TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING MP,
ADDRESS TO ] LAUNCESTON CHAMBER OF COMMERCE, JANUARY 23 1992
E& OE PROOF COPY
Thank you very much for that kind welcome Michael ( Field),
Robin Holyman, Mrs Holyman, the Chamber of Commerce, my
distinguished colleagues, including the Mayor, Alderman
Graham BeanEts, and my Parliamentary colleagues, Senators
Tate, Aulich and Sherry, ladies and gentlemen.
Thank you very much for arranging such a substantial
gathering at: such short notice. It's a compliment for me,
Robin, that the Chamber of Commerce was able to invite so
many distinguished people tonight to come for dinner and
that they've agreed to come. And I'm particularly pleased
to be here in the company of Michael and Jan, particularly
in election campaigns. We have partisanship in all of usmost
of us barrack for our own side and I have great
pleasure to be barracking for Michael.
Over the years a lot of Premiers and Treasurers came my way.
I must say I always have a soft touch for Michael, always a
soft touch for Michael, because he had that disarming
frankness about him, no nonsense about him. And there was a
great change occurring in the fiscal basis, particularly
with the States, there was a great funding gap between fixed
revenues and discretionary spending, and no Treasurer in the
Commonwealth of Australia had a greater, more difficult task
than making -the books of the Government of Tasmania adjust.
And as Premier and Treasurer Michael has done a sterling job
for us, the public here. I don't know whether they quite
understand what he has done. But he had to have a heart as
big as Western Australia, big in size, to actually take the
job on and to do it, and he's done that while at the same
time balancing all of those industrial interest which have
been important to the State's continuing progress and
development. So I not only regard him as a pal and as a friend but as
somebody who has really faced up to really rutted-in
problems of the State he inherited, and didn't gloss over it:
or take the cosmetic job, but to do it the right way.
At the last: Premiers' Conference I attended as Treasurer, he
made a speech I would have been very proud to have made
myself. It: was about fiscal policy, and his achievements
were quite profound. So I was delighted to be in Tasmania
with him today in the course of his election campaign and to
be on his side.
Now you've asked me tonight to talk about the agenda of the
Federal Government and how we see Australia and where we're
going now, and where we're going from here. And this will
be important, not just for Tasmania, but for Australia as a
whole. And I think that the main objective that we have to keep
before our eyes is a commitment to growth and to adaptation.
To growth and to change. That may sound like an
unexceptional objective, but there are not too many
governments around the world who have committed themselves
as positively as this Government has over the years to
growth. Andl that means taking a macro economic risk, taking
the forward economic risk on inflation and the current
account by : letting the place grow more quickly rather than
taking the safe course which would put less pressure on
prices, less pressure on inflation, less pressure on the
current account to grow slowly.
And during the ' 80s we ran Australia quite quickly, quite
fast. In the first seven years of this Government the rate
of economic growth was twice as fast as the previous seven
years under the Fraser Government. And that was a
deliberate policy. And that employment that came from it,
which took the workforce from 6 million to 7.5 million, a
per cent increase in the workforce, came expressly from that
policy. But we've lost that growth with the recession, we've lost
some product, and while we've kept largely those 1 1/ 2
million jobs, we've lost some and we're adding to the
unemployment pool because the labour market is not growing
quickly enough to take up the new entrants into the
work force.
And so our commitment to return to growth, the commitment to
return to equity and to prosperity, where all Australians
have a share of the national cake through their capacity to
get a job. And this is no more true than with our young
people. So the Government will be committing itself to a recovery at
the earliest opportunity, a sustainable low inflation
recovery, andi to commit itself further to building on the
successes of change in the 1980s in what was broadly the
internationalisation of the Australian economy.
And so we are not embarking on an economic statement, the
point of which will be to get a recovery going as quickly as
possible, to restore employment back to the labour market,
to check unemployment and then bring it down, and then to
continue the structural change which we had, the momentum
which we had up in the 1980s.
And that Statement will be looking to further
internatiortalise the economy, to pin in our success with low
inflation, to bolt it in, to continue the changes and
efficiency of each place of commerce and each workplace
around the country, to change work practices, to change
management practices, and to generally improve efficiency,
to expand further our manufacturing exports, which have
already expanded substantially in the 1980s, to improve the
infrastructure of Australia, particularly some of the public
infrastructure to make that process happen more quickly.
