TEL 27. Jan. 94 18: 09 No. 008 P. 02/ 08
PRIME MINISTER
EMBARGOED AGAINST DELIVERY
ADDRESS BY THE PRIME MINISTER THE HON P J KFATING, MP
TO THE UK/ AUSTRALIA TRADE AND INVESTMENT CONFERENCE
MELBOUIMN, 27 JANUARY 1994
Mr Premier and Mis Kennctt, Mr arnd Mrs Hescltine, Sir Derek Hornby, ministcrial
colleagues, Indies and gcntleinea.
I an prateful for the opportunity to open this very important conference.
And let me begi b~ cxtcnding to our guests from the Ulnited Kingdom a vcry wam
wecmet a-thank you for coming.
For those who Interpret the cumrnt debastc about our constitutional arrangements; a3
marking a decline in the rclationship betweeut our two coutres this coinferice offers a
timely corrective.
It is further proof that, far from declining, the relationship has reached a new level of
maturity. It should surprise no one that in 1994 we Australians are debating questions of identity
and sovcrclinry and, because it Is germanec to the debate, our rcmainWig constitutional
links with The United Kingdom.
And it should surprise no one that last night His Royal Highness also formally rcwoised
the truth of this it should not surprise us because few Englishmen have taken such a
close interest in Australia for such a ton& time and few, I suspe~ ct, have such a sympathetic
understanding of the issues which concern us.
These debates reflect nothing more or less than recognition of a chartfing rcality. And the
pivotal change Is thc change in our trading and investment relationship.
That is why this conference comes at such a stratcgic moment it undcrlincs the
unarguable, but little appreciated. fact that the business relationship between our two
countries is stronger than it has bcn for many years and it has the potential to grow much
stronger. It underineis thc fact that our new more independent relationship is mutually rewarding.
It is, to quote Mir Major just a year a~ o, a " new relationship which is well suited to the late
twcntieth century and which holds pentzy of promise for the future".
A new relationship which builds on our common heritage, cultural and institutional
ajffinities and substantial commercial links, while acknowlcdging that the direction of
policy in each country has, of necessity, changed.
To put It in the baldcst terms: as Europe has been to Britain in the last twenty five years
the Asia Pacific has been to Australia in the last decade namely, the place where our
principal interess lie, the placc whert out future lies, thc place where Australia simply
had to find a role.
As N& r Ma jor said " it is perfectly natural for two nations on Opposite sides of the world to
dcvclop distinctive characters, to carvc out paillcular roles in t heir own regions, to pursue
policies which promote their own economic interest-.."
Therc is no doubt that this is much imore widely und erstood and ac~ ptcd than it was even
a year or two ago.
But much less understood, I am sure, is the degree to which the pursuit of our own
interests creates clmplemcmna interests~ and considerable new potential for both of us.
The tact is, the maturing and modernisation of our relationship has enlivened and
enlarged it.
And I might add I am in no doubt that maturing and modernising our constitutional
relationship would have a similar effect.
Lct me quote a few flgures to illustrate the strength of the economic relationship;
IlTe UK is Australia's fourth largest trading partner
our largest services trade partner
our eIl1ith largest export Miarkcet
our third largest source of imports
our fastest growing European export markct
ou thid l rgest souceof tourist
our sccond ;~ reintvfreisnto r
* out second largest destination for investment
our largest foreign investor in manufacturing
The exciting dimension to this profile is, of course, the change in the na= a of
investment.
No longer do British firms invest in Australia because they can get behind tariff wail in
order to scrvice the domestic market.
No longer does Austialia have such a tariff wall.
1instead, Australia has the confidence and ability to compete Internationally in
manufacturing and services, just as we have done for many years in agricultural an~ d
mining products.
The Australian domestic marqct continues to attract British investment becuse, with our
population steadily increasing, the market is expandig.
But today British firms along with firms fromn other countries also invest here because
they know they can compete internationally [ loin an Australian base. I
And, in particular, they know that Australia is an ideal beachhead for thc most dynamic
markets in the world the Asia-Pacific markvis.
Some of you will have sccn in today's Financial Review a summary of a report by Clayton
Utz called Doing Business ut Auvrrafia. The report details just how attractive the
Australian beachhead is. For Instance:
27. Jan. 94 18: 09 No. 008 P. 04/ 08
3
Operatjngf costs are 40 to 105 per cant cheaper than Singapore. 105 to 286 per cent
cheaper th~ an Hong Kong.
E DO phone costs arc 50 to 85 per cent cheaper than Singapore, up to S0 pcr cent
cheaper than Hong Kong.
Managerial costs are substantially lower.
We have a distinct skills base advantage.
Thet report concludes: " Looking ahead five to ten yemr and beyond, one camiot be other
than optimistic about Australia's future."
And that is the truth of the matter.
The simple fact is that we are a low cost, efficient location for business.
And a low tLx location last year the corporate rate was reduced to 20%, along with
provision6 -accelecrated dcprcciation, an investmnent allowance of up to 30 per cent, and a
150 per cent tax concession for research and developmnent expenditure.
