIVERY CHECK AGAINST DELIVERY
ADDRESS BY THE PRIME MINISTER THIRD ANNUAL GENERAL MEETING
BUSINESS COUNCIL OF AUSTRALIA SYDNEY 17 SEPTEN~ BER 1986
The Australian community is increasingly coming to
understand the dimension of the economic challenge
confronting our nation.
I am not here today to attempt by way of any rhetoric to
increase that level of comprehension.
Rather within a calm appraisal of our present and
foreseeable economic environment I will announce to you
several important new steps the Government is taking to put
Australia into the best possible position to meet this
challenge. It is now four weeks since the Budget.
The Treasurer and I have explained the rationale of the
Budget on many occasions over these weeks and I do not
intend to go over that ground in any great detail today.
The main point I have to make is quite straightforward.
r,
Like any househy,. d which falls on hard times Australia can
for the pr-esent no longer maintain its accustomed living
standards. We must face up to the reality of drastically
lower world prices for much of what we expprt, prices that
are unlikely to recover quickly in the short term.
As a nation, we simply cannot go on indefinitely spending 6
per cent more than we are earning and financing the
difference by adding to our external debt.
Accordingly the Budget is designed to slow the growth of
public and private sector consumption and raise public
sector saving.
2.
it will thus directly reduce the public sector's claim on
private sector saving and help to lessen Australia's need to
import and to borrow from abroad. In this way it will also
aid the process of domestic economic adjustment unleashed by
the dramatic improvement in our international
competitiveness over the past year and a half.
In fact the dramatic fall in our terms of trade over the
period simply brings into sharp focus a number of issues
which have been on this Government's agenda these past three
years. A consistent tenet of our economic policy has been the need
to internationalise the Australian economy.
This strategy has rested on three simple observations:
First, the fastest growing economies o ver the last
decade or so have been those which have placed greatest
emphasis on export-oriented strategies.
Second, whi le services and manufactures have been the
fastest growing components of world trade, Australia's
share of this trade has been steadily declining since
the early seventies.
Third, it has become very much tougher to sell into
Australia's traditional export markets. The reasons are
clear. Agricultural trade is corrupted by subsidies;
and for this and other reasons several previously large
net importers of foodstuffs have become self sufficient
or large exporters. Moreover many metals and minerals
are in chronic oversupply, partly because new technology
has reduced the resource-intensity of world production.
Of course export-oriented strategies are not just about
exports. Just as it is true, as every first year economics
student knows, that " a tariff a tax on exports", so it is
true more generally that inefficiencies in any sector of the
economy can ham~ per Australia's trading performance overall.
So an essential pac~ t of our thrust to internationalise the
Australian economy4 -ias been a series of initiatives to lift
the performance of all sectors of the economy whether
directly engaged in trade or not.
By any standard the list of measures taken is impressive:
Reform of the financial system, including floating the
currency; Taxation reform incorporating substantial personal tax
cuts and the ending of double taxation of dividends;
Incent ' i'ves for industrial research and development which
are among the most generous in the world;
Steps to reform the education and training systems;
The steel, motor vehicle, ship building and heavy
engineering industry plans;
Incentives to promote the formation of venture capital
companies; Liberalisation of foreign investment guidelines and
administration; and
Measures to reduce farm costs.
Shortly I w'ill also be announcing major reform of the
Commonwealth Public Service reforms to streamline and'
rationalise public sector operations and thus contribute to
a more efficient economy overall.
Moreover substantial progress has been made in reducing the
burden of business regulation.
I provided a first report on progress in this area in my
address to last year's Annual General Meeting. I will not
repeat that list, except to provide an updating in just two
cases. The BRRU estimates that in the first case the streamlining
of Customis clearance procedures introduced last year the
savingG clready being achieved by business amount to more
the $ 30m a year. In addition, I am pleased to announce
that, as Loreshadowed last year, all States have now agreed
to a National Food Standards code, which it is estimated
could save business a~ iout $ 50m per annum by elim~ inating the
need to comaply with different standards in different States.
In the past year the Government has continued to reduce the
extent of regulation wherever possible. For example, the
Commonwealth has withdrawn from regulating private
hospitals, taken , further substantial steps to relax controls
on foreign invest mnent and begun to phase out inspection of
processed fruit and vegetables except where a requirement is
imposed by the target market.
