PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P. J. KEATING MP
OPENING REMARKS AT PREMIERS' CONFERENCE, PARULAMENT
HOUSE, CANBERRA, MONDAY 5 JULY 1993
E& OE PROOF COPY
I declare the meeting of the Premiers' Conference open and say that this Is
somewhat of a significant occasion because this will be our first meeting where
we have together participated In a study of the national fiscal outlook. Where,
before, fiscal policy of our effect upon savings has always been something
which we have together contemplated, on this occasion we have had quite a
long run study between us and we have prepared a document called the
* National Fiscal Outlook". And It attempts to look at the public sector, Its role
over the medium term, its call on savings and therefore our role In Investment
and in debt and In recovery.
This is the first time we have sought to have that greater transparency,
rationality, predicability thereby giving the rest of the country an Idea of where
we are heading.
This follows the meeting of the Council of Australian Governments which first
met last year and in that it was itself a somewhat historic meeting because It
was the first time that we separated out non-financial matters from the
Premiers' Conference Loan Council agenda. Normally we would have an
agenda for financial assistance grants, Loan Council matters et cetera then we
would have other matters associated with it and invariably, as attendees of long
standing here know we would not get often on to those issues. Now we have a
separate non-financial meeting our Council of Australian Governments
where such things as electricity generation and distribution, technical and
further education, recognition of standards and reorganisation of ministerial
councils has already produced a positive result and so In a way we have been
operating the federation at the financial and at the policy level In a way that
better meets the country's needs than we have In the past.
We have been focusing on sensible, practical gains wherever we Could see
them, and taking advantage of them.
At this meeting we have another opportunity to deal with the nation's public
financing for the coming year and the fact that you now have a much better
Idea of where the Commonwealth budget Is going by virtue of the national
financial outlook and the fact that we now provide the States, all of you, and
Territories with the ' offer document' at least two business days ahead of the
meeting In this case last Friday means that all Governments represented
here have an Idea of what the Commonwealth proposes and what you
responses to it may be.
The first thing I would like to say is that about the Issues of this meeting Is that
this Is the third year of a real terms guarantee on the -pool of financial
assistance grants to the States and we have maintained that commitment in
that guarantee, on maintenance In real termns for 1 993-94. This for us Is
despite considerable pressure on our own Budget, as you know in terms of the
Outlook Statement.
The Commonwealth offer also accepts In general terms the outcome of the
1992-93 Grants Commission Review so, including all hospital funding grants In
the base for both years, the Commonwealth In Its offer for this year is
increasing comparable funding over $ 544 million over last year which Is an
increase of about 3 per cent nominal and above the expected inflation rate.
in that sense we think that we can do justice to the States In this and at the
same time to national fiscal policy. It is very clearly the Commonwealth's view
that the Budget IS playing an appropriate role In terms of cushioning the Impact
of the recession and with the so-called natural stabilisers working. The world
is slower than we thought it would be just a year or so ago and It Is just worth
recalling that in December 1991 the OECD forecast for the year 1992 was 2.7
per cent. That turned out to be .9 per cent which was a dramatic change from
+ 3 growth for the OECD area as a whole to virtually And for 1993 in
December 1991 the OECD forecast growth at 4.3 per cent for the area, In Its
latest forecast It has 1993 coming out at .3 per cent. So a change from 4.3 per
cent to .3 per cent and the previous year from 2.7 per cent to 9 per cent. This
is a very dramatic change and most of that Is coming from in the case of
Germany, Germany was In there for 1992 at 1.8 per cent and ended up for
1993 at 2.5 per cent in forecast and ended up at -1.9 per cent. Japan was in at
per cent and Its forecast for 1993 Is + 1 per cent rather than 3.5 per cent and
the United States was 3.8 per cent and was In at 2.6 per cent. So, we can see
how that 2.7 per cent and 4.3 per cent transiated themselves Into 9 per cent
and per cent. That was not just the impact of restoring balance sheets and
dealing with lower inflation and the blow out of the credit boom of the eighties,
but the reunification of Germany has obviously put a very large dampener on
European growth. That's obviously affected Japan as well and the United
States. So, this is the context In which our fiscal situation Is set, And It means that for
our country we've been growing of the order of 2.5 per cent while, as I say, the
OECD area In 1992-93 if you took at us, I just gave you the calender years
but if you look across the financial year If you put OECD numbers In with our
financial year we're growing at about 2.5 per cent and the OECD is growing at
1 per cent. So we're doing better than twice the OECD growth rate. Now, part
of that is because of the role of fiscal policy and lower interest rates and lower
Inflation. And you saw on the national accounts a couple of weeks ago where a
substantial contribution was being made from the public sector. And the public
sector In deficit Is holding the growth in the economy up higher than It would
otherwilse be.
