THIRD NATIONAL CONFERENCE OF THE
INSTITUTE OF DIRECTORS
SYDNEY. N. S. WX. .11JUNE J. 970
Speech by the Prime Minister, Mr. John Gorton
Thank you, Mr. President, for your introduction. I cannot
remember the long list which you gave of those to whomn I shouild address
my remarks. May I confine it to the Prime Minister of New Zealand,
Mir. Holyoake and the other distinguished persons who are present.
Gentlemen, you have had a long day and you have listened, I
think, to seven speakers from the four corners of the earth, all of them
men with an international reputation, all of them men~ with something of
significance to say to you. And I think that their presence on this occasion
has been a mark of the status which this Institute has reached.
Mr. President, may I congratulate you and your Institute on
becoming an Institute in its own right today and no long-qer just a division of
its founding father, the British Institute of Directors. 1 think that this has
come about with the encouragement and the support of the British Institute.
It is the kind of process which has been going on in many fields ever since
Australian colonies became States, and the States became a Federation, and
the Federation became a nation, and this Institute becamne an Institute in its
own right. I wish you well, Sir, you and your Institute as you set course
on your own, as an Institute on your own. And may I congratulate you, Sir,
on the part your personal leadership has played in the very rapid growth
of this Institute. I know that you are a successful helmsman, both in business
and in public affairs and on " Balandra", although I do seem to recall that
in a recent Sydney to Hobart yacht race you were outpointed by a politician:
In any case, Sir I thank you for giving me a forum where I
can talk to so many key members of our commercial, -financial and industrial
world face to face without having to talk to them throughi the sometimes
somewhat dubious media of third parties who interpret what one says through
various public media. ./ 2
I have been provided tonight because I really have, over the
last week or ten days had scarcely one minute to myself I have been provided
tonight with a speech that was written for me by the Treasury. As one
would expect, it is a very careful speech. It is one which seeks to cover
every eventuality. kt is one which, as far as possible, seeks to say nothing
which can be held up against it in the future. And consequently, except
in parts, I don't propose to give it. I will from time to time be ad libbing
and speaking " off the cuff".
But some of it I will give because I thfiL it might be of
advantage if I went back a little to look at the recent history of this nation
to see what has been achieved in that period of time, to see where we stand
today and put to you what I believe to be the pressing problems for this
future decade. Ten years ago, in this country and in thle world outside it,
there was much doubt as to where Australia was going and as to what the
future of Australia would be. At that time when some of us m. any of you
in this room, I think began to glimpse the posibilities of the future,
there were others who said Australia would never become a great
industrial country, Australia could never sustain a great population,
Australia should remain a hewer of wood and a drawer of water and a
grower of wool for the rest of the world.
Yet three years later in 1963 an economic survey put
out by the Treasury said this
" Over the past ten years, and especially over the past three
years, Australia has achieved -its greatest breakthrough in
point of resources since the crossing ofZ the Blue Mcuntains
a hundred and fifty years ago. That earlier event opened
the first doorway to the pastoral and agricultural wealth
of the continent on which our growth has since been built.
But until not very long ago it was commonly held that
Australia would not be a great industrial1 nation and therefore
could not support a great population. The quick succession
of rich mineral discoveries, bauxite, copper, iron ore and
now oil, go far to dispel this view. We do not yet have in
adequate quantities all the essentials for well-rounded
development, arid in the background lies our deficiency of
water, likely perhaps to prove the costliest and most stubborn
of barriers to large-scale expansion. Yet, taken with the
resources already known, these new riches beyond doubt lift
the horizons of Australian growth quite incalculably.
This was written seven years ago not by me but in a Treasury
Bulletin, and I am bound to say that it has raised my eotimation of the
Treasury greatly to read it.
That was a confident statement at that time, and some thought
over-confident, but the years have shown that it was true if anything,
understated. All the resources listed in it have been chown to exist, many
of them in quantities at that time unthought of, and many new resources have
been added to the list.
The problem of water in the development of Australia remains
water for industry, water for creating a pleasant environment for those
Australians who must live in the towns and cities that miust grow in our
North; water for protection against fire and drought and famine in our
rural areas. Yet even this is not as intransigent a p~ roblem as it appeared
seven years ago, for now atomic power, desalination, new water resources
proposals and programmes offer a hope that even this barrier will be removed.
