SPEECH BY THE PRIME MINISTER THE HON P J KEATING MP
ADDRESS TO THE FINANCIAL REVIEWS CONFERENCE " AUSTRALIAN
INDUSTRY AND THE KEATING GOVERNMENT', SYDNEY,
TUESDAY 5 JULY 1994
Let me begin by congratulating the Financial Review for taking the initiative in
organising this conference on the future of Australian industry.
Just a few years ago there were some who would have placed a question
mark at the end of the title of any conference on Australian industry.
And the agenda would have largely revolved around tariff levels and sectoral
support measures.
At such a conference there would also have been those who argued we would
be better off to turn our backs on the reforms of the
We should, the argumentwyould run, have re-regulated the economy and
returned to a regime which sheltered Australian industry from a more
competitive world.
At the heart of that debate was a test of our national will and a test of our
national nerve.
Last week in Jakarta I saw the results of having passed those tests.
In Indonesia I had the privilege of opening Australia's biggest ever trade
promotion in that country.
More than 200 exhibitors participated in an impressive display of just how
much Australia has to offer the world and, in particular, the Asia Pacific.
After visiting the exhibition you could not fail to be struck by what a distance
we have travelled in the past decade.
The overwhelming impression the exhibition projected was of a diverse,
vibrant economy with world class capacities in services and manufactures.
Industry sectors ranging from building and construction to education and
training and from marine, engineering and manufacturing services to power
and energy were all strongly represented.
So I come to this conference this morning with fresh evidence of what
Australian industry is achieving and a well-founded confidence that we will
build on these successes.
The Financial Review has therefore picked a very appropriate time to stage an
examination and discussion of industry policy.
As a starting point the Government does not see industry policy being
developed and implemented in isolation from the other major policy streams.
Industry depends for its success as much on macro-economic, industrial
relations and trade policy and micro-economic reforms as it does on specific
industry develo~~ ri6nt aind supp'ori m-easures.-
In fact, much of what we are striving to achieve in industry policy is intertwined
with our objectives in these other areas.
Industries committed to world best practice need a Government committed to
ensuring the domestic impediments are cleared away.
Our industry policy is, therefore, in many respects an international competition
policy which seeks to identify and encourage those characteristics we need to
be able to compete in world markets.
Australian industry should. approach the future with optimism.
Few other developed countiribs can match the circumstances in which
Australia presently finds itself. Few countries have such good prospects for
growth. No predictions for the future of Australian industry can be made, however,
without comparing its condition now with the situation of a decade ago.
While we had some strong export industries at that time particularly in mining
and agriculture the manufacturing sector was still sheltered from
international competition by absurdly high tariff barriers.
For all this protection, the reality was that industry was not strong.
The steel industry, with our resource endowments, should have been one of
the nation's strongest industries. Instead it was going out the door backwards. 4/ 7/ 94 9: 54 PM
Australian made cars were becoming less and less competitive both in terms
of price and quality. The response of the outgoing government was to
propose yet more protection, with tariffs~ of up to 125 per cent.
While other countries were increasingly participating in world trade, we were
putting the shutters up.
When we introduced the first tranche of tariff reductions we were warned we
would have a disaster on our hands. While the last generation of Australian
managers may have been found wanting in certain respects, they certainly
had an entrepreneurial approach to finding reasons for government
assistance. We were told that our market was too small to allow international
competition, our labour force was unskilled, lazy and strike-prone and that
nobody else had a level playing field and so why should we.
Instead we have a story of outstanding success.
Exports of elaborately transformed manufacturing have grown by 17 per cent a
year ince 1988, one of the very highest rates of growth in the OECD.
Services exports, which have grown by about 9 per cent a year, now account
for 20 per cent of exports.
Small firms have emerged from the former torpid business environment and
become innovative and export-oriented McKinsey has identified more than
700 small and medium manufacturing exporters.
Foreign-owned companies that told us they could well leave Australia without
protection, have invested in state of the art plant, competed successfully with
imports and also entered export markets.
Whole industries that were set to be counted among the dead or dying have
undergone Lazarus-like revivals.
