PRIME MINISTER
EMBARGOED UNTIL .1.30 P. M. CHECK AGAINST DELIVERY
SPEECH BY THE PRIME MINIS-TER
MELBOURNE CHAMBER OF COMMERCE
MELBOURNE 29 OCTOBER 1984
I very much appreciate this opportunity to address you
today.
Some of you may be aware that your invitation to me was
made some time ago and that I was unable to accept at
the time.
The delay has meant that I am able to report further
evidence of strengthened economic performance. With the
passing of time, the strength and extent of economic
recovery is becoming increasingly apparent. At the same
time, there is increasing evidence of decisive progress
in the decade-long fight against: inflation.
Today I want to talk to you about a number of aspects of
the economic recovery which are vitally important to the
well-being of all Australians.
I want to talk to you about our general strategy for
sustained, strong non-inflationary growth.
I want to talk to you about employment.
I want to talk to y~ u about industrial disputes.
I want to talk to you about how we havet been keeping
wages growth within the capacity of the economy, and
about the other side of this coin, real. unit labour
costs to business and the profits sharc of total
incomes. I want to talk to you about inflation and interest
rates. I want to talk to you about housing.
I want to talk to you about the tax cuts which come into
effect this week, and about broader taxation reform.
I want to talk to you about all these things that are
absolutely vital to all Australians.
You don't hear much about most of these issues from the
other side of politics these days.
When did you last hear Mr Peacock and Mr Howard talk
about growth, and inflation, and interest rates, and
housing, and employment and unemployment, and the
profits share of total incomes?
Obviously they are not very comfortable on these
subjects.
But they know quite a lot about them.
After all, Mr Howard was Treasurer and Mr Peacock was
Minister for Industrial Relations at the onset of the
great wages explosion of 1980 and 1981, which destroyed
the profitability of Australian business and set the
scene for the subsequent recession.
Mr Howard knows quite a lot about inflation. He could
be considered something of an expert, since he created
inflation rates that were well into double digits and
twice the world average.
Mr Howard should know a good deal about unemployment.
He was Treasurer when a quarter of a million
Australian's jobs disappeared in the year before my
Government took ofof ice.
Mr Howard was Treasurer when interest rates rose to
record highs and housing activity slumped to record lows
a couple of years ago.
Mr Peacock, Mr Howard and Mr Sinclair hold all sorts of
records for indust ' rial confrontation, wages explosions,
high inflation and-interest rates, housing slumps and
growth in unemployment, not to mention the $ 9.6 billion
budget deficit that they tried to hide from the
Australian people.
But don't be fooled.
Just because they won't talk about the special expertise
they accumulated in seven years in government, it
doesn't mean that they would not apply their expertise
if, by some accident, they were ever to form a,
government again.
A Peacock-Howard-Sinclair government would give us the
stagnation, the inflation and the recession all over
again.
They would wheel out the same old failed policies.
Only a bit messier, a bit more damaging, because, after
all, those that are left in their ranks are really the
second eleven of the last conservative government. I do
not intend to be deterred by their silence from
addressing the issues that matt~ er most to all
Australians. I want to tell you what the Labor Government has
achieved on the issues that most affect the standards of
life of all Australians.-
This Government is proud of its record on these matters.
This Government, and I as Prime Minister, can look the
Australian people in the eye and say that we have
delivered the economic recovery that we promised.
And because from the beginning of our period in
Government we have been preparing and building not for
one or two years of economic recovery, but for a long
era of strong non-inflationary growth, we face the
future with anticipation, pride and confidence.
When the Labor Government took office early last year,
the economy was in deep recession, and Australia's
political and economic life was characterised by
destructive confrontation. The policies of the outgoing
Government offered no way forward.
Economic growth was negative, the unemployment rate had
ri~ en to levels not seen since the 1930' s Depression and
our inflation rate was around twice that of our trading
partners.
That was only twenty months ago.
The transformation in the economy's fortunes since that
time can only be described as dramatic. The progress so
far has created real opportunities for the first time
for a decade, to entrench sustained strong
non-inflationary growth in Australian economic life.
As I promised the Australian people in February 1983,
immediately after taking office the Gove-rnment convened
the National Economic Summit Conference an event
unique in Australia's history. That initiative made
manifest the Government's commitment to a new approach
to economic policy.
I do not think it is possible to overstate the
importance of the spirit of co-operation engendered by
the Summit and the crucial contribution that it has made
towards achieving sustainable economic recovery. In
particular: The process begun by the Summit and carried forward
through EPAC has seen an unprecedented degree of
information sharing and exchanging of ideas about
feasible solutions to the twin evils of unemployment
and inflation;
This process has been the concrete expresssion of the
Government's commitment to consultation and
consensus; and
It has helped to forge a new spirit of common purpose
and a conviction that together we can overcome
our difficulties.