And we can ( do some of that by building on the great fiscal
position that the Government secured for Australia and for
itself by having structural Budget surpluses, which in the
cycle of the recession are now in deficit, but as the
economy starts to grow and revenue starts to pick up will
move back into surplus, to use some of those carefully
husbanded changes in fiscal and budgetary policy to now
stimulate the economy to lift it back to growth and
activity.
Now, much ha~ ve changed in Australia, but the ' 90s have to be
a decade of productive investment because we're now paying
part of the price of actually knocking inflation and
speculative investment out of the system.
That may not sound, again, a profound statement, but much of
the 1980s was not simply about producing a taxable income,
it was about having an inflation bet on the side. And often
that was in property. Often a lot of companies or
individuals w~ ho had reasonable productive businesses decided
that because they were doing so well they'd have a little
inflation bet on the side with an office block or a set of
shops or an office car or something else or a factory, and
it is that asset price problem, that is the fall in asset
prices coming from washing the inflation out of the system,
which has not threatened many of those businesses because
they relied upon the inflation pump. And it's that change,
the washing of two decades of inflationary expectations and
inflationary culture out of that system, which has produced
a recession of greater dimension than official policy ever
wanted or probably would have caused.
And when you had 20 per cent credit growth per year in the
late 1980s, financing a production of about half that, we've
now seen credit go back to about 4 or 5 per cent and the
banking system has taken losses and is keeping to itself and
is now abstemiously funding only productive cash flow
investments.
In other words, the inflation psychology has gone. It is
the going of that inflation psychology which gives us a
chance of being a low inflation country where the premium
again is on lower cost of money, low interest rates,
permanently low interest rates through the ' 90s, a lower
cost of capiLtal and a more productive place. That is
putting the premium on building productive investment rather
than simply investment in the non traded goods side of the
economy. And that wil. l help us continue to grow the place in the
and to become more self sufficient, less reliant on imports,
and therefore less reliant on overseas savings and overseas
debt. It's just worth recalling some things. Because I notice in
the public debate we've had a few people say the policies of
the ' 80s have destroyed manufacturing and our manufacturing
businesses are closing down, and our agriculture is down,
beef is down, wool is down, non-ferrous metals are down
zinc, lead, etc, and therefore the economy is in
difficulties. But the fact of the matter is that we had a
very great success in manufacturing industry in the 1980s,
and between 1982-3 and 1990-91 non metal manufactures rose
by 200 per cent ' in that period, when total manufacturing,
that is all manufactures including metal manufactures, rose
by 125 per cent in the period. They more than doubled. And
most of that occurred in the last five years of the 1980s.
So the growth in manufactured exports is now 17 per cent per
annum, whereas rural export growth was 2 per cent down. So
if we were the same country today as we were in 1982/ 3
relying on wheat and wool and other grains and minerals,
then this country would be a country which wouldn't be able
to afford to import, which would have a very low basis of
exports, and the international market place would have
sought to recess it probably in perpetuity.
Now we've beaten than dismal legacy, that dismal prospect,
by making the changes to internationalise the place in the
1980s. But " the challenge now is to keep the process up.
And they are the first order issues to get people back to
work, to get a recovery going, to make sure the inflation
rate stays low in a structural sense, to lift investment in
productive plant and equipment, to get the investment up to
get the produce, to get the produce to import compete and to
export, to get the current account down and hence our
reliance on overseas debt.
And to do that to make the place set a premium and focus
back on those parts of the economy long forgotten like the
public infrastructure, the transport system, the airports,
the airline system, all the things that are going to matter
in whether Australia is a truly international place or a
place which h7. as settled for second-best and which just
doesn't have a national will to carry itself off as a first
rate economic nation.
Now these are the challenges the Statement the Government is
putting together will address. In other words, they are
what I call the first order issues. And they are about
guaranteeing a place in the world for Australian commerce,
in the Asian Pacific area, the fastest growing part of the
world, which we have been now very closely integrating
ourselves through the 1980s and now the early 1990s.
