FOR MEDIA TUESDAY, 9-MARCH 1982
SPEECH TO THE PARLIAMENT
ON THE STATE OF THE NATION
Today, Mr Speaker, I would like the House to step back from the
cut and thrust of everyday political life to consider the
direction in which we wish to move as a nation in the next few
years. This Parliament has a profound responsibility to keep
abreast of the whole range of issues facing Australia. We
need to understand Australia's position in a broad perspective
as well as in detail, in the light of international as well
as domestic factors. We need to understand the choices which
lie ahead and the consequences of the decisions we take. We
need a clear sense of our nation's values and objectives and
we need to develop and explain our policies in the light of
our phiLosophy.
The world,,'-is full of uncertainty and because of this, Australia
needs -olicy approach which is marked by balance, vision and
realism. The world is also full of unrealistic demands and
expectaiCions in spite of the immediate social and economic
problems which many countries are experiencing and which are
having an indirect impact on most countries.
In a situation of significant uncertainty and difficulty, it
would obviously be absurd to expect that high and immediate
expectations can be attained at little cost or as a matter of
course. But neither should we allow the difficulties being
experienced by the world economy to be seen in a way which
gets them out of proportion it would be wrong to overestimate
or underestimate them.
We need to try to understand them realistically because it is
vital if we are to move ahead as one nation in the next few
years that people's expectations should be closely adjusted to
reality. Nobody has a crystal ball to predict the future fully
but we do know that unless we anticipate and adapt our policies.
in line with changing circumstances, unless wie are in a position
to take advantage of changes in the world economy as and when
they occur, then opportunities will pass Australia by.
We also know that the old adage that you only get out as much
as you put in remains as true today as it has always been
and it is timely to remember, when we are considering realistic
levels of expectations, that what some people get cannot go
to others.
The international perspective
In coming to grips with Australia's present position in an
overall perspective, it is appropriate to start with the
international dimension. our independence as a nation cannot
blind us to the fact that overseas events affect us profoundly.
Much of Australia's history bears witness to the recognition
by earlier generations of Australians that we are affected by
what happens in other parts of the world. At the present time,
Australia cannot ignore the tensions and the threats which
exist in so many parts of the world to international security
and stability. The Soviet Union pursues its militaristic and
opportunistic programmes relentlessly. We see the effects of
that policy in Afghanistan and Poland and in attempts to
frustrate the peace process in the Middle East. We see it
through Cuba's support for Communist insurrection in Africa and
Latin America and closer to home, Vietnamese troops continue
to occupy Kampuchea, in violation of that country's sovereignty,
and posing a threat to Thailand.
Without question, the world situation is troubled and uncertain.
New trouble spots can erupt with little or no warning. our
policies m., ust-take account of the broad global context and we
must recoc= ise that Australia's security-is bound up with the
strength of the Western alliance. We obviously benefit from
the securiltv which this alliance brings to us but at the same
time we must7-s-h-o ulder the responsibilities which it entails.
All of thsis part of interdependence and whether we are talking
about threats to world peace and security, or about problems
of world ; Dcverty, or about the slackness of world trade, the
growing ilnterdependence of the world must be seen as fundamental.
I would li~ e to say here that the development of multiculturalism
in Australia in recent years has helped us enormously as a
community in gaining the wider understanding which the successful
management of interdependence will increasingly call for. I
believe it is a tribute to our responsibility and compassion as
a community that Australians have felt involved in tragic events
in other countries and have given practical effect to these
feelings as shown by the massive public responses to appeals
like those for Kampuchea, for Southern Italy after the earthquake,
and for Poland.
The same concern is equally apparent in the willingness of hundreds
of young Australians to respond to an appeal to go as teachers
to Zimbabwe.
Interdependence is real and in managing it we need policies
which take advantage of the opportunities it creates, as well
as minimising the difficulties and dangers which go with it.
The growth of world trade provides a compelling illustration of
our growing interdependance, of the advantages it can bring as
well as its impact on key areas such as employment.
It was the rapid expansion of trade in the post Second World
War period that was a mainspring of rapid world economic growth
that supported the growth of employment opportunities, and of
real living standards for countries at all levels of development.
Between 1963 and 1970, while the volume of world output grew
at an average annual rate of 5.6 per cent, the volume of world
exports grew by 8.6 per cent per annum. But during the 1970s,
the growth of world output and exports both significantly slowed
and as a result unemployment started to get worse.
It is particularly worth noting in this regard that between
1973 and 1978, exports from developed to developing countries
rose at an average rate of over 20%. How much worse would
unemployment problems in developed countries now be without
that trade?
