.4I PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING, MP,
FINANCIAL REVIEW CONFERENCE, ' AUSTRALIAN INDUSTRY AND THE
KEATING GOVERNMENT QUESTION ANSWER SESSION
TUESDAY 5 JULY, 1994
Q: I wondered what your major policy agenda is for the 12 months from now?
Do you have one or two specific things that you want to achieve in the
next twelve months?
PM: Well, I want to drive the White Paper changes from, simply, a statement
of policy changes to an outcome. That is, developing the training market,
developing the job placement market, getting a much better focus. With
information technology the way it is, the capacity to match demand and
supply, we should be able to develop a much more sophisticated job
placement business outside the CES which also should include, I think,
case management. That is, we want to develop a market beyond the CES
for case management. That is, we are to take people who are either long
term unemployed that is, unemployed over 12 months or at risk of
long term unemployment and manage them into the workforce. Including,
of course, meeting the commitment we set in the White Paper of not
letting any person under 18 slip through the system. That is, making a
commitment to case manage every young person under 18, who might
slip out of school, back into training, education and back into the
workforce. Now, I made the point in the speech, I don't think we're going to see
migration making the commitment to skills formation which we're going to
need in this recovery and we can do it through training and I think that is
going to be one of our major objectives actually driving this change
along and making it work.
The other... the Government has got a sort of holistic approach to these
things. I made the point about foreign policy being a part of economic
policy and now it is in a very big way. I can't emphasise too much how
well we did with the Uruguay Round. It went on for seven years, I was at
the OECD meeting where we s! tood up the Europeans in pushing
agriculture into the round and, with the support of the United States, got it
into the Tokyo Summit with President Reagan and into the Uruguay
agenda. And, as you know, with the Cairns Group, we drove a lot of the
debate through the period. But, there was a great cockiness in Europe
coming up to 1992 and the notion that they could go their own way
without giving concessions to the rest of the world was pretty strong
among them. But, they were and are very worried aboutAPEC
needlessly so, in my view, but right through my visit to Western Europe on
this occasion I had all the major European leaders asking for full observer
status by the European Union in APEC. They are worried about APEC
getting away as a fast growing area and I think, as I said, without APEC
having developed the way it has with half the world's production and
over half the world's population sitting down represented by heads of
government it was the nudge the Europeans needed to sign up at
Uruguay. For a country like Australia which is not part of the European
markets, that's not, has a close market like North America, that's basically
got to trade on its own fat, the Uruguay Round was a great change for us.
In principle and in content. And, to go and extend that and do GATT plus
things in the Asia-Pacific is, I think, the way to go. That is why APEC is
important to us. We are now exploring this opportunity, as I say, with
AFTA and Australasia. The GDP of Australasia is about $ 500 billion, the
GDP of the ASEAN countries combined is about $ 500 billion; there's
complementarity between us in not only relative size and weight but
complementarities. And it would give Australia a place in a trading market
of around 300 odd million people and a combined GDP of around $ 1000
billion and growing quite rapidly. So, that's important for us as well.
These are all, I think, things we have got to drive, and drive this industry
innovation debate and the extension of that into these markets over the
next couple of years. I think it is going to be terribly important to us. In
the last year exports have grown by about 11 per cent and imports by
nine per cent. This is quite encouraging in a recovery phase where we
normally see a sharp lift in imports. So, we're heading down the right
paths. I think the thing is to cdfitinue to push these changes through.
The other change we want to see pushed through is the shift to entemnse
bargaining of the great majority of areas under federal award coverage.
And, as I say, we want to get to 80 per cent by 1996 and if we can do that
we've really remodelled the Australian labour market away from the
centralised system and made it more responsive. There's going to be a
test in this recovery to see whether managers can spot the opportunities
and draw from the workforce the productivity of related changes in
business which can keep that inflation rate low, but lift profits of
companies which can be divided between profits and wages. This has
never been the case in the past because, by and large, industry was
always looking to centralised wage fixing. In fact, we are already hearing
some firms saying, as there is a little bit of pressure coming from the
recovery, " Can't we go back to centralised wage fixing?" Well, the
answer is, " No, you can't go back to centralised wage fixing and we've got
to do this one right." So, I think, that is another important part of the
government's agenda and driving those things is going to take more than
enough time.
