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Transcripts from the Prime Ministers of Australia

Transcript 7919

SPEECH BY THE PRIME MINISTER MICRO-ECONOMIC REFORM: THE FOURTH TERM AGENDA SYDNEY - 22 FEBRUARY 1990

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: 22/02/1990

Release Type: Speech

Transcript ID: 7919

PRM INSE
CHECK AGAINST DELIVERY EMBARGOED UNTIL DELIVERY
SPEECH BY THE PRIME MINISTER
MICRO-ECONOMIC REFORM: THE FOURTH TERM AGENDA
SYDNEY 22 FEBRUARY 1990
Last Friday, after I called upon the Governor-General to
recommend an election be held on 24 March, ' I outlined to the
media in Canberra the vital issues facing the Australian
people in this election campaign.
I said that the election will determine whether we continue
forward into the 1990' s, creating a fair society, an
efficient and productive economy and a healthy environment
for ourselves and our children or whether we turn the
clock back to the days of entrenched privilege, lost
opportunities and environmental degradation.
As the campaign progresses my Ministers and I will be
spelling out our practical and progressive plan to take
Australia through the 1990s and into the next century.
Yesterday, Paul Keating laid down the framework for Labor's
macro-economic policies a statement that demonstrated,
once again, Labor's capacity to achieve real improvements in
family living standards within a responsible and
fully-funded fiscal framework.
Labor wants a modern, growing economy, shaken out of the old
complacent dependence on commodity exports, re-equipped and
restructured in its attitudes, institutions and technology,
to be fully competitive in the world.
Fundamental to the achievement of this goal is the obtaining
of more from any given level of human or capital resources
through micro-economic reform.
As you know, Labor's achievements in micro-economic reform
have already been far-reaching. The Australian economy is
profoundly more efficient, less hamstrung more
competitive, less fettered than it was when we came to
office in 1983.
I am releasing a detailed list of our micro-reform
achievements to date so I will not detail them further
here.

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1 will simply make the point that Australia is now weil
placed to maximise the gains from these reforms. Professor
Rcss Garnaut, in his recent repor-t to me on Australia's
links with Northeast Asia wrote that, after misssing out on
earlier opportunities up until the early 1980s:
" Australia's advantages this time are a wider community
perception of the magnitude and complexity of the task,
and a recent record of solid achievement on policy
change in the directions that are necessary for
long-term success. A start has been made on reform in
most of the areas where change is necessary."
So I want to outline today ten central elements of Labor's
fourth term micro-economic policy agenda.
I apologise in advance if the detail is somewhat technical.
But I want it very clearly understood from the outset of
this campaign, that Labor's plans comprehensively dominate
the debate about micro-economic reform in the 1990s.
Ours is an ambitious but achievable agenda that covers ten
areas of critical importance to Australia's economic future
ten areas where Labor has both the plans and the means for
further reform.
1. Aviation
The most significant impediments to growth in Australia's
tourism industry are the regulations limiting aviation.
That is the clear conclusion of both the Industries
Commission and the Garnaut Report.
We will continue to remove those impediments.
From November, new airlines will be able to compete on major
routes for the first time. Already, at least two operators
have foreshadowed genuine competition to the existing
airlines.
My Government has ensured gateway access at major terminals
for new entrants by negotiating terminal leases. The
Federal Airports Corporation, the operator of our airport
facilities, is discussing with airlines the establishment of
common user facilities.
Where essential facilities would otherwise remain
undeveloped, we will accept, as Ross Garnaut recommended,
private development of airport or terminal facilities.
We are conducting a joint study of a single aviation market
between Australia and New Zealand. It's appropriate to
accelerate our consideration of trade in services, including
the current exclusion of aviation from the Closer Economic
Relations Agreement between Australia and New Zealand.