We must also recognise a further aspect of interdependence
that other nations are taking an increasing interest in our
economic and trade policies. others rightly expect us to be good
neighbours, to play our full part in promoting the continued
orderly growth of world trade as responsible members of the
international economic community. It is plain that the growth
of trade, and the growth of interdependence more generally,
increasingly exposes a nation's economic system to influences
from outside its own borders. Our own increased interdependence
with the -rest of the world has been highlighted by the quite
violent e: nomic fluctuations which have been a characteristic
feature much of the last decade.
Each sur~ e in the price of oil has led to a crisis which caused
the grow-h-of world trade to slacken and Australia has been
affected in a number of ways by both the oil price shocks and
by the slackening of trade. There was obviously renewed interest
in the exmioitation of alternative sources of energy and this
has given Australia opportunities. But the slower growth in
world markets has affected our exports and any dip in commodity
prices due to unfavourable conditions overseas is plainly
going to have an impact on Australia.
Even before the first oil price increase in 1973, inflation had
become more or less endemic in most industrialised nations..
Excessive growth of government spending and inappropriate use
of deficit financing played a major part in this. The oil
price increases compounded these problems, making growing
unemployment and growing inflation the order of the day. Even
then, most countries did not recognise what was needed in terms
of restraint of government spending, in terms of firmness of
monetary policy and in terms of wage restraint. Although there
are now signs in a number of countries of a determination to
pursue more economically realistic policies, natural economic
processes have run their course. In Europe and North America,
economic growth has virtually come to a standstill in the last
two years and unemployment is high, and rising. In France
unemployment is in the USA it is 8.5% in the United
Kingdom it is 11.7%.
By the second half of 1982, total of OECD unemployment is
expected to rise to 28.5 million people, compared with just
over 21 million in 1980. In these conditions of virtually no
growth and rising unemployment, overseas inflation rates are
falling. The OECD inflation rate is now unider 10% and falling,
a reduction of three percentage points below the 1980. rate.
The U. S. inflation rate fell from 12.4% in the 12 months to
December 1980 to 8.9% in the 12 months to December 1981, and
the British inflation rate fell from 15.1% to 12% in the same
period. Perhaps paradoxically, sluggish growth and falling
inflation has been accompanied by some of the highest interest
rates, both real and nominal, that the world has seen. This
situation stems from a number of factors.
The situation should be seen against the background that
interest rates rose less rapidly than inflation during the
1970s. Real interest rates were negative for a substantial
part of that decade. And while falling inflation rates in some
countries is a cause for optimism, financial markets are not
convinced that the underlying problem of inflation has been
solved. The present situation has been aggravated by an
unfortunate mix of policies in some countries. Budget deficits
have been allowed to soar and the resulting pressures on the
money supply have only been kept in check with exceptionally
stringent monetary policies.
Sluggish growth, low business profits and high interest rates
have in ta* rn interacted to produce stagnant investment and
continueP-economic recession. Overseas markets are growing
very srl y, if at International commodity prices fell
percent in the year to the last September quarter.
Australia's farmers are also experiencing generally flat or
falling prices along with rising costs and they are also
subject -to quotas and restrictions of many kinds in international
markets. Over the last year or so, and partly reflecting some of the
factors I have been referring to, there have also been some
significant shifts in the world oil situation. At the present
time, world crude oil supplies are more than ample to meet
demand but oil prices are still very high. The future levels
of energy supply and energy prices are full of uncertainty.
Our economy is inevitably constrained, and increasingly
constrained by its interdependence with the rest of the world.
We cannot but be affected by factors such as the present
slackness in world demand, and the high cost of funds, nor
can we avoid being affected by the protectionism which strikes
at many of our exports, especially our farm products. And
it is important for us to be aware of the very real dangers
that are created by increasing protectionism in other countries
during a time of world recession.
Associated with these influences has been a rapid growth in
our current account deficit, squeezed profitability for our
export industries and some reappraisal and deferment of resource
projects. But investment is still moving ahead strongly.
We cannot afford, as a nation, to try to ignore overseas
developments or their inevitable influence upon us. What we must
do is develop appropriate responses. We must be ready to react,
ready to adapt, especially to fundamental changes in the world
economy while minimising the undesirable efflects of unwelcome
influences. In so doing we need policies which lay solid
foundations for future growth which will allow us to take full
advantage of the renewed growth overseas which must occur at
some time and which will carry us through the intervening
period of world downturn no matter how short or long it may
turn out to be. In particular, we must prove ourselves reliable
and competitive suppliers. We cannot afford to price ourselves
out of world markets, or earn ourselves the reputation of being
incapable of meeting contractual commitments because of poor
industrial relations.