And it's very interesting to know that 15 per cent of our
trade went to Asia in 1983-4, 15 only, and between 1983-4
and late last year, that has shifted to 28 per cent. So
it's a very dramatic shift in the orientation of Australia's
markets and trade with the Asia Pacific area, which is the
fastest growing part of the world, which has got the fastest
growing demand and which will need the things for which
Australia has a natural comparative advantage such as food,
agricultural products in general, metals, other finished
products, which we can supply to this part of the world for
either further fabrication or specialised high technology
things which Australia can do like telephones,
telecommunications, medical services and of course all the
services which we never had in the ' 70s such as tourism,
financial services, again medical services, education
services, and all the sort of sophistication of the service
sector a country like us should have.
So we are part way through the largest structural post war
transition and what we want to do is to finish the job, to
set Australia up in the ' 90s, to get back onto those things
recovery, jobs, inflation, investment, the capital stock,
exports, the current account and our debt.
Now they are the first order issues. And what I have to do
as Prime Minister and as Leader of the Labor Party is to
make sure Australians understand they are the first order
issues. And that basically we are not going to be dealing
with those issues like inducing a recovery, creating
employment, locking in low inflation, a lower cost of
capital, adding to the capital stock and producing exports,
we're not going to do all of that by simply taxing our food
and clothing. And this is where I have to deal with my
friend and colleague, Dr Hewson, and his proposal for the
GST. Now I often get the question, and I've had it in the last
few weeks, when are you going to get stuck into Hewson and
the GST? Well, I'll tell you this. The politician in me
wants to get stuck right into it but I'm not going to
indulge myself. I'm going to do it when the time is right
after I've put together Labor's plan for the 1990s.
And I don't doubt, I don't deny Dr Hewson the fact that he
has a plan for Australia. But it is the wrong plan, it is
the wrong pl. an. Flghtback is not a package, it is an excuse
for a new ta~ x and there's more camouflage on that new tax
than any tax: in the history of this country. Never has a
new tax been so disguised by the ons and of fs and shifts in
revenue and the changes to policy, but when you pull all the
bits away, Underneath there what there is simply a tax which
will tax thE, basics of most Australians.
And the question will be whether Australians really want a
tax that will go right to the heart of the Australian
lifestyle, or whether they will want policy changes which
will deal with the true problems of Australia that is
taking us from an agrarian society which produced a bit of
wheat and wcool and minerals to a sophisticated industrial
place which provides employment to the cities where people
live, where the bulk of the population is, and where we can
have interesting jobs and be part and parcel of the rest of
the world.
Those are the issues for the ' 80S. AS usual the hard ones,
the difficult ones, the ones which are not easily sold and
won't be done in five minutes. But we are so far through
now, we are so far through the transition that we've
actually licked a lot of the big problems. We've got the
problems of the recession, but we'll come out of this
recession not with a 10 per cent inflation rate, like 1982-
3, but with a 3 per cent inflation rate. Not with a
structural budget deficit but with a structural budget
surplus, a cyclical deficit but a structural surplus. With
a high profit share because as soon as any growth occurs in
the economy it will go straight into profits as the extra
production moves straight into the profit share, which will
mean we will be set up reasonably well to carry on our
ongoing investment.
So now we're running a current account deficit of about 4
per cent of GDP. Our debt has stabled at about 2. The
difference is about 2 per cent of our national production.
That's about $ 8 billion. We've got to produce import
compete or export to the tune of about $ 8 billion to turn
our current account deficit into a surplus and to guarantee
Australians -their sovereignty over their affairs from now on
into the future. And to do it living in the most exciting
part of the world.
So in structural terms, if you look at the future, the solid
bits, coming into the ' 90s is nothing like coming into the
We came into the ' 80s with the wage share up and the
profit share down, with inflation in double digits and mass
unemployment, with investment smashed, with virtually
manufacturing closing down, with no tertiary sector to speak
of. And yet now we have such great opportunities,
notwithstanding the fact that we repair from the recession
to pick them up.
Now the recession is part and parcel of events world-wide
there's a recession in the United States, there's one in
Canada, there's one in Britain and there's one in Australia
and in other. countries. And they're for roughly similar
reasons. But be there or not, our policy must be to get out
of it because it is not acceptable of us, simply for the
Labor Party to say we will adjust Australia into a more
productive place by letting the burden fall on the
unemployed, they can carry the adjustments. That's not been
the Australian way, it's not the Labor way. And that's why
we must go back to positive rates of growth and do things
that have quick mechanical effects inside the economy, to
get the place back into growth and recovery, and to get that
unemployment: down, so that all Australians can share in the
fruits of our economic wealth and our economic prosperity.