This naturally leads to the questions of domestic rights for
Qantas and Air New Zealand, international aviation rights
for domestic operators and the fu. ture possible links between
Qantas and Australian Airlines. Professor Garnaut has
highlighted the potential gains and we will carefully
examine all the options.
We are also looking at the feasibility of a new
international air freight operator. Proposals from a number
of operators are before the Government.
As our crucial decision to build the Third Runway at
Kingsford Smith Airport shows, we have the commitment to
take the tough decisions in this area.
The third runway cannot, however, be built for some years.
We will implement a system to allocate landing slots in peak
periods following receipt of a traffic management review in
the next few months.
TPIecommuninatipnn~
For Australia in particular, our isolation and size demand
that we are able to communicate efficiently. Australian
business must have access to the most recent technology. We
must achieve better services through greater competition.
AUSTEL our new telecommunications watch-dog is reviewing
the use of private networks. My Government will use this
report to open the way to effective sharing of private
networks between different corporations, without threatening
Telecom's basic system.
Further reviews by AUSTEL are being undertaken in the area
of mobile communications cellular mobile telephone systems
and cordless remote systems. Mobiles are a phenomenal
growth area look in any restaurant or city street and we
will be working towards increasing consumer choice in this
area. Also on my Government's fourth term agenda will be
consideration of AUSTEL's review of Telecom's first phone
monopoly which will expire on 1 July 1991.
And we are also examining the inter-relationship of the
three public telecommunications operators with a view to
achieving maximum efficiency. This will be in effect the
first review of the total structure of telecommunications in
many years, and can only lead to further improvement.
3. Tnduntry PolIcjy
Labor aims for nothing less than a fully competitive,
internationally oriented, manufacturing sector.
From 1972 through to 1992 the average level of protection
will have fallen by over 60% all achieved by Labor
Governments.

Professor Garnaut has recommended the complete removal of
all tariffs by the year 2000. T1his recommendation will
receive our very close assessment early in our fourth term,
as I indicated when launching Ross Garnaut's report last
November. Under our existing policy approach, protection will decline
significantly beyond 1992, and such declines will accompany
broader policy moves to improve the business environment and
the competitiveness of our industries.
Consistent with this, the new Industry Commission will
handle a vast range of related references over our fourth
term covering: the contruction costs for major projects, the
commercial tariff concession and by-law systems, export
franchising, availability of capital, statutory marketing
arrangements and raw material pricing for domestic use.
In addition the Industry Commission will review the
passenger motor vehicle, dairy and sugar industries.
4. Shippinn
We will promote internationally competitive shipping over
our fourth term.
Our international shipping reforms in 1988 have received
universal approval and even the Coalition has dropped this
area f rom its agenda.
On coastal shipping, we will implement the recently revised
guidelines allowing foreign flag ships to engage in
Australian trade where domestic services are inadequate.
The success of this change will be vital for the future of
new resource based projects.
The incentives we have provided to overhaul this industry
are a precondition for pragmatic change which allows.
competition but retains jobs.
Under our reforms new vessels are being rapidly introduced,
half of which are net additions to the fleet. ANL has been
returned to profitability. OECD standard manning levels
have been achieved, without strikes, on more than a third of
the fleet, and we will ensure that, by 1992, the rest of the
fleet achieves this goal.
This " revolution" will be strike-free.
BHP has shown the way. It profitably operates Australian
crewed vessels on triangulated runs internationally and on
the coast.
We will be discussing with New Zealand means of lifting
union bans on foreign vessels on the Tasman. These
discussions need to involve unions from both countries and
to focus on freeing up specific trades.