Firms have embraced innoVtion, giving us one of the highest growth rates of
business R& D among developed economies if even from a relatively low base.
The reasons for such success are complex. Partly it is due to the basic skills
that were lying dormant in Australian industry. We were also helped by some
natural good fortune, such as our location in this dynamic region of the world
and the fact that we are reaping great benefits, in terms of productive
diversity, from our multicultural population.
Some credit must also go to the Government, for having the courage to take
the hard choices and stick with them.
Policies in a range of areas will support the future growth of Australian
industry, and a continuation of its success in world markets. They will help us
maintain high rates of employment growth so we can reduce unemployment.
We want to bring an unemployment rate of 5 per cent within our grasp by the
4/ 7/ 94 9: 54 PM
turn of the century. To achieve this, we must have a high rate of economic
growth. We must also ensure that this growth is sustainable.
We have made an impressive start.
We are growing at an annual rate of 5 per cent, which makes Australia a star
performer among OECD countries. We have added 260,000 new jobs over
the past year and re duced the unemployment rate to under 10 per cent.
Inflation is running at less than 1 1/ 2 per cent and expectations are for a
continued low inflation environment.
As a nation we can take satisfaction from this progress.
But even more importantly, we can expect to see strong growth with low
inflation continue.
Of course, there will be the permanently miserable who will want to talk up the
risk of the economy overheating, of economic boom followed by economic
bust. In their minds, the risk flickers from too little growth to too much growth.
But the reality is quite the contrary. The nature of this recovery gives us
confidence that strong growth can be sustained. We have what we term a
" 1rolling" recovery.
Initially, the recovery was driven by public demand, the pick up in dwelling
investment and strong exports. The strong export performance is set to
continue, but as the recovery proceeds the stimulus from the public sector is
quite deliberately being wound back while the dwelling cycle will naturally
begin to wane. In its place, business fixed investment will both support overall
demand and provide the wherewithal for greater production.
The rolling nature of the recovery is not limited to what is happening in
Australia, it is also a characteristic of what is happening internationally. Some
of you may have seen a sh~ t article in the latest OECD Economic Outlook
reporting that major OECD economies are not synchronised in their current
cycles. The US recovered earlier than Japan and much of Europe which are
both now beginning to turn.
The consequences for Australia are very healthy. Commodity prices have not
gone on a roller coaster, with the result that our exchange rate has been more
stable. Our traders continue to benefit from favourable international
competitiveness which is still around 30 per cent better than in the early 1980s
notwithstanding the recent rise in the Australian dollar.
Moreover, as this international cycle has helped keep inflation low worldwide
so our rolling recovery has helped in Australia. The OECD now sees inflation
remaining between 2 and 2 1/ 2 per cent over 1994 and 1995.
We have established a low inflation culture and we intend to keep it. 4/ 7/ 94 9: 54 PM
We have not done this by telling the Reserve Bank to blindly pursue zero
inflation and then washing our hands oftthe matter. Instead, we have given
inflation a central role in all economic policy.
Of course, monetary policy has a major role to play in containing inflation. But
monetary policy, by itself, doesn't deliver a change to the culture of inflation. It
is too indiscriminate and cannot be left to apply indefinitely.
Today's low inflation has been achieved through monetary and fiscal policies
as well as through the Accord with the unions and the flexibility we have
introduced into the supply side of the economy. The attitudes of those directly
involved in setting prices or wages have been changed.
And it is these changed attitudes that are at the heart of keeping inflation low.
We won't achieve that by relying on any simple-minded formula to control
interest rates. Instead, we need to maintain comprehensive policy action
through: the continuing commitment to low inflation via the Accord VII;
the improved responsiveness of our workplaces to enterprise bargaining
and higher skill levels;
the lessening of the risk of bottlenecks by re-engaging those unemployed
for lengthy periods with the labour market;
the greater competition to our product markets from domestic and
international sources, via the exchange rate and lower tariffs;
the progressive winding back of fiscal stimulus as the recovery proceeds;
and when action is warranted, appropriate adjustments to monetary policy.
