AU STRAA
PRIME MINISTER
FOR PRESS 7 MARCH) 1978
ADDRESS TO INTERNATIONAL PRESS INSTITUTE
I am delighted to be with you this morning and Australia is
privileged to host the 27th Assembly of the International Press
Institute. I understand this is the first meeting of the Institute south
of the Equator. Of course, it is the largest press gathering
of its kind Australia has ever seen.
I'm particularly pleased to talk with an audience of editors,
proprietors and publishers under full public gaze.
I make that point because I am occasionally accused unkindly
accused of spending too much time in private conversations
with Australian newspaper editors and proprietors.
Some people not, of course, reporters from the press gallery
here in Canberra have the notion that I have a great influence
over what the press say about my Government's actions and
policies. Of course, one only has to look at the exceptionally flattering.
political cartoons or read editorial writers' fulsome praise
to understand exactly what influence I have on a newspaper's stance.
Newspapers are not in business to keep Prime Ministers and
politicians happy.
Editors and proprietors owe no debt to any politician.
Governments need a free press just as they need opposition parties.
Without press freedom, the standards set by any government will
decline, the worth and quality of government policies will
deteriorate.
With this freedom comes responsibility.
A responsibility to expose; to criticise; to distinguish fact.
from opinion; to be honest and fairminded in the presentation
of opinion.
But the responsibility is greater than this. / 2
2-.
There is now a responsibility to examine the effects of the
press on the fibre of the nation, whether it fosters dispute
or division, whether it enhances community spirit and pride.
It is the ability to fuse criticism with this equally important
sense of responsibility that is the hallmark of a free press
at its best.
The freedom of the press is of course the great ideal-for which
your Institute stands and among you here are many who have
taken heroic stands for freedom of speech.
Australia's association with I. P. I. goes back to its infant days
when the late H. A. M. Campbell of the Melbourne AGE was one of
the 35 editors who gathered in the office of the New York Times.
This was in the early post-war years a time of reconstruction
and reform, when the leaders of the free world were establishing
a new framework for international cooperation in many fields.
The new institutions were set up and new rules were established
for the conduct of trade and payments between nations.
These rules were directed at avoiding a reversion to the " beggar
thy neighbour" policies that exacerbated the 1930 economic
recession. These new rules and institutions provided a framework by which
international trade and payments could develop without
restriction: that recognised the potential increase in wealth
and welfare that can result through the international division
of labour.
The fact that total world trade has grown at a faster rate than
the world economy during the post-war period indicates the success
of this approach.
Regrettably, however, the post-war international co-operative
effort to reduce trade barriers has not been applied uniformly
and there have recently been signs of regression in areas where
progress had previously been made.
The continued failure to deal with agricultural protectionism,
and the yielding to pressures for increased protection in
other areas pose one of the most important and testing challenges
to world leaders today.
That challenge is all the greater because it comes at a time when
the western world continues to be plagued with the twin problems
of inflation and unemployment.
To understand these problems and -reach towards their solutions,
I believe we need to stand back a little and view recent development
in historical perspective.
Immediately after the depression, there was some optimism that
new economic theories held the answer to steady economic growth
and the end of cyclical booms and recessions. .3
3..
The economic policies of the New Deal, after some initial SUCC ssOS,
were beginning to lose steam with the Second World War suddenly
providing a huge boost to demand.
The period since the Second World War has almost certainly seen
a rate of economic development unprecedented in history.
In the past quarter of a century, average incomes in both deve: loped
and developing countries increased by about 3% per annum in real
terms-In a relatively short time, there has been a " doubling" of
the average standard of living.
Many factors have co ntributed to this remarkable growth, but there
can be little doubt that maintenance of a continued strong consumer
demand has been a vital element.
This has been so since the time of the generous and necessary
Marshall Plan to rebuild post-war Europe and the widespread adoption
of " full employment" policies in the immediate post-war period.
Our economies have responded to meet the vastly increasing demand
for cars, washing machines, T. V. sets and all other multifarious
trappings of the consumer society.
It seems just yesterday when, in my own home, our Coolgardie
safe was replaced by a new-fangled kerosene refrigerator. Today
we demand automatic defrosting and complain when it doesn't work.
As in the other developed countries, strong consumer demand has been
a major driving force in Australia's economic growth during the
last thirty years.