The Waterfropnt
On the waterfront, we will achieve a more than 20% increase
in productivity in our fourth term through: redundancies for
3000 waterside workers; 1000 new and more skilled
employees; transition to enterprise employment; training
and multi-skilling of the workforce; and removal of outmoded
management and work-practices. These are reforms unmatched
since containerisation.
We are concerned about the lack of competition on the
waterfront. We have already increased the resources of the
Trade Practices Commission to allow them to investigate
restrictive practices on the waterfront. We will now ask
the TPC to report on any other activities which restrict
competition or inhibit efficiency.
Stevedoring costs will be further decreased during our
fourth term by the replacement of antiquated paper
transactions with electronic data interchange.
This development, which will flow into road, rail and air
cargo transport, stems directly from our waterfront reforms.
It will lower costs by up to $ 200 million per annum.
It will also improve timeliness and reliability of cargo
movement. These reforms will lift waterfront productivity. They will
Justify the taxpayers' investment. Our next term will prove
that. 6. Fl~ ntrinity Qenpratin
One of the main impediments to export-oriented processing
industries is the inefficiency of electricity generation.
Again, Professor Garnaut cited these industries as offering
great scope for improved exports.
My Government has asked the Industry Commission to review
electricity generation and distribution.
The Commission's report will hand my Government, and the
public, a powerful weapon with which to combat resistance to
reform from State and other interests.
Particularly, we will examine the private provision of
electricity to industry, as recommended by Garnaut, with
surplus or shortfall capacity able to be sold to or bought
from the grid.
7. Raiways
Increased rail efficiency will, for local firms, increase
the effective size of Australia's domestic market.

And it will relieve pressures on the roads.
As with electricity generation, we have asked the Industry
Commission to review the efficiency of Australian railways.
And as with electricity, we will use whatever powers are at
our disposal to see that sensible recommendations are
implemented.
We will not wait for the Industries Commission report,
however, before finalising our current feasibility study on
a national freight carrier one integrated entity to move
freight door to door across State boundaries.
Export of Sprvines
Australia stands to earn substantial additional income from
the export of services especially to our dynamic
Asia/ Pacific region.
In health, education, the law and tourism, Australia offers
attractive services that will be in increasing demand in the
19903.
Austrade has identified $ 150 million a year in earnings in
health in the early 1990s; we are earning $ 100 million a
year in the export of legal services; education is already
earning some $ 200 million a year.
We intend sending early references to the Industry
Commission on impediments to the export of both health and
education services.
Austrade will move increasingly into these service export
areas, including the export of legal services.
9. International Trade
Australia needs a competitive and fair international trading
environment in which to participate.
And this is one of the starkest differences between us and
the Coalition.
Andrew Peacock's flirtation with an Asia-Pacific trading
bloc is extremely dangerous.
Imagine if he were able to pursue this option.
In the next few months, Australia becomes known again as
a protectionist nation. The. Cairns Group then collapses.
Later this year, when the hard bargaining of the Uruguary
Round commences, Australia has no voice.

Just comprehend the mindless irrelevancy the Opposition.
This Parliamentary Leader, Peacock, calls for the
creation of a trading bloc anid then his office said he
didn't understand what a trading bloc is. The Federal
Liberal Party President, Mr Elliot, says w. e should join the
European Community and his office, together with everyone
else in the country, gives a collective horselaugh. And
these people want to run our country!
The alternative, under our approach, is to see the Cairns
Group retaining its very substantial clout. With the
successful launching of the Asia-Pacific Economic
Co-operation initiative, too, Australia is well-placed to
put the case for reductions in international protection and
improved overseas market opportunities. We will pursue
these opportunities with vigour.
Rdunation and the Labor market
Continuing education and labour market reforms are vital
parts of the Government's fourth term agenda.
I will be talking further on education later in the
campaign, and Paul Keating's statement yesterday went to
labour market reform.
An element of Paul's statement that deserves special
attention is the restructuring of assistance for the
unemployed. This is far-reaching micro-reform.
Indeed, it constitutes possibly the most important labour
market reform since Federation.
Many developed economies such as the United Kingdom and
the USA have spawned a permanent underclass-of people for
whom jobs, decent housing and relevant training are
unattainable. With these reforms, we seek to ensure that in
Australia, human resources are not wasted, and human
aspirations can be fulfilled.
This reform is the culmination of our consistent increasing
emphasis on training for employment rather than fostering
the dole mentality. It is the antithesis of the Opposition
approach which simply wants to replace the social safety net
with a social trap door let the unfortunate fall through
and forget them.
Ladies and Gentlemen.
Institutions and attitudes can't be changed overnight.
Results can never be immediate.
Public debate will be dominated by the vocal complaints of
the minority who are adversely affected, rather than by the
vast majority of consumers and taxpayers who are
incrementally advantaged.