All of this represents a mature approach to policy. And the increasingly
mature approach to business that we are seeing in our workplaces is also
delivering results.
The A=" r will continue to play a central role in wages policy. It has been
crucial in achieving appropriate aggregate wage outcomes since 1983 and
pulling inflation down. It has facilitated the move towards a more
decentralised productivity related wage fixing system.
Enterprise bargaining has become the primary focus for wage fixing and a
vital catalyst for workplace reform. The new industrial relations legislation
provides the framework to achieve the labour market flexibility, productivity
growth and wage restraint necessary for strong and sustainable economic
growth. 4V7/ 94 9: 54 PM
As I announced in Working Nation, the Government aims to see 80 per cent of
employees in the Federal award sector-covered by direct bargains by the end
of 1996.
In addition, awards will be reviewed and simplified.
Working Nation spells out the close interrelationship between industry policy,
the creation of secure and rewarding jobs in flexible high productivity
workplaces, and the policies we need to educate and train the work force that
industry needs.
Working Nation contains a number of important initiatives to get
unemployment down and the skills of our work force up including a Job
Compact for those unemployed for over 18 months, and a Youth Training
Initiative. Under these initiatives training and jobs will be provided for people who have
become marginalised from the mainstream of economic life during the
recession. We want to ensure that this is a recovery for all Australians not just for the
top end of town.
But the case for doing so is not just based on equity arguments, important as
they are. Failing to address long-term unemployment would be very costly to
the whole economy.
But we are succeeding in meeting this challenge. In the past three years,
close to a quarter of a million long-term unemployed workers have been hired
by employers through JOBSTART subsidies alone.
As from yesterday, the attractiveness of Jobstart has been improved.
Subsidies have been incregsed, the period of subsidy has been extended to
9 months and a bonus payment is available to employers who keep these
workers on for a year.
Employers will also have the incentive of the new training wage which will be
payable to all unemployed people and new entrants to the labour force.
Together with Jobstart, this will mean an employer will be able to receive
subsidies ranging from $ 5000 to $ 8260 for taking on a long-term unemployed
person. The training initiatives in the White Paper were also directed to the longer
term needs of industry. They encompass a comprehensive strategy to enable
industry to sharpen its competitive advantage through getting the training it
needs. 4/ 7194 9: 54 PM
We all must recognise that training is not a welfare issue. It is not something
the Government is promoting because we feel sorry for the unemployed.
Training is a mainstream economic issue, and promoting training is the
responsibility of all of us business, unions and government.
Both management and work force skills are vital to the competitiveness of
firms. Access to capital and investment in technology are important of course,
but these can often be replicated by competitors. Replication based on the
skills of individuals in a firm's work force is much more difficult.
Whatever the reasons for the failure to invest in training in the past, Working
Nation wipes out any excuse for this state of affairs to continue.
The Government has set up NETTFORCE, chaired by Lindsay Fox and
including Ivan Deveson, Bert Evans, Ted Wright and Bill Kelty as members, to
ensure companies are aware of the benefits available, and assist them to take
full advantage of them.
NETTFORCE is developing 21 national, industry-based traineeships. It aims
to cut through the delays of the past and provide employers with a one-stop
shop to put together training and industrial packages to get trainees employed
quickly. Industry is being given the opportunity to have more say in early vocational
education. The Australian Student Traineeship Foundation announced in the
White Paper will provide funds directly to local groups, which may be
committees of employers, to run traineeships for year 11 and 12 students.
Students will combine school studies with work experience in local industry
and off-the-job training. The traineeships will allow young people to complete
their training in a shorter time.
Industry must set the direction of training and drive the administrative
processes so that they are simple and relevant to the needs of firms.
I I
To show our faith in this approach, the Government has suspended the
Training Guarantee Levy. Now it is up to industry to take advantage of the
funding we have provided. It is up to industry to take control of the training
agenda. Industry must play a strong, positive role and capitalise on the opportunities
the world is offering. The game plan has been spelt out in Working Nation.
