EIMBARGO: 9. 30 p. m.
ij> A U S RA LI( A~
PRIME MINISTER
FOR PRESS 9 MARCH 1978
ADDRESS TO THE INSTITUTE OF DIRECTORS
M1L% BEO URNE
On a relaxed occasion like this, it is not the time for talk
about deflators, deficits or delineating trends, seasonally
adjusted or otherwise. I would like to stand back a pace or two
from day-to-day economic issues, and look at the part Government
should or should not p1ay in our economy.
During the nineteenth century it was gYener ally accepted that
government intervention in economic life should be extremely
limited. Its job was to provide the bare essentials for the
conduct of commerce and industry. Some people regard this
epoch as a kind of director's paradise, when the enjoyment
of boardroom lunches was Mwhindored by such trivial considerations
as cost. But what vast changes have taken place since that time.
Even the most anti-business elements would recognise that today
directorships are no longer-a sinecure. Companies and their
directors now have heavy respons ibilities andoliaiosimoedo
them by law. Responsible directors have overwhelmingly
welcomed their increased obligations. They recognise they have
responsibilities to the community as well as to their shareholders.
And organisations such as this Institute have played a key role in
fostering these changes.
Since the heyday of laissez-faire, the role of Government in the
economy has increased immensely. Governments cannot avoid
involvement in the economy. Since the 1930' s it has been accepted
that governments can, through their expenditure, taxation and
monetary policies, man * age or guide the overall level of activity
in the economy. But the nature and extent of government involvement
is a matter of choice a matter of philosophy.
The Depression was the great watershed. It became clear then
that market forces alone were incapable of resolving the
great crisis of the 1930' s, that government action was imperative
if countries were to survive. Keynes' theories, formulated to
cope with periods of unemployment, low interest rates, and low
inflation were appropriate for that time. They helped our
system to survive.
It is unfortunate that since then, the theories of that great
liberal economist have far too often been wrenched out of
context and used as a justification for uncontrolled government
expenditure. / 2
Government must involve itself in the economy because there
are cases in which the unfettered market fails, or does not
take account of important social considerations. The most
obvious case is when a monopoly exploits its position to
harm other companies or the community, or where an essential
community service must be provided by government as no entrepreneur
w ould be prepared to fill that need.
In other cases, the governmen * t's role is to make sure that in
commercial arrangements, the interests of the general communit~ y
and employees are adequately protected. Hence the need for
industrial laws, environment and packaging laws.
Beyond this, there is a vastly increased expectation of government
action in all areas of social life. Politicians have themselves
fostered these expectations by bidding for support through
promises of greater government action. They have raised the
community's expectations without always pointing out that increased
activity must be paid for either in much higher taxes, or in
much higher inflation, or much greater regulation and a larger
and larger public sector. Of course, it's always difficult to
guage opinion about the desirable size of the public sector.
When people are asked they generally say they will settle for
more government spending and less taxation. I was reminded
of this by the recent White House conference on balanced national
growth and economic development. The conference ended
with a call for less government interference. At the same time
however, the five hundred participants called for incentives t~ o
create new jobs, total Federal financing of welfare and medic-aid,
and more Federal funds for deprived areas.
Clearly, it is not only politicans who have the happy knack of'
holding two conflicting views at the same time. There will always
be vocal groups pressing for more expenditure of other people's
taxes in their own particular areas of interest. But in the
last few years it has become perfectly clear that Australians
have had enough of Governments that grow bigger at the public
expense, and I take great heart at the general support shown for
the Government's policy of overall restraint and its provision
of tax cuts.
The question of electoral popularity aside, I am convinced that
our policies of restraint and transferring more of the nation's
resources from government to people are right for Australia.
Each one of you in this room knows why this Government seeks
to -transfer more of our country's resources back to private enterprise
You know what we stand for: the elimination of unnecessary
government interference, and a creative involvement to provide:
the best conditions for business profitability, employment
opportunities,, job satisfaction and consumer satisfaction.
