EMBARGOED Not for
MEDIA RELEASE publication before
b. UU P. M. 22 June ] 9/ b
VICTORIAN MANUFACTURERS' EXPORT COUNCIL 2
Annual Dinner Melbourne 22nd June 1976
by the Acting Prime Minister the Rt Hon. Anthony
I would expect that$ as exporters, one of the things most
in your minds is the Government's decision to reduce, and in
some cases defer, benefits to exporters under the Export
Market Development Grants Scheme.
This is a decision none of us likes.
Bu t it is a decision which was part of the Government's
firm approach to economic management.
The Government's basic and imperative objectives are to
bring down the rate of inflation and to restore economic
stability to this country.
Inflation lies at the very heart of our economic
difficulties. I suggest it lies at the heart of your difficulties as
manufacturers and exporters.
And a major contributor to our damaging inflation rate
has been excessive Government spending in recent years.
We inherited a massive and intensely inflationary
budget deficit.
If inflation is to be reduced.-and it must be
then that deficit must be reduced.
The major acceptable way of reducing the deficit is by
reducing the rate of growth in Government spending and if,
this is to be done, then all sectors must share in the cuts
to be made.
As I've spoken to people around Australia recently, they
all tell me they understand our problem, and support what
we are doing but they all feel that their particular area
of interest should get special consideration.
Nevertheless, I think the community now accepts the
fact that a Government that tries to spend its way out of
economic problems only drags the country deeper into trouble.
Our experience of the last two years should have shown
us that. I hope you will accept my statement that our action on
export incentives in no way diminishes the importance
the Government attaches to the sustained development of
overseas trade.
In fact, I think it fair to say that the total program--
of which this decision is part is designed to help exporters
maintain competitiveness and strengthen their positions by
cutting inflation.
In aggregate terms, as distinct from the situation of
individual industries and exporters, our export situation
is most healthy.
Total exports for 1975/ 76 will be well in excess of
$ 9,500 million,' having doubled in the past four years.
Exports of manufactured goods, have more than doubled
over this period and are expected to total a record $ 2,150
million for 1975/ 76.
I think it's a great tribute to the strength and
resilience of the Australian economy and to the skills
of its producers and entrepeneurs that this very substantial
growth in Australia's exports took place against the
background of the world's worst economic recession since
the 1930s. But whilst the aggregate figures are gratifying, you
know very well there are many difficulties being encountered
in our export industries which are not revealed in the total
growth figures.
As you are only too well aware, the export of a wide
range of manufactu-.' ed products has been sharply reduced,
or has ceased.
Most factories are running at under capacity.
Some have shut down.
I don't have to tell you that the staggering rate of
inflation we had to contend with has meant a severe erosion
of Australia's export competitiveness.
While it is true that our competitors have similarly
had to contend with rising costs, Australia's rate of
inflation has been much greater than all of the major
Western economies except the United Kingdom and some of our
major competitors, such as the United States, Japan and
the Federal Republic of Germany now, have cut their inflation
rates to less than half those with which you have had to
contend. Unless our objective of controlling inflation is
achieved, all of our export industries not only manufactured
exports, but the mining and farming industries as well
will face intolerable burdens.
They simply will not be able to compete in overseas
markets. The vigorous and determined pursuit of our objective to
control inflation has meant and will mean many difficult
decisions by the Government.
I've already mentioned one of direct concern to you
as exporters. The Government did give very careful consideration to
the proposals put forward by yours and other organisations.
I hope you will appreciate that at this time the Government
cannot afford the luxury of looking at individual proposals
in isolation a method our predecessors used with
disastrous results.
Rather, we must look at the whole range of Government
activities, and determine the priorities that & re in the
nation's best overall interest.
As I have already said, we are fully conscious of the
need for a continued strong export sector.
But, we believe that in the present circumstances, we
can best contribute to the attainment of that objective by
arresting and reversing the erosion of our international price
competitiveness.
And, to do that we must reduce inflation.
So it was in this context of an overall anti-inflationary
policy and the urgent need to alleviate the immediate
budgetary problems that the decision was taken to defer part
of the payment on some of the market development claims lodged
in 1976/ 77 until the following year.
In allocating the available funds, particular regard
will be had to the claims of smaller exporters.
Where the amount of the grant appro ved does not exceed
$ 10,000, claimants will be paid in full.
Those firms whose approved claims exceed $ 10,000 will
be paid an initial grant of $ 10,000 as soon as their claims
have been processed.
It is estimated that about two-thirds of all firms submitting
claims in 1976/ 77 will receive their grant payments in full,
immediately on approval.
As I announced last week, in keeping with the Government's
overall policy of expenditure reductions, legislation will
be introduced during the budget session of Parliament to
amend the provisions of the Export Market Development Grants
Act. Briefly, the premium rate of grant of 85 per cent will be
removed, leaving the present 60 per cent as, the standard rate
for all grants.
In addition, the grant ceiling will be reduced from
$ 100,000 per annum to $ 70,000 per annum, while the provisions
relating to Commonwealth Government-sponsored promotions will
be removed after 31 December, 1976.
These changes are designed to bring Government expenditure
under the scheme to the level originally provided for when
the scheme was first introduced.