This underlines the need for creative thought, proper
consulta!-ion and a willingness to ease the burdens on those
facing change. It also shows that, at times, a Government
needs to stand firm against those groups who, for short-term
or selfish reasons, threaten to upset the gains that can be
made by the community as a whole.
I've shown today Labor's credentials for this task. We have
the energy and determination to develop a workable agenda
for change. We have mastered the skills of consultation.
And we have also shown we will stand firm where we have to.
Our political opponents understand none of this -and yet
they repudiate all of it.
For them, consultation is a waste of time.
For them, standing firm involves too a high price they
would just cave-in, as they would have done with the pilots,
whose irrelevant Federation is, understandably, now pumping
for the opposition in this election.
For the Opposition, productivity is an empty buzz word.
They know it is something good, but they haven't the
faintest notion of what to do if they were elected.
The Opposition Leader insults our intelligence by saying
that his immediate implementation of a micro reform program
will lower interest rates.
This is absurd, for at least three reasons.
First, markets will want to see improvements, not accept
promises. Indeed, the markets know that Opposition to change can
temporarily make things worse.
Second, the performance response to micro reform is never
fast, as I have said.
And often we must await new projects or new capacity to see
the largest benefits: for example, from changes in coastal
shipping.
Michael Stutchbury said in yesterday's Financial Review that
avoid the severe short-term indigestion costs of
labour market deregulation, the productivity pay-off can
only come slowly. And this means that Mr Peacock's promises
of big and quick interest rate falls are baloney".
Third, the Liberals' policies, when you look at them, go
nowhere.

Look at their promise to introduce company-based employment
on th~ e waterfront, and n'ot pay money without genuine change.
This is a shorthand description of Labor policies that are
already being implemented.
In coastal shipping they'll introduce foreign competition.
Full stop. No adjustment package, no consultation. What do
they expect the coastal shippers' response to be?
Mr Peacock probably hasn't thought about it. But badly
handled and you know the Liberal's IR record such moves
could easily close Australia's sea transport for months.
Labor will achieve OECD manning limits, and the use of
foreign vessels via continuous voyage permits. We had some
heated discussion, but no industrial disruption.
The Coalition will cut tariffs, they say. Well, they never
have before. Only Labor has.
The ultimate irony for those subjected to the Opposition's
new-found enthusiasm for micro-reform is that much of the
legacy of inefficiency that Labor is erasing today dates
from the days of Liberal rule.
It was the Liberals who established the two airlines
agreement and the system of waterfront pooling.
Today they have found voice to decry such inef ficiencies
and to damn us for our slow pace of reform!
Late last year, when I was speaking at the National Press
Club, I summarised my Government's achievements in microreform
and I issued a very specific and pointed challenge.
I challenged anyone to find a period in Australia's history
that had seen an achievement of micro-reform that came
within a bull's roar of ours.
That was on 7 December 77 days ago.
The response to my challenge from the Opposition, those
faint-hearted champions of productivity, has been total
silence. That silence speaks more eloquently than words; it virtually
shouts from the rooftops; it declares that when it comes to
micro-economic reform, Labor in the 1980s set an
unparalleled pace of reform.
My first challenge has gone unanswered. So let me issue
another today.
Now that I have announced Labor's agenda for reform in the
1990s, let the Opposition reply.

Let them show how they would match the rapid pace of reform
we will set and to do so without sacrificing the jobs of
thousands of Australians and without wrecking the successful
integration of Australian industry into a competitive
international environment.
Labor set the pace for micro-reform in the 1980s.
And it will be Labor in the 1990s who will maintain that
pace. Not glib promises, not the slick phrase but real,
determined, well thought out action to take Australia fully,
competitively, into the vigorous and highly lucrative
international economy.