I think, Sir, that today only a chronic and cofirmed peosimist would say
we lack the foundation for really large-scale industrial development in
Australia. In short, the debunkers and the knockers ten years ago have
been shown to be completely wrong.
But might there not be another problem before us? Having
shown these things to be wrong by a certain amount of luck and a considerable
amount of effort, there still could be a risk of another mood entering into
Australian thought, potentially as dangerous as that mood which said years
ago we never would grow great. I am referring to a disposition to believe that
most of our underlying problems have been solved because of the progress
we have made, because of the opportunities that have opened before us; a
disposition to believe that the progress we expect, the progress these new
resources have made possible, will come more or less of its own accord
and without the brains and effort and hard work-and sweat which ultimately
are the only bases on which progress can be made.
There has been a spreading of affluence amongst our society,
and some of those to whom it has spread not tClose who took part in the
real development, but those who indirectly profited from it must perhaps
think it came rather easily and that it will continue to come easily.
This is a mood which, if Australia is to grow as quickly
as it can, we must eschew. You must see that this mocod does not enter
into the Australian consciousness, because I am talking to an audience of
men who direct companies, who know that when one problem is solved,
another problem arises; who'. know that nothing is easily done, who in
4.
their everyday lives must say " Right, we have got over that hurdle, there
is another one in front of us. It will not be easy to get over it. We must
continue with the effort that we have put in. ThiB is done, and I think
the leadership for it can come in great part from you. Then the possible
mood of complacency into which Australia could fall will not become the
danger which it otherwise might be.
I said that many of our problems had been overcome and they
have, but there are still many before us. May I enumerate to you those
problems as I see them, and Derhaps take this opportunity to explain to
you why the Government has done some of the things it has done to try
and overcome these problems.
We, in Australia, must have vast and increasing amounts of
overseas capital if we are to develop. Yet we must also try to see that as
much as possible of Australian industrial development is in the hands of
Australians, remains in the hands of Australians and grows in the hands
of Australians. Our nation is going through a period o! industrial expansion,
of great mineral development. We need large and coatinuing infusions of
capital from overseas in order to sustain this, and in the last five years,
one-sixth of all such capital investment in Australia has come from
overseas. And, Sir, inevitably that infusion of capital in our larger
industries brings with it a greater degree of overseas ownership and control,
both of our mineral developments and ultimately of the processing of our
minerals, which is a highly capital intensive enterprise.
And if I may give you some examples o! what has been
happening, overseas investment in mining five years ago . was $ 34 million
in the year. It has risen to somr-ething like $ 250 million and Australians'
control of production in minerals alone has dropped i-n that time from
63 percent to 47 percent. At the same ti-me, Australian requirement to
service existing capital by remitting abroad has risen from 8. 3 percent
to 10. 5 percent of our export earnings. This has happiened in the last
five years. And there is a build-up of commitments 1or the future because
inccm= earned in Australia by overseas investment Cand ploughed back into
AusL* alia has more than doubled in five years.
I do not mention these facts in order to complain about them.
We are glad about them because these are prices we can afford to pay for
the development we must have in the time scale in which, in this world,
we need that development. We can afford to pay it, because the benefits
which come to us from it as fifty percent shareholders in every enterprise
because of taxation and other benefits, do come to us, and we could not
develop as we should without this influx of capital. So 1 don't complain.
But though they are prices we can afford to pay, they are not in their
entirety prices we should pay unless we must. And so, as a government,
we have tried to provide the opportunity to retain as much Australian
ownership and as much Australian control as we can, provided we don't
iiuaibit the inflow of capital, and provided we don't inhibit growth.
And to that end we have adopted a number of policies. We
have adopted a " takeover code". We have adopted a guidelines policy for
borrowings in Australia. We will be laying on the table of the House of
Representatives this week for discussion by you, and all those interested,
proposals for convertible notes, so that those Australians who have money
to invest and who must get an income from it, will have an opportunity to
invest it in notes, get an income from it, and have an opportunity to convert
it to equity at some later stage.
And we have introduced now into law what appears to have
been a rather controversial proposal for an Australian Industry Development
Corporation. Sir, this Corporation is designed to borrow abroad on behalf
of Australian companies which ask it to do so and only on behalf of
Australian companies which ask it to do so; and cornmanies which it judges
to be viable and which might not themselves be able to borrow and which,
because they were unable to borrow, might have to surrender equity to an
overseas partner. Its objectives are simply those, and I do not think that
those objectives could be attacked by anyone with an interest in Australian
development and Australian ownership of development.