The Australian Economic Achievement
When we look at Australia's present position in the light of
our economic achievements over recent years, it is plain that
great advances have been made and a strong foundation laid for
the future. Although we are a trading nation and despite the
continuing slackness of world trade over recent years, we have
swum against the tide. And I believe that in the current
circumstanzmes, when the facts of interdependence plainly make
our position increasingly difficult, our determination to succeed
through farsighted and sustainable policies will be seen as
right. i s an undoubted fact that as a result of our policies
Australia hast prospered in recent years while the rest of the
world has -een stagnating. Private enterprise has prospered
and Aust---a7i-a has benefited. To be sure, we have had valuable
resources -: 0o exploit and profit by in a troubled world economy.
But that did not make success certain for the opportunities we
had could have been squandered. Possession of resources is only
the first condition of prosperity. Another necessary condition
is sound government policy and there is no denying that the
policies we have followed have created the conditions in which
private enterprise has been encouraged to take the lead in
exploiting the opportunities on offer. The confidence required
for investment to go ahead has been created and as a result of
this turnaround, the living standards of Australia's families
have been improved and we now stand ready to grasp the opportunities
which will inevitably lie ahead for us.
A consistent assault on inflation has been essential in creating
an environment in which private enterprise could plan and
invest with confidence. The sustained restraint which has been
imposed on government spending which has been virtually unrivalled
throughout the world has been indispensable to success. The
interests of all Australians require that this restraint must
be maintained along with giving proper emphasis to priority
needs and concerns. The Budget deficit has been pulled back
from almost 5% of G. D. P. to less than The Commonwealth has eased
the pressure on domestic capital markets by curbing its own
borrowing requirements and we look for support in this endeavour
from other levels of government. Action has been taken to
promote industrial expansion and encourage the growth of
productivity and there has been a concern for the competitive
position of Australian industry.
While success with inflation has been vital, successful,
non-disruptive'management of the exchange rate has also been
vital. Secure and improved access for our products has been
sought on established markets, in the Europe and Japan
and Australian exports have been helped to make significant
gains in new and expanding markets especially in Asia and the
Middle East. Industry has been helped by initiatives to
encourage industrial research and development and by an accelerated
depreciation allowance. Industry has been given due notice of
change where reduced levels of assistance are desirable.
And to avoid delay in putting in place the stable policy
foundation on which industry will be able to plan in the
longer term, the general reference on tariffs was brought
forward.
Manufacturing industry is indispensable to balanced development
throughout Australia and in 1981, manufacturing industry
investment increased by 32% in money terms. The effect of all
these policy approaches has been to build Australia up.
Their goal, which we all share, has been higher livingj standards
for Australia's families. And their benefits are now plain
to see almost 400,000 new jobs created in the three years to the
December quarter, almost 90% of them in the private sector;
real household disposable incomes up by $ 2.9 billion after
tax in 1980-81; average weekly earnings up by more than $ 13
per week in real terms in the two years to the September quarter.
This has been reflected in stronger growth in consumer spending
and much stronger private investment in housing; between 1977-78
and 19; 30-8l, investment in dwellings rose by 26.5% in real terms.
The ga-ins that have been made also point towards a better future.
Business profits rose 17% in real terms in the last three
years. With that has come a surge in business investment.
The 11360-81 rate of increase was the highest for. 30 years.
The 1931-82 rate is also likely to be over 10% in real terms.
And this, as a share of will bring business investment
back close to the levels that used to be taken for granted in
the 1960s.
Business investment is vital to our children's future. It is
the only basis of more jobs and more real spending power in the
Australian community and this is why it is so important to give
high priority to building up the economy. But it is not only
in economic matters that Australians expect their Governments
to apply effective policies. And when we look across a wider
range of concerns, there is cause for pride in what has been
achieved. I shall mention just a few areas in order to provide a broader
perspective from which to view some of the challenges which lie
ahead. In relation to defence, important steps have been taken
in the policy of making sure Australia has an up-to-date and
balanced defence force, including the acquisition of the F/ A-18
fighter aircraft, of the British 105M. M. gun, and of the
aircraft carrier Invincible; and we need to be aware that strong
capabilities contribute not only to national security but also
to regional stability and security.
In international affairs, consistent expression has been given
to Australia's concerns and actions such as our efforts in
relation to the issues of world poverty, our decision to take
part in the Sinai Peacekeeping Force, and our contributions
through the Commonwealth have helped to build Australia's
reputation as a forward-looking, outward-looking and reliable
nation. In the area of tax avoidance, determined measures have been
consistently applied measures which are really biting into
this anti-social industry.
