.&) US'RLA
SPEECH BY THE PRIME MINISTER
DECISION-MAKERS' LUNCHEON
PERTH
19 APRIL 1984
CHECK AGAINST DELIVERY
EMBARGOED AGAINST DELIVERY
SPEECH BY THE PRIME MINISTER
DECISION-MAKERS' LUNCHEON PERTH 19 APRIL 1984
I am very pleased to be back once again on my home groundeven
if the circumstances aren't quite as memorable as they
were last time I was here.
One year ago at the time of the National Economic Summit
Conference Australia was in the worst recession since the.
Great Depression.
For the first time in 30 years there was-negative economic
growth. And unemployment had exploded by more than a quarter of a
million over the previous year.
You only have to recall that period of virtual crisis 12
months ago to realize just how much the economic outlook has
changed in one short year.
Twelve months ago at the Summit Conference there was really
only one challenge facing Australia to reverse the tragic
slide deeper and deeper into recession.
Twelve months later one thing is clear -we have met that
challenge. In the second half of last year economic growth began again
with a vengeance.
Today employment is growing once more, profits have
increased stronyly, inflation is falling, interest rates are
down and confidence is returning.
The economic recovery has begun.
But Australia now faces a new and very different challenge.
That challenge is to sustain the momentum of the recovery
that is now underway and to sustain it. not just for 6
months or 12 months but year after year.
We have to make economic growth and prosperity a permanent
feature of our way of life.
2.
Of course, nobody in this audience needs to be told just how~
difficult that is going to be.
But provided we as a Government, and as a nation, approach
it in the right way, that challenge can be met and will be
met. Role of Private Sector
However, in facing this challenge we need to remember one
fundamental point.
There is no way there will a sustained economy ' recovery,
there is no way there will be a return to prosperity without
a healthy, vigorous, profitable private sector.
That is beyond question.
So I have no hesitation in reiterating here m-y fundamental
commitment, and that of this Government, to the private
sector's central role in our mixed economy.
We as a Government recognize the inescapable fact that the
key to sustaining the economic recovery lies in the
potential contribution a strong and dynamic private sector
can make given the support and backing of the national
government. A related commitment is also vital.
This is our commitment to sustained economic growth.
Growth allows us to make provision for Australians in need.
Growth enables governments to ease the burden of taxation.
Growth means an expanding cake with workers and employers
able to meet their legitimate aspirations without turning on
each other.
Growth means rising productivity, allowing wage earners'
living standards to rise without fuelling inflation or
creating unemployment.
And above all growth creates jobs for Australians young and
old. These were the fundamental realities recognised in the
communique issued at the end of the historic National
Economic Summit last year..
But it's one thing to be committed to Sustained,
non-inflationary economic growth and a revitalized private
sector. It's quite another to have the framework and policies for
that to occur,
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The Federal Government is squarely addressing the challenge
of sustaining non-inflationary economic growth.
Our policies are geared, above all, to maintaining the
momentum of the recovery.
We recognise that to do this will require a sustained
improvement in private sector investment.
Private investment is normally the last component of demand
to pick up in an economic recovery.
But it is an essential component of sustained recovery.
There are three matters as important as any for a long-term
investment improvement and a sustained recovery.
These are : first, a balanced fiscal policy; second, a
workable wages policy; and third, a forward-looking industry
policy. Let me address them in turn.
Fiscal Policy
In the case of the first~ matter fiscal policy the
Government must put together its Budgets with a careful
view to the impact they will have on private sector
activity. This impact will vary with the circumstances of the time.
Last year, for example, the economy was in the depths of
recession. A contractionary Budget would only have aggravated the
rece'ssion and so hurt the private sector.
What was needed was a reasonably expansionary Budget to
provide a floor for demand and so enable private sector
activity to pick up.
But it had to be a responsible expansion kept* within the
limits necessary to allow moderation of the high interest
rates prevailing when we took office.
That's what our last Budget was about and that strategy is
working. Within that Budget strategy., inflation is falling.
The Consumer Price Index rose by 8.6 per cent in the year to
the December Quarter the lowest increase for over 4 years.