The linchpin of the Government's macroeconomic strategy
has been the Prices and Incomes Policy based squarely on
the Accord with the ACTU. That policy has been
ouLstandinjgly successful in constraining wage and price
C) C S I,
has been alnost in iversal compoLiance . eith the ag. j
fixing pr ilncai! e'; Iard dovqn by thie -rbi tration
Commission, reflecting in no small measure the restraint
and cominmItnent of virtually all of the trade union
movement to the centralised wage fixation system.
A further measure of the success of the Accord is the
shiarp reduction in industrial disputation. The nuinbc! r
oF . j-rking days lost, in the last year is the lowest
since 1969. And the mechanisms of the Accord can be
expected to be instrumental in holding award wages
growth below 3 per cent through the current financial
year. Measured against AustraLia's history, and by any
standards, this is an extraordinary oitcome in the
second year of strong economic recovery.
The change since early 1983 in Australian industrial
disputation, in wage outcomes, in the profit share of
total income and in the prospects for all of these
is nothing short of phenomenal. It is being recognised
well beyond our shores. Already it is being reflected
in strong r d. mr-and for our mnineral exports. It is a
major cause of our greatly improved performance in all
spheres of national life. It is the single greatest
difference between life and policy under my Government,
and life and policy tinder the Liberal National Parties.
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With the Labor Government, Australia has left behind the
debilitating confrontation and division of the past.
The gains, measured in terms of productivity and
competitiveness, are for everyone to share.
Wage moderation within the Prices and Incomes Accord has
allowed us to use fiscal policy to stimulate economic
recovery. We have done this by increasing resources to
housing and other activities central to economic
recovery while cutting unnecessary expenditure,
cutting taxes and re-ordering budgetary priorities.
Our Budgets have given special a: teni: ion to alleviating
the hardship and the distress of the unemployed and the
disadvantaged.
We provided substantial fundinrg foEr : he Community
Employment Program and for the Community Youth Support
Scheme to assist the unemployed. Medicare now provides
basic medical care for all Australians. There have also
been substantial increases in real pensions, benefits
and services to the most needy groups in our society,
including pensioners with children, pensioner renters,
the single unemployed, and the Aboriginal community.
Our efforts to improve the living standards of these
groups stand in stark contrast to the real decline in
funding which occurred in the previous seven y. ears.
At the same time, we have made a major investmeit
thcrogh our fiscal policy to strenjthening ' and
supporting our Prices and Incomes Policy. Chief amoij
such elements has been the tax cut in the 1984-85 Budget
and improvements in the social wage. That has been a
major investment in the sustainabili-y of economic
recovery.
The setting of our fiscal and moneta: y policies has been
and will continue to be an important factor in ensuring
that the recovery continues to broaden and strengthen.
In particular, restraint in the growth of public sector
borrowing will be essential to limit pressures in
financial markets as the private sector recovery
broadens and increases momentum.
In the last Budget we achieved a substantial reduction
in the deficit.
In conjunction with the restraint which States, at the
Loan Council earlier this year, agreed to exercise under
the new system of global borrowirg limits for public
authorities, this means that the public sector borrowing
requirement as a proportion of GDP is falling
substantially in 1984/ 85. Further reductions ' will be
achieved in later years. 0
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The Incomes Policy and the fiscal stance have been
supported by an appropriately firm monetary policy which
has, nonetheless, permitted significant declines in
interest rates, in line with reduced inflationary
expectat ionts.
1983/ 84 was the first time in years that any Government
achieved its monetary projection.
And we have alopted] a conditional monetary projection
for 1984/ 85 that will continue to provide for strong
economnic gjrowth while accommodating no mo(-re than the
minimal cost and price increases that mnight flow from
the effect ive oaeration of Llie Pr ices and Incomes
Z'c co rd.
zks the Summit !-ore witness, an-imp. ortinlL element of Lhe
Gove rnment ' s cvera 11 pol icy approach has been the
consultative me chanisins iniclubding the Cormail Advisory
Clouncils frcom, EPAC through to indutstry sp) eci fic-
IrinCis j1e( s1 .1 -3W ide c -I' I g informal C 0 1t -1C L-
0on: 13 t. 1It i o n las -b-, 3n a t-vo 4ay proces: s-. Th rotigh i i-h
? o 21et 11 -3 bnne i1t. i rr on a ' ide r a of ' i ew
Equally, it fos-, ters greater colimuni): y understanding and
3co t an vL vflent esi'C
The correctness of our general economic strategy hias
t'x-en coriE i rn-ed I-lihe : l-rl.: sw~ 22 nnic reCo(.. e ry
ini economnic i nd i: a tors across t: he oa id.
