: e~ UTALIA
FOR MEDIA TUESDAY, 23 MARCH 1982
PRIME MINISTER'S SPEECH TO THE INSTITUTE OF
DIRECTORS IN AUSTRALIA, WENTWORTH HOTEL, MELBOUR~ NE
It is a great pleasure to have this opportunity to address such
a wide audience, including representatives of overseas
governments, international business concerns and public and
private sector organisations in Australia. I trust your
deliberations have been productive. For all of us, business
as well as governments, unions as well as management, have a
profound responsibility to face up to the realities of our time
and the challenges that they create.
I want to talk tonight about the response that is needed from
govexrrmient to meet the challenges that Australia faces at the
present time, about how our policies are already tailored to
anticipate -the issues of the 1980s, and to lay the
foundations for continuing growth and prosperity. The challenges
themselves are not hard to discern. We are faced by uncertainty
in the world economic outlook, by high interest rates world-wide,
by wage and price pressures, strikes and industrial
disputes, arnd some unreal expectations, by a host of threats
to our international competitiveness, our balance of payments,
our growth and our employment prospects.
It is little wonder that recent surveys reveal pessimistic
business expectations, little wonder that excessive wage settlements
and rising industrial disputation, including the potentially
horrifying effects, both for the economy and for families, of
the present situation in NSW, should give the confidence of
the business sector a heavy knock. The ultimate challenge
arising out. of all this is to keep growth going in Australia
while the world economy remains depressed, to secure the
confidence and investment on which growth depends, to make sure
we will be ready to take full advantage of world recovery
when it eventually comes.
T. hese are the great objectives which the Government is dedicated
to achieve in the interests of all Australians. The
Government has already shown that with the right policies and
the right attitudes, Australia can succeed, even against world
trends. For Australia has had economic growth at twice the
average rate of other major industrialised countries in recent:
years. Australia had its highest rate of increase in business
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investment for three decades in the last financial year; Australia
has had substantial growth in employment and in after tax real
incomes over several years, and all of this at a time when
most of the m~ ajor industrialised countries, in Europe and North
America have been struggling to maintain any growth at all.
The question now is what Australia's response should be when
growth rates in Europe and North America have declined yet
further as they enter the 19801s, when their unemployment
rates are high and rising, and when interest rates have climbed
to historicaily high levels. I have no doubt that the broad
thrust of our established policy approaches provides the right
response. Indeed, events have already shown that these
approaches work; but we must also be flexible and imaginative
in our approach.
If inflationary pressures, and the problems of high interest
rates are to be overcome, it is essential that we continue
to restrain government spending. If the private sector is
to remain the driving force in economic growth and prosperity,
it must be allowed the resources to do so.
We have already had success in reducing the share of GDP taken
by government from over 30% in 1975-76 to less than 28%
today, and we shall continue to stand by this approaach.
But to continaue this progress will not be easy. Over 62% of
the expenditure that now occurs is committed to the needy
and the elderly, to the states, and to defence, all of which
are areas of the highest priority.
The unavoidable costs of government are high indeed. on top
of this, many people want government to spend more, often
without recognising the basic fact which
we all know -too well, that higher government spending must
inevitably mean rising taxes. The consequences of a big
spending approach would be totally disastrous for Australia.
A spendthrift government in Australia would rapidly be
caught up in a spiral of higher taxes, and rising deficits,
which would ' have an intolerable impact on Australia's families,
especially thirough increasing pressures on interest rates,
and there is little doubt that a high spending approach
could threaten the very fabric of our society.
The effects of budget deficit financing on interest rates
in particular is clearly illustrated by the experience of
governments overseas, which, unable to bring their budget
deficits under control in the short-run, have had to adopt
tighter monetary policies, and have thereby contributed to the
pressures on interest rates that are now being felt world-wide.
