.9TEL: 2~ No0V. 0: 31 No. 004 P. O. 1/ iiU
L PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING MP
ADDRESS TO THE MTIA ANNUAL DINNER, PARLIAMENT HOUSE,
CANBERRA, 27 NOVEMBER 1995
E& OE PROOF COPY
Thank you very much Graham and Jo ( Kraehe), Bert and Pauline ( Evans),
Bill and Barbara ( Page-Hanify), Senator Robert Hill, Senator Kernot,
distinguished members of the diplomatic community, my ministerial and
parliamentary colleagues and ladies and gentlemen.
Well, I did want to follow you immediately, Graham, so I could get back and
get into the tucker and the wine. But you may be a bit weary and I think I'll
have to cheer you up a bit. It was a reasonably cheerful speech, but only
reasonably cheerful and I thought I would say a few things to you that have
occurred to me in recent times about our prospects and where we are.
We are about to go into, sometime next year, an election campaign where
one half of politics will say we are all ruined and the world is about to end and
the other half will say that things have never been rosier. But I think the truth
of the matter is that we are facing a period of substantial prosperity In the
region in which we live and we are in a good position to capture it and to
grow with it.
We have got a number of commentators in Australia now talking about, for
instance, Don Stammer calls it a ' long lasting upswing that will take us
through to at least the year 2000' and, I think, that if you look around the
world particularly in our region, you can see plenty of reasons why that
probably is so. That is apart from the domestic reasons that we have now got
on top of, a lot of the problems here of competitiveness that we have been
growing quite strongly, certainly in OECD terms and that there is no particular
reason why we shouldn't continue to do that. Our cost structure is fine, the
profit share in the economy is very high, the exchange rate provides a
mechanism for competitiveness, we have essentially now endemically low
inflation and, I think, we can keep that there and we are trying now to remedy
the savings imbalance through the public sector in superannuation as you,
Graham, remarked.
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So, all those elements are in place and I think there are other good signs too.
The Japanese economy is now starling to show some signs of growth again.
I think the so-called bubble of the late 1980s, they are starting to wear their
way through that problem, the Japanese government has just introduced a
very large stimulatory package which will lift domestic demand and lift activity
in that country. The Yen has started to depreciate against the US dollar
which will lift Japanese competitiveness. This gives the breathing space in
terms of their own productivity changes and if that economy starts to lift again
it will have a lot lugging power for Australia.
The US is still bowling along quite well at around 2.5 to 3 per cent or probably
at the moment just over 3 per cent. China is growing more slowly than it was
two years ago, but still at such a speed as to provide a lot of demand in this
part of the world. So, the environment we find ourself in is quite good, even
Europe is starting to pick up now with the German economy knocking up
around 3 per cent and the British economy doing quite well in terms of
growth. So, the scene is really quite an up-beat one in terms of growth and
activity. Given that we have now got a much higher proportion of our product
in exports, there is no reason why that can't make quite a substantial
difference to us.
I think that that presents some real opportunities for us and the Government
is trying to make the most of those opportunities by our trade penetration in
the region and also shifting the pattern of what we are doing here. It is worth
recalling, I think, that a decade ago we were exporting 13 per cent of GDP.
The middle range of the OECD countries is between about 23 and 25 per
cent of GDP. We were lagging way behind. In 1983 we were right at the
bottom of the pack. Since then, of course, we have had a very big change in
opening up our economy and competitiveness so now we have got exports
running at around 22 per cent of GDP. -We are not quite up there at that, if
you like, mid range of the OECD, but we are closing quickly and, of course, 9
per cent of GDP the difference GDP this year is $ 500 billion 9 per cent is
billion, you can just imagine what that current account would look like If
that transition had not occurred. I mean, you would be sitting here In a
comatose. economy, growing at probably 1 to 1.5 per cent a year with high
interest rates holding it down and those who had a quid would keep a quid
and those without it would never get one and there would be a lot losing it.
