EMBARGOED UNTIL 9.25 P. M. CEKAANTDLVR
SPEECH BY THE PRIME MINISTER
CHAMBER OF MANUFACTURING, NEW SOUTH WALES
SYDNEY 25 SEPTEMBER 1984
Ladies and Gentlemen,
I very much appreciate this opportunity 1to address you tonight.
The turnaround in Australian manufacturing over the past
eighteen months represents a substantial achievement.
it is not simply the sharp reversal Of What had been a dramatic
decline in Australian manufacturing that is significant it is
also the vigour of its recovery which is now providing the
Australian economy with a source Of real strength.
The Industry Councils' Secretariat: is currently undertaking an
assessment of the performance of the Australian manufacturing
industry.
The conclusions drawn by the Secretariat demonstrate for all
Australians, and particularly those engaged in the manufacturing
sector, the severity of the problem confronting the Labor
administration in this area when it assumed office in
March 1983.
They indicate that in terms of low ' output growth, employment
decline, low export growth, rising import penetration and low
growth in capital. stock, the manufacturing sector in the period
1971/ 72 to 1981/ 82 was performing the worst of the five major
sectors of the Australian economy. CHECK AGAINST DELIVERY
In the year to March 1983 the situation was particularly
disastrous output fell by over 12 per cent and, over the year
to May, more than 100,000 jobs were lost in the sector.
This record of decline, both in growth and in absolute terms,
had to be halted and reversed. Since March 1983 it has been.
The Labor Government accepted this task as one of its highest
priorities. Indeed my Government when it assum'ed office, and ever since has
regarded the restoration of a highl. y productive, strongly
competitive manufacturing sector as crucial, not only to the
immediate purpose of economic recovery, but also to the even
more important task of securing conditions that would guarantee
the maintenance of longr-term economic growth in Australia.
Hence the emphasis we have given to the development of a sound
industry policy as part of the Government's overall economic
strategy.
Only if we have a more internationally competitive manufacturing
industry can Australia achieve the growth in output, income ard
employment it needs. A defensive, inward-looking, and stagnar. t
manufacturing sector could hold back the growth of the whole
Australian economy.
Tho fact is that the manufacturing sector has a singular
importance for the people and economic life of Australia.
It can either exert strong depressive effects on other sectors
of the economy or it can play a central role in the process of:
economic growth.
Improved performance of the manufacturing sector is essential.
This will only be achieved if we have a manufacturing sector
which is:
more internationally competitive and export oriented
than at present;
better able to adapt to changing conditions;
better equipped to take advantage of opportunities
presented by technological developments.
Government's industry policies -and economic policies more
generally are directed to providing the framework within which
attainment of these conditions might be possible.
The remarkable turnaround in Australia's economic performance
achieved over the past eighteen months has certainly provided an
environment of unparalleled opportunity for the manufacturing
sector. Through the last year we have exper~ ienced the strongest growth
in economic output since national accounts data were first
collected in their present form a quarter of a century ago.
Through the last year more new jobS have been created in
Australia than in any other year in our history.
Through the last year we have seen inflation and inflationary
expectations fall decisively, from about twice the average of
the industrial countries, to levels that are more or less in
line with comparable countries.
Faster growth and modest wage increases within the Accord have
dramatically reduced real unit labour costs. The share of
national income accruing to profits is now higher than at any
time for the past 10 years. The continued successful operation
of the Accord will enable still further improvement in real unit
labour costs because there will be no increases in award wages
over the twelve months to next April. Real wages costs per unit
of output are now mud) the same as in the late 1960' s to early
1970' s.
This rapid turnaround in economic activity has been accompanied
by the lowest incidence of industrial disputation, as measured
by working days lost, in the past J. 6 years3.
Interest rates have fallen appreciably, contributing directly to
lower business costs and improved sales and investment
prospects. And the manufacturing sector, albeit unevenly and haltingly, has
reflected in its own performance something of this decisive
shift in Australia's economic fortunes.