Although it has been decided to reduce the overall benefits
available, the changes have been designed to minimise the
impact on the smaller and more financially vulnerable exporters
who make up the bulk of the claimants under the scheme.
Whilst I fully appreciate the importance exporters attach
to incentive arrangements, there are other important and
extensive forms of assistance that the Government is continuing
to provide to exporters.
The services of the Department of Overseas Trade in
Canberra and through its six State Regional Offices are
avallable acL all timues tc, assist exporters wizh their problems.
The Trade Commissioner Service will be only very marginally
affected by the Government's expenditure cuts.
Funds for overseas trade promotion are to be maintainied
at approximately existing levels.
The department will continue to arrange and service what
has been to date a most effective programme of trade displays,
exhibitions and trade missions throughout the world.
An Australian Trade Exhibition is to be held in Moscow
next month. This is one of the most ambitious exhibitions staged by
Australia, with about 50 Australian firms participating.
I will be visiting Moscow to open the Exhibition and I will
take the opportunity to have discussions on future trade
prospects generally between our two countries.
The successful overseas trade publicity programme of the
Department of Overseas Trade will be continued.
The Government intends to maintain and strengthen the export
finance facility under which the Export Finance and Insurance
Corporation provides concessional finance on a long-term basis to
Australian captial goods exporters to enable them to compete
with overseas suppliers.
Negotiations are being held with the private banks to
extensively widen their involvement in this area.
This is consistent with the Government's desire to ensure
that initiative and responsibility in appropriate areas are
restored to the private sector.
However, should the private sector specifically request
Government co-operation in the commercial sector, then prompt
and practical consideration would be given to the proposal.
Recently the Government has been in close consultation with
some Australian firms on the possibility of co-operation in a
large overseas turnkey project.
In addition, a proposal canvassing the possible establishment
of an Australian Overseas Projects Corporation has been received
from the Associated Chambers of Manufactures and is currently
the subject of study within my Department.
As sson as the economy is restored to a satisfactory state
we will be able to give further attention to expanding the
assistance that can be made available to exporters.
Meanwhile the state of the economy must be our prime concern.
And I must say, Mr Chairman, that when I read the resolution
carried by the National Executive of the Labor Party last week,
my feeling was what a tragedy that such lack of understanding
of the nature and depth of our economic crisis continues to exist
in That Party.
How ironic that a resolution purporting to call for
protection of incomes and living standards completely ignores
the most devastating enemy of those standards inflation!
How ironic too that we are attached on unemployment by
the party whose policies contributed so largely to the worst
unemployment in 40 years.
And how disturbing it is that there is still no realisation
in the Labor Party that inflation is the root cause of unemployment,
and that we won't beat unemployment until we beat inflation.
Private investment will, of course, play an important part in
economic recovery.
One of the very early steps we took was to introduce a new
investment allowance.
And by deferring company taxation early this year, the
Government tried to cushion the cash flow of companies from
the ravages of inflation.
We are also committed to changes in the company tax
arrangements and this is even more complex than income tax
indexation, but we have various proposals now under consideration.
I believe that we are seeing early, yet clear, signs of
recovery. The March quarter national accounts lend support to this,
showing an improvement in gross domestic product and an
important reversal in the trend in expenditure on such items
as plant and equipment.
The last Survey of Manufacturing Activity published
in May shows an aggregate upturn in orders and employment,
and further increases in overtime and the utilisation of installed
capacity. This is not to say, however, that there are not major problem
areas. Nor is it to say that there is the slightest room for any
complacency about rising costs and prices on either the
Government's or the private sector's part.
Inflation is still the major obstacle to stability and
growth in the Australian economy.
That's why the Government is taking such stringent steps
against spending.
No doubt there will be further criticisms levelled at the
Government for scaling down some of the programmes of our
predecessors. But it was the enormous cost of these programmes that played
a major part in leaciing the Australian economy to where it is
at present. A!-xhough it is never easy to take unpopular decisions, ido
believe that there is growing acceptance by the community of the
need for the kind of firm and decisive action we're taking.
No doubt some elements in the trade union movement will
endeavour to frus~--c-e our efforts.
However, I'm quite confident that the great majority of
people are prepared to have the patience and to accept the
discipline needed to get the economic situation under control.
For until it is under control, no-one will gain any real
benefits. The Government believes that the direct relationship between
excessive wage rises and the continued rate of high inflation
and unemployment is now becoming much better understood
throughout the community.
The Government has recently had very useful discussions
with the ACTu, and I think we can all be very encouraged by the
constructive and positive atmosphere in which that meeting took
place. What the discussions should have made clear to the whole
community is that we are all in this fight together.
If we're not, we might as well give it away now.
It is essential that the basic competitive position of
Australian producers be restored.
The steps taken by the Government have all been with this
prime objective uppermost.
We believe in a strong and healthy free-enterprise sector,
which has the necessary resources to grow and provide employment
for Australian workers.
We believe also that too many of our available resources
were directed to the Government sector over the last three
years. We are acting to change this situation.
I am confident we can achieve a real recovery.
But we won't do it without a lot of discipline, restraint
and even some sacrifice.
I hope that when economic recovery gets under way, there
will be much more scope for industry and Government to work
together on new initiatives and new projects to ensure
sustained national growth in the future.
But we've first got to rebuild a strong foundation for that
recovery if it's to be a lasting one.