Our development has, of course, also been spurred on by
other factors: a great immigration programme the discovery and
exploitation of our great mineral resources.
Essentially, however, the Australian economy in the post-war period
has been geared to trying to fulfil the expectations of the
Australian consumer or, through overseas trade, his international
counterpart.
The slow down in personal consumption expenditure since 1973 in
Australia and other O. E. C. D. countries has inevitably raised the
questions whether we are approaching consumer satiation.
But while consumer spending patterns may have changed in recent
years, we need to look elsewhere for the underlying explanation
of this slackening.
What seems to have happened is that the increased rate of
inflation in recent years has led consumers to reduce their spending
rates and increase their savings rates.
In one or two instances most notably the United Kingdom the
absolute level of personal consumption has actually fallen since
1973. / 4
These developments have reflected the effects of inflation
in increasing uncertainty and pessimism about the future as well
as the desire to maintain real values of personal assets through
saving. It is worthwhile asking why we got into this situation, because
it might help us in overcoming our present difficulties.
There is of course no single simple explanation. You are all
however aware of overnment's ready acceptance of the theory
that it is possible to trade off between inflation and
unemployment the enticing idea that if governments allow just
a little bit more inflation we can reduce unemployment a little.
That has been described as a " Keynesian" theory, although I am
told that Keynes himself believed that there were serious
limitations to the use of demand management policies to reduce
unemployment. Unfortunately, too many people forget that Keynes wrote in a
period when unemployment was high but inflation and interest
rates were low: his prescriptions were fundamentally designed
for those circumstances and it is not necessarily appropriate
to transpose them into another time.
But the misuse of Keynes theories provided too many governments
with the rationale for telling their people " we can afford it
all". Political leaders sought to out-bid each other in
promises to their electors, and government expenditure began to
run out of control.
It was inevitable that sooner or later this would give rise to
rapid inflation.
And this is exactly what happened in the early 1970s: at a time
when oil producers were extracting very large price increases
for their product, the irresponsibility of massive government
spending was compounded by the irresponsibility of trade unions.
Unions exploited their growing prower to extract higher wages
and reduce profits.
In retrospect, we can now see that the trade-off for higher
inflation was increased, not lowered, by unemployment.
Moreover, higher inflation has left many countries an unfortunate
legacy of distortions in key economic relationships, most notably
that between profits and wages.
Against this background, it is not surprising perhaps that we
are only now emerging, slowly and painfully, from some of the
worst manifestations of this recession.
Such growth as there has been in the world economy over the last
two years has been underpinned by policies of those countries
which have done most to overcome inflation the United States,
Japan and Germany.
They have demonstrated that a reduction in inflation is a vital
pre-condition for the expansion of economic activity, that there
is no instant solution for reducing unemployment
and no alternative to policies which further reduce inflation
if sustainable growth is to be restored.
This Government's policies are based on the firm conviction that
beating inflation and restoring economic confidence are the keys
to economic health.
In Australia, it has been a hard struggle, but inflation is now
below ten per cent, and expected to fall further this year.
With the conditions being set for a further fall in interest
rates, pick up in consumption and investment expenditure we expect
continued moderate growth in output and a decline in unemployment.
Because our economic policies have emphasised controlling
government expenditure we have been able to introduce substantial
personal income tax cuts.
These have been in operation since the beginning of February,
and are adding about one billion dollars a year to after-tax
earnings. We have noted with interest that the U. S. administration has
recently proposed tax cuts which would have a broadly similar
effect in relative terms in that country.
We would, of course, like to see a faster growth in demand for
our exports. But we do not seek to achieve that through
advocating precipitate stimulatory action overseas.
Australia's interests lie in sustained growth in world activity
and trade: too often in the past we have suffered from boom
and then bust commodity cycles.
What we do seek, however, is a fairer deal in treatment of our
exports. Australia is a substantial world trading nation.
Notwithstanding this, we are faced with increasing difficulty in
getting access to overseas markets for some of our major
exports. In the past thirty years or so the institutional framework and
rules which governed world trade, have benefitted all trading
countries. But the benefits have not been equitably shared, and the rules have
not been equally applied. / 6
we have found all too often that the rules have
been iricerpreted to suit the purposes of the major developed
countries. They have manipulated or ignored the rules to build special
trade barriers to protect the high cost agricultural sectors,
and under the multilateral negotiating procedures of G. A. T. T.,
agricultural products have been placed in a special position,
far less amenable to clear cut negotiations than industrial
products. In fact, it largely exempts them from the rules of trade.
