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PRIME MINISTER
EMBARGOED UNTIL DELIVERY CHECK AGAINST DELIVERY
BUSINESS COUNCIL OF AUSTRALIA
CANBERRA 29 APRIL 1987
Sir Roderick Carnegie
Ladies and gentlemen
It is a more than usual pleasure to be with you tonight.
You can imagine it has been a rather entertaining couple of
days in Parliament, observing from hour to hour an
ever-changing opposition line up.
But I have to state honestly as Prime Minister of a country
which still faces a serious economic challenge that the
chronic shortcomings of the Opposition are disturbing.
Their basic failure has been an incapacity to develop
workable and relevant economic policies.
That failure must be of particular concern to the business
community which along with the rest of the country,. is
incapable of getting answers to their legitimate questions
about where the alternative Government stands on the
absolutely central issues in the national economic debate
such as taxes, spending cuts and industrial relations.
That opposition policy vacuum makes it all the more
important that groups like the BCA continue their articulate
and constructive involvement in national policy making.
Let me commend you in particular for the part you have
played in encouraging the review of out-dated work practices
and in opening channels of communication with universities.
We have recently received your important submission to the
Government on the Budget and your report on enterprise-based
wages negotiation. I want to make some specific comments
about those reports later.
First let me make the general point that as Prime Minister I
appreciate your contribution and, even where we have not
been able to see eye to eye, I welcome your continued
involvement in the public arena.
And in saying that, let me reaffirm my commitment to the
process of consultation and cooperation which I believe is
one of the abiding hallmarks of my Government's approach.
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This process is based on my deeply held conviction that our
shared destiny will be enhanced if we are prepared to share
the work of getting there.
in 1987 that conviction is more, not less, relevant than
when we came to office in 1983.
Next month Paul Keating will be presenting to Parliament the
May Statement and, later, we will be hosting another
Premiers' Conference. We see both of these events as
absolutely crucial stages in the Government's overall
strategy of restructuring the economy and ensuring the
future prosperity of the Australian people.
The task of economic adjustment is far from over. Years of
sustained effort lie ahead if as a community we are to
create a kind of Australia that Australians deserve.
But that is not to say there has been no progress in the.
seven months since I last had the pleasure of-speaking
formally to the BCA. There has indeed been significant
progress and tonight I want briefly to review that progress
with you.
Let me begin with Australia's trading envi ronment.
This week we are witnessing another unedifying episode in
protectionism as the US and Japan argue over their market
for semi-conductors.
I do not wish tonight to take sides in the dispute, or to
overestimate the importance of this specific dispute to
Australia's trading prospects.
But I mention it as another disturbing symptom of the
spreading plague of protectionism.
Australians are already suffering enough from the failure of
the major agricultural producers to lift their crippling
restrictions on the trade of farm products.
I outlined a plan in Switzerland in January to bring about a
reduction in those protectionist excesses. That plan has
been well received.
And I have decided to send an all-party delegation of MiPs to
Washington next month to lobby the US Congress against its
next round of proposed protectionist legislation. Mr
Dawkins will be visiting Washington shortly afterwards to
take our concerns directly to the Administration and to the
Congress. So in that context the semi-conductors dispute between the
Us and Japan illustrates again the unwillingness of two of
the world's major trading nations to undertake the
structural reform they so urgently need.
Poised as we are on the Pacific rim region, the most dynamic
economic performer in the world, those opportunities are
gigantic.
Of particular pride to me personally is the strong bilateral
relationship we have developed with China. The importance
of the relationship can only grow as China's impressive
modernisation policies bear fruit in the decades to come
the more so if other countries resist the need to change.
The Government has also put considerable work into
developing bilateral ties with other countries within the
region that may emerge as major trading partners of the
future.
Many of the businesses represented here tonight have built
strong ties with the region. I applaud that and encourage
others to do so.
For many smaller companies, however, the task of exporting
must seem daunting.
The Government has in place a number of programs designed to
assist small exporters. In particular, Austrade can and
will provide assistance to those who wish to become involved
in this task.
I have asked Austrade to establish a register of companies
willing to help small exporters market complementary
products abroad.
Let me again invite you, as I have on previous occasions, to
look closely at your operations both to ensure you are not
missing export opportunities and also to see whether you
have the capacity to " give a leg up" to other Australian
companies who may be too small alone to tackle the challenge
of exporting.
Ladies and gentlemen,
There can be little doubt that the long and complex task of
restructuring is bearing fruit.
As we predicted in the last Budget, the slowing in the
economy then evident was short lived. The December quarter
saw a return to strong growth in Gross Domestic Product with
an increase of 1.1 per cent.
Latest estimates of the 1986-87 current account deficit are
of the order of $ 1 billion less than the Budget forecast of
$ 14 4billion.
Moreover net exports are expected to coptribute
substantially more to growth than the 14 percentage points
forecast at Budget time.
