EMBARGO: 2.00 P. M.
JJU STRALIA&
FOR PRESS 27 JULY 1977
ADDRESS TO ADELAIDE ROTARY CLUBS
It is a great pleasure to be able to speak to you today.
The latest economic indicators have been most encouraging. This
week, the June quarter Consumer Price Index was announced
the increase was 2.4 percent; over the year, excluding
Medibank effects, the index rose 10.2 percent, substantially below
the 15.8 percent increase over the year to June 1976. The
annual inflation rate is now approaching single digit levels,
and the devaluation price effects are being contained.
As we approach the second Budget of our first term of office,
it is now clear that the first Budget last August achieved a
great deal. Expenditures were largely held within Budget
estimates for the first time in some years; the deficit was
substantially reduced; the growvth of the money supply was held
to the budgeted target; investment increased; and most significantly,
the economy began to grow again.
Last week, the latest Commonwealth loan closed, and
I can say that it was a very successful result which will make
very useful contribution to financina the Budget deficit in
the current year. The Treasurer will Se announcing the
loan figures later today.
The Government still runs a large deficit which must be financed
in a responsible way and these two successful Commonwealth
loans will help in this task. They will make the job of
containing money supply growth to responsible levels easier,
they will help the longer run fight against inflation.
One sector of our community which has always been well represented
in Rotary is small business. Small business is a vitally important
sector of our economy. It employs more than 40 percent of
the work force, it constitutes more than 90 percent of all
business enterprises. But during the past five years, small
business has been under considerable pressure.
Some of the problems of the small businessman arise from inflation,
industrial trouble, and in some cases lack of managerial
expertise. But perhaps the most serious problem has been the
difficulty many small businessmen have found in raising adequate
capital to finance their growth and development. 2
2.
Unlike the large public company, small business cannot raise money
from the stock market or by the issue of debentures to the public.
And businessmen are sometimes unable to raise the required finance.
The Government is most concerned to ensure that small business
has access to sufficient funds to finance growth. For after all,
growth of small business is vital to full economic recovery for
this country. The Government has already moved to assist the
financial position of small businessmen. Various taxation
reforms have made available to small business substantially
increased profits and cash flow, thereby, placing them in a better
position to finance growth out of retained profits. First,
we have introduced a generous investment allowance a special
tax deduction of 40 percent of the capital cost of eligible new
plant. Second, the initial stage of our scheme for trading
stock valuation adjustment reduces the tax paid by businesses
by discounting the value of trading stock for tax purposes by
half the inflation rate, so for the year just ended, the tax value
of stock will be discounted by 5 percent. Third,, with the
needs of small businesses particularly in mind, the retention
allowance for private companies that is, the proportion
of after-tax business income that a private company may retain
free of the special tax on undistributed income has been
increased from 50 percent to 60 percent.
In addition, small businessmen, like all taxpayers, have
greatly benefitted from the introduction of tax indexation.
We are also taking steps to see what action might be taken to
ensure that loan capital is readily available to small businessmen.
Last year, the Government published a report by Professor Johns
on the availability of finance to small business. His survey
concluded that there was a gap in the supply of medium term and
long term finance to an important number of Australian enterprises.
In the light of that Report and other -representations we have
received, we have set up a task force to examine this matter
further and I hope to receive their report shortly.
In addition, we have appointed Professor Johns to be the first
director of the new Bureau of Industry Economics.
Part of the work of that Bureau will be to undertake detailed
research into longer run economic issues of relevance to the small
business sector.
We have also acted to improve coordination of Commonwealth and
State assistance to small businessmen. Under the new cooperative
scheme, the States are providing counselling services,
management courses.. and in some cases, guarantees for bank loans.
The Commonwealth is providing research and information and
coordinating the whole scheme to ensure a proper pooling of
resources and minimise duplication. Consultation between the
Government and maniufacturers has also been increased by the
establishment of the Australian Manufacturing Council, which
meets for the first time in Canberra today. These measures
taken as a whole should leave no-one in any doubt of the
Government's desire to encourage the growth of small business.
One other factor which undoubtedly would further stimulate
small business would be a significant fall in interest rates.
