PRIMEUSTRMINIE TUESDAY, 29 JANUARY, 1980
ADDRESS TO BUSINESSMEN'S LUNCHEON, LOS ANGELES
Some of the things I want to say will not be new to you. But I
would like to say at the outset that the increased international
concerns that the United States, that we have, as a result of
events in Afghanistan and elsewhere, demonstrate all the more
the need for economic strength, because whatever the great
democracies can do, their effectiveness depends upon their basic
economic strength. That is obviously, and has always been, one
of the underlying strengths of the United States. We hope, as we
grow and develop our own capacities, that we can operate more
effectively. We recognise the limits, quite obviously of 14 million
people, but I believe it is more important to show willingness.
It is important to play as much a role as we can.
I am sometimes asked: " Why is Australia concerned in the larger
international events?"' My answer to that is: " Well, we might
be 14 million people, but if the scales on great issues were evenly
balanced, and if we had sat back and left it all t ' o other people,
then if the weight of 14 million people had tipped the scales
in the right direction, we would never forgive ourselves for not
having taken whatever action we could."
Economic strength is ever more important, in the uncertain
international times that confront us. Therefore, it is opportune
to talk for a moment or two about the current economic climate
in Australia, what we are doing and trying to do, and how that
climate is enabling us to develop, as I believe responsibly, and
to share with our world trading partners the possibilities that
are opened up by the possession in Australia of large quantities
of raw materials arnd in many cases abundant energy reserves.
In the sort of world we face, we believe that these will come
together in Australia, giving us many opportunities over the
next decade.
Many of you will know the background to the problem that we faced,
starting about four years ago. There had been a certain loss of
competitiveness in Australia. There was an inflation rate much
higher than our major trading partners, and much higher than the
OECD average. There was a loss of confidence. A number of
overseas concerns took up their stakes and ceased their operations
from Australia. There was weak domestic and international
investment in the country, and exports were also threatened
by high domestic costs.
So this all had to be put right. Central to it all has been an
unyielding attack on inflation which has not ceased and will not
cease. No matter what the other policies might be, no matter what
other things we might have to do, we cannot give up that attack
on inflation, because we believe that it erodes the very heart of
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an economy. It hurts too many people. It makes enterprise
difficult. It erodes profits. It erodes everything that
contributes to strength and the capacity of an economy to do
the things that you need for your own people. So, over the
four years, our monetary policies have all been designed to bear
down on inflation, have all been designed to take their
share of the weight.
I do not believe that you can adequately fight inflation if you
are lax in some elements of policy and put all the weight onto
other elements. That will not work, I believe, over the longer
term. Perhaps the hardest thing for government, and perhaps
the most important in the fight against inflation, is adequate
expenditure restrain. There are always people who go to
governments and say " will you spend more money on roads or
hospitals" , or a countless number of things. Governments just have
to have the capacity to say no to those requests, because
to meet them all would send the government, the country and
every individual in it bankrupt.
Obviously, we have sought also to lower taxes, to provide
additional incentives for exploration and for investment. We
have administered flexible guidelines for overseas investment
which are designed to attract and encourage overseas investment,
but to do so within a national framework that is broadly
acceptable -to all Australians. That of course is good for
Australia, but it is also good for those who invest, because
it means their investment is secure and they do not have to
worry about national reactions to it. I think we have beenlargely
successful in that. As a result, overseas investment
has very greatly increased.
Investment guidelines have to be administered flexibly, because
we would never be able to finance some major projects. our
capital markets would run dry if it were not for funds from
overseas. The North West Shelf offshore gas project will take not
less than $ 4 billion to develop. Quite plainly, capital of that
kind cannot be found frcmn Australia's capital markets. That
just emphasises in fairly stark terms, the need for overseas
partnership and involvement in Australian affairs.
In the current position in Australia, inflation over the last year
has run at about 10 per cent. That is too high, and much
higher than we would like, but you all know that there have been
problems with oil prices which have had to be accommodated.
But, our inflation rate is less than the OECD average, which is
11 per cent, or thereabouts. It is also less than the
United States' rate over the same period. As a result of
bringing our inflation down below a number of our major trading
partners, and below the OECD average, clearly Australian enterprises
are now more competitive than they have been for a long while.
Manufacturing exports are increasing very greatly as a result.
In addition of course, our rural industries are having a much
better time, adding very greatly to the underlying strength
of the Australian balance of payments and balance in trade.
