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F HIAI j-AURI A Lb TE
E. O. E. Proof Only
TRANSCRIPT OF PM AT BUSINESSPERSONS' LUNCH, SHERATON HOTEL, PERTH
28 SEPTEMBER 1983
Thank you for the reception that you've given me the great
numbers that are here and the warmth of that reception. I
appreciate it very much indeed.
Talking about recovery and growth, and as you in business know,
one of the essential ingredients in successful business decisions
is that of timing. Whatever else you may say about the Hawke
Cabinet and the way it moves, you have got to concede that our
sense of timing in. coming to Perth was impeccable.
I also want to give you one of the more ( inaudible) signs
of economic recovery. I am leading it myself by insisting that
I have my suits washed in champagne'.
I wore a suit for the first time last Sunday, as I have
told some of you, to the Sydney Cricket Ground, to the Grand
Final of the Parramatta and Manly Rugby League, and with that
sense of perspicacity which has come to characterise my Government
I backed Parramatta and also publicly and was therefore invited
to the afterwards and there the champagne was flowing and we
were overshowered then. I went off to the dry cleaner and when
I came to Perth I thought I was right to put it on again, and
look what happened.
I tell you what I don't mind those sorts of showers.
Brian referred to the extent of the powers that he has winning
the Cup and having the dams over-flowing.
Let me tell you a true story about what happened to me in May.
We brought down our first major economic statement, as you know,
on 19 May. We weren't waiting for the Budget to start to get
things moving. As you know, I like to talk and consult with
various elements in the community and I asked the representatives
of the farmers federation to come in and see me in the Prime
Minister's office not long after that. I was there welcoming
them when they came in and you recall this was May and the drought
had broken. The ' dams had opened up and the head of the farmers
delegation came in and he said " Now, Prime Minister, you have
ended the drought, will you stop the bloody rain". I have tried
to fix it up.
Brian also referred to the fact of his open expectations that
vie would, as a result of our visit here, be able to announce
some goodies to the Stalte7 of Western Australia. I think it
is probabl-y qiite enough to know that if you have got something
to say, you want to say it at a time when you have got a chance
to be heard. Ile had that Ca! Dinet meeting yesterday, but I
just had the same sort of feeling that making an announcement
out of our meeting there yesterday, it wouldn't have got the
sort of coverage today that it intrinsically deserves.
So, -we are leaving tomorrow morning, but Brian has been able to
persuade me that it would be a good idea to have a joint press
conference tomorrow morning and we will be doing that I suggest
that you watch the outcome of that. I think we might be able to
say one or two things thtwll be of value to this State.
Ladies and Gentlemen, it. is the case that you, an audience
like this would like me now after six months in office to
speak to you about the signs that are apparent in cur economy.
Where are we going and what i: 3 happening? of course indeed the
last six or seven months hay e seen a very great deal of attention
paid to the question of economic policy in our country. Of course
that is exactly as it should be for the health of our economy
is of prime importance not just to politicians and economists,
but naturally to every individual and every business concern
large or small in Australia.
Now I think that the main features of Australia's economic
performance over the recent longer period going back before our
election are pretty well known to all of you. Those features
were inflation had been running well in excess of 10% 6 for 1982
and of course well above almost double the OECD countries.
Private consumption was very weak in 1982/ 83 and as you know,
private business investment fell. over the year to June of this year.
The drought had very very severely cut back farming production
and income and correspondingly had severely depleted Australia's
capacity to earn export income. World demand for our goods
generally had been cepresse. by the poor state of the world's
major economies, effected. in particular by what was happening
in the United States.
On current estimates domestic production of goods and services
actually declined in 1.982/ 83 as a whole and I want you to
understand that that actual decline in the production of goods
and services in 1982/ 83 was the first time for 30 years since
1952/ 53 that that had happened and it was the last tiLme since
1946/ 47.
As a consequence of all those features to which I have referred,
-employment actual employment in Australia plumetted and the
rates of unemployment increased very dramatically and reflected
in measured official terms over 10% of the Australian workforce.
But owing to the characteristics of the economy, that
constituted our economic inheritance. Now, after six months
of our Government in office, the outl. ook today is very much less
grim.
Let me make it clear what 1 have got to say. We are not
stupid enough to claim credit for those thingjs for which
we are not entitled to claim credit, but there are many things
for which we are entitled to claim credit.
We cannot of course yet say that there is totally conclusive
evidence which would enable us to give the time and date to
when the process of recovery actually began and as you all
know economic statistics are rarely conclusive on these
matters so close to the event.
But, without any doubt, ladies and gentlemen, there is a new
optimism about in many sections of the community and there is
rightly, a feeling of the worst is over and that recovery is
underw'ay. Today, with you briefly, I .; ant to examine the evidence for
that optimism.