So they are the real challenges. To recognise that we've
come a very long way, that we have come from a place which
was slipping down the international income league table and
which is now, coming back up that table in terms of its basic
foundation of its wealth, and to realise that it is that
which will give Australia it's future into the 1990s. By
only being competitive, by only being productive, only being
efficient can you make it, and we will not solve our
problems by slashing our essentials of life with a very
heavy flat tax, believing that that will cure all of those
very specific and practical difficulties which the country
is now facing.
Now, the other problem about the GST is simply the fairness
of it. Can I just make this point. I think it is fairyland
for the Coalition to believe that they can basically market
a tax which affects the poor the same as the wealthy, which
is a flat tax, the same nominal tax on all goods regardless
of income. And ' if you're on $ 20 000 a year and you spend
all of your : money, all of your income and all of your
outgoings are taxed. But if you're on $ 100 000 a year and
you spend $ 40 000, only the $ 40 000 is taxed, and not only
that, not only is the $ 60 000 not taxed, but there's a tax
cut in stall for you as well. And that sort of disparity in
distribution and that sort of unfairness is not what is
required to keep the Australian community socially cohesive
and looking at the same issues in recovery and production.
Now, in the last few weeks we have had the pleasure of
meeting many members of the business community in this
consultation process which the Government has run. And
three of my colleagues and myself have seen a very
representative group of people from Australian business,
unions and other walks of life. And I can say the most
clear and obvious thing that came from that is a lot of the
ideology has fallen away from the public debate. But the
business commnunity was not in there saying, as they would
have said a couple of years ago, look first thing is we
want is the labour market deregulated; second thing is, we
want a change in the tax system with a certain agenda.
Basically people are saying now let's put all that to one
side, let's get the place moving again, let's pull together
and let's get the place moving again.
There's a great spirit of cooperation out there and which I
hope the Government can use fruitfully to get Australia
moving again. But I don't think that spirit will obtain if'
we try to tear the consensus up and we rip away at the
fabric by a profound change to the tax system, which leaves
the low income people worse up and the higher income people
better of f and we have a transfer of wealth from the poorest
people to the wealthiest people in society, while at the
same time wet try to lock in a low inflation rate and start
rebuilding cur productive sector for the long run through
the 1990s.
It won't wash. And it's my job to tell people why the GST
is not a policy, and I'll be doing it fulsomely, but when it
suits my Government to do so. And it will suit it after, we
will address it comprehensively after we've addressed our
own fightback, the real fightback that is to get the
economy moving again, back into recovery, and back into
growth. So I look forward to working with the business community, to
bringing down an economic statement which is relevant to the
things that really matter, that really matter, about
engendering that recovery, about sparking that employment,
about pinning that inflation rate down, about keeping that
lower cost of capital, about getting investment going,
building the capital stock, watching that production grow
and seeing those current account projections come down.
That's where Australia's bread and butter is. That's where
its future is. And isn't an ideological obsession about tax
rates, which might have their place in Western Europe but
don't have their place in Australia.
So, I conclude on this point that the Government has
listened and is listening to what Australians say. I'll be
very interested to hear from some of you tonight your views
about how you see affairs in your own State of Tasmania and
we will be enideavouring, we will put together a policy mix
which keeps on the main gain of Australia's competitiveness
and its future, and keeps the fairness of Labor stamped upon
it, but the product of which we hope can be accepted by
broad sections of the Australian community as fair and just
and in time. And I hope from the presentation of the
Statement we can get confidence moving again so that we can
actually get that confidence log jam broken and let people
know that the Government wants the economy to grow, and the
Government isn't sitting back there trying to keep the
economy recessed or slow for inflation or current account
reasons.
9
It actually wants the economy to grow and will do the things
to get that growth and activity. And we can go out, leave
this trough, leave this period behind us and go back to the
great changes through the ' 80s, build on them in the
and find ourselves in a very, very significant position in
the world and most particularly in the Asian-Pacific region.
That has to be our great objective and that's what we will
be committing ourselves to. Thank you very much for coming..