In the year to May 1984 there were hardly any job losses in the
sector. Employment in the sector has levelled out and I would
hope the forthcoming employment figures for the year to August
1984 will show some growth.
The latest June quarter index of total, manufacturing gross
product ( seasonally adjusted) also showed a growth in real terms
of nearly seven per cent over the previous year.
Despite the unexpected fall of 0.7 per cent in output in the
June quarter itself due in large measure to stock rundowns,
technical difficulties in one sectoral group, and quite possibly
to statistical aberrations I should expect the strong growth
which has been apparent in the sector since the March quarter
1983 to be sustained in the current year.
My confidence is based not only on an anticipation of continued
strong growith in the economy though obvi-ously that will be
important.
There is also the clear evidence of' strengthening private
consumption. July retail sales figures showed an increase of 3%
in seasonally adjusted terms and retail sales in the year to
July 1984 rose by This pick-up in demand is obviously very
encouraging to manufacturers.
The Government's economic policies, including some specific
industry policies, also provide a most effective underpinning
for a sustained recovery of production in the manufacturing
sector.
My confidence is shared by Australian manufacturers.
The September quarterly survey by the Confederation of
Australian Industry and the Westpac Bankii~ g Corporation of
industrial trends showed its most optimistic capital spending
results for three years. Forty parcent of manufacturers
expected to increase spending on plant arid machinery over * the
next 12 months, compared with 20 per cent who forecast lower
spending. This is the best result since June 1981, and compares
with 36 per cent predicting a rise and 22 per cent a fall in the
last June quarter.
The approach the Government is adopting t~ o manufacturing
industry policy is clear and deliberate. It is an approach
which at once aims at a definition of goals, the consideration
of the timing of the process of adjustment, the selection of
appropriate policy instruments, the examination of necessary
institutional and administrative arrangcnients, and attLention to
the equitable distribution of the social costs of structural
adjustment. The Steel Industry Plan introduced last year is a highly
( successful example of this approach at work. Through it, all
groups involved dramatically enharced their ow,. n positions by
agreeing on measures aimed at rapidly improving the
competitiveness of the industry. The careful choice of
appropriate policy instruments in the Steel Industry Plan has
benefitted all Australians by providing steel at lower prices
and in a more competitive environmient than was the case under
the regime of import quotas which the Plan replaced.
The Motor Vehicle Industry Plan is another example it aims to
encourage a more competitive industry, providing more secure
employment and investment opportunities I-or those directly
engaged in motor vehicle production, and better vehicles at
lower prices for consumers than would have been available under
the arrangements we had inherited.
The success of arrangements such as these hinges not on
unilateral action by Government, but on a co-operative approach
by all concerned governments, employers and unions to the
problems of the industry in question.
To foster this approach throughout the manufacturing sector we?
have established an extensive industry consultative mechanism
spearheaded by-a restructured and revitalised Australian
Manufacturing Council.
Already the Council has some valuable runs on the board. Its
recent statement on manufacturing industry policy representing
as it did the agreed positions of all bodies and individuals on
the Manufacturing Council was a major achievement. It not
only served to underline that a vigorous and competitive
manufacturing sector was vital to the Australian economy, but
that a positive industry policy was an integral part of
achieving stronger economic growth and increased employment.
more specifically the Council sugge! sted that:
" The main impetus to growth must be achieved by the
development. of economies of scale, achieving larger volumes
and more diversified trade, increased factor productivity
and being more competitive in the domestic and export
markets."
The Council went on to propose that: " Policies to this effect
should focus on:
maintaining and where possible exp) E. nding our existing
position, in world manufactuting, agricultural, mineral
and resource markets where we do have a competitive
advantage developing export and import competing opportunities for
the manufacturing and service sectors and matching the
removal of protection with the development of those
opportunities
* planned reduction of support for manufacturing
industries not consistent with determined objectives to
be trimmed so that job losses can be made at acceptable
social costs
* the need to ensure that the costs of capital,
availability 6f finance and taxation provisions are
conducive to developing manufacturing industry in
Australia."