The current trade accounts are as strong as they have been for many,
many years. I be: lieve that looks like persisting as far as we
can reasonably see into the future. / 3
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Last year, private overseas investment in Australia was the
highest for many, many years. The Australian economy has
stood up pretty well, when you have in mind some of the
problems that have occurred the high interest rates in the
United States and in the United Kingdom. It has stood up
because of the basic strength of our exports and also because
inflation has been lower than in some other places. But quite
plainly, international events do have their impact around the
world, and they do have their impact in a country such as
Australia. Money supply is on target for this year; something less than
per cent, a little less. Having in mind the rates of
inflation that are predicted, and the rate of growth in the
economy that we hope for and expect, I think that seems a
reasonable target.
The Budget deficit, as a total deficit, is less than two per
cent of our gross domestic product. That shows the degree of
expenditure restraint there has been. The domestic deficit
is considerably less than 1 per cent of the gross domestic
product.. That is a better result, than most European countries
have been able to achieve, at any rate. Gross domestic product
is, as we believe, likely to rise by about 3 per cent through
1979.
There is always a battle on the wages front. There is always
a battle on industrial relations. These are things that are
never won entirely. You can win them for today, of for this
week, but if you think you can vacate the field you will lose
it next week, next month, next year. Pressure, I think, in
any country has to be maintained in those particular aspects of
domestic affairs. We have had a reasonable level of success.
Employment has started to grow in Australia again, rising about
2 per cent over last year.
I give you those economic fac ' ts because I believe they do
demonstrate that there is a basic strength in the Australian
economy and that the future looks pretty secure, putting aside
for a moment international events of other kinds.
There is a strong sense of optimism in Australia. There are
opportunities for the medium-term for investment and opportunities
in Australia that might not have been there four or five years
ago. Many of them would be resource-based. There is a
possibility for mucy greater activity and greater partnership
between Australians and people from other countries. Much of
that I think is based on large reserves of raw materials, and
of energy. We are one of the significant net exporters of
energy in the free world. In all, we are 70 per cent selfsufficient.
In that sense we are lucky, having in mind current
oil problems. Like the United States, we do possess enormous
Shale oil deposits. We are hoping that development of those
deposits will be able to proceed before too long. / 4
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Uranium; a fifth of the Western world's reasonably recoverable
pEserves. In coal; large deposits of high-grade coking and
steaming coal. Together with the State Governments we have embarked
on major development programmes which will make sure that Governments
are not sh-ort in providing the basic infrastructure which is
necessary to enable private investment, private enterprise, to go
ahead and play their role in the development of these resources.
We have, for example, a special examination going on at the moment
with the State Governments about the pace of development of their
electricity programmes, electricity based on coal, because there
would be some pressure on supplies as a result of $ 4 billion
investment in the aluminium and smelting industries very high.
energy users. We want to make sure that there are no investment
opportunities lost in Australia as a result of inadequate foresight
on the part of State Governments, which are largely responsible
for power generation.
Steaming coal exports, in our examination, look like rising from
1978, 6 billion tonnes, to 1990, maybe 50 million tonnes, to the
year 2000, maybe 100 million tonnes. That obviously would take
some handling, but it can be done. There are, again, examinations
going on between ourselves and the States to make sure that we have
the capacity and the basic infrastructure for that expansion to take
place. I think Australia is embarked on the beginning of a new phase
in her own national development. Resources projects, resource
projects based on energy, are going ahead and in some -pervers -e way
I suppose the energy problems, the oil-based energy problems, are
throwing more opportunities Australia's way because of our possession
of our coal and the capacity to provide, by world standards, cheap
electricity for heavy power users.
At the moment, there is $ 16 billion to $ 17 billion worth of mining
and manufacturing investment on the line all ready to go. Compared
to five or six years ago, that is a pretty substantial figure, which
indicates, I believe, a growing sense of confidence in what is
happening in Australia. In that, as I have already indicated,
there is a very significant role for foreign capital.
In a world that is greatly in need for raw materials, and in a world
which. is greatly in need of energy, the possession of both. provides
opportunities and responsibilities for Australia. We intend to
grasp the opportunities. We intend also to meet our responsibilities,
because we know that other countries need to have access to secure
and reliable supplies of energy and raw materials. If other areas
are somewhat unreliable in supply, Australia has been and will
always be reliable in supply of these particular materials.
If I could just end, gentlemen, at the point at which I began.
The economic strength of countries such as the United States,
which. is undoubted, and countries such as Australia, is all the
more important in the light of the uncertain international political
situation that has been developing over recent months. We want more
diplomatic strength in the free world. If we are to have that
greater diplomatic strength, greater economic strength will certainly
assist in that. That means the figh~ t that we have all been waging
over recent years against inflation has got to continue unabated.
We cannot be diverted from it because if we are diverted, our capacity
to meet other concerns, whether they are domestic ones or international
ones, will be diminished from what otherwise they would be.
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