In the field of legal refor', the Human Rights Commission and
now the Freedom of Information Legislation the first that
will come into place nationally in a Westminster system
are effective measures to meet important community concerns.
In the field of environmental protection, the declaration last
year of the new section of the Great Barrier Reef Marine Park
gave further clear expression to the concern for the preservation
of our environment which is so widely felt in the community,
especially among young people.
In education, the issue of giving our young people the skills
they need is being tackled and the increasing emphasis on
TAFE is an important element in this.
Families, especially those with low incomes who received little
assista-nce from the old rebate arrangements, have been enormously
assisteC1 by the Family Allowance Scheme which was introduced
several years ago and family allowances were substantially
increased for larger families from last January.
In the area of social welfare, the automatic indexation of
pensions has given income security to a very significant number
of people in the community and assistance has been extended
to particularly needy groups, such as pensioners facing high
rents and sole parents on low incomes.
It is obviously important that governments work to advance the
wider opportunities and way of life which Australians want as
well as working to secure and improve the material living
standards of Australia's families. I believe that as a result
of what has been achieved, Australia is now facing the future
from a position of comparative strength for there is great
underlying strength in our economy and as I have said already,
we are well placed to take advantage of future opportunities
provided we work hard to maintain our strong position.
Challenges and problems
But it is not only opportunities which lie ahead although they
will surely come. As we look ahead, as we form our expectations
for the future, we plainly need to recognize that there are
also problems and challenges. It is our task to identify them,
to explain them, to address them realistically; having done that,
to seek the co-operation of the community in coming to terms
with them. one thing which is plain at the present time is that
a fresher and sharper breeze is blowing through the markets of
the world as our-industrial competitors, faced with their own
situation of no growth and unemployment, restructure their
industries, as they improve their productivity and efficiency
and as their inflation rates fall. When this is added to the
fact that many markets are, if anything, shrinking rather
than growing, it is clear that we shall have to fight harder
to sell the exports on which our economic development depends.
This harder competition from overseas comes at a time when
there are some problems on our own doorstep. Plainly, inflation
remains at the forefront as the principal threat to our
economy because while much has been achieved in pulling
inflation back, there are substantial inflationary pressures in
our economy at the present time.
Demands for higher wages and shorter working hours have been
contributing substantially to these pressures. And in Australia's
present situation, there can be little doubt that excessive
wage rises and damaging strikes are placing economic progress
at serious risk. It is imperative that we recognise as a
nation that wage rises which are beyon * d the capacity of the
economy harm everyone and benefit no-one. They cause higher
inflation; they threaten our ability to compete on world
markets and they create more unemployment.
There is no doubt that wage restraint in the next few months is
vital to us all for further wage increases at this time on top
of the wage and shorter hours settlements of the last six
months are beyond the capacity of the economy and time is
needed to absorb the increases which have already taken place.
Let mes add that there is plainly a continuing need for an
approrriately firm monetary policy. In present circumstances,
with weakened balance of payments and strong inflationary
pressures, there could be no thought that the money supply
would be allowed to expand to accommodate inflationary wage
settle-ments. It is vastly important to us all that demands
and expectations should be matched with economic reality as
it now is both internationally and domestically. Whatever else
may be arguable, there is no doubt that our overall level of
economic growth places clear limits on the sustainable real
wage increases which can occur.
We must never forget that everything, including wages, has to
come out of what Australia is producing. Further limits on wage
increases are imposed by the claims of needy and underprivileged
people to share the benefits of prosperity and investors
also have their legitimate claim for profits, which are the
basis of the further investment on which future growth depends.
As I have said on many occasions, Australia would benefit
greatly from rational debate on the proper balance between these
respective claims and I believe that such a debate could have
a most valuable impact in helping every section of the
community to decide what expectations are reasonable, what
claims are legitimate, and which demands ought to be moderated.
I turn to the industrial front where the level of strikes and
industrial disputation is plainly a matter for the most serious
concern. The Government is addressing the situation with some
important legislative initiatives as part of an on-going
concern with reforminq industrial relations.
First amonq these initiatives will be the provision giving
private employers a right of stand-down in strike situations
to bring about a better balance in the bargaining position
of unions and employers and to equalize their responsibility
before the law. We believe that this measure will help to
bring home to unions the real cost to the community of strike
action and that it will help bring a degree of balance to
the negotiating process.
The second initiative is designed to put renewed vigour into
efforts to achieve a restructuring of unions more in line with
the needs of a modern Australian economy and to move away
from a system rigidly tied to craft-based unions.
And the third proposal, for voluntary unionism, seeks to
protect the basic rights of ordinary average Australians.