0: Prime Minister, you've just alluded to a very important point about the
management challenge in all of this and the David Karpin Task Force
report is due out very soon and in that, I think you will already know, that
management doesn't get a very high score card there. I'm wondering
whether you feel the challenge that management is up to this national
picture challenge that you paint for us because, clearly, the rest of the
workforce seems to be pushed very much towards the big challenge?
PM: Well, I think the environment has changed, that is the main thing. The
environment has changed and, as a consequence, there is always, in
every company, the person who spots the new environment, who
understands the new environment better and exploits it better. And the
performances of one firm verses another in this environment means that,
generally, boards of directors make decisions about management if they
find they are losing a competitive position or their opportunities are not
being fully maximised. So, I've always been a great believer in getting
the tariff levels down, getting the free winds of competition in the
economy, getting an emphasis on product innovation and all the bits and
pieces which need to come with that to make investment fire. That is, a
profit share that gets investment off and running, a tax system which is
sensible and, of course, flexibility in the labour market.
Now, I think, with those things we are seeing, really... I don't know what
the consensus in business now is about the term of a chief executive
officer but I would think that it is getting shorter and shorter. It was always
about eight years and it is now coming down to about six and, more likely,
five. After five years of a big effort by managers I think they are mostly
moving on to do something else and there is another wave coming
through. This is very healthy for the economy, I think, and very healthy
for business. So, I'm very optimistic, really, about business management
in Australia. I don't think we've been the best in the world, by a long
margin, but I think that is changing and I think that turnover is going to
sort of pick the people to suit the environment.
Q: Prime Minister, your White Paper was very well received. This move to
increase training, I think, everyone must have agreed with that. Now,
there were a few comments though, buried deep in the leader of the
Financial Review was a comment that perhaps the training was being
concentrated too much on the people who are least likely to show any sort
of response. I was just wondering if you have any reply to that and that
perhaps that you could do better next time around?
PM: Well, I think that our view is that the Cinderella area of Australian
education has been TAFE. And, trying to lift the status of vocational
education has been one of the key objectives of the last few years. We
started this with Qn-eNatio-n by putting $ 700 million over three years
which we've now added to, it is now $ 1 billion for the growth in the
TAFE system and we pulled the threads together into a national system.
But, we wan-t to develop... I mean, there is always a division of, if you like,
interest or loyalties, as the case may be, in these things. I think the
government wanted to see a training market emerge and not a monolith
with TAFE. But, because we haven't really seen the proliferation of
private training providers TAFE was the basic building block of the
system. So, what we have sought to do is get TAFE geared up to take
the throughput of the higher participation rate in schools and to say to
kids, " Look, 15-19 is a period of vocational preparation, you can go
through high school and out into tertiary institutions." We take about
per cent of the output, we are at the top of the OECD, or in that near top,
where we are optimising the number of people exiting the secondary
education system into tertiary. But, we are way, way below the optimum
sorts of level of training through vocational education if, say, we compare
ourselves with Western Europe or even North America, but particularly,
with Western Europe.
So, expanding TAFE and getting it right is, I think, an important way to
make a difference to aggregate training training in the aggregate. But,
that means, I think, that we want a private market to develop and we want
business to be, basically, driving it. And, I think we'll see a very different
complexion across TAFE. Where TAFE was once, the product of TAFE
came from the training providers in the system we now Want the product
designed by the users of the system, the people who have demand for the
product and that is, essentially, business. So, I think, if we can get the
result we need in TAFE we are going to see a big change in training
capacities and a focus by business on human development within
companies and on training in the broad, which we haven't seen in the
past. Now, the labour market and the long term unemployed are different things
again. Here, we've got people who have been unemployed for a year or
18 months or even greater, longer, two or three years. And, our
experience with them is that, properly streamed and invested that is,
people investing some time and effort in them they pay, generally,
substantial rewards. And, it is not a case of investing in the least likely
but, rather, knowing that we can't have, in this economy, a labour market
of this size 300,000-400,000 people who are long term unemployed.