After all, although the interest rates may from time to time
be high in the Eurodollar market or the United States, if Hamersley can
borrow at 10 or 11 percent on these markets and makie a profit from it,
then why shouldn't an Australian company be able to do the same if it can
find a corporation of the stature to act for it? And this is what the Australian
Industry Corporation is all about.
It will have no power to interfere with a company or to act
financially on its behalf unless it is asked. It will be subject to the same taxes
as other companies engaged in its field. It will compete on equal terms
and it can't do any more than compete. It cannot dominate. In fact, Sir, it
will offer a choice to a borrower and, after all, the right of choice, as
everybody in this room would agree, is one of the essentials of a freely
growing economy, whether it is a choice of the bank from whom one can
borrow, the company with whom one will go into partnership or the lines of
action one will take as directors of a company.
And I believe, Sir, that this Corporation, under the control
as it will be of directors drawn from private enterprie, will help to
retain the greatest possible Australian ownership of growing Australian
enterprises. It won't interfere with the inflow of capital from abroad that we
need and must have, and indeed, I think it will be an adjunct to the growth
of Australian private enterprise and will help it grow as Australian
private enterprise. That is the way in which the Government has approached
one of the problems we see before us now which is, having reached this stage of
our development, more and more capital is required, more and more
capital we will take; but we want to see as much of it as possible retained
in Australian hands for economic or, if you like, for nationalist reasons.
What are some of the other problems that now face us that
will nct be easily overcome?, I, without putting them in their proper order,
would say that the problems of rural industries now and in the future are
perhaps the most significant. I do not see how we can possibly go on
growing more and more or indeed as much, of the commodities which the
world either does not want or is not prepared to pay for at a rate which
will cover the cost of pr-oduction. And with the very possible entry of the
United Kingdom into the European Economic Community, this problemn
looms before us with even greater urgency.
Subsidies can be a palliative, but only a palliative, not an
answer, and this problem will niot go away because of' industrial development,
because of mineral development, because of the application of the minds of
you gentlemen to your own businesses. This is a problem I merely flag
at this stage as one of great significance to the future. I can't do more
than flag it at this stage, because we are talking about it very deeply in
Cabinet itself, and I wouldn't want to say anything wihich was in advance
of what Cabinet might say. But it is one of enormous significance.
We have in this country and this affects business too
the problems inherent in a federal nation. You will all have heard various
epithets applied to me, one a! which is " centralist". The other day I said
I didn't quite know what it meant and I don't know now-, in spite of the
" Sydney Morning Herald" endeavouring to tell me in one of its editorials.
But there is in a federal systemn, which I think is the best system under
which to live, always inherent difficulties between governments, and those
difficulties often wash over on to the companies who have to carry out their
enterprises in Australia. If somebody wants to export iron ore in Western
Australia and they can deal with one government to do that, then they have
to decide at what price they will be allowed to export it, and they have to
deal with another government to do that. And so it goes.
But these problems themselves will be worked out, I think,
within this framework that we cannot and must not and will not have
six separate nations in the boundaries of this continenl-t. We will have
one nation, but we will decentralise the running of that nation as f ar as
it is humanly possible to do so. This is the bes-t way to bring not only
the people but the leaders of industry such as you into the operation of
the economy of this country.
Can I give an illustration I hope I dor't try your patience
an illustration of the approach that I have to this matter, by referring to
something you might have read about in the papers from time to time,
quite wrongly, quite loosely called offshore minerals legislation. Because
I think that does illustrate the approach which I and my Government have
to this affair. / 7
It has been claimed that we as a central government want to
take away mineral rights from the States. That is quite wrong. It has
been claimed that we want to get control of all minerals, but that is quite
wrong. But there exists a situation in. this nation now where nobody knows
who controls, who is responsible for, the seas which lap the coasts of
Australia. Nobody knows who is responsible for the resources of the
seabed not only minerals but other resources. Nobody knows who is
responsible for the conservation of fisheries. Nobody knows whose law
runs either between the low water mark and the three-mile limit, or
between the three-mile limit and the outer continental shelf. it is unknown.
It is in dispute. And we believe that we should not be the only federal nation
in the world that doesn't know who is responsible for these matters, and so
we believe that there should be a legal decision on these matters by the
High Court which has been set up for the very purpose of interpreting
constitutional matters which are in doubt.