First of all, it is almost universally accepted within this
country and amongst overseas financial and economic observers,
that Australia will undergo at least some recovery this year.
Now, I would say that we forecast a decgree and it's usually
a cause for worry. However, in this case the argument is
altogether quite persuasive. Some pick-up in activity is of
course assured by the ending of the drought, by the fact that
stocks cannot continue to be reduced for long at the rates of
recent quarters and by the strong support which my Government' s
monetary and fiscal instruments provide and by the indications
of a substantial improvement in the world economy.
In that respect we cannot, of course, simply assume that the
international * economic recovery! will simply flow through to
Australia. I can put it this way. We just cannot hitch a ride
into the future. We must ensure, by our own decisions, that
the momentum of economic growth comes from within our country
as well as from without and that we are well placed to take
the fullest advantage of every opportunity which that world
recovery offers to us.
Now, our economic policy is directed to fostering, sustaining
and broadening the incipient recovery which we can now recognise.
The elements of our policy in the short term are to take up some
of the slack that exists in the economy, to provide by way of
Government decision direct stimulus through capital works to
job creation activity and support for housing and to assist those
who have been made adversely and grievously affected by the
recession. However, and I think all'of y'ou know, that it has been
recognised in the business community here and overseas that our
approach, as IBrian Burke has said, is a responsible one. We
have served notice and I serve again that as the recovery proceeds
and strengthens, the level of that stimulus by government will
be reduced as appropriate to avoid clashes with expanding
private sector demands. We are not going to have a situation
where the demands of government upon the market to finance the
deficit, are going to continue at a level which will. prejudice
the capacity of the private sector to go to the market, bocause if
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we were to do that, the pressures upon the capital market
would be unsustainable and would inevitably be reflected
in rises in interest rates which would be against the
interests of all in the community and so, as 1 say, we are
doing what has been necessary to give that stimulus in
the state of a depressed economy, but we will reduce that
level as the demands for private sector increase.
Our Budget policy, as I say, commenced really in May. We were
not prepared to wait until August. That Budget policy can
afford to be more stimulatory than it otherwise cnuld have
because of the scope which the historic Prices and Incomes
Accord provides for non-inflationary growth. The success of
that Accord, and in particular the suppression of all
unnecessary sectional claims Ys, as has been'rxcegnised again
in this country, and increasingly arcund the world which is
watching with great interest the experiment that we have
successfully initiated. The success of that Accord is a vital
component of our annual strategy to restore Australia to long
term prosperity and withstand a typical degree of pressure
from some quarters at some stages and at its recent congress
the ACTU endorsed the Prices and Incomes Accord and at the
same time also paid tribute to the business community. We
have not, as you know, in these matters sat down with a view
that we have all knowledge and wisdom. We have worked these
things out in consultation with the important sectors of the
community and I have been able to approach the leaders of
business in this country large and small and they have
responded. They put somewhat different submissions in the Commission and
that is as we agreed it should be. But they have accepted the
outcome and within their own deliberations have resp~ onded to
the direct communications that I have sent to the leaders of
business and in respect of their own dividend policies, in
respect of the emoluments for directors, they should exercise
and exhibit the degree of restraint that we are expecting and
will continue to demand of the trade union movement.
Now reception of the Budget and our policies generally and
community perception of the correctness of those policies
provides, I believe, the strongest possible case for optimism
about the economy. I know that there wouldn't be anyone in
this room who would disagree with the proposition that very
seldom has a Budget framed in difficult times been as well
received both here and abroad as was that handed down by my
close friend and colleague, Paul Keating on 23 August.
Business reaction to the B~ udget and to the other relevant elements
of our policy has been remarkably favourable. i remind you
that that reaction has been seen in the stock markets around
the country. It has been seen in lower interest rates and, of
course, we don't claim the entire credit for that reduction in
interest rates, but, of course, our policies have been relevant
to it. Also that reaction has been seen in the strength of
the external capital account which indicates the vote of confidenc2
in our economy by world financial markets arid let me say in
respect of the external perceptions oif this government anid not
its policies that you may recall the sort of talk that was foisted
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upon this country during the election campaign by our
conservative opponents. A campaign tactic of fear and smear
against the people of Australia if you're silly enough to
elect a Labor Government that the capital of this country and
overseas would flee and that it would not give its support to
the Labor Government.
Now that was manifestly an absurdity and it was a disloyal
absurdity at that time. Of course, from the very moment of
the assumption of office by our actions we showed that it was
unfounded and reciprocally by their actions business here and
abroad showed that it was a nonsense. It was a matter of
considerable comfort to me that when recently I went abroad,
and particularly in the United States in June I had Treasurer
Paul Keating with me, we met the representatives of the
international business community and the American busj: iess
community in Washington and particularly in New York and we
weLe well received. It wasn't a question of them seeing
ideological sign writers marching through the door, but what
they did see were the representatives of the democratically
elected government which recognised the nature the intrinsic
nature of the Australian economy and the essential characteristic
of that economy is that it is a mixed economy. The private
sector which provides 75% of the employment in this country
which depends for itself on a stringently efficient public sector
and in which there is a mutuality of concern between the public
and the private sector a recognition that they both depend
upon the health of the other.