Now there is a view around the place, particularly from the Federal Opposition
that we ought to be having the budget pulled more rapidly back into surplus.
Well this Is very much a wrong view very much a wrong view. And, again, I
remind people what the OECD secretariat and the IMF said just six or eight
months ago. And that was, that the stance of fiscal policy In the area of the
OECD and the IMF ought to be basically In deficit so that the world economy
starts to come out. Now, that's meant that the One Nation funding which has
been spent throughout calender 1992 and now Into calender 1993 Is playing its
role not just in the nation of course, but In each state and it has had its
own Impact upon fiscal policy.
Now, I just paint that picture to put the setting. In that context, our budget and
the maintenance of the same real In terms of payments to the states and
the sixteen hundred million we're going to spend on health over the next three
years is, we believe, getting the balance fairly right In terms of payments to the
states. Now, I'm not sure what Premiers may say about the offer but I just want
to make this point. And that Is that the Federal Opposition at the time of the
last election was intent upon taking $ 709 million dollars out of financial
assistance grants for this year. And that meant NSW losing $ 195 million,
Victoria losing $ 145 million, Queensland $ 138 million, Westemn Australia $ 76
million, South Australia $ 72 million, Tasmania $ 29 million, Northern Territory
million and the ACT $ 11 million. Now, at the time we argued that that
policy was a wrong policy I might say many of you couldn't see the wisdom
of that position at the time and were happy to sign up to that policy and I only
make the point that what you are receiving now Is far more generous than that
which would have been received there.
Could I just say that going back to the economic outlook could I just
make these points. We are well positioned now to grow, particularly after the
visit I had to China and Korea our stance with Asia, our competitiveness has
improved thirty percent since the middle eighties has put us In a very good
position to participate in the growth of this area of the world. We've got solid
productivity growth at the moment, our productivity growing at about two per
cent per annum. inflation is better than our trading partners; Australia's top five
partners' inflation rate is 2.2 per cent and ours Is 1.2 per cent, well below that of
our partners. As we said, manufactured exports In 1992-93 are now around
per cent higher than a year earlier and nearly three times higher than a decade
ago. interest rates are at historically low levels and, Importantly, the profit
share In the economy Is now already up to just about the late eighties level
which Is beyond the sixties historic experience, even at this stage of the cycle.
So, profitability has Improved, balance sheets of companies have improved and
I think companies are In a position now where thley can look around for
opportunities and take investment decisions.
So, could I perhaps conclude on this note and invite the Treasurer to say a few
things and then I'll Invite the Premiers to address the Commonwealth offer
document and any other remarks they wish to make, just to say that In the
1 980s Australian fiscal policy was arguably in better shape than any OECD
country. As a consequence, we've been able to stand the shift in the budget
balance better and cushion our economy better, than comparable countries.
It's one of the reasons why we're growing at 2.5 per cent and they're growing at
one per cent, on average. We know we've got a fiscal task to perform in the
medium term. But not In 1993-94. 1993-94 Is a year when the budget should
be In deficit; it's a year when we still need the public sector hauling activity
along and at the same time encouraging private sector Investment. And It Is, as
a result of that national fiscal outlook statement, that we will focus on the
medium term of fiscal policy. And that statement allows all states to
understand where we're coming from; It allows the public the opportunity to
know what the shape of fiscal policy may be; and It also provides a role for the
states In being part of that fiscal outlook and savings equation.
So, we think the offer today Is a fair one, we've maintained our commitment to
the real terms guarantee, we've sought also to receive the Grants Commission
Report and Introduce It, and I remind you again that we'll be spending $ 1 ,600
million over three years on health. So, with those things, we think In all the
circumstances the Commonwealth offer Is a decent one and one which the
states can accept.
I now invite the Treasurer to augment my remarks.
ends.