This approach proposed by the Australian Manufacturing Council
constitutes a coherent, properly balanced indeed totally
sensible prescription for growth in the manufacturing sector;
it also, in the implementation of all its elements, represents
an appropriate strategy for national economic growth.
Importantly the Council's approach highlights the futility of
narrowly-based, and often ill-conceived, golutions to the
problems of Australian industry.
Sterile old arguments, within which the respective merits of
free trade and protection were seen as the only issues in
industry policy, are buried -hopefully forever.
In their stead, and in line with what both John Button and I
have argued for the past year or so, the Council declares that:
Australian manufacturing industry must expand sales both in
international and domestic markets, and that the key to success
in both areas is enhanced competitiveness.
The achievement within the Council of a consensus on this
approach is a valuable advance in the development of comimunity
understanding of the issues involved. It constitutes needed
recognition of common ground and an equally important movement
away from narrow sectional interest. What is required now is
action to give effect to the thrust of the strategy proposed
to identify and nurture the processes by which the manufacturing
sector might achieve enhanced competitiveness.
In this regard, the role of the industry specific Councils
established under the umbrella of the Australian Manufacturinc
Council is vital.
Importantly-these Councils have been constituted in such a way
as to draw upon the views of representatives across the full
spectrum of industry. The benefit their understanding and
experience brings is an essential prerequisite to the
development and implementation of appropriate industry policies.
A comprehensive work program for the Councils has already been
established. The program concentrates initially on the manufacturing sector ' s
current position and aims to identify the strengths and
weaknesses and prospects and opportunities of the sector. From
this work, and guided by the long-term stiategy approach
outlined by the Manufacturing Council, specific action-oriented
proposals for industry restructuring and development will be
formulated.
This work is being complemented at the Government level by a
sub-committee of Cabinet and a high level officials' Task Force
formed to consider the , issues involved in industry adjustment.
I consider it most important that the Government bring a
properly considered and carefully integrated approach to the
policy issues involved in this crucial area. It is not simply
that Government action should be supportive of the perceived
needs of industry. Certainly, at a minimum, Government polic:; es
across the full range of areas of interest to industry should be
consistent in their effects on industry; but Government action
should also serve as a catalyst for necessary change.
Government would be failing in its responsibility were it not to
provide a policy framework appropriate to the long-term
developmental needs of competitive Australian industry
structures. Government should also see that the costs of change
are not borne alone by those at the face of change. As I have
said many times before, if change is to be justified in terms of
the benefit to the community as a whole, then the community must
share the burden.
One direction in which the Government will look more
deliberately for change is in the accumulated pattern of
excessive and often irrelevant and obstructive body of laws arid
regulations. The removal of unnecessary regulation will
contribute significantly to improved economic growth
performance.
It is with this aim that we are establishing a tripartite
working group comprising representatives of government,
business and unions to examine critically the whole range of
business regulation. As I said the other day to the Business
Council: " We will maintain regulation which, upon careful analysis,
clearly promotes economic efficiency, or which is clearly
an effective means of achieving more equitable income
distribution.
We will abandon regulation which fails these tests."
Whatever action we take in Government, however, can be no
substitute for the initi'ative and enterprise of industry itself.
only through your efforts are we likely ultimately to succeed in
achieving a sector which will have the capacity to provide
Australians with increased standards of living
a manufacturing sector which will provide increasing
number of jobs and jobs which are secure and have long
term prospects, and
a manufacturing sector which will provide increasing
numbers of jobs and jobs which arc! secure and have lont3-
term prospects, and
a manufacturing industry producing goods which are up -to
date, technologically advanced, arid produced efficiently
at competitive prices.
In many parts of manufacturing, production for the domestic
market alone will rnot allow industry to achieve these goals.
Our success will depend crucially on improving the export
performance of the manufacturing sector.
In this regard, allow me to say that recent comments by your
Chamber's Director, Jbhn Martin, were music to my ears.