As a farmer, I am well aware of the benefits which would flow
from an easing of the interest burden. 3
Government bond rates have had to remain high as part of
our concerted anti-inflationary programme, but as inflation
is brought further under control, there are prospects of some
fall in rates occurring. Those businessmen among you who
are involved in manufacturing industry will know only too
well how much erosion there has been in recent years in our
international competitiveness. Greatly increased costs,
sluggish productivity and poor industrial relations have
resulted in a loss of export markets, and increasing
competition from imports in domestic markets.
It was factors such as these which led to our decision to
devalue last November, and we confirmed our determination
to fight inflation.
It is also clear that recovery of the economy is still being
retarded by overpriced labour costs. Do you know that
based on ruling exchange rates at the time, average weekly
earnings in Australia in 1971 were 17 percent lower than in the
United States, but that now they are over 13 percent higher
in Australia than in the U. S. A survey issued last week by the
Australian Chamber of Commerce and the National Bank showed
that two-thirds of companies wholly or partially absorbed
the last two wage rises without increasing prices, but that
half of these companies did so by reducing their number of
employees. Never was it more true, as Mr Frank Crean to his
credit once observed, that " one man's wage rise, is another
man's job."
It will simply not be possible to reduce unemployment to
acceptable levels unless union leaders and the Arbitration
Commission take a realistic attitude to wage increases.
In the long term, structural change in our secondary industry
is inevitable. And the Government will be encouragng
future development in manufacturing to flow into those
industries which have the best long term prospect for growth.
But for the present, the Government is determined to alleviate
economic and social disruption, and minimise the erosion
of employment opportunities. We have determined, for example,
that 80 percent of the local market for passenger motor
vehicles should be reserved for local producers, this level
is regarded as necessary to avoid disruption of the industry.
The local industry's share of the market has declined this
year below 80 percent. This has coincided with a fall in
demand for new vehicles and the result has been retrenchments
of employees, as occurred in the past week in this States.
We are most concerned at the damaging effects this may have
on the South Australian economy, and the hardship caused to
employees to the car industry and their families. We have
therefore acted to introduce quotas on imported vehicles,
and we have sought reports from the I. A. C. so that we can take
action if necessary to prevent further major dislocation in
this industry. 4
On my recent trip to Europe, trade was a central issue in all
my discussions with leaders of the European Community.
One matter of primary concern to me was the increasing difficulties
which the protectionist policies of the E. E. C. were causing
Australian exporters of agricultural products. Virtually
all our primary products other than wool are denied access to
European markets. And what is worse, European surpluses
are exported at such vast subsidies that our goods are being
undercut in many of our other traditional markets around the
world. Recently, these policies of exclusion have been
applied not only to agricultural but to Japanese manufactured
goods and steel from Japan and South Africa. The attempt
was also made to make Australia reduce our exports of steel to
the E. E. C. by 25 percent on the grounds that Australia was an
unfair trader. I would not voluntarily contemplate such cuts
and the request has since been withdrawn.
The E. E. C. with its 260 million people.. is the world's largest
trading bloc, accounting for 40 percent of the world's trade.
In 1960, our exports to members of the E. E. C. accounted for
percent of our total exports. Now that proportion has
been reduced to 14 percent. Not because we are any less
efficient, than we were, but because of the restrictive
policies of the E. E. C. As a result of my discussions last
month, the European Commission has agreed to a series of
bilateral trade discussions commencing later this year.
And as a sign of the of the vital significance of these talks
to usl I have appointed a Minister, Mr John Howard, to lead
our negotiating team. Mr Howard will, as the Constitution
requires, head a new Department, but it will be confined to
20-30 people and effectively constitute a secretariat for the
negotiating team.
The matter of primary concern to the Europeans, however,
was not agricultural goods but uranium. Their most pressing
shortage is energy. And they have reached the decision that they
must rely on nuclear energy if they are to meet the needs of
their factories and homes over the next two decades.
Their nuclear industry is already well developed, over 10 percent
of the energy produced in Belgium, Britain, Sweden and
Switzerland, last year was derived from nuclear reactors.