It is obviously not possible tonight to discuss all the ways in
which government decisions affect business. Clearly almost
every government decision has its effect on the private sector,
particularly decisions on such matters as interest rates,
the exchange rate, taxation and so on. But the Government's
specific policies for industry fall into two broad groups. .1.3
There are those regulating the business community to ensure fair
comp~ etition and protect the public interest, and there are
those that provide incentives for industry. I am well aware
that the first group of regulatory policies often cause
inconvenience and irritation, and according to a recent survey,
significant costs to businessmen. But, I believe that
few businessmen would reject totally the need for some sort of
regulation. The regulating of banking, insurance, aviation,
foreign investment and unfair trade practices are all essential
to protect businessmen, employees, consumers and the general public.
In the same way, I firmly believe that a comprehensive cooperative
scheme with the States to regulate company law and the
securities industry, and which is uniform throughout Australia,
must have a high priority.
The impartial regulation of business activities need not be seen
as purely restrictive. On the contrary, properly devised
-regulation expands areas of freedom. By establishing rules
of fair behaviour, the strongest are deb. arred from abusing their
position in an anti-social fashion, harmful to other businessmen
and to the community at large. I do not suggest that all
Commonwealth regulatory procedures measure up to this ideal.
I do not imagine many here would think so either, but it is
the Government's objective to make them measure up.
Since coming to office, we have been undertaking a systematic
review of such procedures, and in many cases unwarranted and
harmful restrictions have been lifted. The Trade Practices
legislation has been simplified to reduce business uncertainty
and to streamline its operations. We have limited the number of
businesses covered by the Prices Justification Tribunal,
provided wider grounds for exemptions, and have markedly
reduced the emphasis on compulsory prices justification.
The emphasis is now on selective prices surveillance in areas
of apparent monopoly, and in particular industries where consumers
or producers claim to suffer under inequitable pricing practices.
The role of the PJT continues to be under review.
We are also studying, as a matter of urgency, all those matters
which might inhibit foreign investment in Australia.
The other side of the coin is the Government's many incentives
to industry. In the past such assistance has overwhelmingly
comprised tariffs and other trade protection devices. This form
of assistance is inevitable in Australia with its small
domestic market and great distance from export markets.
There are definit& limitationis on the rate at which changes
in this area can be effected, particularly during periods of
economic difficulty and unemployment, and governments must
help formulate a coordinated approach for longer-term development
of industry.
Apart from tariffs and bounties, the government provides
incentives to a wide range of activities which it believes must
be encouraged in the national interest. We provide, for example,
an investment allowance, tax incentives for oil and mineral
exploration to protect our energy supplies, and assistance
to encourage decentralisation. / 4
4.
These policies also are continually under review to ensure
that they are justified and cost effective. For example,
legislation will be introduced to promote exports by establishing
an effective export incentive scheme, and an Australian
Overseas Projects Corporation to help Australiani exporters
compete for large scale development projects overseas.
Incentives to promote industrial research and development are
also under urgent review. '[' his is a field of vital importance
to our long-term future. Australia has the potential
to be the technological leader and supplier for our entire region.
But for this potential to be realised, more emphasis must be
given to developing more original and innovative technology of our
own. These two groups of policies for industry regulation and
incentives are complementary, and are both equally essential
for the health and vigour of our economy. I should say that
from time to time I receive unkind remarks about our
regulatory policies. But businessmen are even handed in these
matters they rarely say no to our incenitives.
Our policies on the role of government in the economy and the
relationship between government and the private sector stem
from the strongest possible philosophical commitment to the
fundamental role of private enterprise in our society.
In all these policy areas, the government seeks the fullest
consultation with industry leaders, and in this respect we
receive most practical and useful views from this Institute.
Governments of themselves can only strive to create the conditions
in which the creative energies of the private sector can find
their fullest expression. It is only if the private sector
recognises and takes these opportunities that we can confidently
look forward to a return to full economic health.