Despite our expenditure restraint, our determination to move
away from deficit financing has committed us to a harder task
than we would have liked in terms of achieving tax cuts. / 3
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The Government's tax reforms have been wide-ranging:
we have reformed the tax scales, almost doubled the dependent
spouse rebate, abolished death rebate, abolished death duties,
allowed for deductibility of superannuation contributions
up to $ 1,200 per annum for self employed persons and others
not covered by employer sponsored schemes, improved income tax
averaging for primary producers provided a tax rebate for
health insurance and most recently a tax rebate for certain home
loan interest payments;' and even apart from the reform of the
tax scales, the annual cost to revenue of these initiatives
amounts tC) a sum in thie region~ of million; we have been mo; re
active than any previous ' Australian government in efforts
to bind thie weeping sore of tax avoidance; we have attempted
to broaden the base of the tax structure and to move away from
a narrow reliance on direct personal taxation; and we have
set our face against the taxation of the capital base
so necessary to growth.
We remain firmly committed to seeking to reduce the overall
burden of taxation, and the burden of direct taxation in
particular, but it would be irresponsible to do so ' unless
economic conditions are right. The reduction we have achieved
in the budget deficit from-almost 5% GDP in 1975/ 76 to less than
1% this year, which last financ-ial year led to the first
budget domestic surplus in seven years, has also made a
significant contribution to our objective of restraining
the growthi of money supply.
The Government is concerned to achieve an adequate growth
in the supply of money to allow expansion of activity
in the economy, and to relieve pressure on domestic interest
rates to the greatest extent possible. But at the same time,
growth of the money supply must not be such as to accommodate
an inflationary scramble after goods and services which
are not available, or an inflationary weakening of the balance
of payments, or an inflationary wages scramble. Indeed, in
relation to the wages pressures that are now being felt in
the Australian economy and which threaten our international
comoetitiveness, it is the Commonwealth's ability to influence
the economic environment within which wages are negotiated
that represents its main weapon. The Government is committed
to monetary and fiscal policies which prevent unbridled
wages growth and the inevitable consequential increases
in unemployment and inflation. Monetary policy will continue
to be sufficiently tight that firms cannot be assured of
financing an unrieasonably rising wage bill.
If we were to let the money supply blow out, we might be
applauded by some in the very short term we might even
buy some short term reductions in unemployment. But let
there be no mistake about it, only very short term benefits
can be bought in this way. People would quickly realise
that the benefits of such an approach are not soundly based,
not sustainable, and the long run costs in-terms of inflation,
in terms of loss of jobs, and in terms of loss of growth
would be immense.
The importance of the right settings in our monetary and
fiscal policies in meeting the challenqjes that we face
at this time cannot be overstated.
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But it is not only through our macro-economic policies that the
challenges of the eighties are to be met. The profitabilityand
the competitiveness of Australian industry are central
to our aim of maintaining growth through difficult times.
The Government has consistently pursued policies to improve
industry profitability and to encourage the development
of internationally competitive Australian industries,
and that thrust will be maintained.
The initiative we have taken to encourage industrial development,
to stimulate exports, and to stimulate investment by mreans of investment
allowances and iThproved depreciation schedules, have been of major
assistance to industry. We have been well aware that in the
long-run, the interests of the Australian community would be
served best. by policies which promote more outward-looking,
internationally competitive manufacturing industries,
but the Government also knows well that movement in this
direction must be within the capacity of industry and the
economy to accommodate change.
The Government has aimed to achieve a balanced approach
which can be seen in the fact that over 20 product groupings
are subject to gradual, predictable phasing down of tariff,
quota or bounty assistance as a result of decisions taken in the
last three years. In addition, the motor vehicles industry,
and the textiles, clothing and footwear industries should
experience significant restructuring in the direction of
greater competitiveness as a result of new assistance packages.
Indeed, in some parts of the textiles, clothing and footwear
industries, significant re-investment is now taking place.
Some manufacturers are looking to secure overseas markets
for their products, and it is our hope and intention that
a similar path may be followed in the motor velhicles industry.
The Governiment will soon be considering a number of major
reports from the Industries Assistance Commission, and I want
to make it plain that in dealing with these reports the Government
will be taking into account the probleris that all industries
face in dif'ficult world conditions, as well as the need to
continue to promote a competitive industry structure, and
we will be aiming to provide a stable and secure policy
foundation on which industry will be able to plan for years
ahead. A further : issue of profound concern to us all is the sort of
irresponsible militant behaviour by unionists that has been
experienced in Australia, particularly since the middle of
last year. Australia desparately needs a more responsible
atmosphere in industrial relations, a better balance between
the effective powers of employees and employers in the context
of industrial negotiations. All Australians lose from strikes,
especially Australia's families and people wanting jobs.