And further reductions in inflation are in the pipeline.
Within that. Budget strategy also, the economy is now growing
remarkably. Growth in non-farm product is expected to be a stunning 8
per cent through this financial year compared with
negative growth in the previous year.
In ad dition employment has risen by 210,000 since April of
last year.
And within that Budget strategy, the deficit financing task
has been achieved in the context of very significant falls
in interest rates.
So last year's Budget is clearly working.
But in drawing up this year's Budget we face very different
circumstances. The economy is on the move again and the private sector is
starting to increase its demands on capital markets.
We now -need a Budget that maintains a degree of fiscal
stimulus to keep growth moving but which ensures that
government financing demands do not place upward pressure on
interest rates as private investment strengthens in the
course of economic recovery.
Accordingly we will significantl. y reduce the deficit in this
year's Budget.
At the same time we will make sure the deficit reduction is
not so large as to pull the rug from under domestic demand
and choke off growth.
We struck exactly the right balance in 1983/ 84.
We will strike the right balance again in the coming
financial year.
The hallmark of the Government's fiscal policy will continue
to be: balance, flexibility, responsibility.
Wages Policy
A second area crucial to sustained economic recovery is
wages policy.
Australia needs a wages policy that is coherent, that is
equitable and, above all, that is workable.
That's exactly what the Federal Government has put in place
for Australia.
The Government's wages policy is centred around a
disciplined central1ised wages syStem and is underpinned by
the Prices and Inco~ mes Accord.
Our policy gives Australia the assurance of long-term wage
moderation. Furthermore, wage rises in the short term will be ver y
small. Because of the effects of Medicare on the Consumer Price
Index, the National Wage Case increase later this year
will only be about 1 to 2 per cent.
The following National Wage Case decision won't-occur until
March or April of next year.
Business can therefore look ahead to almost a year of
minimal wage rises.
Of course, the business community would have preferred lower
wage increases than occurred in the last two National Wage
Cases. This is understandable.
However, what Australia needs is a wages policy geared to
the requirements of long-term economic recovery not a
wages policy for recession.
What we have put in place will serve AuStralia well in the
period of economic recovery and growth that is ahead of us.
Against that background the wage rises that have so far
occurred are very much an investment in the future a
future of wage moderation and therefore a future that will
bring immense long-term benefits to business.
Already we are seeing the benefits. The latest national
accounts figures show that in the second half of last year,
the profits share of GDP was the highest since the first
half of the 1970s.
Unit labour costs, after being way out of line for several
years, are now close to the levels of the late 1960s and
early 1970s.
A year of continued wage moderation within the Prices and
Incomes Accord will take unit labour costs back to those
earlier levels.
The last thing Australia needs is a wages surge that will
choke off the economic recovery.
However, that's what the Opposition has effectively proposed
for Australia with their wages policy.
That wages policy and I use the term ' wages policy'
advisedly would hardly be put into effect belfore it came
crashing down and brought the economic recovery crashing
down with it.
The Opposition's wages policy would be a recipe for a wages
explosion led by the most highly organised sections of the
industrial movement.
At the same time it would threaten the living standards of
more vulnerable workers.
The Opposition's wages policy would divide Australia.
It would returbn this country to the politics of
confrontation, the politics of division.
Australia has had enough of confrontation.
We've had enough of divisiveness.
What Australia needs is co-operation and consensus and a
wages policy that embodies those elements a wages policy
that puts the mistakes of the past behind us -and looks to
the future.
That's what this Government alone can offer.
All the Opposition can offer is a wages explosion, an
upsurge in strikes and a. n end to the recovery.
Industry Policy
As well as fiscal policy and wages policy, a third area of
policy vital to sustaining the recovery is industry policy.
Over the years successive Australian Governments have been
unable to come to terms with the requirements of a
forward-looking industry policy.
This has undoubtedly contributed to Australia's relatively
poor economic growth performance.
The Australian economy over the past two or three decades
has registered economic growth rates on average well below
those countries with which we normally compare ourselves.
We have squandered our national opportunities.
Perhaps the heart of the problem has been our incapacity to
adapt to change and to take advantage at' the opportunities
provided by change.
