PRIME MINISTER
CHECK AGAINST DELIVERY EMBARGOED UNTIL DELIVERY
SPEECH BY THE PRIME MINISTER
OPENING OF THE NATIONAL CONFERENCE OF THE
' GROUP OF 100'
SYDNEY 1 OCTOBER 1987
David Say
Ladies and Gentlemen-
The advent of the Group of 100 onto the national sce * ne is to
be welcomed by all who care for Australia's economic health.
The organisations which make up this Group be they
privately or publicly owned represent a major component of
the nation's economic activity.
So it is a pleasure to address and to open this first
national conference of the Group of 100. I look forward to
hearing of the results of your deliberations not only at
this conference but at future conferences.'
one of the hallmarks of my Government has been its
determination to seek the active contribution of all groups
in the community including business groups such as this
to the task of Government decision-making. We have never
believed that Government has a monopoly either of experience
or of wisdom.
As David Say, your President, said in his introductory
co ' mments, we must seek a -cooperative approach to the
resolution of the serious economic problems we face.
The virtue of such cooperation lies ultimately in its
recognition of the fact of our mutual dependence and this
is particularly true in an economy of relatively small size
like Australia.
I want to come later to the details of Australia's domestic
economic situation. Let me say at the outset however that
the successes we as a nation ' have so far enjoyed in meeting
the considerable economic challenges we face have been
attributable in no small measure to our recognition of our
interdependence and to our capacity to cooperate.
Through working together we have advanced the interests not
only of individual groups, but of the community as a whole. t U
The recognition of our mutual dependence is just as
important on the international scene.
I had the pleasure in January of delivering the keynote
address to the World Economic Forum at Davos. David Say, I
know, was among the audience. My message on that occasion
was that unless nations recognised their complete
interdependence they risked returning to the economic
insanities of the pre-1939 years with the added danger
that in the nuclear age the consequences of conflict would
be truly horrendous.
The debt crisis and the commodity price slump demonstrate
that the poverty or prosperity of individual nations are
questions that concern us all.
I told the audience at Davos that successful leadership
today required two closely related commitments. Though my
prescriptions were directly chiefly at governments they have
considerable relevance to the business sector.
First, Governments must show their willingness to
restructure their own economies, with the way being led by
the developed countries.
Second, Governments must be committed to the development of--
free and fair international trade.
Good domestic policy and good international policy are
inseparable.
The implications for business are also clear. Without the
cooperation of business, without its willingness to take
advantage of the opportunities which ' open trade and economic
reconstruction can bring, the best efforts of governments
will be ineffective.
I believe we in Australia are being successful in making the
appropriate domestic adjustments. Although this enormously
complex task is far from complete, we are already beginning
to achieve an improved economic performance.
our successful approach has also lent credibility to our
efforts in international forums to turn back the tide of
protectionism which threatens not only the trade in
agricultural products, in which we have an immediate stake,
but also the whole trading system on which the prosperity of
the world depends.
If I may refer once more to my Davos address, I said that
nations which seek to achieve domestic political goals
through distorting the international trading framework are
deluding and hurting themselves while they are also hurting
others. I will shortly be travelling overseas and I will make use of
the opportunity presented by this trip to reinforce this
basic argument in a number of forums. 4 &-1
3.
In San Diego I will be addressing the American-Australian
Chamber of Commerce on my concern about the prospect for
Australian exports in view of the growing protectionist
sentiment in the United States.
At the Commonwealth Heads of Government meeting in Vancouver
I will be discussing trade reform with Heads of Government
from a diverse range of Commonwealth countries, many of whom
share Australia's concern about the world trade system.
Indeed I have been asked to lead off the CliOGM debate on
world economic issues.
in Geneva, I will be addressing GATT members on the progress
of the agricultural protection initiative I launched at
Davos. Later in the year, ' at a valuable regional forum to which I
have been invited, I will discuss the future of Australia's
political and economic links, including trade, with the
crucial Pacific Rim economies.