In the international business community understood that in
myself, the Prime Minister, and Paul. Keating as Treasurer and in
our Cabinet Minisiters, we have leaders and ministers who
understand the nature of our economy and are committed to making
those decisions which are necessary to stimulate the health of
the private sector as well as the public sector and that
confidence which they displayed in us then verbally expressed
has much more importantly subsequently been expressed in the actual
hard decisions which are being taken by the international
community in respect of the Australian economy.
Of course, I never claim that all the signs of the recovery to
which I have alluded are purely the result of government action.
But, as I say, they do stand in stark contrast to those dire
predictions made by the Of-position not only as part of the
election, but all those stupid predictions which remain in
regard to Budget impacts. I believe that there is very sound
reason indeed ladies and gentlemen, for those favourable
reactions to our Budget strategy that I have indicated.
There is simply no doubt that our confidence is returning to
the Australian business community. Surveys of business by the
Australian Chamber of Commerce/ National Bank and by the joint
Confederation of Australian Industry and Westpac show that
business anticipates improved conditions over the coming months.
While it is true that data are patchy by States the CAI/ Westpac
survey indicates that Western Australia is one State where
business anticipates growth in new orders, output, and cmployment
in the December quarter.
That confidence is in great part due to the sense of certainty
that business in this country now has about the conduct of
economic policy. You look back over the previous 7 years
there was simply no degree of certainty and predictability about
what was happening in regard to economic policy and planning on
the part of governments. My Government, since we have been in
has continually from day one sought fully to consult with all
relevant bodies and to seek as far as it is possible to achieve
consensus in the approach to economic management. It has
established a clearly understood policy direction and more
importantly, it has demonstrated the will to implement. Business
now has in this country a further basis for planning ahead than
it has had at any time since the end of the last war and with
that certainty comes confidence and that confidence provides
one guarantee that the recovery will not be aborted.
The Western Australian economy has been one of the nation's
strongest over recent years. While the world down-turn has
affected the State it remains well placed to participate in the
recovery. Now at this stage, of course, the recovery to which I referred
is somewhat patchy. The strongest areas at the moment are
housing and the rural and the public sectors. Firstly, in
respect of housing there has been a very welcome upturn in the
housing industry which has been gathering strength since 1983
goes on. The latest figures indicate that Australia wide
dwelling commencements in the June quarter rose by 13.2%
seasonally adjusted from the March quarter which itself was
4.9% higher than December. Commencements in the June quarter
are 3.9% up over the depressed levels of a year earlier.
I am glad to observe that there are signs that Western Australia
will share, albeit seemingly more slowly at this stage, in the
upturn in housing activity. While Conmencements are still down
on last year and the remains are broadly flat for the past four
quarters, approvals figures are improving compared to the trend
of the year.
There is still better news at one further stage back in the
construction chain. Housing lending has been increasing strongly
and interest rates have been reduced by many of the major
mortgage institutions.
Loan approvals in the three months to July are up 6% in Western
Australia over the level of a year earlier and are up by 30% in
Australia as a whole. In the case of Western Australia this is
still a comparatively disappointing situation but I should
expect, nevertheless, that before long, if not already, Western
Australia will be matching the national trend.
Now these things have not happened by accident. The Government's
new First Home Owners Assistance Scheme comes into effect on
1 October. It should add further to the housing recovery. The
Government responded in August to the Western Australian concerns
expressed to me by Premier Burke that there was a hiatus in
home buying pending introduction of the new scheme. We responded
to that by removing the savings requirement of the previous Home
Deposit Assistance Scheme.
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I want to say to you that the Treasurer, Paul Keating, and
Minister for Housing and Construction, Chris Hurford, will
be holding discussions with financial institutions to ensure
the continuing availability of finance for housing. Recent
reduction in interest rates, of course, have also significantly
reduced the cost of home loans. Most housing lending
institutions have cut their interest rates on home loans by
and have trimmed deposit rates. Savings bank home loans
are now charged 12% while building society rates have also
reduced Indeed, as you would know, interest rates have generally fallen
recently including in respect of those rates relevant to the
financing of the needs of the business sector. The prime rate
charged on large overdrafts, for example, has fallen by between
1 and 2% since March. This is, of course, as we all recognise
another major plus point for recovery. Interest rates will,
of course, and I don't try and disguise this fact fluctuate
especially for short dated instruments. Much, of course, will
also depend upon positions in financial markets abroad.