What Australia needs is a more constructive, forward-looking
industry policy, one which encourages Australian industry to
respond Positively to change and to become more dynamic,
flexible and outward-looking.
At the same time the Government needs to ensure that the
pace of change is gradual and that no one group is asked to
bear an undue share of the b~ urden of adjustment.
The Federal Government is already laying the groundwork for
this new approach to industry policy.
Earlier this year, at my instigation, the Government
established a Special Group of Ministers, chaired by Senato z
Button, to coordinate work in areas relevant to structural
change. These areas include trade, education, training and
retraining, science and technology, employment and
industrial relations and defence support.
Th-e Group is receiving strong back-up from a study group ofe
senior officials established to facilitate its work.
Those officers have been chosen not as departmental
representatives but-because of their special skills and
experience. I believe the work of the Group of Ministers will make an
important contribution to developing a more positive
industry policy.
The Government has also initiated very useful discussions of'
industry policy in the Economic Planning Advisory Council
( EPAC).
Following its March meeting EPAC issued a very constructive
statement calling for an active industry development
strategy for Australia.
In the steel industry the Government has introduced policies
which I believe are a model for how Australia should go
about industry restructuring.
Our historic Steel Industry Plan puts the industry firmly on
the path of higher productivity, lower protection and
greater international competitiveness.
Both sides of industry unions and employers support the
Plan and are committed to making it work.
This approach to industry policy, which we are fostering,
will help ensure that Australia takes advantage of the
opportunities for economic growth that lie before us.
So in each of these areas I have spoken about fiscal
policy, wages policy and industry policy the Federal
Government has policies which will help to sustain the
economic recovery.
We have a balanced fiscal policy, a workable wages policy
and a forward-looking industry policy.
These policies are helping to revitalize the private sector.
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They are laying the bas is for recovery through the Eighties
and beyond.
Continuity in Policy
But there is a further matter just as important as the ones
I've mentioned.
This concerns the way economic policy is put together.
This Government has brought back stability and cont inuity
to economic policy.
Our policies are following a clear path. They have a clear
purpose, a clear direction.
This means the business community knows where it stands.
Business can be confident about our management of the
economy in the short-term.
It can also be confident we are addressing the issues vital
for medium and long-term growth.
Business knows what our policies are and where we're going.
And it can plan for the future confidently with that
knowledge. I believe that is a very significant achievement.
It distinguishes our performance dramatically from our
predecessors. The previous Government was totally confused on economic
policy. It was hopelessly divided and it chopped and
chanlged incessantly.
Business didn't know where the Government was going and the
Government didn't even know itself.
Worse still, business was ignored more and more by the
previous Government and eventually frozen out altogether
from any positive role in economic policy.
This Government, however, has brought business back in from
the cold.
Business played a key role in the Economic Summit
Conference. Business is now playing a key role in the Economic Planning
Advisory Council.
We've gone to great lengths to talk to business, to listen
to business, to consult with business.
That's ar it should be.
In this spirit of cooperation, I am pleased to announce that
the Government has decided to appoint a Business Advisory
Group to advise the Federal Government on the special needs
of Western Australia's employers and its economy generally.
This will complement moves we are taking to improve our
consultations with the trade union movement in Western
Australia. I have asked the Minister for Finance to announce the.
details of this significant development later next week.
I can, howeve r, say to you that the tyranny of distance and
the costs that this imposes are well understood by us.
By appointing an exclusively Western Australia n group to
advise us on your special problems, we will ensbre that youir
voice is heard in Cabinet and your problems attended to.
What this Government is about is harnessing the talents, the
capacities, the imagination of all Australians for our
national advancement.
I have said consistently that we do not believe that we have
a monopoly of wisdom and experience.
We look to advice from the whole community in developing
policies to take Australia forward.
And this applies very m uch to the business community.
We greatly welcwiie the contribution that you have been
making. Ultimately, this Government is a partner with the trade
union movement and with business in the one enterprise the
creation of a long term national recovery for Australia.
Both Government and business have a common vital interest in
the recovery.
We must succeed in that enterprise.
And, working together, we will succeed.