European leaders made it very clear to me that they looked
to Australia which holds one fifth of the world's uncommitted
reserves of uranium to be a stable long term supplier
of uranium. My response was that we were considering the
report of the Fox Inquiry and had not yet reached a decision
on uranium exports, but that their needs would certainly be
taken into account.
I was also able to outline to them the comprehensive
system of safeguards which would apply to any uranium we might
export. They constitute the most stringent safeguards so
far adopted by any country, and will be applied both through
compliance with the requirements of the International Atomic
Energy Agency, and through bilateral agreements,* between Australia
and each user-country.
The European's wish for us to be a stable long-term supplier
of uranium bore striking similarities to our request that they
be a stable long-term customer for our beef and other agricultural
products, and I do not think the logic of this comparison
was lost on them. The development of our uranium resources
of course affects not only the Europeans, it also affects
all Australians, some very closely indeed. The benefits
of mining are obvious, particularly to the economy of the
Northern Territory. But we shall not determine this issue until
other fundamental issues have been resolved. In particular.
no decision will be made on mining until we are absolutely
satisfied that the environment will be fully protected, and
that the needs and interests of the Aboriginal people are
safeguarded.
The issue of uranium is not the only matter on which the interests
of the Aboriginal people require urgent attention. For too long,
the interests of Australian Aborigines have been overlooked
by the rest of our society, their plight as among the most
underprivileged Australians is not always appreciated.
Sickness and malnutrition are rife in many Aboriginal communities.
Child mortality rates and life expectancy for adults are far
worse than for other Australians, and over 50 percent of the
Aboriginal workforce is unemployed. The Government is
giving a high priority to tackling these problems, and in doing
so, to restore self-confidence and dignity to the Aboriginal
people. The Land Rights Act, proclaimed earlier this year, is an
historic achievement, and the Law Reform Commission is
currently studying the feasibility of recognising
Aboriginal customary law as part of the law of the land.
Substantial sums are being paid for Aboriginal health services,
and our aim is to train more Aboriginals as field health
workers, to ensure that there is adequate communication
between those providing and those receiving the service.
The Minister for Aboriginal Affairs, Ian Viner, recently
announced that we would establish an Aboriginal community
health service using the community itself and traditional
healers to provide the service. This is an appropriate point
perhaps to lay to rest speculation which I have read in the
press about an early election.
I can tell you that there will be a national election in Novemberan
election for the National Aboriginal Conference.
This new body has been set up on the recommendation of a Committee
of Enquiry, all but one of whom were Aborigines.
The N. A. C. will operate under a charter which has already
been tabled in Parliament, and will provide a forum in which the
views of 1-borigine communities can be expressed at Federal and
State level. Another body, the Council for Aboriginal Development,
will also be established. This all-Aboriginal body half
elected by the N. A. C. and half nominated by the Government
will be the formal adviser to the Government on Aboriginal affairs.
We have introduced a number of initiatives which together
amount to a national employment strategy for Aboriginals. / 6
We are establishing a programme of community development
employment projects. ThiS: programme is directed towards
Aboriginals who live in remote or separate communities,
and who do not form part of the open labour market.
The projects approved under this programme will provide work,
including part-time, contractual and cooperative work, as an
alternative to income support by way of unemployment benefit.
Aboriginal Councils or incorporated groups will receive lump
sums which will enable them to determine the work projects
to be undertaken and allocate resources to them.
You may be aware that in response to the Government's
initiative, two Aboriginal communities in South Australia
have already decided to work on community development projects
instead of receiving the dole.
The Government is also taking steps to expand the number and
variety of employment opportunities for Aboriginals in both
the private and public sectors. A national campaign will be
undertaken with a view to persuading employers at top management
level to train and employ Aboriginals in their establishments.
Support of this will be provided under the National Employment
and Training Scheme. I would be particularly delighted
if Rotary would ensure that all its members were aware of this
Scheme and urged to support it.
Mr Chairman, thank you for inviting me to speak here today.
Gordon Davidson has been extolling the virtues of Adelaide
Rotarians to me for as long as I can remember.
Rotary is an organisation which I personally hold in high regard,
its reputation is largely based on its manifest concern for the
uriderprivileged in our community. This is a concern which the
Government endorses and shares.
I congratulate your social service programmes and I wish you
even greater success in the years ahead.
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