Ec: onr. m! ic on tu ' hiisa ecjjer-jd ama I y, ithi CDP
growing 10 per cerit through the course of 1983/ 84, the
fastest annui~ al result sin3,? National \ u,, counts h~ tve been
kept in a comparable formn, and Lhe st. fongest perforfnancle
in that ye-: ir o iaiy advani ed country.
Par-t of this grovith is attributable to the breakingj of
the drought and the consequent bounce--back of the rural
sector. In addition, world economic activity began to
pick up in 1983-84, particularly in the United States.
But those factors do not fully explain the rapid growthi
in non-farmi prodiict, which rost. by 3.3 per cent over
1983-84; nor do they explain the strong underlying
growth now runningj through the economy; nor the
substantial progress which has been made towards
achieving sustained growth.
They do not explain the pace oif the expansion in housing
activity, and they do not explain. the lift in business
investment which the latest National Account Estimates
and investment Surveys reveal. 3.
The reasons for these are to be found in economic
policies which have cut inflation, restored
profi tabil i ty, re] ced uncer ta inr ty, boos ted con f idence
and cut interest rates.
Inflation hais been drainatically redi.: cd in the last
six month the underlying rate of inflation has been only
half of . hat it was in the six ' nonths prior I: o on being
elected. Thle annual rate now of 6.1 per cent is the
lowe; t inFlat ion ate for , nore than a decade. Eqlally
important, however, is that ii-lationary expectations
have been subs tafiiilly red? i c d. In Lhis, the
circuit-breaker wage inflation provided through the
A\ ccorcd arln tlhe .1dicace ef Efcr: . on : th-CPI has been
crucially imnportant.
As a rsu t1, n( wj4 ect rio : 1ovement in award v j3es
until April 1935. These lower inflationary expectations
have enabled our fiscal stimulus to increase real
activity rather than prices.
The re has been a real i: nmpro: vemnt in employment as well
as inl output. Over 260,000 new. jobs were created from
the Summit in . Aril 1983 to Septernber this year, and the
Government is well on its way to achieving the target of
500,000 new jobs in thre.? years.
The unemployment rate has fallen to 8.8 per cent, down
from 10.2 per cent in April 1933.
Importantly for business, and for new job prospects,
real init labour costs have fallen dramatically and are
now at the levels of the late 1960' s and early 1970' s.
I wouldi add that the imnasire oE labour costs to whichi
am Creerrring is based on the :. ational Accoun; ts Estimate
of w-iges, sal i and sup~ p) lenents. It ther efore
includes an estimate of most on-costs.
Reflecting the restrained growth of unit costs, the
profit share has risen to its highest level in the last
years. That summary measure also based on the
National Accounts is being confirmed almost daily by
profit reports of individual companies.
Interest rates have fallen across the board, from
housing loan rates which are down by up to 1 per cent;
through larger falls in yields on official securities;
to a drop of up to 2 3/ 4 per cent in the prime overdraft
rate. C)
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The Government's economic policies, together with the
success of the First Home Owners Scheme, have led to a
dramatic recovery in the housing sector. Commencements
in 1983/ 84 were 30 per cent above the 1982/ 83 level, and
in the first half of 1984 ran well ahead of our
announced target of an annual rate of 130 to 135
thousand.
The latest forecasts predict even higher commencements
in 1984/ 85. Indeed the industry is expected to be
performing at close to its capacity. The lift in this
sector not only directly provides jobs and alleviates
the housing needs of many, but also contributes to
strengthened demand for a wide range of goods as
, hoise.} hoid:.] s e.-s'tablish the, 1selves.
With that record already behind us, it is not surprising
that confidence in the community is at a high level.
Consumer surveys continue to show optimism at record
high levels, while surveys of business indicate that
trading conditions and profitability have improved in
recent j-iarters al: n firm e xpectatioris j[ further
improvements over coming months.
The survey results have been borne out by a turnaround
in business investment, which increased in the March and
June quarters aEtr 8 successive quarterly declines.
Business itself expects further growth in investment
throgh 1984/ 85, an expectation thai has been assisted
by our specific actions in the Budget to encourage such
investment. These include the introduction of company
group taxation; lifting the depreciation rate for
commercial buildings from 2 1/ 2 per cent per annum to
4 per cent per annum; and an extension by one year of
the time for the eligibility of plant ordered before
I July 1985 under the terms of the investment allowance.
While workinj towards these clear achievements in
reducing inflation, expanding employment and providing
the basis for a sustainable recovery, the Government has
from the very beginning given high priority to issues
relevant to raising Australia's long term growth
performance.