I would add that business has had a major-input into the
work of the Business Regulation Review Unit. Business was
consulted in the drawing up of the priorities for the Unit.
But, in addition, two people have been seconded by business
groups to assist the BRRU. The Head of the Unit, Alan
Moran, tells me tlat the work of these secondees has been
invaluable and productive.
The last of the secondees will return shortly to his parent
company and we have invited business groups to nominate four
replacements. I cannot stress too heavily how important it
is for the BRRU to gain the services of suitably qualified
and experienced people with a business background.
If the BRRU is to play the role the Government hopes for it,
the Unit needs to be sensitive and responsive to the needs
of business as well as the wider community interest. It is
for this reason that I urge business leaders here today to
consider seriously making quality people available to the
Unit on a temporary basis.
measures to improve the internal workings of our economy
have been complemented by initiatives directly to improve
Australia's ability to market goods overseas. These include
the formation of Austrade and action at
government-to-government level to secure Australia's access
to key markets. In my Address to the Nation last June, I
announced a number of further measures in this area,
including the launch of a national export drive and
initiatives to assist small exporters.
But I can now say that the Government has taken further
substantial steps to make it easier for Australian firms to
meet world competition.
The first concerns international marine insurance. In
1984-85 premiums totalling about $ 800m were paid in respect
of such business originating in Australia but only some
per cent of this was written by Australia-based insurers.
Stamp duty on international marine insurance contracts
varies from State to State but invariably is substantially
in excess of the world norm.
The Government considers this to be an unnecessary
impediment to the sale of insurance services by Australian
insurers. Accordingly the Commonwealth has decided to
remove duty on contracts written in the ACT as soon as
possible but no later than end December.
I have written to State Premiers and the Chief minister of
the N. T. advising them of the Commonwealth's decision and
requesting their co-operation in removing the duty
Australia-wide.
The second set of new measures I am announcing today
concerns export controls.
You may recall that in my address to your Annual General
Meeting last year I said that the Government would relax or
abolish or simplj-; , export controls wherever they no longer
serve legitimate-ends or they involve excessive costs.
The Government has now decided to relax substantially
controls on the export of crude oil and a range of minerals.
In the case of crude oil surplus to domestic needs, prior
approval of export prices no longer will be required. But
prices will continue to be monitored to prevent avoidance of
excise revenue.
The requirement to obtain prior approval of negotiating
parameters for coal export sales has been removed. In
future, companies will only be required to seek approval of
final settlements. Export approval will be given except
where it would be against the national interest to do so.
There will be early consultations with the Australian Coal
Consultative Council to determine the basis for the exercise
of this reserve power.
Following de'Cailed consultations with industry initiated
after my address to your last Annual General Meeting, we
have also removed the requirement on exporters of bauxite
and-alumina to obtain approval for their negotiating
proposals. Henceforth transactions between unrelated parties, which
account for 60 per cent of these exports, usually will be
approved. The new arrangements also provide scope for
simpler procedures in the case of transactions between
related parties, which raise questions of transfer pricing
and the associated scope for tax avoidance.
Export controls on tungsten are to be terminated. This
brings tungsten into line with tin, as these controls were
lifted in July.
Further deta'. ls of thesemeasures are being announced
concurrently by the Acting Minister for Trade and the
Minister for Resources and Energy.
Taken together these steps represent a considerable easing
of the regulatory burden affecting more than a quarter of
total exports in 1985-86. They will give Australian mineral
exporters much greater scope to respond flexibly to market
opportunities as they arise a capacity which is so
important in today's tough minerals markets.
Uranium apart for which our position is clear and where we
properly apply the most stringent safeguards in the world to
ensure uranium cannot be diverted from peaceful purposes
the Government will continue to review the remaining areas
of export control to see whether they are still justified or
could be made less burdensome. C.