MICROECONOMIC REFORM UNDER LABOR
1. General Tariff Reform
With the exception of the two industries described
below and a small number of rates that would otherwise
have become anomalous, all tariffs above 15% are being
reduced to 15%, and those tariffs between 10% and
are being reduced to 10%, all over 4 years to July
1992. The general revenue duty of 2% was abolished at a
cost of S240m.
2. Motor Vehicle Tariff Reform
Tariff quotas on motor vehicles were removed and
tariffs are to be reduced from 57h% to 35% by January
1992.
3. Textiles: Clothing and Footwear Protection Reform
Quotas are to be phased out by 1 July 1995 to leave
tariff-only protection.
4. May 1988 Agricultural Reformr
Assistance to sugar, dried vine fruit, tobacco and
citrus industries was converted to tariff and subject
to the same reductions as applied to manufacturing
industry and some domestic administered price
arrangements were liberalised ( eg. dairy). Removal of
fertiliser subsidy.
Foreign Exchange Market
The $ A has been floated and the major part of existing
exchange controls have been abolished. The Government
authorised 40 companies to deal on the foreign exchange
market, thereby broadening that market from its
dominance by the major banks.
6. Banking Sector
All maturity controls on bank deposits have been
removed, thereby enabling banks to compete in the short
term money market. Following consideration of 42
applications, 16 partly or wholly foreign based
applicants were invited to establish banking operations
in Australia. The interest rates ceilings on bank loans
under $ 100,000 has been removed; the ceiling on bank
home loans has been removed; the distinction between
trading and savings banks has been removed; and the SRD
requirement has been replaced with a non-callable
deposit ( NCD) requirement.

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7. Non-Bank Sprrnr
The " 30/ 20 rule" ( which allowed tax concessizns life
offices and super funds provided they held at least
of assets in public securities and at least 20% in CGS)
has been abolished. On 1 July 1987, the Cheques
Payments Orders Act came into operation enabling nonbank
financial institutions ( MEFIs) to issue chequelike
instruments called payment orders and thereby
compete better with banks in the demand deposit market.
8. Daea~ ulatinn of Forpign Tnvastmpnt
Most investments are approved unless judged contrary to
the national interest. As a further step, the Treasurer
in January 1988 announced changes to the foreign
investment guidelines as they apply to oil and gas
projects over $ 10 million. Today, all proposals in the
oils and gas sector are approved unless judged
contrary.
9. TArmin tInn of the Two Airline AnrApment
Present regulation limits competition on trunk routes
between 18 Australian cities to two airlines. Prices
are set by a Tribunal. On termination of these
arrangements at the earliest practical date ( October
1990), all routes will be thrown open to competition,
prices will be set by the market, and new entrants will
be guaranteed gates at all major airports. Also " user
paysm pricing for use of airport facilities will allow
the Federal Airports Corporation to respond quickly to
industry needs for new facilities. At least two new
entrants are at an advanced stage of planning for major
trunk operations.
Intarnational Passenger rhartpr Policy
Charter flights for tourists have been broadly
deregulated. Programs of charters are now strongly
encouraged and previous restrictions designed to
protect scheduled carriers have been reduced to the
minimum consistent with Air Service Agreement
obligations. Canberra, Perth and Cairns have as a
result received the benefit of major new tourist flight
programs.

2.1. internritnnal Air r':
Both charter and scheduled capacity have been strcngly
encouraged through virtual deregulation in the case of
the former and positive negotiating stances in the case
of the latter. Charter flights have increased from 167
to 956 over the life of the Government. Scheduled
capacity is up from 85,000 tonnes outbound to 166,000
tonnes.
12. Grain HandlinagpRform
Recommended reforms were estimated to produce cost
savings of up to $ 10 per tonne ( more than $ 100 million
a year in total). Whilst the Commonwealth legislated to
implement those recommendations which fell within its
responsibility, action at the State level was
disappointing. In view of this, the Government decided
to use Commonwealth powers over export and interstate
trade to include in new wheat marketing legislation
provisions to regulate to exempt the AWE and other
grain trading corporations from restrictive State
legislation in the areas of grain storage, handling and
transport and the marketing of wheat.
13. TP1lerommunicating Reform Pankage-of May 1988
Allows effective competition in the provision of
customer premises equipment ( eg PAEX), value-added
services ( eg answering machines) and other
telecommunications services ( eg phone maintenance,
installation of second and subsequent phones) through
regulatory changes and the establishment of AUSTEL.
This independent body will subsume Telecom's regulatory
functions, so allowing effective competition.
14. Company Tax Rpform
The corporate tax rate, in one step, has been cut from
49 per cent to 39 per cent. This built upon earlier
reforms, which abolished the double taxation of
dividends through introduction of the imputation
system, and was accompanied by major reforms to the
company tax base to remove tax distortions.
Depreciation provisions were brought into line with the
economic life of assets, removing 5/ 3 year depreciation
provisions which distorted decision making. Likewise
concessions, favouring particular industries such as
gold mining, agriculture, life offices and other groups
were removed.