That is too big a drag on our national efficiency, it is inequitable and it
produces this, sort of, division in society which is unhealthy. So, getting
the focus back there, taking a personal interest in these people, case
managing them, getting to understand their personalities, their
educational attainments, their work experience, their aptitudes.... focusing
them into a business or training them, I think, gives them a chance to get
back into society. Particularly when the economy is producing enough
aggregate jobs to take up a substantial proportion of unemployed people,
including that stream of the long term unemployed who would not
otherwise be there. So, it is a balance and in the balance I think we are
getting the balance right. At any rate, I think it is a mistake both in
social and economic efficiency terms to regard the long term
unemployed as a lost cause and to move on. Because, we will run into
skills bottlenecks and shortages and that can give us problems about
wages and wage push inflation at another stage in the cycle and now is
the time to be thinking about that.
Q: Prime Minister, infrastructure. In your last budget you adjusted the One
Nation infrastructure bonds so that they are now tax attractive to
investors, including institutional investors. What are your expectations for
the role of private sector investment in infrastructure in your economic
development agenda over the next five years?
PM: Well, I think this is going to let me just go back a step and say public
infrastructure has suffered in the time when we had fiscal consolidation in
the 1 980s. When we had the government in a savings mode, the public
sector in a savings mode developing those surpluses in the middle to late
1980s. We cut back all of the public sector, including infrastructure. And
there will be a need for some public infrastructure which we have
recognised in later times, in One Nation, for instance, in the national rail
highway where we are putting now a substantial investment in the
national rail agreement, in the major highway systems, in the trunk roads
around the capital cities, I mean, we are doing it, now, in some places.
But, there will be places where public investment or community
investment in facilities will be important. I mean, after Working Nation I
went down to the Sunraysia district and there this is going to be the
bulk wine growing capital of Australia. And, yet, the irrigation system was
set up on gravity, all the contours of the system have, basically, been
designed around the local topography. And, now, to expand the system it
needs some community infrastructure in terms of drainage systems and
water reticulation which, as a community, would provide an optimal kind of
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investment to go there. Now, it may be that a super fund which is a low
tax paying body which has found infrastructure bonds unattractive in the
past given we are now giving a 33 and 1/ 3 per cent rebate on
infrastructure bonds may find them attractive to invest. But, again, it is
going to be a ' suck it and see' situation, to see what the funds think of the
particular projects, whether they think they are going to stand up
economically or whether they're, simply, just after the tax concession.
And, we'll have to muck around to get that balance right, see where it is.
Some substantial state infrastructure, infrastructure in the states, will also
qualify under the investment bonds, infrastructure bonds, but I don't want
to see, if you like, a large proportion of state infrastructure responsibilities
transferred to Commonwealth tax expenditure either. So, we're going to
have to just see how it goes. For our part, we are willing to give it more
than a reasonable fly to see if we can tap some of the savings of the
superannuation industry and see them go into some of these sorts of
areas. And, if they are well judged and well managed this could be a real
addition to the national stock of infrastructure.
Q: Prime Minister, I was pleased to hear you reject, in the early part of your
speech, the thinking that we either have a strong resources sector or a
competitive manufacturing industry...
PM: Yes, that was a John Stone thesis so we don't hear much of it these days.
Q: Given the rejection of that thinking, though, I'd be very interested to
hear how you see the benefits of the resources sector in building the
future economy of Australia. How do you see it contributing to a future
competitive Australian economy?
PM: Well, I think it is still of primary importance. And, if you look I mean,
we are now focusing, often, on the success of the manufacturing sector
from the inward looking structure we had a few years ago to what we have
now. There's been a great transformation. This, in some way, is masking
the success of the resources sector which has gone from strength to
strength through the eighties. It has picked up, first of all, the primary
benefits from the exchange rate, the new exchange rate system, but it has
been well managed, it is more productive, its markets have diversified, the
market penetration. The effort has been maintained and the contribution
to national production and national exports has been growing very
strongly. So, any notion that, you know, there's a new fascination with
manufacturing and services at the exclusion of the primary export sector
would be a very big mistake, in my view. And, I think, therefore, one has
got to concentrate across the board and to see that all of our sectors get
the advantage of enhanced competitiveness and where we can at least
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give the managers of these resource sector companies of ours the
chance to pick up the things that are coming from national productivity
and national competitiveness. Now, a lot will then depend upon their
entrepreneurship, their marketing and everything else but, by and large, I
think that we have been able to provide a much more competitive
environment and they have done the things that they need to do to make
their businesses more productive and more competitive. Anyway, the
proof of the pudding is in the eating and the strong contribution from the
resource sector is sitting there in the national accounts.
Thank you very much.
Ends.