This task will be carried forward as part of the work of a
special Sub-Committee of Cabinet which was formed ( last
night) to consider a number of specific areas in which
action could be taken to reduce impediments to trade
competitiveness.. The Sub-Commrittee, to be headed by the minister for
Industry, Technology and Commerce, Senator Button, has been
charged to examine and report to Cabinet on a number of
specific reviews commissioned by Cabinet. Ministers have
been requested to bring relevant papers and their
recommendations to the Sub-Committee against defined
deadlines, mostly staggered over the next few months.
As well as the remaining export controls, papers relate to a
number of issues including, for example, policy in respect
of visa free entry of tourists and other short term visitors
arnd a number of studies which are underway concerning
transport and handling procedures.
The formation of the Sub-Committee will enable proposals for
change to be considered in an integrated and co-ordinated
way but with the degree of urgency which our difficult
trading conditions now require.
of course the major impediment to exports in 1983 was the
manifest uncompetitiveness of our economy.
Real wages were too high. The exchange rate was too high.
Today the story is very much different. Despite economic
growth averaging about 4-5 per cent per annum, real wages
have declined by 4 to 5 pei~ cent over the past three years.
The significance of this point cannot be overstated. Since
1949-50 there have been five occasions on which a year of
weak economic growth has been followed by at least three
years of strong economic growth.
Apart from the period 1983 to 1986, in none of these cases
did real wages decline over the period. The lowest
comparable outcome was a rise of 1.5 per cent in the three
years following 1977-78. In all other cases real wage
growth has exceeded 6.7 per cent.
Those who would decry the value of the Accord to the
Australian economy would do well to heed those facts.
Returning to the present, restraint in unit labour costs,
combined with the 36 per cent decline in the value of the
currency since 1983, has produced a profound improvement in
the competitiveness of Australian manufacturing. Indeed
Australia has not been as competitive for at least two
decades.
By far the largest element in that improvement has been
depreciation. while necessary to rid us of the encumbrances
of the past, however, we cannot rely on on-going real
depreciation to preserve our competitive edge.
The only effective way for us to retain our competitive edge
permanently is to take our destiny in our own hands, work
harder and more effectively, and maintain firm wages
restraint for as long as it takes a course to which my
Government is resolutely committed.
What we require in Australia at the moment is nothing more
nor less than a thorough reshaping of our attitudes to work,
to costs control and reasonable price-setting, to innovation
and to risk taking. And that means not just exploiting our
export competitiveness, but also our competitiveness against
imports. That reference to impcrt substitution may strike some ears
as sounding odd against a general policy thrust to
internationalise Australia's economy. But, of course, it is
perfectly consistent with that thrust.
What is different now as compared with earlier periods of
substantial import substitution is that it will take place
not because we have hidden manufacturing away behind a
higher wall of protection but because our relative costs are
now such that we can compete. In fact the trend under this
Government has been and will remain to reduce
protection. Investment in additional productive capacity will, of
course, be a critical element in Australia's ability to take
advantage of our newfound competitiveness.
For that reason it is particularly pleasing to note that new
manufacturing investment in 1985-86 rose by 40 per cent in
nominal terms, which by any stretch of the imagination also
implies a substantial real increase and possibly as much
as twice the 10 per cent real increase of 1984-85.
Similarly it is pleasing to note that tourism-related
activity has been well to the fore in the 40 per cent real
increase in non-residential construction which has occurred
in the past two years.
Nevertheless it remains true that the share in GDP of
business investment overall has been low in recent years
compared with the average experience of the 1970' s and
1980' s. And moreover, it is obvious that increased
investment would be a powerful vehicle for increased
productivity.
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The Government is looking to the business sector for a far
sighted appreciation of the fundamental change in
Australia's economic circumstances over the past three
years. while recognising that profitability varies as
between firms and industries, it is nonetheless true that
the profit share is now the best that it has been since the
late 60' s and early 70' s. And the opportunities for
business to invest in profitable export-oriented and import
replacing activity rarely have been better.
one of the least appreciated developments of recent years is
the recognition that investment by Australian companies
overseas can also be a spur to Australian exports. A recent
survey by CEDA of major Australian exporters to the ASEAN
region highlights the necessity for exporting firms to
develop an adequate marketing and distribution presence in
target markets overseas. 0
I am aware of some cases in which Australian exporters with
a substantial permanent presence overseas offer assistance
to smaller exporters of complementary products. The benefit
to the smaller exporter is the ability to tap into existing
expertise and facilities to promote their products, to the
mutual benefit of both companies.