There, we have set out a comprehensive industry policy that will help
Australian firms achieve world class excellence. It is about providing a
competitive environment for doing business and enhancing the capacity of
businesses to succeed by being competitive both in Australia and on world
markets.
Tax policies have worked to reduce industry costs and enhance our
competitiveness. Australia is the lowest taxed country in the OECD. Working
417/ 94 9: 54 PM
Nation includes tax initiatives to encourage private investment in public
infrastructure, investment in smaller and medium sized enterprises and the
location of regional headquarters in Australia.
The Government's telecommunications, Government Business Enterprises,
shipping, aviation and waterfront reforms are reducing input costs, increasing
the quality of goods and services and ensuring the reliability of supply.
We've introduced competition to telecommunications and seen domestic call
rates fall by about 13 per cent and international rates by more than
per cent in the past three years. Further falls in prices and improvements
in service quality and diversity can be expected as carriers position
themselves for increased competition after 1997.
While domestic costs have been cut, the export sector of the
telecommunications industry is thriving. Exports reached $ 545 million during
1991-92 and are likely to grow to as much as $ 2 billion in 1996-97.
In shipping, the average crew level on Australian ships has come down from
28 in 1959 to 18 and is expected to be reduced to as low as 16 in 1995.
These reductions will save over $ 80 million a year across the Australian flag
fleet, or about $ 1.2 million a year on an average ship.
On the waterfront, the workforce has been reduced from 9000 to fewer than
4000 in the face of strongly increasing trade volumes, more than doubling
labour productivity. Container handling rates in the more efficient terminals
are now at levels comparable with our trading partners. Ship turnaround times
have been cut by nearly 45 per cent. Truck queues and waiting times are
much shorter.
We are increasingly look~ ing to the States to achieve, in partnership with the
Commonwealth, rapid progress with the reform priorities that remain. Here
governments are working to reform electricity, gas and water supplies, further
maritime reform, and to ref& m the legal profession. Industry will benefit from
lower input costs and better services.
Most importantly, we are working with the States to implement a national
competition policy, which will increase the transparency of pricing practices of
public monopolies and provide a more systematic basis for reforming public
utilities, the professions and agricultural production and marketing.
The transformation that our manufacturing and services sectors have
undergone during the past decade has produced a new generation of firms
and business leaders.
No longer are they producing just for a protected domestic market, accepting
second best methods. 4/ 7194 9: 54 PM
Rather they are operating at the leading edge of their industries using world
best practices and technology.
Our industry policy reflects these changes. From a phase when the focus was
on opening up the Australian economy, we have moved to policies which
support our firms to grow, be innovators and ultimately prosper in world
markets.
Access to finance will be improved through a range of measures including the
provision of expert advice, promotion of the role of the Commonwealth
Development Bank, greater tax concessions for equity finance provided by
Pooled Development Funds, and the extension of the Export Finance
Insurance Corporation's facilities to cover the services sector and
manufactured goods.
Innovation will be encouraged by a more generous R& D tax concession, a
program assisting small and medium sized enterprises ( SMEs) to
commercialise new technology and a national network for technology access
and diffusion.
Management and marketing skills will be encouraged by expanding enterprise
development services to SMEs including a major effort to target potential
exporters focusing on innovation, quality, research and development,
marketing and management skills. SMEs will also be helped to form networks
and alliances.
SMEs will benefit from the National Regional Development Strategy that will
provide more than $ 150 million to regions over the next four years to enhance
the development of their competitive industries.
The establishment of Au~ lndustry within the Industry, Science and Technology
portfolio will improve coordination and delivery of programs and bring together
all the Commonwealth's business assistance programs under a unified
marketing structure. The Chair of Auslndustry's Advisory Board and a
significant proportion of its membership will be drawn from the private sector.
Auslndustry will provide the entry point for all Commonwealth business
improvement programs and, through the existing network of the National
Industry Extension Service, provide a major link to State and Territory
programs.