Strikes al: 3o reduce the competitiveness of Australian
products, and bring into question Australia's reliability
as a supplier.
A dramatic and profoundly worrying example is provided by
powerzoning in New South Wales,-which is of course not just a
questi on of the present *. trikes, but of inadequate maintenance and
mishandled industrial relations over time.* The potential effects
of even onE!-day-a-week zoning are immense. For example, if
power zonin~ g meant that 500,000 employees in New South Wales
each lost one day's work a week, and if each of those
employees was on an average weekly earnings, there would
be a loss of after tax'disposable income by families-in
New South Wales of some $ 22 million each week, a loss
of final output by firms in New South Wales of some
million each week, a loss of P. A. Y. E. income tax
receipts collected from New South Wales by the Commonwealth
Government of some $ 10 million each week, and untold
further repercussions in the form of reduced sales,
reduced profits, increased prices and reduced employmentas
these effects flowed-on throughout the economy.
The impact of all this on the Australian economy and
especially the suffering caused to the families of the
people directly affected is incalculable, yet in essence,
they represent only an extreme of the sort of damag~ e that
industrial disruption has been imposing on the economy
month after month in recent times, as many of you well
know. The Government has been active in bringing improvements
to Australia's industrial relations system throughout the
last six years, and it is important to remember that bad as
last year may have been, the number of working days lost
did not approach the record 6.4 million days lost in 1974.
The Government is now bringing forward additional
initiatives to address the present situation. We have
already discussed them with employers and unions. Under
these proposals, employers will be granted the direct right
to stand down employees who cannot be usefully employed
because of industrial action by other employees. This
will help protect employers from being doubly penalised by the
actions of a handful of employees, and will bring more
clearly to the attention of employees the full costs of
industrial action.
The Government gave itself the equivalent power a few years
ago, and hLas used it on occasions to good effect.
Only last week over 2,000 teachers were stood down in the
A. C. T. . ThEy lost several days pay; if they did not go back to
work we were quite prepared to consider dismissing them, and indeed there
had already been preliminary discussions on this course of action. A further
proposal involves amending the Conciliation and Arbitration Act to encourage the
formation of industry based unions. Australia has long
needed a more rational union structure, one that is more
relevant to0 the nature of industry and commerce in Australia
today, and our legislation will assist that process.
The Government is also moving to promote voluntary unionism,
in protection of the rights of employees. we are also seeking
better co-operation with the States in handling
demarcation disputes, and problems on the waterfront, and
we hope to be able to advance a number of issues at the
next Premiers' Conference. / 6
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All these . pproaches should help in improving the industrial
relations climate, but I want to emphasise that governments
cannot conduct industrial relations on behalf of employees
or firms. There is no substitute in industrial relations
for on-going efforts in the workplace by the parties
directly involved.
A willingness on the part of top management to become
involved is fundamental to successful industrial relations,
and in the current economic environment, it is vital
that priority should be given to these concerns.
I have spoken tonight about how government policy in a
number of key areas expenditure restraint, taxation,
money supply, industry assistance and industrial relations
is adapted to the facts of our present situation. I have
referred to these policies because they are so fundamental
but we are also pursuing policies in related areas which
are equally relevant to the present needs of the Australian
people. For example, we have training and transition schemes
in place to give young people the kind of skills which will
be increasingly needed in the years ahead. We are developing
our defence forces in a way which is designed to meet
Australia's needs at a time of considerable world uncertainty.
And we have developed a new housing package which, I believe,
addresses the key problems which have grown up in this
area of concern to so many Australians.
In terms of its practicality, its comprehensiveness, and
its capacity to give help where help is needed this package
is unrivalled in protecting the Australian ideal of home
ownership. In the present world environment, Australia is
obviously going to be facing some difficulties, but
our achievements in the past provide the guarantee that
we can face the future with confidence of success.
We can be grateful for the underlying strength of Australia's
economy, and provided we don't throw away the gains that have
been made, provided we continue to anticipate and respond
to new developments as they arise, we can keep building
Australia up, and thus achieve the prosperity and the way
of life which we seek for ourselves and our children.