The Commonwealth is also addressing a number of industrial
relations issues in co-operation with the States. Important
consensus was reached at the recent Premiers' Conference
and Labour Ministers have already met to consider options to
facilitate handling of demarcation disputes and the development
of a complementary industrial relations system. In considering
the problem of demarcation disputes, the objective must be
both to protect employers who are harmed and unions which
are att.-acked.
The Prrniers have also agreed to work with the Commonwealth
in efforts to seek agreement with unions and shipping interests
along the lines of the recommendations of the Crawford Report,
and to reduce the level of industrial disputation in the
maritime and waterfront industries. Thus in co-operation with
the States, and through our own legislative initiatives,
we are taking a positive approach which should remove some of
the hurdles in the path of industrial peace and bring a greater
sense of responsibility into industrial relations.
In addition to the threats to Australia's economic well-being
posed by wage demands and industrial disputes, there are a
number of other issues which are of great concern to the
community which need to be explained and addressed with balance
and realism.
Home ownership is one issue which is causing very considerable
concern in the community and nobody wants Australia's high level
of home ownership to be damaged. The issue is complex. There
are three inter-related problems. The availability of funds,
the high interest rates which currently prevail, and the high
cost of houses, especially in some cities. At the present
time, the Government has this issue under close review and
the Government will in due course announce the policy changes
it believes are necessary.
Taxation is a further issue of great concern to the entire
community and I want to reaffirm that it is the policy of the
Government to make further income tax reductions when it is
economically responsible to do so. The present tax levels
concern the Government as they concern the community and it is
important to remember the major taxation reforms which
the Government has implemented including initiatives such as
the doubling of the rebate for dependent spouses which has
taken place, the deductibility of superannuation contributions
up to $ 1200 a year for self-employed persons and others not
covered by employer-sponsored schemes, the abolition of death
duties, and the tax rebate for health insurance. ! the cost to revenue
of these initiatives alone'is well over a billion dollars a year. it is
dJxnPortant, when the comxniity considers taxation levels, to be aware of
a-number of critical factors, the implications for the budget o f an
ageing population, the need for increased defence expenditure,.
and the need to pull back earlier budget deficits drastically.
Consistent with factors such as these, the Government's
commitment to lower taxes and greater spending power i~ s clear
and we shall continue to follow those policies which provide
the only basis for sustainable tax cuts.
Mr Speaker, I have sought to draw the House's attention to
some of the major factors which need to be taken into account
by the Australian people as we look to the future and seek
to match our expectations with reality. Many of the issues
which we are facing are complex. Many of the problems do
not offer easy solutions and the right balance between competing
claims iJs in many cases difficult to find. But of course
it is not" unusual for a situation to exist in which
expectations are greater than can be satisfied, in which
different groups within the community are making claims which
are inconsistent with each other, in which some claims can
be satizfied only at the expense of others, in which some
short-term aims conflict with longer-term objectives.
It is ea= sy for people in pursuing their own objectives to
overlook the claims of others and put at risk the source of the
future we-11-being of everyone.
The objectives of the vast majority of Australians are plain.
As a nation, we seek rising standards of living. We seek more
dollars in taxpayers' pockets. We seek an increasingly
compassionate society. We seek wider opportunities and
greater scope for people to develop their talents. We seek
greater security for all our people. we seek increasingly
efficient public institutions. We seek the conservation of
our heritage and our environment and much more as well. All
of these objectives are consistent with each other and a
balanced policy approach commits us to pursuing them all.
But we plainly cannot pursue all or any of them as fast as
we would wish. Indeed, in times of economic difficulty and
stagnatidffeVEe~ ay be committeJ to pusuing them far more
slowly than we would wish because one thing which is vastly
important is that in pursuing these objectives, we cannot
afford to destroy economic growth itself. without growth,
all our other efforts and objectives will come to nothing.
It is significant that Australia's growth rate in the last two
years has been almost twice the OECD average and it is
significant that the OECD predicts a growth rate of over 3%
for Australia in 1982 against an OECD average of just over 1%.
11.
There is growth in our economy but we cannot take the future
for granted. In a situation of international uncertainty and
world economic downturn, where our own growth is held back by
the no-growth situation of other economies, we must surely
accept as a community the need to avoid putting at risk the
present strength of our economy.
In dealing with these issues, it is imperative that we weigh
up our own claims and expectations against the kind of growing
Australia which we want to build for our children, considering
both in the light of the real opportunities which are open
to Australia in the interdependent world in which we live
because only in that way can we reach responsible conclusions
on the decisions which lie before us both as individuals and
as a nation. ooo000ooo---
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