In the US, at CHOGM, in Europe, and in our own region, our
message is consistent and it is forceful.
Restrictive and distorting trading practices those already
implemented and those in prospect ultimately serve 4
no-one's interests. All countries would gain from a move
towards fairer competition in international markets.
A good many of the impediments to fair trade have been
prompted by hasty and negative responses to bilateral
concerns. I will be stressing that a more positive and
beneficial response is available through multilateral
solutions to such problems.
Australia has consistently stressed and worked towards this
goal in the context of the new MTN round. We took a leading
role in establishing the Cairns Group as a new third force
in negotiations, which led at Punta del Este to agriculture
being put for the first time on the MTN agenda as a matter
of priority.
GATT is crucially concerned with questions of fair and open
world trade and has championed this cause throughout its
yearexistence. The shortcomings of the world trading
system today should not in my view be blamed on GATT.
Rather they have resulted from the selfish approach of some
of its members.
Australia is a smoll country and therefore has limited power
In the world economy. Forums such as those I will be
addressing provide us with great opportunities to put our
view on the need for reform of the world trading system, and
to marshal those forces with similar interests and
objectives. But I will be emphasising in these forums that multilateral
trade reform is not enough. Domestic economies must also be
restructured. 0( 01t)
4.
As far as Australia is concerned, the domestic economy has
seen a more fundamental reorientation over the last few
years than it has in any time since its emergence from the
Second World war.
Australia had been too complacent in the post-war period.
We relied on primary commodity exports, we protected an
inward looking and inefficient manufacturing base, and we
ignored the potential of our neighbours in the Western
Pacific Rim.
The fragility of such an approach was highlighted in 1985
and 1986 by the massive' collapse in our terms of trade.
A sustained effort is needed to reduce our reliance on the
production and export of primary commodities. The community
business, unions and the Government must work together
to reconstruct the Australian economy to take us in
prosperity to the end of the century and beyond.
This task must build on the strengths of the Australian
economy: our skilled workforce; our rich natural resource
base; our well developed infrastructure; our political
stability; and our proximity to the world's most dynamic
growth area, the Western Pacific Rim.
It has been to realise the full potential of these strengths
that my Government has directed its economic decision-making
since our election in March 1983.
We are steadily eliminating protection, encouraging
manufacturers to innovate and to compete on the world
market. We have striven to ensure,' with the cooperation of
the trade union movement, that unit labor costs move broadly
in line with those of our principal trading partners. We
are encouraging newer ways, smarter ways, cheaper ways, more
efficient ways, of earning our national income.
Just as important, we are also providing the broad
macro-economic framework which is necessary. In addition to
wages moderation it has been crucial to-deliver sustained
restraint in budgetary policy and appropriately tight
monetary policy.
We have sought to emulate private sector efficiency
improvements, streamlining the public service to parallel
more closely the performance of efficient private sector
bureaucracies. moreover we are looking closely at the
operations of our major public enterprises to see how their
performance can be improved.
Last May, the Treasurer delivered an Economic Statement
which contained the toughest expenditure cutting exercise in
years. This, and the tax reform policies which we
adopted in our second term, allowed us to all but balance
the Budget for 1987-88. 0 0 t 53 G
This is a substantial achievement. We have trimmed
$ 10,000 million from the prospective Budget deficit which we
inher -ited from our predecessors in just five Budgets. It
compares very favourably indeed with the recent fiscal
performance of other developed economies.
The broad Budget aggregates suggest a fiscal climate in the
years ahead which will complement the task of restructuring.
We have cut real outlays for the second year in a rowthe
first time this has been achieved in 35 years.
Decisions already taken-on recurrent outlays will
produce cuts next year which are at least as large as
this year.
Tax will be a significantly lower share of GDP this year
than last; andI
For the first time in 35 years the Commonwealth will
this year be retiring both domestic and overseas debt
each to the tune of about $ 1000 million.
I cannot stress enough that the Budget outcome is not a
one-off or chance occurrence. It is a further step along
the consistent path of responsible macro-economic management
that my Government has followed since March 1983. Largely
as a result, interest rates are beginning to fall.