As a consequence that $ 45 billion in addition to exports a year has
completely transformed the face of the Australian economy and, of course,
elaborately transformed manufactures are now leading the way in terms of
our growth. That is a very, I think, important change and it is also just worth
recalling that you hear a bit of doom saying about our debt and we certainly
have to keep an eye on it. But, 10 years ago 21 per cent of our export
proceeds went to paying our interest. This year it is I11 per cent. So, there
has been a very big transformation in the debt service component of the
Australian current account. You might say ' well, we have got substantial
national debt', we have. Perhaps like the person in the street with a big
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3
mortgage, they have just had a doubling of their income, it certainly makes
you sleep better at night and that is what has happened to us. Our debt
service component has come down immeasurably and we are in better
shape. The other thing that I think is worth saying is that and Graham made a couple
of comments about the primary exports sector, obviously his company is not a
foundation member of AMIC or any of those other bodies, but I am rather
bullish about the terms of trade. The terms of trade have been shifting on
Australia since 1950. In 1950 the things we sold to the world were valuable
and the things we bought were relatively inexpensive. Resources were
expensive and manufactures were cheap and we had, therefore, a very high
standard of living in the post war years. That all changed so we got to those
absolutely depression level terms of trade in 1985/ 86, the period that I talked
about the banana republic and those banana republic terms of trade. That
was probably our low point, but I think we are probably going to see, with a
rise in the Chinese economy, India, South America, Russia, all really joining
the world economy certainly for the first time in the case of China, India and
South America and for Russia the first time since World War 1, 1 think we are
probably going to see an upward pressure on prices and more value
attaching to real things as distinct from manufactured things.
I think the premium that has been on widget making technology, gadgets
which has carried a lot of industrial societies along for quite a long time is
probably going to shift given that most countries are now in the gadget
business, whether they be developing economies like China or new
industrialising economies like Thailand for instance, or ones that now have
the aura of a developed economy such as Singapore, these are all countries
that have enjoyed a premium from technology. But, I think, there is going to
be a swing back to real resources, those finite things which for some reason
or another have fallen in value and, I think, if Australia actually gets the
double with a high value added manufacturing industries and at the same
time a pick up In the terms of trade, we'll start shooting back up that Income
curve which we slipped down between 1950 and the mid 1980s.
So, ther is a lot going on out there, I think, and a lot of countries you
compare us with in the industrialised world don't have the resource base we
have, they don't have the capacity to produce food the way we do, yet at the
same time now with an educated population and a much greater commitment
on the part of industry to produce transformed things we can pick up that
premium and at the same time improve our position on the resources front.
Now, that is a reasonably good outlook I think and the other thing then is our
penetration of these markets. Graham mentioned APEC, let me just say a
couple of things about it. The APEC meeting in Osaka was, of course, a
watershed for the region and for Australia. What it meant was that the Bogor
declaration which proclaimed free trade in the Asia-Pacific by 2010 for
developed countries and 2020 for developing countries was transformed into
an Action Agenda at Osaka which ran to 35 pages which was absolutely firm
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I' .1L0 J u: 61 No. COU4 F il
4
and solid all the way through in terms of developing that agenda, making a
start in 1997 and putting down a huge down payment on that agenda as the
first round of Uruguay Round commitments, WVTO commitments on the part of
APEC member states. In other words it was not just simply a declaration or
further words, but a very clear commitment on all the member states at Head
of Government level, to actually go down the path of free and open trade and
to do so in a way that also shows the lead in the Uruguay Round.
You could not have believed that such an agreement could have been made
just a couple of years ago. So, this will be not only transforming and
redefining the Asia-Pacific, it will probably lead the world in terms of free
trade given the fact that already 63 per cent of world GDP is in APEC and in
years time 75 per cent of world GDP will be in APEC. Three quarters of
the world's production, half the worlds population and at Head of
Government level we have sat down and hammered that commitment out. In
a structure, I might say, that in a very substantial measure Australia has
invented and dealt itself into. I think those of you who know a bit about the
Government and the way it works know that now no longer is domestic
economic policy and domestic and foreign policy two arms, two separate
arms and two separate areas of Government. But foreign affairs and trade is
as much part of the domestic agenda as any other part of the domestic policy
focus and we tend to try and operate it in a way where one goal serves the
other. Now with' APEC, we have put a body together which I think is going to
change, certainly in the next half century, the political architecture of the
Asia-Pacific, not just the commercial architecture. Because when I was there
recently I came there with Jiang Zemin the Chinese President, having
recently visited South Korea which, of course, would have been unthinkable
at any time since 1949 until now with a Japanese Prime Minister having
visited China, with the Korean President having visited Japan and I think a lot
of this goodwill has come from APEC. The fact that they all meet each other,
know each other and have some confidence of trust in one another means
that these barriers are dropping.