As a result, the upward trend in protection for agricultural
products in industrial countries has continued.
In addition, the agricultural policies of the E. E. C. have
thrown surpluses on to the available world markets almost at
any price.
The result has been to shift the burden of adjustment on to
efficient producers in other countries not least Australia. / 7
By interesting contrast, the rules have ensured that in industrial
products, where the more powerful nations have a comparative
advantage, there is a largely unfettered access to expanding
markets. Despite this, when the industrialised nations
find the going difficult in the areas where they should be most
successful, they have been adept at devising new protectionist
mechanisms. For example, demands are now being made for voluntary export
restraints on goods as diverse as colour television sets and steel.
Australia's position in the world trading network is a distinctive
one. We are a relatively rich country yet, unlike other developed
countries the bulk of our exports 75 percent of them
comprise primary products, largely agricultural products.
We have found that our agricultural exports to overseas markets
are subject to a variety of restructive measures, such as
variable levies, quantitative restrictions, state trading practices.
The variable levy is an imaginative devise to ensure that
no product subject to it can compete on the community market
other than on the price the community chooses.
The E. E. C. claims that the variable levy is not a tariff, is not
subject to any international rules, is not negotiable at the MTN.
The only thing about the variable levy that the E. E. C. would
concede is that it is in practice infinitely variable, on an al~ most
daily basis, if necessary. But not even this wonderful
device is always adequate. It has to be supplemented at times
with other devices: tying imports to local purchases, minimum
import prices and surveillance licencing.
In common with the developing nations, most of our major exports have
received unfavourable treatment under the policies. of the largest
developed trading nations., ./ 8
Australia's trading problems in the European Economic Community
and elsewhere form part of an emerging pattern of trade which
has greatly affected the developing countries. Many of the
problems they face have arisn from their inability to generate
markets for their commodities. There is much to support their
argument that this situation has arisen because the world
trading system operates unfairly in relation to the commodities
on whichi they depend. In all these regions there is still great
poverty. Unless the developed world move-s to assist their search
for a fairer share of world trade and access to trade, this
poverty and suffering will not be alleviated.
The developed countries will have an early chance to demonstrate their
good intentions. At the MTN negotiations in Geneva there is an.
opportunity for them to make greater efforts to provide an equitable
international trading framework. Will those negotiations show the
way to an increase in world trade? An opening up of markets
for commodities? The creation of new trading conditions
providing a real equality of opportunity for developing and
smaller countries? If that were to be done, it could lift the
world trade and assist in establishing a sustained
economic recovery.
A further test of the intentions of the major developed countries
will be provided when negotiations resume on the Common Fund,
first amongst Commonwealth Ministers, probably in April then
afterwards in UNCTAD. We can only hope that all countries, but
particularly the rich developed nations, will see the need to reject
rigiLd positions and enter meaningful negotiations. Certainly
it does not augur well that the EEC refuses to be a party to the
International Sugar Agreement, a matter of vital importance to
developed and developing countries alike. We believe that
agreements for individual commodities with assistance available
from a Common Fund, could introduce greater stability into world
trade and to the incomes of developing countries.
In the hope that other developed countries will see the need for
movement, Australia has recently made certain proposals which
could speed the establishment of a Common Fund.] / 9
We must all approach the coming international discussions with
a genuine commitment and in good faith. If growth in developing
countries is not to be inhibited we must establish a trading
system that allows scope for development, instead of putting
up barriers against it.
Developing countries are beginning to realise their industrial
potential and they must be allowed to continue to do so,
Australia stands ready to participate in this process, but we
cannot undertake it alone. The problem needs to be treated as
a global issue if it is to be resolved. It is a challenge
that the developed world must face if we are not to revert to the
inward looking policies of the 1930' s. That way would spell
economic and social disaster.
The opportunity now exists on a multilateral basis to agree on
mechanisms to open world markets and to keep them open in ways
which benefit all the trading nations. The contribution
that freer trade can make to an economic revival in the developing
countries, if it can be achieved, will not only lift the standard
ov living in developing countries, it will also stimulate
trade and markets around the world. This will be of direct beneift
to all nations, developing and developed alike.
Thus my appeal to you today is not more unfettered idealism:
it is embedded in the self-interest of the whole world.