I can only applaud such " piggy back" arrangements. I have
asked Austrade to establish a register of companies willing
to assist smaller enterprises in this way and to stand ready
to put potential partners in touch with each other.
increased productivity, combined with wage moderation
consistent with our straitened economic circumstances, is
essential if we are to trade our way out of our current
difficulti~ es. And that response cannot be a short-lived
one. A permanent improvement in our competitiveness cannot
occur without a permanent improvement in the quality and
productiveness of our work.
I have been drawing attention for some time now to the need
for management and labour to work together more effectively
and more efficiently.
And, indeed, many business people have told me their
particular stories of how unions and management have worked
quickly arnd co-operatively over recent years to review
thoroughly the way work is organised. In each case the
objectives have been improved quality, greater flexibility,
improved productivity and sustained growth of sales.
But in view of the rapid deterioration in our terms of
trade, which is now slicing $ 6 billion from our national
income, our pressing need is to speed up the
internationalisation of the Australian economy. This has
given a new urgency to the task of workplace reform.
we simply can no longer afford to retain many of the work
and management practices which grew up or were agreed to in
earlier periods, when trading conditions were less
demanding. Our competitors produce high quality products, on time and
within budget. We must learn to do the same.
I have spoken, over the past few weeks, to representatives
of both business and unions, to highlight the Government's
concern that workplace reforms should now receive greater
priority. The response has been very heartening.
Representatixves of BCA, CAI and the ACTU have agreed to
participate at a meeting which I will convene in Melbourne
on Wednesday, 24 September.
The parties have agreed to meet with one very clear
objective. This will be no talk fest. The parties agree
that reform is~ both necessary and urgent and moreover that
they do not need to waste time telling each other so.
Rather the o.' jective of that meeting will be to discuss
practical wa3ys to give added impetus to this task of
boosting productivity. All aspects will be on the table
all aspects of work and management practices within the
overall context of seeking to achieve the optimum invostment
and productive strategy calculated to meet the economic
challenge facing our country.
The role of Government initially will be limited to
convening the meeting. Once that is done we will withdraw
to allow the parties to ddress the questions which only
they can resolve.
The Government of course will stand ready subsequently to
provide whatever further assistance the parties themselves
may consider necessary.
The meeting next week, being a meeting of peak councils,
cannot resolve issues which require a detailed knowledge of
particular industries, enterprises or, in some cases,
plants. However I look to the meeting next week to face squarely how
to encourage the most productive dialogue between those best
able to effect change.
I call upon all parties to approach this task with energy
and foresight. A little vision and a large measure of
co-operative leadership at this stage can set Australia
firmly on the course of sustained economic growth in the
challenging new environment now confronting us.
The meeting next week will, of course, be only the very
start of what must of necessity be a painstaking process.
But it is a very necessary first step.
To succeed there must be others in unions, in firms, in
industries prepared to take up the challenge and carry
forward the impetus to co-operative change and reform.
I have every confidence in the capacity of ordinary
Australians, when confronted with the facts, to respond
constructively. Ladies and gentlemen
The measures I have announced today will, I believe, be
welcomed responsibly by the business community. That sense
of responsibility derives from our shared knowledge that the
private sector provides seventy five per cent of employment
in Australia.
A healthy, competitive private sector means more jobs and
more secure jobs. And that sense of responsibility means
equally, I believe, an understanding by the business
community of its obligation to respond positively and
co-operatively in its investment and management strategies
to maximise the opportunities for growth and employment.
Australia is facing a crucial time in its history. The task
is large but it is by no means insurmountable. moreover the
instruments to deal with it are to hand.
These instruments are as pervasive as they are powerful.
They include:
A massive real depreciation of the order of 30 per
cent since end 1984;
A Budget to support adjustment in the current account
but also, as sentiment improves, to permit lower
interest rates;
An approach to wages policy which will produce real
wages outcc. nes consistent with our new circumstances;
Government measures both longstanding and recent to
promote adjustment and to internationalise Australian
primary, secondary and service industries; and
most of all, the determination and co-operation of the
Australian people.
Together this is an unbeatable combination.