Australia's real unit labour costs are almost ten per cent lower than a decade ago and our
labodumarktsa6re infinitely more flexible and responsive.
Today you may have read that the Australian company, Transficid, outbid all othtdw>*
international competitors for the construction of a $ 80 million oil and gas platform In
Bass Strait.
And the pr'nIpa reason for their success was a benciuark enterprise agrceree which
cut costs by 16 per cent by increasing labour and equipmnt efficiency.
Australia has frec-financial markets operating in the Eas Asia time zone, sophisticated
cost efficient telecommunications and highly developed linkages into the countries of the
Asia Pacific.
For all these reason an ineroasing number of companies arc now making Australia their
springboard ito those Asia Pacific markets companies like Cathay Pacific, Data
General, Microsoft, Dow Corning and Kellogg wbich have located their regional
headquarters here.
Bniih companies arc doing the same. A recent Australian British Chamber of
Commerce study found that eighy per cent of the companies surveyed were using their
local subsidiaries to servicce oflier markets in the region.
Almost half use their subsidiaries as a springboard into South-East Asia. and more than
twenty per cent are using them as a basi. Tor operations In NJ6iihthEst Asia.
Behind these trends we can find individual comipanties positioning thcmsclves for the
futurc. For instance, British Airways' 25 per cent holding in Qantas will givc it improved access
to the Asia-Pacific region and provide Qantas with an opportunity to boost its presence in
world markets, including Europe.
To qjuote a few other examples:
4
Cadbury Schwepps Is doubling its capacity with a view to supplying the Asia-
Pacific which happens to be the fastest growing chocolate market in the World
Vodafone has decided to establish its Asia-Pacific headquarters in Sydney.
British Telecom will locate its Asia-Pacific Centre for Nctwork Management and a
software enineering centre in Sydney.
Tate and Lyle, United Biscuits, B3Th, ICI, BP Oil, Bond Helicopters among othets
arc all using Australia as a base for their trade with the region, and
demonstrating beyond doubt that this is a competitive and cost effective country in
which to do business.
Meanwhile thc implementation of the single market in Europe and further economic
integration promotrd by Maastricht has created opportuinities for Australian companies to
expand their operations in Europe, using the United Kingdom as a base.
I imigine it would surprise a lot of Australians to know that Australia is the fourth largSt
investor int ( he UK a larger Investor in fact than Japan and that the increase between,
1984 and 1992 was fourteen fold.
Uf it is true to say that in recent years Australia has bcoeon a good place to do business, it
is equally true that ia' 1994 and the years to corn it is going to be an even better place.
Over bho twelve mnths to the September quartcr, Australian G3DP increased by abut
three and a half per cent. I
Some commentators think Qiat we will see growth rates reaching four per cent or more
before too ln& and I believe they arc right. I believe we are now well placed to grow at
four par cent orniare for a number of years.
At the same timec the OE~ CD is looking at a rate fur this yea of two per cent-
We have had inflation of two per cent or less for the past two years, and TuLsday's figures
confzm our ability to keep it ainong the lowest in the OECD.
Where once we survived on the margins of the world's most dynamnic mnarkets, we are
now strategically placed alongside them and increasingly integrated 2aih thenm.
But as Max Walsh pointed out today in the qydrMami Anrlerald even Max has
acknowledged it now -the grwth we are achieving, like the new role we are carilng out
to the Asial-Pacifc,' did not bappen by accident.
We have been achieving out current growth rates despite a very weak world economy,
and with a business sector more concerned with clawing back debt than looking for new
investment opportunities.
The Frowth can be directly traced to the stimulus lower interest rates provided in the
housing market, the strength in exports flowing from the lower dollar, and the direct boost
to spending we provided through the Budget.
lntc-rcst rates are now at their lowest levels for 20 years.
We are now around 30 per cent more internationally competitive than a decade ago.
And, since the Oiic Nation statement of Febr-uar-y 1992, we have pTovidcd stimulus from
the Budget equivalcnt to more than two per cent of GDP. T2E7L:. Jan. 94 18: 09 No. 008 P. 05/ 08
TEL: 27. Jan. 94 18: 09 No. 008 P. 06/ 08
Out of respect for our British guJests I will Dot record here the unending criticism of these
pol icies we have rceived from the Opposition, some business groups and many in the
financial pres".
The figures speak for themselvcs.
But what also Should be spokeni for i the fact that Government policies havc provided
more than short term stimulus: by focussing on the skills of our people, on infratructure,
reschb and incentives for business investuient, they are providing long term benefits to
the operation of the economy and tho opurations of business.
Renlly, the time has come, I think Australian business ought to recoonse that the
present recovery andC the outstanding prospects for the futurc have been made possible by
these policies and policies implemented in the eighties.
Long experience tells mc it is pointless to expect the equivalent of a Faullan coaversion
among Australian business I can assure our British guests that political affctions die A'S
hard In the New World as they do in the Old.
Despite the logic of it. I don't expect to see a niass defection from our increasingly
Inchoate and rudderless political opponents.