However, it is clear that the lowering of rates recently will
greatly assist the cash flow position of many enterprises and
it will help to under pin the firming of confidence of private
investors. Lower interest rates and improved consumer sentiment will also
I believe help to produce a much needed fillip to consumer
spending, particularly for spending on consumer durable goods.
Real private consumption has been reached for some time. The
latest data for retail sales suggests that theremay have been
a firmer tone to consumer spending very recently.
Now, of course, our rural economy the resilient rural economy
has bounced back well from drought. Wnile Western Australia
escaped the worst effects, the main benefits from the recovery
in production and demand will appear in the Eastern States,
improved rural export performance in the new year will benefit
all of our country.
The world recovery, of course, as we all know, is of absolutely
major importance to Australia, particularly to Western Australia.
The minerals sector in this State has been bleak for some time,
but overseas demand has already picked up for some non-rural
exports and the economic recovery in the United States foreshadows
some measure of improvement in demand for exports. I
should not, however, be particularly sanguine about the near
term prospects for either iron ore or energy exports, both of
which are particularly imp; ortant for Western Australia.
The iron ore market faces particularly difficult times be: cause
of a quite fundamental structural change which is occurring
in the Japanese steel industry market.
On balance nevertheless the general outlook for exports coupled
with an imnroved industrial climate that can best be sustained
by implementation of the Prices and Incomes Ac-cord means that
the producers in this State are generally more placed t-o be
competitive in fulfilling extra demands. I
r 7 I can't conclude on that note, without expressing to you my
deep and sincere hope that the current industrial problems
in the Pilbarra will be soon resolved. credit
and without trying to be up front about it, I can simply say,
to you quite seriously, that we have behind the scenes been
trying to have an input to see if we can get those matters
resolved not only in an imiriediate sense, but in the longer
term and I express the hope that those efforts together with
the efforts of others will soon be successful.
Ladies and gentlemen, that then is how we see the economy
developing through 1983/ 84. There are indications that
manufacturers are beginning to respond to these prospects.
Such indications of production as we have the Australian
Bureau of Statistics production statistics and the ANZ
Bank index of factory production have been showing upward
trends, but it is to the local market that many people look
for evidence of economic performance.
When we took office we said that halting the decline in
employment would be the first hard step to reducing unemployment.
We are encouraged to believe that that has happened that we
have reached the bottom of the trough and that we are beginning
the steady upward climb.
Employment did fall in seasonally adjusted terms in August.
Isolated falls of this kind can always occur, especially when
the economy is only in the very early stages of a recovery.
There may well be other seeming setbacks along the generally
upwards path. I suggest to you that one reliable indicator
of trends in the labour market is attained by computing 3-monthly
averages. On this basis employment rose by 0.3% in the latest
period after having fallen consistently on this basis for over
a year.
The unemployment rate, on the other hand, has stabilised at a
bit over 10%. 10.3% when we came in. It has held the line
and gone down to 10.2% last quarter. Employment growth in
other words has been sufficient roughtly speaking to absorb
the natural increase in the workforce. In all likelihood the
unemployment rate will rise somewhat again at the upturn in
economic activity getting underway. This, of course, is partly
also because better prospects for employment may be expected to
encourage people to return to seeking employment in the paid
workforce who had previously been discouraged.
Western Australia contines to perform better than the majority
of States in this area. It the only State to record an
increase in employment over the year to the three In nths ended
August and its average unemployment rate in the three months
to August was the second lowest.
In regard to this area of employment I believe that my
Government is on track in regard to the promises that we made
in the election. I remind you what thev were. I said that we
would end the explosion in unemployment rates which had
characterised the previous 18 r. onths that we have done.
I said we would move to a situation where there would be an
actual increase in jobs. That has been done an& will increase.
I said that in that sort of context I believed that we would be
able to create something like 0 million new jobs in the first 3
years of office and I believs we will go close to achieving that
obj ective.
Overall, therefore, T come to the conclusion, ladies and
gentlemen, overall tne signs are somewhat mixed. Some components
of demand are weak and as you know private investment in
paricuarwill take some time to pikup. Yet the
indications are qluite clearly that the worst is ovr Some
areas are showing definite signs of an upsurge. These, coupled
with the one-off factors which I outlined earlier, will give
us a good start as 1983/ 84 proceeds.
The facts are, my friends, that it is our firm belief on the
basis of the evidence available to us already and an our
assessment of the impact of the deliberate economic p~ olicies
that we have put into place, that as we come to the end of this
financial year 83/ 84 in other words as we get to the middle
of 84 this Australian economy will be growing at a rate of
at least 5 annum against the experience that indicated
before of 82/ 83 where for the first time in 30 yeara we had
an actual decline. We will turn this economy around..
what we have done ( tape ends)