For those of you who operate in the corporate environment
and face the disciplines of the market, our approach offers
further confirmation that the Government's macro-economic
policy is predictable and stable. This is one of the most
important contributions a Government can giake to the
economy, allowing business to plan investment decisions with
confidence. As a measure of the extent to which Australia is
successfully meeting the challenge of reconstruction, we are
now beginning to witness a turnaround in our current account
and trading performance. The current account deficit has
declined from 6 per cent of GDP in 1985-86 to 5 per cent
last year, and we expect a further fall to 4 per cent in
1987-88.
But to get a real impression of the adjustment which has
occurred already, one needs to look beyond these aggregates.
In 1984-85, Australia had a goods and services deficit in
constant prices of 2.6 per cent of GDP.* Last year we turned
that into a surplus of 2.4 per cent and this year we expect
this surplus to increase to 4 per cent.
Particularly gratifying is the large increase in
manufacturing exports, reflecting the improved
competitiveness of our manufacturing sector. 0 I 5-3 7
6.
This growth has been so strong that exports from the
manufacturing and tourism sectors now account for virtually
one quarter of exports, compared to only one fifth just one
year ago.
Although we have a long way to go to solve our external
problems, it is clear that we have turned the corner.
Ladies and gentlemen,
David Say was kind enough to give me advance notice of what
he had in mind to say in his introductory comments. Let me
at this point, David, take issue with one of your remarks in
your kind introduction.
You mentioned that Australia has two major disadvantagesthe
small size of its market and its remoteness from the
major markets of the US an'd Europe.
of course both of those descriptions are true. But they are
nothing like the impediments that they once were as so
many companies, especially as many of the smaller companies
which I have visited, are only too willing to attest.
The reality is that Australian manufacturing is now more
competitive abroad than it has been since at least 1973.
Even John Elliott has been moved to comment: " The ending of
a fixed exchange rate saw the dollar fall to a level where
tremendous opportunities have opened up in new
manufacturing."
At a time when freight rates are so sharply compressed, it
is hard to imagine a time when Australia has had a better
opportunity to break out of the confines of its small market
and take on the mass markets of Europe and the USA, where
our competitive gain has been particularly strong..
However, even that proposition bears further analysis
essentially because of its Atlantic-centred view of the
wo rl1d.
There has been a clear shift of economic power over recent
years towards the Pacific basin. if there is one statistic
which encapsulates that fact it is that in 1984, for the
first time, the value of trade across the Pacific exceeded
that across the Atlantic.
The countries of the Pacific Rim include the world's two
major economic powers the United States and what must
become an increasingly import-oriented Japan. They also
include one of the world's most rapidly growing and populous
countries China and an array of developing countries of
diverse size but grpwing economic strength.
Each of these countries is undergoing profound economic and,
in many cases, social change. They are changes which over
time can provide Australian business with outstanding
oppo . rtunities for trade and growth. 0( 0i)-~ 33
The Government is doing what it can to provide the right
environment for business at home, to encourage other nations
to speed up the necessary process of economic reconstruction
which they have to undertake, and to open previously
insulated economies to imports from Australia.
But in the end it will come down to the foresight and the
entrepreneurship of Australian business to determine how
well we perform.
It is clear that profitable opportunities will increasingly
become available for those bold enough to seek them out.
Yet it will require hard work to exploit those
opportunities. Specific projects have to be identified.
Distribution outlets have to be estab~ lished where none now
exist and a marketing strategy has to be developed and
promoted all of which require the investment of management
talent and financial resources.
The commitment required is not transitory and it needs to
involve the whole of the enterprise.
It will take time to build up trade in new areas and we will
have to learn to cope with the vagaries of floating exchange
rates and the other hazards of trading.
That is not just a task for management. It is one for
workers also. We simply have to be prepared to look at how
we do things now, to see what changes are necessary to meet
today's environment and to make those changes.
Moreover that is a task which we need to address constantly.