Reform of Goverremn Musines EntP-rirses ( GBEs)
Over 40 longstanding controls have : een removed frcm
nearly all GBEs, allowing them, fcr example, to enter
into contracts without Ministerial approval; exempting
GBEs from processes under the Public Works Committee
Act 1969; extending their ability to invest surplus
monies and enter loan contracts without Government
approval; providing to boards the right to dismiss a
Chief Executive; removing many public service staffing
and administrative practices; and allowing GBEs to
establish their own superannuation schemes.
16. The Tndustrial Relations Act 1988
Places special emphasis on settling disputes at the
workplace level, provides scope for greater flexibility
with respect to working arrangements and remuneration,
requires unions to increase membership to at least 1000
and facilitates union amalgamation.
17. Award Restructuring
This offers the prospect of substantial workplace
reform, in particular reform of Australia's traditional
craft based union structure. To a significant extent,
the success of award restructuring has been and remains
dependent on the initiative shown by management in
fully exploring the opportunities offered.
18. Drpgulation of Oil Markatlina
Effective from 1 January 1988 refiners and crude oil
producers are able to negotiate freely the quantities
and prices of crude oil they buy and sell.
19. Natural nag
The Government has terminated the administered pricing
formula, allowing a more flexible approach to price
setting, and relegated export controls to a strictly
reserve power.
Request and Response ProcedurA
For review of existing regulations announced in
December 1988, provides for industry-driven regulatory
reform.

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21. Coa-gral Shipping
Program to reduce industry costs by incentives to
replace old, ineffective ships with new vessels as a
result, 25 new vessels have been ordered or introduced
( one-third of the coastal fleet). This is linked
explicitly to lower manning levels and multiskilling of
crews on the new vessels average crew sizes have as a
result fallen from 33 in 1983 to the mid 20s now and
will be 21 by 1992 ( equal to OECD levels). With a
program to alter leave and other conditions the number
of crew per berth should fall from 2.2 to 2. In order
to see that these cost savings are passed on to users,
a Prices Surveillance Authority review will take place.
The new policy permits foreign vessels onto the
Australian coast where Australian vessels cannot meet
customer requirements.
22. Waterfrn By 1992, all major stevedoring operations should be
fully responsible for their own work forces rather than
dependent on a " pool" system financed by levies. The
present system allows no flexibility in employment
arrangements and little in terms of pricing between
operators. The new system will make the waterfront
labour market similar to that in other industries; this
is an essential precondition to competition.
Further, the industry and the Government have agreed to
finance a package to release from the industry 3000 of
its least productive members, and bring in 1000 new
employees. Together with multi-skilling, the removal of
poor work practices and new investment, this will raise
productivity by over 20% Container depots will be
freed from all constraints on competition.
23. Defpnne Industry Reform
There has been a massive program of restructuring
Government-owned defence facilities. The Government
sold the Williamstown Naval Dockyard in Victoria and
the aircraft workshop in South Australia; it converted
the former Government Aircraft Factories at Fishermen' s
Bend and Avalon into a Government-owned enterprise,
Aerospace Technologies of Australia, run strictly on
business lines. Since 1984 the annual cost to the
taxpayer of subsidies to our Government-owned defence
factories has been cut by around $ 250 million. The
number of employees in dedicated defence manufacturing
facilities has been reduced from more than 15,000 to
6,800 employees.

Transcript 7919