The successful pursuit of global m~ rkets is vital to the future success of
Australian industry. The growth of world trade has been faster than the
growth of world output in nearly every year since World War 11 and much of
this growth has been happening right on our doorstep with exports from the
developing Asian countries growing at twice the rate of world exports over the
past decade. 4/ 7194 9: 54 PM
The successful conclusion of the Uruguay Round and the creation of the new
World Trading Organisation will add around $ 400 billion annually to the world
economy. For Australia alone the Uruguay Round will be eventually worth an
annual $ 5 billion.
As well as big gains for Australian farmers and miners, the Round outcome
will bring great opportunities for our manufacturers and services exporters.
The Round achieved the largest global tariff cutting package ever negotiated
with tariff cuts on products of interest to Australia of more than 50 per cent.
The new GATT agreement on services will allow Australian services exports,
already worth some $ 15 billion, to compete on an equal footing in this fast
growing $ 1 trillion ($ 1,000 billion) area of world trade. Sectors such as
telecommunications, banking, insurance, professional and business service
sectors stand to benefit substantially from this agreement. On current trends
by the end of next year Australia could well be a net exporter of services.
With APEC, we are working to build an enduring framework for trade and
economic relations in the Asia-Pacific. Already, APEC is doing work that will
greatly facilitate Asia-Pacific trade and investment.
In November this year, I expect APEC leaders will endorse a set of investment
principles that will define some common approaches to the treatment of
foreign direct investment flows. Work on harmonising product standards and
mutual recognition of standards and conformance arrangements is also
proceeding well. This will have tangible benefits for Australian businesses
trading and investing in the region.
Having recently met President Soeharto, who will chair this year's APEC
leaders' meeting, I am convinced that in November APEC leaders will again
push APEC on to a higher. plane of activity. President Soeharto and I both
want our region to be actively involved in liberalising trade, facilitating
commerce and strengthening economic linkages between APEC members,
whose economies are now the powerhouse of the world economy.
And we want business to drive the APEC process. After all, business, not
government is responsible for the high level of economic integration amongst
APEC economies intra-APEC trade is even higher than intra-EU trade.
Business now needs to give APEC governments a clear message on what it
wants. One way this will happen is through the APEC Business Forum, which
was established by APEC leaders last year in Seattle and will report to the
November 1994 leaders meeting in Bogor, Indonesia.
We are exploring with ASEAN countries the possible link between CER and
the ASEAN Free Trade Area ( AFTA). This is an attractive proposal. Our
economies are very complementary and linking them could create a market of
335 million people with a GDP of about $ 1 trillion. ASEAN members have
4V7/ 94 9: 54 PM
agreed that the idea merits further consideration and we will continue to
discuss it with them.
At home, the Government is working directly with exporters through Austrade's
and other exporter assistance programs and in industry-based strategies
such as for those for agri-food, construction, and health services to jointly
harness Government and industry export efforts.
Australia is on the threshold of a new and exciting era.
Australia has opened up, culturally and economically, to the rest of the world.
We are ready to reap the harvest of opportunities presented by the new
technologies, the new era of trade driven world growth and our proximity to the
most dynamic and fastest growing region of the world.
Our immigration and multicultural policies have nurtured a unique human
resource on which astute businesses are beginning to capitalise a culturally
and linguistically diverse nation, whose migrant and ethnic communities are
drawn from all parts of the world, including our fastest growing export markets
in the Asia-Pacific.
All this means that Australia can become one of the great social democracies
and one of the great trading nations a nation with a vibrant, multidimensional
culture underwriting a strong, vigorous and internationally
competitive industrial base trading extensively in all the continents. Our
cornerstone will be especially close links to the Asia-Pacific nations.
In all this, industry must play a prime role. Industry must be able to capitalise
on the full range of skills, talents and potential in Australia's human resources,
including its youth, its women, and its many migrant and ethnic communities.
There is still a long way to go. We will succeed because we are a naturally
innovative nation with the will to change. Our unique combination of policies
to free up markets, while en'suring social justice for all, provides the
opportunities, fairness and cohesion needed to succeed.
Thank you 4/ 7/ 94 9: 54 PM