While discussing the subject of research and technology, John
emphasised the need for industry to become more export oriented.
He noted that there is a significant market out there for our
products and that industry should reach out for it.
Expansion in the trade of manufactured goods has been the
driving force behind world trade growth over the past two
decades. But because of the esentially import competing,
substitution nature of manufacturing in Australia, we have had
little share in that growth. This single fact, more than any
other accounted for Australia's share of world exports fal'lin~ g
from 1.7% in 1970 to 1.2% in 1980.
Many of Australia's ba~ ic commodities face uncertain price
prospects in the medium and longer term and are experiencing
intensified levels of protection in foreign markets, increasing
supplies from developing countries and increased substitution.
Australia needs the impetus effect of income and employment
growth that manufactured exports can provide.
Looking at Australian manufacturing industry, I have no reason
to doubt the competitive capacity of Australian manufacturing
industry. There are absolutely no grounds for pessimism about
our ability to export the products of our manufacturing and
services sectors.
We have achieved a stable macro-economic environment in which
lower real unit labour costs, falling interests rates and a
realistic exchange rate are more conducive than in recent memory
to the heightened competitiveness of Australian industry.
We have an established pool of enterprise and initiative.
Internationally, economic recovery has taken hold and with it
flows the prospect of expanding market opportunities.
The opportunities for Australia's manufactured exports are
further enhanced by our location within the world's most dynamnic
reg ion.
' We need now to put all these circumstances together into a
highly successful expdrt drive.
There is, however, no room for complacency in our approach.
Australia will not be an automatic beneficiary of the dynamism
of the Western Pacific simply by virtue of the good fortune of
being located there.
The recent report of the high level trade mission to Japan
drives the point home. while the -report identifies a number of
areas where particular export opportunities exist, it says that
successes in marketing Australian mianufact~ ures in Japan have
been rare and nearly all exports of manufactures to Japan have
been the result of Japanese trading companies seeking out
Australian products and, then marketing the! m in Japan.
Australian industry must be more active arid adventurous in
seeking out overseas markets. There are risks in such action
but there are also significant rewards. As a nation, and as
exporters, we must be prepared to take these risks.
A more outward-oriented approach to Australia's manufacturing
activities has important implications for both industry and
Government: -for industry it means seeking out and capturing the
opportunities of the international market, matching the
quality of overseas competitors and resisting the
temptation to shield behind the protective walls of a
limited domestic market. The imperatives of successfu* l
international competition stimulate vigour and
flexibility not only in economies but also in the
enterprises on w. hich those economies depend.
-for Government, an outward-orientation means recognisinig
the mutually supporting role of production for the
domestic and export markets. It means establishing
systems of incentives in which prices reflect both
domestic and international resource scarcities. Above
all, it means creating a climate which is conducive to
enterprise and to flexible responses to changing market
conditions. It is in just such a climate that specific,
positive measures of Government support for industrial
development are likely to bear fruit.
Recent changes in the structure and approach of the Australian
Department of Trade have been designed to further enhance the
export prospects of the manufacturing sector.
The market development activities of that Department are now
giving a particular priority to manufactures and services.
A " Global Marketing Plan" has been established to identify
products and firms which are competitive by world standards. it
will also identify overseas markets where Australia is likely to
be able to secure an increase in dxports of manufactures.
In practical terms, a number of industries have been identified
as having scope for improved export performance. The diversity
of these industries testifies to the broad base of the
Australian manufacturing sector and to the range of
opportunities presented.
Specific country " Action Plans" are also being implemented. By
taking account of the individual characteristics and trading
conditions of the individual countries tiese plans will maximise
our chances of breaking into new markets.
Already very considerable progress has been registered under
both the China and Japan " Action Plans". Very significant
impetus has also been achieved by mnyselt, Lionel Bowen and many
other Ministers involving ourselves directly in the national
effort to promote Australia's exports. The China iron and stEel
iniative is one clear example of the real gains already
registered. The visit to Australia later this year of a high
level Japanese import expansion mission tv. ill be another example
of opportunities crea~ ted in this case it will be for
Australian manufacturers to persuade the visitors of the
competitive quality of their product. I could not overeinphasise
the need for Australian manufacturers to prepare
thoroughly for this most important mission's visit.