So it has political ramifications as well as trade ramifications and, of course,
we are an integral part of it. It has been, I think, a very key change and one
which Australia should take a fair bit of pride in and I hope more than that a
fair bit of sustenance from because some calculations we have done between
the Industry Commission and a couple of other of the economic intelligence
agencies is that APEC is likely to add about A$ 1 trillion of GOP to the APEC
countries during the period up to about 2015. So this is quite a dramatic
change and, of course, will start to open all that area up.
The reason APEC is working is because it has got a design quality that no
other trade body in the world has. First of all, it is driven by a
Leaders Meeting. It is not a ministerial meeting. It is a H-ead of Government
meeting and that meeting has decided the end-points of the trade
liberalisation. Whereas in that drawn out process of the Uruguay Round,
ILL:
TEL 26,. 10V 95 0 -1 N'o . CC4 F'. 05/
there were never any end-points. There was only what you could garner from
the person next door and it was all based around the proposition that trade
liberalisation is something we had to do, but we didn't like it very much.
So you had to give something away just to. sort of, get along and to get your
share. Whereas what has happened here is that the APEC leaders have actually
decided that trade liberalisation is a good thing and that they will free up their
markets in goods and services by a certain date and the process will then be
driven towards that by the Leaders Meeting. In other words, it is just
completely different to the Uruguay process altogether and thinking of the
design of APEC and how it might function has been thinking about how we
can really change the whole of the Asia-Pacific, keep East Asia properly
resourced and keep it growing because Graham made the point about these
high growth rates in East Asia. Well if you have got a relatively small
economy, you can grow at 6 or 8 per cent because off a small base you can
get large increments to growth. But you get the Australian economy which is
$ 500 billion and grow it at 4 per cent, there is a $ 20 billion increment to
wealth. That is a large proportion. For instance, it is a third of the size of the
Malaysian economy our growth in one year equals a third of the size of the
Malaysian economy. So just keeping that sort of resourcing up to it is an
enormous challenge.
Now all of this is going to happen, of course, in the Asia-Pacific with China
requiring I mean I have got just a couple of statistics here, Talking about
energy. For instance, East Asia's demand for energy is going to double
every 12 years compared with the world average of every 28 years.
China's growing food needs has an estimated grain shortfall of up to
136 million tonnes annually within 15 years. That is three to six times our
total production of wheat. East Asia's infrastructure requirements for roads
and airports, railways and power stations are likely to exceed $ 2 1/ 2 trillion
over the next decade.
So just keeping that great machine resourced is going to be a great
challenge. In other words, if we want to keep growth in East Asia, and be
part of it,.-we have got to set up the machinery for it to happen. And clearing
the impediments in the road blocks and the logjams out of the system is going
to be an important thing to do to keep it going and that is what APEC is
about. Essentially if we can fuel income growth in East Asia, then we can
participate in it.
Now, fortunately, we have seen a lot of success in this part of the world.
Economies are growing, living standards are rising, people are getting better
opportunities. But this is not so all around the world. Look at Africa, for
instance, Southern Africa, or West Africa. There you have got, you know,
faltering political structures, falling real incomes. It doesn't have to be the
way it is here in East Asia. But keeping East Asia growing, keeping
expectations rising, keeping people happy means keeping income growth
moving, which means keeping resources mobile, which means getting the
I LL: 2 . Nov U NO . u04 F u6/ I'
6
political will to get all that into place. And that is, essentially, what APEC has
done and which Australia, of course, has shown a substantial role in leading
in its formation and in seeking to support those other people who have given
it impetus such as President Soeharto of Indonesia with his declaration, and
Prime Minister Murayama in Japan. So this is Important.