One area of concern is the burden that excessive and
often irrelevant and obstructive laws and regulations
imposes on the economy and on the operations of
businesses. We see the removal of unnecessary
regulation as contributing significantly to improved
economic growth performance. The Australian Chamber of
Commerce is one of several national busin'ess
organisations which have pledged ' their assistance to the
Government in its efforts to remove unnecessary
regulation.
I believe that this Government is the first to have
begun tackling daregulation in an effective manner.
The major financial deregulation we have been
implementing over the past year is benefitting the many
users of F inanc ial services and the whole community
through the contribution of financial reforms to overall
growth. The Steel Indiustry Plan and the approach to the Motor
Vehicles announced by John Button earlier this year
provid a realistic basis for improving the performance
and efficiency of Australian industry in these areas.
Th'" y are an ntejral part of oir stra'g/ for ensirinj
us tai; ned, long-term economic growth.
Lookrig i: i: e f , it re, there is ev ry reason to expectL
that strong economic growth will continue.
T; i-B'a jet o L'ce as ts i nd i caL on tinued s trong j row-th in
activity at around 4 to 5 per cent, further gains in
. e: nployrment of over 2 per cent through 1984/ 85, an-i lower
underlying rates of inflation.
There has been nothing since the 3, ud: et to cause us to
revise that broad assessment in any way downwards.
Rather t" he opposite indeed, revisec. forecasts of th: e
farm sector by the Bureau of Agricultural Economics
suggest an upwards revision to farm GDP: and private
investment and consumption both appear to be performing
as well as or better than anticipated in the Budget.
In the three months to August retail sales rose by 1.7
per cent compared with the previous three months and it
seems likely that private consumption spending will show
strong growth in the September quarter.
I know that some concern has been expressed that the
timing of the election may prejudice the growth of
retail sales. You should remember that some. powerful
countervailing pressures will be operating. From next
week, tax cuts will be increasing everyone's take home
pay. For the great majority the increase will be $ 7.60
per week. Increases in pensions and benefits will also
mean higher disposable incomes.
Single rates of pension and benefits will increase by
$ 2.50 a week, which represents an increase in real terms
beyond that required for indexation. The rate of rent
assistance will rise by $ 5.00 a week, or" 50 per cent,
while supplements for children will increase by $ 2.00 a
week, bringing the total increase in child supplements
since we came into office to 40 per cent. n
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This is happening at a time of year when spending always
tends to be high and when, furthermore, consumer
confidence is at record levels. Retail sales should
reflect the combined benefit of. all these factors.
To maintain the recovery and to establish sustained noninflationary
growth, we must address a range of
difficult issues.
We will continue to reduce the budget deficit as private
investment expands strongly as it will do next year,
and beyond, in the course of economic recovery.
In this area, our record as responsibl fiscal managers
stands for all to see.
We delivered a final 1983/ 34 i3udgjet deficit of iinder $ 8
billion, substantially lower than the inherited
prospective iit ro'i ef $ 9.5 bi'. lion, and the 1983/ 84
Budget estimate -of $ 3.4 billion.
In the 1984/ 35 3udet reduc. id d! f icii: by a
further $ 1200 million, as compared with 1983/ 84.
Let: there be no doubt, under my Government the deficit
will be reduced further next year.
We belie. the only long-term way to : reduce deficits i:
through jrowvth in the economy, coupled with firm control
over Governne'-it spending.
We do not believe that there is any scope for reducing
the budget deficit by increased taxation.
I give you, the categorical assurance : hat there will be
no overall increase in the tax burden, next year or
through our next term in office.
But while avoiding any increase in the overall level of
taxation, we will not let down the Australian people,
who believe that the whole taxation system is in need of
a thorough overhaul.
We all know that the burden of taxation at the moment is
distributed unfairly.
And we all know that there are features of the
Australian taxation system that: inhibit production,
investment and employment.
What is needed is not a quick political fix, but a
careful review in full consultation with the Australian
community. C)
My Government is proud of the economic' recovery of these
past twenty months.
But we recognise that these are only the beginnings of
our struggle to achieve the great ambitions we share for
Australia. Australia needs and deserves not one or two years, but a
generation near the top of the world league table of
economic growth.
Australia needs and deserves not unly higher employment
and lower unemployment, but a return to full employment.
Australia needs and deserv(.' 3 not a peCr'iod of lower
inflation, but permanently low inflation.
Australia n: eeds and deserves a Government that is
conscientious in allocating part of the fruits of
national economic growth to genuinely needy Australians.
These are the great ambitions we all share for
Australia. And now, after a decade of despair, Australians
justifiably are daring to hope that they can realise
there great anbitions.
The Australian Government is working to realise these
hopes and ambitions.
I look forward to your continued support in this great
venture for Australia. A* k*
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