Particularly pleasing has been the strong performance of
manufacturing exports up 30 per cent so far this financial
year.
Without that reform the entire trading system, including
Australian traders, can only suffer.
The Japanese and the American Governments are both well
aware of our concerns on this issue. Only this afternoon I
received from the Japanese Prime Minister Mr Nakasone a
letter, written just before his departure for talks with
President Reagan, in which he expressed his Government's
commitment to address the issues seriously.
The 6.5% decline of the $ US on world currency markets
against the yen over the past month is a signal of the
extent of adjustment required.
The yen and the US dollar are both heavily weighted in
Australia's trade and financial transactions.
The weakness of the US currency has greatly reduced the
significance of movements of that currency as an indicator
of changes in the average value of the Australian dollar.
Greater attention needs to be focussed by markets, by
policy makers, by potential exporters on the trade
weighted value of our currency. The value of the SA
measured in TWI terms, although it has risen significantly
against the US dollar, is in fact little changed from its
level of a month ago.
On average these developments do not adversly affect
Australian producers though they do reduce the
profitability of those exporters who sell in markets quoted
in US dollars and who compete against producers in the
United States.
Both the United States and Japan seek greater currency
stability. But both parties will need to back that
sentiment with domestic policies macro-economic,
industrial and trade which are conducive to stability.
In the absence of those measures, the potential
trade-related dangers for Australia are considerable.
On one hand, the easiest way for Japan to meet US pressures
on market access would be to transfer existing market share
from less valued trading partners; and on the other, the
easiest way for the US to reduce imports is through
protectionist legislation.
Australians would suffer from both of these alternatives and
we will continue to resist them strongly.
As well as urging others to reduce protection this
Government has applied those lessons to our own domestic
institutions and attitudes as well.
That has created new pressures on Australia's businesses to
seek out and exploit new export markets and not just
pressures but opportunities as well.
Tourism has also stepped up markedly. The net foreign
deficit on travel has fallen 49 per cent.
The net services deficit, which covers freight and insurance
in addition to travel, has fallen by 21 per cent.
Weaker than forecast consumption growth a desirable
development in present circumstances has also greatly
assisted this turnaround in the current account.
Interpretation of the trend in the current account is likely
to become more difficult over coming months as the seasonal
increase in the deficit begins to inflate the monthly
statistics. But the underlying improvement in the current account is now
well established and is expected to continue in 1987-88.
AS for GDP growth overall, it appears likely to be rather
weaker for 1986-87 as a whole than we forecast at Budget
time, essentially because of the slower growth of
consumption.
Employment growth has however exceeded our expectations.
In the nine months to March employment has grown by 1.2 per
cent. This means a further 82,000 jobs, bringing the total
number of jobs created under my Government to 760,000.
More than any other statistic, the robustness of employment
growth this year demonstrates the underlying strength of the
economy and the success of the Government's economic
policies. But I don't want to weigh you down this evening with
statistics. The important point is what lies behind those
figures namely, a new and absolutely critical set of
attitudes which now pervades the nation.
There is a dramatically increasing awareness of the need to
export and, more generally, to make and market competitively
priced, quality products.
There is an awareness of the need for continued wage
restraint.
There is an awareness of the need to re-examine past ways of
doing things and an awareness of the need to address our
industrial issues constructively.
Through the Australian Made campaign, there is a growing
awareness of the need to support domestic rather than
imported goods though let me add there is still room for
more Australian companies to adopt the green and gold
kangaroo symbol to identify their products as
Australian-made.
Capitalising on these new attitudes is a task for all of us
business, government, trade unions and the wider
community. Nowhere is this more apparent than in the area of wage
setting and industrial relations and it is to that subject
to which I wish to turn now.
This is the area which the BCA addressed recently in its
report " Towards an Enterprise-Based Industrial Relations
System". I think we can all agree with your concluding comment that
" 1what we want is a better way of working for the benefit of
our industries, their employees and for all Australians".
Similarly, we are on broadly common ground in seeking
flexibility and cooperation to enhance efficiency at the
workplace and greater employee participation in the
workplace. However having said that I must register my disagreement
with your central long-term aspiration totally
enterprise-based agreements on wages.
Australian economic history teaches us that unregulated
bargaining would inject increased inflation into the economy
via a wages explosion and would massively erode the position
of those workers unable to bargain successfully.
The current system has, thank s to the generally magnificent
cooperation of the trade union movement, delivered wage*
outcomes whose macro-economic benefits I believe cannot be
questioned by anyone in this audience a 6% fall in real
unit labor costs over the last four years.
But committed as we are to that centralised system, we are
also determined to make whatever sensible reforms are
necessary to ensure it remains a relevant and useful element
of the national economy.
The Government will shortly be introducing into Parliament a
new Industrial Relations Bill based on the Hancock inquiry
which will contain a number of reforms to enhance the
centralised system.