The other thing that I think you should remember too is that the Government
is also working on putting together, as much as we can, some sort of union
between AFTA the ASEAN Free Trade Area and Australia and
New Zealand, or the CER agreement.
Here we have the opportunity in South East Asia of creating a market of
around $ 1.2 trillion in GDP and about 300 million people as a sub-group of
APEC and we are travelling quite well. The Foreign Minister and I are very
pleased with the progress we have been making to date in the AFTA/ CER
discussion and I think, around the region amongst the ASEAN countres,
there is a willingness to involve Australia and New Zealand in this particular
undertaking and where we help them open their markets up and in so doing
create a better mar'Ket for Australian produce.
So it is not anything other than an optimistic scene, I think, and the fact that
we are well placed here in this fast growing part of the world, that we are
starting to get these structures into place, that our own economy is
competitive, we are 40 per cent more competitive this year than we were in
1983 and that competitiveness is now driving that export growth into
elaborately transformed things in services and, of course, in the big bulk
trade of commodities in minerals and, of course, in agriculture. So I would
like to try and ride that process further and to see where it takes us and that,
of course, in trade. The other things in trade facilitation which Is a way of
clearing away impediments to things like the tax system, foreign investment,
customs harmonisation, all of these other things are very much on the
agenda as well.
Now, I think, that we need to savour how far we have come. Certainly
understand how far we have got to go, but know what the opportunities are
and there-are very few OECD countries like Australia that have either the
growth we have, or the growth opportunities we have and they are very much
there. But, first of all, you have got to want to be in it. You have to want to be In it
the East Asian game. You can't be there as a sideline, or a fad. You have
actually got to want to be in it and you can't straggle out there with loyalties to
Whitehall and to Washington believing that you are going to have all the
doors opened up for you in Kuala Lumpur, or Beijing, or Jakarta if our focus
remains only in the places where we have been before. Those things we
have got to do well too and, I think, we can and we continue to keep
for instance, Britain is the largest foreign investor in Australia, we are the
second largest foreign investor in Britain. We have still got very large
investments from the United States. We still have a great strategic
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partnership with the United States. But we have got to make our way here
too and I believe we can.
Now Graham said earlier, we have had a period of sub~ stantial industrial
peace and he correctly identified the problems of the CPA dispute and
I would just like to say a couple of things about industrial relations.
One is to say that we have had a dramatic decline in industrial disputation in
this country. The Accord has delivered tremendous certainty, I think, to the
labour market. It has been principal amongst the instruments in reducing
inflation and lifting employment. We have had a 26 per cent increase in
employment since 1963, household disposable income has risen by
per cent since 1 983, household disposable income per capita has risen by
21 per cent and real wages have risen by 7 per cent. So there is a very good
scene there in terms of the workforce and that is reflected in the wage
restraint and the commonsense is reflected in a much higher level of profits
and, of course, stronger levels of investment which has been powering our
rate of growth.
We are growing, on average in the period of this Government, just on twice
the rate of growth on average in the period of the last Coalition Government
and that is, in part, because you can run. the economy faster without
crunching it with interest rates because there is an Accord to rely upon in
terms of wages growth.
Now this dispute we have had is, of course, not in the normal course of
enterprise bargaining, or in wage settlement. The dispute was not about the
normal growth we have had in enterprise bargaining which has changed the
labour market, I think, markedly. It was about, amongst other things, this
whole question of choice and, by and large, CRA had run a policy which said
that if you take a contract you are worth more than If you are on an award.
Or put another way, that it will discriminate in favour of contracts against
award employees who get their conditions by collective bargaining.
Now if the Government were to say to the MTIA, or to the Business Council,
or to AMIC, or any other body that our policy will be and the union's with us,
under the Accord that we will pay workers up to $ 10,000 $ 20,000 a year
more if they are unionists, there would be a hew and cry around the country
you would have to put cotton wool in your ears. What has happened here is
exactly that, but the reverse. They're saying that If you're on a contract, you
can have more because you are worth more. Now, that's not about equal pay
for equal work it's about unequal pay for equal work, and it essentially not
about choice at all it's about discrimination. And CRA played that game,
and quite successfully, until they finally put those civil writs on people, and at
that point, they stubbed their toes and the unions reacted against them.