The effectiveness of the Australian Trade Commissioner service!
is also being improved through a stronger marketing orientation
and by recruitment of suitably qualified private sector
personnel on short term appointments.
As well, a National Export Marketing panel has been formed to
focus on manufactures'and services. This panel will advise on
the most effective ways in which the Government can assist
Australian exporters and ensure that our export finance and
insurance activities, export development grants, and trade
promotion ' activities are each being effectively employed.
My own regional trade initiative, first announced in Bangkok in
November last year, should also help secure improved access to
international markets for Australian suppliers. In this regard,
I am delighted that the next meeting of senior regional trade
officials will be held in Sydney from 3-5 November. Out of that
meeting I expect countries of the region to define more
precisely their interests in contemporary -multilateral trade
issues. By so doing we should be able to secure more adequatE!
international attention to this region's trade needs and
priorities. Finally I suggest to you that far greater effort needs to be put
into fostering closer links between industry and research
organisations by Australian manufacturers and researchers, anc.
especially the CSIRO, so as to facilitate commercial development
of research findings.
For too long research in Australia has been too much divorced
from development. If measured against the yardstick of
relevance, there is clearly a need for our scientists Lo lift
their game.
As a nation we have been deprived of the full benefit of our
internationally acclaimed research effort. The fault lies on
both sides with researchers disinterested in the application
of their product, and with industrialists not sufficiently aware
of the benefits to be derived from a vigorous research effort.
It is for this reason that I have recently discussed with both
the Australian Vice-Chancellors and with Lhe Business Council of
Australia some of the ways in which this gulf might be bridged.
Foy its part the Government will actively support this process.
There is a need for Australian scientists and industry leaders
together to focus more deliberately on the quality and relevance
of Australian education systems.
The gap between Australian research and development has its
origins in traditions that have never recognised nor
acknowledged the relevance of each to the other. This problem
will only be overcome if researchers reach out more deliberately
to understand and provide for the needs of industry and if
industry itself puts much greater effort into defining its
requirements more precisely and embarks on the even more
difficult task of persuading educationalists and researchers to
redirect their interests.
While change in areas ' such as this is inevitably slow, there
should be no doubting the Government's determination to
encourage progress.
The Kirby Committee is currently reviewing the whole range of
Government training programs. And we have established the
Karmel Committee to review the quality of Australian education,
at the primary -and secondary level, with a special concern to
improve the relevance of the education process to employment and
future economic opportunities. Similar work is being undertaken
by the Commonwealth Tertiary Education Commission, under its new
Chairman, Hugh Hudson.
These inquiries would all benefit greatly from carefully
researched, well-co-ordinated industry inputs.
Ladies and Gentlemen,
in the final analysis, the Australian manufacturing industry's
best prospects lie in improving its-competitiveness and in
seeking out new markets, especially internationally. Without
this approach its contribution to the Aust: ralian economy will be
well below its potential.
The opportunities presented by international economic recovery,
together with the underlying invent iveness3 and diversity of
Australian manufacturing activity, should dispel any pessimism.
What is needed above all else, is improve(] competitiveness. Any
measure of import replacement and export expansion achieved on
this basis will-be to the benefit and advantage of all
Australians. The task confronting us as a nation is to remove
all impediments to competitiveness.
A deliberate and concerted effort on the part of all concerned
is required. Government certainly has a role to play my
Government recognises this and has already moved to shoulder its
responsibi lities.
But, ladies and gentlemen, the real engine for growth is not
Government. It is inaustry itself which must develop successful
strategies to export and grow. The people of Australia are
looking to you to do so. It is because I know you have the
capacity and the commitment to meet that challenge that I have
had the greatest pleasure in being with you tonight.