In drafting these reforms, our approach has been one of
consultation and consensus the very style of approach we
wish to encourage and foster in industrial relations.
On the matter of sanctions, which I know to be of crucial
concern to the business community, I can assure you that the
new legislation will ensure the effective operation of the
industrial relations system, and will include appropriate
penalty provisions and means of redress.
After proper consideration of the Bill I am sure that
generally both unions and employers will recognise its
inherent good sense and equity.
A further example of the centralised system's capacity for
flexibility is provided by the new two-tier structure.
This structure effectively provides one of the goals urged
in your report bargaining over productivity issues at
industry or enterprise level while permitting aggregate
wage outcomes to be kept within responsible bounds.
It is the responsibility of all parties to ensure that the
system works properly to the maximum benefit of Australia.
It has therefore been a little disappointing recently to
observe that agreements have been reached which do not
comply with the principles laid down by the Commission.
The business sector cannot have it both ways.
Business cannot at once call on the Government to seek
modest wage outcomes while acquiescing in significantly
higher outcomes at plant level.
The Commonwealth will be opposing in the appropriate forums
any agreements which are inconsistent with the Commission's
principles. Firms which breach the wages principles can expect to have
the closest of scrutiny applied to them by the Prices
Surveillance Authority.
Ladies and gentlemen,
The Government is determined to preserve and build upon the
economic gains we have made so far.
We can confidently expect inflation to decline over the
course of the coming year or so, given continued wage
restraint and currency stability.
Interest rates have already begun to decline, partly in
anticipation of further responsible fiscal measures and
lower inflation and partly because of greater overseas
interest in $ A assets.
The Government is determined to preserve and build upon
these gains.
The forthcoming May Statement and Premiers' Conference will
be important building blocks in the Government's strategy.
I have said on a number of occasions now our approach will
be tough but we will not be abandoning our commitment to
fairness in expenditure restraint.
There will be significant cuts in our own outlays in the
Statement and we will adopt a similarly hard-headed approach
in the ensuing Premiers' Conference and Loan Council.
The BCA has recommended we achieve a Budget deficit of
to $ 2 billion in 1987-88.
It is still too early in the Budget cycle to have precise
estimates of revenue and, therefore, of the deficit which
will emerge.
But given our record there should be no doubt about the
Government's determination to provide a significant cut in
both the Budget deficit and the total Public Sector
Borrowing Requirement as a share of GDP.
In the May Statement, spending cuts will be spread across ' a
number of portfolios. Although the Commonwealth is looking
closely at its asset holdings to effect rationalisations
where prudent, the major focus of our attention is on
general recurrent outlays.
There will, for example, be further measures to weed out
welfare cheats and ensure that social security benefits go
only to those who are entitled to them.
A more wide ranging examination of welfare outlays has also
been necessary, producing some measures which, in earlier
times, may not have been contemplated.
But we will not be wielding the knife indiscriminately.
Instead we will be seeking, as we have sought in the past,
to implement durable, structural reforms which achieve
budget savings but which also bring about more effective and
fairer delivery of Government services.
The collapse in our terms of trade since the end of 1984 has
stripped some $ 9 billion dollars from our national economic
capacity. To distribute a loss of this magnitude equitably
and to maintain employment growth has been no easy task.
But we have faced this task with firm resolve and we are
succeeding.
The Government is getting the economic fundamentals right.
Private enterprise now must exercise its responsibilities.
Australia needs entrepreneurs with drive and new ideas to
create new products and new markets.
We need research and development, expenditure on which now
qualifies for an extremely generous tax deduction of 150 per
cent.
We need investment which has, indeed, already begun to pick
up, especially in manufacturing.
Over the next year several factors will create unprecedented
opportunities for investment to strengthen further. These
include:
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SA gradual easing in interest rates as the task of
adjustment is progressively removed from monetary
policy;
SA resumption of economic growth;
SA slowing in the rate of increase of prices of imported
investment goods; and
SA wider perception of the opportunities emerging for
Australia to expand into new export markets thanks to,
among other factors, the depreciation of the dollar.
So we enter the crucial next stage in our strategy of
reconstruction with some cautious optimism that the economic
future is brighter than the months and years we have just
passed through.
The worst is behind us.
As you are aware I decided earlier this month not to call an
early election.
The disarray among the Opposition parties provided an
enormous temptation to go to the voters early. It would
certainly have been a successful political move. But it
would also have been inconsistent with our long-term
strategy to improve the economy.
That strategy means we must take the hard decisions. We are
taking them.
It means we must act with fairness and compassion. We are
doing that.
Our strategy means we must govern for the future even at the
expense of some short-term flak for unpopular decisions
along the way. We are acting accordingly.
Our strategy, finally, means that we must together promote
the nation's best chances of prosperity. We most certainly
are doing that.
And we look for your continued assistance in this shared
task of reconstruction our task for today and,
importantly, our responsibility to future generations of
Australians.