Now, this Government is not about to discriminate In favour of unionists, we
are not about to go around and say that if you are on an award, there should
be a beneficial offer made and indeed, the ACTU for its part, wants only a
TEL: 28. Nov. 95 0: 31 No. 004 P. 08, i0
level paying field. They want to be able to secure the same wages and
salaries for the same work if somebody is on an award, versus somebody
who is on a contract, and that's what the dispute is about. Now, it's not about
the way forward, it's not about labour market reform, It's not about organising
the workplace, it's not about best practice, it's not about training and
retraining, because if we look through the successes we have had in
enterprise bargaining in Australia which now affects, of course, about twothirds
of all federal award employees.., well, look at the great industrial
companies in Japan, and other big companies around the world who have
made very great changes in productivity levels, these have generally come by
teamwork, team spirit.
( tape break)
And that's why I wasn't at all surprised when the Industrial Commission held
in favour of no discrimination being brooked or tolerated. In a sense, there is
no place for ideology in this. And what, I think, the company is doing
essentially, is taking an ideological view that if you are on a contract, you are
more useful, and therefore, you are worth more. Now, you know that there
has been the Employment Contracts Act in New Zealand since 1991, but I
don't know whether you know that labour productivity has grown by 1 a year
since. And labour productivity in Australia has grown at 2.4% over the same
period. So, I don't think it's the answer to a maidens prayer, though New
Zealand, of course, has set a model which it's comfortable with, and which
can operate its economy. Can I just remind you, too, of the US Labour
Secretary Robert Reich, who not long ago at a European OECD Conference
lamented the absence of flexibility in the US labour market, and the US
economy. This is a country where the model that CRA wants is the vogue
where people are basically on contracts, and Robert Reich said " in the United
States, we have had huge employment, but falling real wages for 16 years.".
The US has a speed limit of 2.5% growth, and whenever it gets over that,
they start pulling it back, and that 2.5% growth you would have thought by
now would have been 4-5% if those who believe in flexibility, coming from
these sorts of industrial arrangements, having seen them operate for so long,
that flexibility would have been there. Well, the flexibility isn't there, the US
is still a much more rigid economy than it ought to be, and taking securing
an army of working poor is doing not very much for flexibility, but it is also
ripping the soul out of US society.
And, you know, I noticed just a little chilling statistic in Time Magazine a week
or so ago, while I was flying up to Japan, saying that gunshots account for
more deaths of young people under 16 in California than road accidents, or
any other category of damage. Now, they're unemployed, they're on the
streets, and no-one cares about them. And that's not what we went here, and
we are not going to have it here.
Now, we're going to have a debate in the election campaign around these
issues. Our Coalition friends are here tonight, and I just want to make this
point to them, and to you to say, the Government doesn't mind an honest
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debate on this, our model is enterprise bargaining, collective bargaining.
each business tailoring its productivity seeking to draw from its employees
more efficient work, and sharing the gains between profits and wages. That's
happening I think we are starting to do quite welt with enterprise bargaining,
we have a very large training agenda, we have got an international best
practice agenda sitting there, we have got a safety net which looks after
those people who can't get an increase under the enterprise bargaining
system, and in terms of the contracts, we are saying in that respect, equal
pay for equal work. That's the model we are in. We are saying if you can't
get an enterprise deal, you pick up something under the safety net, but if you
can, you and your employer can actually produce a better business which is
more profitable. There's sense about that there has been a great evolution
in that, and there is, I think, a great deal of sense and respectability about
that.