But I do expect, and I think it is reasonable for the country to expect, that Austalioa
business will iucrtasingly go out and invest in those areas which will deliver long teTm
riewards to their companies and the pation.
I mean investment in plant, in technology and in people in trining and employment.
Thc capsary to do it is theire: In the past year profits have grown 20 per cent and are now
above t I9M peak. As a Share of GDP, profit share is now approaching rhc peak of the
Late 19WVs and that was an all-time record.
As volumes pick up in the recovery, profits will increase further.
Those who made the effort to export in recent times are today reaping very substantial
rewards.
Those who make the effort now will also reap them as the markets grow.
And the markets till grow'. They will grow in no small measure because of the
successful conclusion to the GAIT; and, in due course, because of the substantial work
now underway in AYEC to remove barriers and facilitate trade and investment in the
. re gion. 1
You are all awarce of the role the Australian Covenimerir played with the U~ rupuy Round
and thc creation-of APEC.
And I can assure you that implementing the GAIT outcome, achieving concrete results in
APEC, and removing bilateral barriers to trade Will continue as issues of the highest
priority for the Ccwcrnnient in the comning year.
Our major domcsiic priority this year might go under the simplc heading of " efficiency*.
We will bc working vcry hard on the microcconurmic reformu agenda; pullinS together the
rail, port, road interface; driving the enterprise bargaining prograili as hard as we and
y'ou can; and implementing the White Paper on employment.
We will be dcveloping and refining industry policy.
27. Jan. 94 18: 09 No. 008 P. 07/ 08
6
Our industry policies bcar no resemblance to those of earlicr decades.
N~ o longer are inefficient industies protected
Rather, policy is directed at helping industry grasp new opportunities at borne and in the
world trading envirowncut.
The transport pro*= az we undertook almost two year ago in One Nation particularly
the national rail highway has begun to rnatcrialisc, and you wilt see it materialise much
more rapidly in the next teve months.
Our industrial relations reforms demand your cooperation and that of the unions.
Cooperation demands recognition of realities.
Onc of those realities is known to every Australian business leader in this room.
It is that Australian workers have made a maslive contribution to the greater
comnpetitiveness of this country, and that the results wc at.. now seeinig, the opportunities
now presented, would have becti impossible without the trade unions' willingniess to
cooperate in necessary change indeed, oftcn to dK Uv the change.
Tht Accord between the Goveninent and organised labour, in place now for 11
Succ= Ssivc years, has beena instrumental in giving us sustained industrial peace, low
hnflation and the profit share which business is now enjoying.
The unions of course must continue to embrace change.
I noticed tho other day the ACTU President, Martin Ferguson, urging unions to move
more quickly towards enterprise bargains.
Today I urge Australian business to do thc same. 17hc new industrial relations legisation
ensures that minimum standards are maintained, but provides for great flexibility.
EAch and every business = a now tailor its arrangements to meet its business P. eeds and
each and every business this year should make the effort to do so.
Many will want to strike their deals with unions, but there is no imperative. As lone as a
mnajority of employees want to, management can negotiate directly with thcir employees
rather than with unions.
I said yesterday that this recovery is not for the top end of town. Our hard work has not
been for the benefit of speculators and fly-by-night developers.
It has been to create a competitive economy of depth andqu ulizy which will assure
Australia's prosperity in the next century. it has been to deliver opportunity to every
community and every Australian.
The responsibility is on businem. as well 4s government to see that this great opportunity
is not wasted.
Togcther wc also share responsibility for employment and training. There is surely no
greater inhibition to national efficiency than a large pool of unemployed men and women.
The White Paper to be delivered in April will form thie basis of a major strategic assault
on Australia's unctrployment.
TEL: 27. Jan. 94 18: 09 No. 008 P. 08/ 08
I 7
The emphasis will be on putting the long term unemployed back In touch with the labour
market. Education and training will be a priority.
In short, our approach to unemployment will be to give those presently uncmployed a
chance to share in the new prosperity and to contribute to it.
In doing so the whole nation's economic performance will be that much morc cfficient.
If this is to be what it should be a recovery for the whole nation the responsibility falls
on the whole nation to make it so.
For this reason above any otha I am pleased to be with you tonight. This conference ca
be anothcr step on the road to greater prosperity for the people of both our countries.
Today the relationship between the Unitcd Kingdom and Australia is built on both
continuity and change.
The continuity of 205 years of shared history, culture, investment and trade.
The chanse in which we are both engagcd, the change which offers us extraordinary new
opportunities at home and abroad and the change which will, without doubt, ensure that
our relationship is stron and enduring.
MELBOURNE 27 January 1994
TEL OFICE OF THE PRIME MINISTER
CANBERRA
Correction In UK Australia Trade and Investment Conference speech, paragraph 4 on
page 3 when delivered will read.
last year the corporate rate was reduced to 33 per cent, along with
provision for accelerated depreciation, an Investment allowance of up to
per cent
27 JANUARY 1994
MELBOURNE T2EL7:. Jan. 94 18: 09 No. 008 P. 01/ 08