Once that is done and I hope it will be I don't know what
the results will be. I don't know whether it will turn out that the States
own and are responsible for the seabed and for the sea above it from the
low water mark to the three mile limit or from the low water mark to the
outer continental shelf, or whether we are responsible for it I don't know.
But I think we should know. And once that has been decided, then
irrespective of the decision, we want to move into an area of co-operative
federalism by saying " No matter who has got the legal responsibility, if
we have got it, then let us co-operate in a federal way. You administer it.
You take 60 percent of the royalties of minerals. You deal with the
overseas companies who want leases. You come to us for a final
decision. This is the approach to federalism which we have and which
has led, 1 think unjustly, to centralism being put upon us.
But if this is not done, then nobody will ever know who is
responsible for what. If a tanker runs aground, ( as it did in Queensland)
two miles offshore, no-one will know what government has the responsibility
to see that that tanker is pumped out so that there vwill not be pollution of
the area around it. No-one will know who has the right to arrest fishing
vessels who are outside or inside the three-mile limit. No-one will know
who controls the continental shelf which runs between us and Indonesia
whether we do or whether Western Australia does. No-one will know,
when New Guinea becomes independent, who is able to decide where the
median line should be on the continental shelf between us and New Guinea
whether the Australian Government does or Queensland does. No-one
will know how to go about closing the Gulf of Carpentaria to fishing, because
no-one will know who has the legal responsibility to do it. And these are
matters which in the future could be of great significance to Australia.
Perhaps they are not problems which directly concern you, gentlemen,
but you will forgive me if I take the opportunity to expound to you some
of the problems which beset me. / 8
Well, what do I see for this country in this next decade?
Nhat are my aspirations? What are my hopes'?
I would hope to see a country in which industrial development
continues at the same rate as it has. I would hope to see a country in
which we process more and more of the minerals in raw state which we
take from the earth. I would hope to see a country in which we clean
up the environment in which we live. I would hope to see a country
and indeed I must see a country, which devotes more and more of its
resources and efforts to the sterile but necessary requirements of defence.
I would hope to see a country which provides more and more opportunity
for its citizens, enabling them to express themselves, to engage in
occupations which give them satisfaction. I would hope to see us gradually
moving towards satisfying the aspirations of Australians for better
education, for better health, for better social services, for better roads,
for all the requirements which are made on the public sector. This is
what I would hope for.
But I would know that government cannot do that by itself.
I would know that it is the people in this room and others like them who alone
could do it because I would know that the provision of these matters for the'
public sector could only come out of what was produced in the private
sector. I would believe that it was the task of a government to see
that a climate was created in which those in the private sector were given
the fullest possible opportunity to make their judgments, to reap their
profits, to sustain their losses, because by this interplay in the market
place, as I believe experience has shown, will come the greatest possible
contribution of wealth to the country and from thiO grctest contribution of wealth
to the cod~ rtrygovernment cnrtake'that which I havr-e ; d I woul. d like to see provided
from the public sector.
Sir, as long as I am in this position, or my successors, what
we would seek to foster is not laissez-faire it is rot laissez-faire. What
I would seek to foster is true competition, true private enterprise, true
opportunity for individual judgments as to where a company should go and
what it should do, because I believe that in that way a government and a
people of a nation best benefit. We must see that as prosperity grows you
are given this opportunity, and if you take it, the fruits of it are shared
amongst the whole nation. This is essential.... shared in the ways of which
I have spoken by a government providing health, social services, education.
And in doing that, must keep a careful balance and judgement to see that
that which is taken to provide these things from the government sector is
not so much that it removes incentive from the private sector to retain
that which it has earned.
And if this careful balance can be sustained, and if we can
look to each individual, each company director to acceot responsibility
for his decisions, and to try to make those decisions not necessarily on
the basis of'what is best for GMH is best for America", but " what is best
for Australia is best for my company", as I think we can look to you, then / 9
I tahink we will in this nationattain the kind of goals I have set before you.
. ut I am sure when we have attained them there will be new problems rearing
their head, and-what-a dull and uninspiring world it would be if that were not
so. It is because I think this kind of partnership the kind of
work that you do, this kind of management which we do for well or for
ill is of such significance, it is because of this that I finish as I began
by thanking you, Sir, for the opportunity to speak to such a representative
gathering, a gathering of people who have contributed so much to the
growth of this nation and who have so much more to contribute.