If we cannot remain adaptable we consign ourselves to the
class of the also-rans. I
Let me say that I beli eve that attitudes are changing and
that Australians have understood the message of the past
couple of years.
As I implied earlier I see it in the actions of medium and
small companies across the breadth of Australia who are now
exporting, perhaps for the first time, and who are
developing new products and new markets.
I see it in the quiet revolution taking place in the
attitudes of trade unions to training and retraining, to the
reform of work and management practices, and to the need for
continued wages moderation.
I see it in their willingness to acknowledge the need for
change and to work with management to achieve it.
I see it also in the willingness of companies to undertake
research and development, assisted by the most generous tax
concessions in the world. And I see it in the lift in
investment which has begun, especially investment for trade
related activities. 0 0) t -j 3
It. has been clear sinceour re-election on July 11 that
while we are not going to relax our efforts on the
macro-economic plane to restructure the economy we will be
concentrating closely in our third term of office on the
search for efficiencies in the micro-economy.
We have identified a full agenda of reform in a number of
areas, including transport and aviation; communications;
government-owned business enterprises; education and
training; and industry policy, including assistance,
taxation and regulation.
Let me say a little today about developments in the last, of
these areas, industry policy.
The next three years will see a continuation of Labor's
efforts to lower gradually the levels of industry
protection.
We cannot, as a nation, hope to be internationally
competitive if. we persist in insulating key industries from
import competition. Indeed, as I said at Davos, the overly
protective approach of the past is a primary cause of the
difficulties facing our manufacturing sector today.
The tax system clearly will play a vital role in the
restructuring process.
Tax reform, as you know, has been a major emphasis of the
Government. We need to be sure, however, that the corporate
tax system remains as efficient and as internationally
competitive as possible.
This is why we have begun a review to identify options to
cut the company tax rate through a sensible broadening of
the company income tax base. This is in line with similar
recent reforms in a number of major western economies
including the United States and Britain. our objective is
to ensure that Australian companies can compete on equal
terms.
At this early stage I obviously cannot comment in detail
about any specific changes. But I can assure you that any
tax changes which flow from the review will be fair,
fiscally responsible and aimed at increasing Australia's
intirnational competitiveness.
The Minister for Primary Industries and Energy, Mr Kerin,
has recently announced a comprehensive review of
Commonwealth assistance and development policy relating to
the resources, energy, agricultural, fisheries and forestry
industries. The review will reassess the direction and
nature of assistance measures, the degree of regulation and
disparities in the treatment of different industries. 001 I0
9.
one area of reform in which I am sure you are all interested
is business regulation. During our second term we
established mechanisms for reviewing regulations. The BRRU
has made a major contribution to this work and is achieving
results. of particular interest to this group, companies
and securities law is being reviewed in our third term of
office. Over recent years, business operations have changed greatly.
Activities are taking on a much more national and
international character and their associated financial
arrangements are becoming more complex.
The existing co-operative Companies and Securities Scheme
has had difficulty in meeting these challenges. The scheme
itself also has a number of inherent defects that must be
addressed. For these reasons the Government has authorised the
Attorney-General, Mr Bowen, to develop a Commonwealth
Companies and Securities Sch~ eme to replace the co-operative
scheme.
This scheme will be introduced only after full consultation
with interested parties. Such consultation is already
taking place through a Steering Committee set up by Mr
Bowen. The task of this committee is to advise on the
powers of the new Securities Commission and on any changes
needed in regulations.
Ladies and gentlemen
The past few years have highlighted the structural
weaknesses in the Australian economy and its vulnerability
and inflexibility in responding to external shocks. The
challenge of the next three years is to set about tackling
those weaknesses, through both domestic and international
policy tools.
At Davos, I emphasised that successful restructuring demands
a fundamental change in performance and attitude both
nationally and internationally. As such it is a task which
individual countries and governments cannot successfully
perform alone. We look to other nations, the business
community and the unions to work with us in meeting this
great national and international challenge. 0j 0) 15: i 4 _ 1