And if the Coalition believes that it doesn't believe in enterprise bargaining in
this way, that it doesn't have a commitment to collective bargaining, that it
doesn't have a no-disadvantage test, that it doesn't believe the Industrial
Commission has a place in all this, then it should say so. And say why it
believes this. To say why it believes such a system would be better for
Australia. Because if they believe it, presumably, they can argue for it, and
make a case for it. But what we won't be having in the election campaign is a
radical change to the labour market by stealth of one side pretending they
have got the policies of the other side, when in fact, they have a completely
different set of policies altogether. Stabbing the Commission in the stomach,
knocking it out of the system, not having a no-disadvantage test, not
effectively giving people a choice these, I think, are alt the recipes, I believe,
of going back to the conflict model that we all came from in the late 1 9709,
which saw a spurt of wages growth, and then a big fall in real wages
thereafter. The inflation rate knocked into 10-11 investment smashed to
pieces, and rising unemployment. That's the sort of model out there. Or,
there's the model we have had as we gradually get the flexibility in the labour.
market, sector by sector, company by company.
Now, I think we are making the grade. A couple of weeks ago I was at tube
makers in.-Queensland, and I was very impressed by a couple of people a
couple of working fellows I sat down with for lunch, and they were literally
blue-collar people in blue overalls, sitting up there talking about how they had
put the last new line production line into the business, and quite proud of
the little innovations they had brought to it. And 1 said to one how are you
going? And he was about 55 or 56, and he said " look, this is the best I have
ever had it in my working life. The best wages I have ever had, the best
working conditions I have ever had, and more time to myself'. And I said,
" well, you please me no end, telling me that", and he said " no, we're looking
forward to the third round of our enterprise bargaining. The first round, it was
pretty much as what we had. The second round we made some real gains,
and we now think all of us think we can do a great job", and they all said
hear-hear down the table. Now, I think that mood is around, and I think we
can really pull it together and make it work. But I think that if we are going to
TEL
split people off, and cut their wages, we will not grow the Australian economy
out as a low-wage country. The Australian economy is going to make it by
innovation, by education, by elaborately transformed things. It is also going
to make it by accessing those big markets for the things the raw materials
we produce, and the secondary processing of them. It's not going to make it
by low wages this is not going to be a low wage, low rent society, and nobody
should try and take it there. But if the Coalition want to take it there,
then this will be the issue in the election. That is, one where we will have a
referendum on industrial relations, on wages and conditions. Where we are
not going to see a sea-change of the kind of country we are by stealth.
Because in this country, IR is not just a matter of factory floor wages or
conditions it's about the sort of society we are, how we relate to one
another. Because your income gives you that mobility, it lets you pass
through the barriers, it gives you your standard of living, it looks after your
family, it brings you the human happiness that the political system should
bring. It's part of the fabric of the way we are, of the sort of country we have
become, the sort of society we now are. And this is why we believe it's
central and it is a debate where we can participate with a bit of goodwill and
keep our society together, and God forbid the point where young adolescents
are finding we're losing more of them from gunshot wounds than we are
through road accidents, or drugs, or anything else. That we actually have a
society that actually does care about one another, and where we have some
common values and some cohesion and some real beliefs about the sort of
country we have become.
So, if CRA wants to go out, and run this debate fine. The unions will rise to
the occasion, no doubt, and as a consequence, I don't know whether any of
us are going to be advanced by it. But let's not call it reform call it ideology
by all means, but not reform. So, perhaps I could conclude on this point -I
really think we are in for a long period of growth, after the turn of the century
at least. I see nothing coming in our way any impediments to knock that
around. Our cost structure is in good shape, our fundamental inflation rate is
in good shape, our competitiveness is in good shape, and our strategies
positioning in the Asia Pacific has never been better. Our bilateral
relationships with the countries around us with Indonesia, with Malaysia,
with Singapore, with Thailand, the Philippines, China, Japan have never
been better, We have got huge opportunities there we have got he trade
barriers down, we have got best practice coming in, we now have
international businesses to compare ourselves with, we are in there for the
break we have never, ever had before. We have had these phases In the
past like, we call the golden years of the 60s. But they were golden for
Britain, the United States, Canada, Australia and a few other countries. They
were not like now, where they are golden for the whole of South East Asia, for
the rising income levels of North Asia, for substantial parts of Europe. This is
a period, I think, none of us have lived through one as exciting as this. And
let's not trade it away in gloom. Thank you very much.
ends. 28 Nov .95T0E: L3: 1 2~ N. oN. v00.49 5 P. io'i':