AU8~ L
PRIME MINISTER
CHECK AGAINST DELIVERY EMBARGOED UNTIL DELIVERY
SPEECH BY THE PRIME MINISTER
LAUNCHING OF " TRIPLE A"
MELBOURNE, 1 OCTOBER 1985
EDITORS AND AUTHORS OF " TRIPLE A",
DISTINGUISHED GUESTS,
LADIES AND GENTLEMEN,
IT IS A GREAT PLEASURE TO BE HERE TODAY TO LAUNCH YOUR
NEW MONTHLY MAGAZINE ON BANKING AND FINANCIAL
MAN'AGEMENT: " TRIPLE A".
THAT A MARKET NOW EXISTS FOR THIS NEW MAGAZINE REFLECTS
I BELIEVE, MY GOVERNMENT'S POLICIES WHICH HAVE LED TO
THE DEREGULATION OF THE AUSTRALIAN FINANCIAL SYSTEM.
THIS HAS, IN TURN RESULTED IN A GROWING SOPHISTICATION
OF THE FINANCIAL SECTOR AND THE CONSEQUENT NEED FOR
SOUND AND IMAGINATIVE FINANCIAL INFORMATION AND
COMMENTARY. THE VERY NAME " TRIPLE A" IS AN INTERNATIONALLY ACCEPTED
HALLMARK OF SECURITY AND SOUND MANAGEMENT. RELATIVELY
FEW QUALIFY FOR THIS MUCH SOUGHT-AFTER RATING. IT IS
ONLY BESTOWED ON THOSE WITH A TRACK RECORD OF RELIABLE
PERFORMANCE, OF DELIVERING THE GOODS. I AM SURE THAT
THE STAFF OF THIS PERIODICAL WILL SEEK TO RAPIDLY
ESTABLISH FOR THEMSELVES JUST SUCH A TRACK RECORD..
I PUT IT TO YOU THAT THESE ASPECTS OF " TRIPLE A"
PERFORMANCE ARE ALSO ASPECTS OF MY GOVERNMENT'S TRACK
RECORD: A RECORD, BASED ON A HIGH STANDARD OF SOUND
ECONOMIC MANAGEMENT. A RECORD BASED ON IMAGINATIVE
POLICIES WHICH ARE SETTING THE SCENE FOR SUSTAINED
ECONOMIC GROWTH. POLICIES FOR THE PRESENT. POLICIES
FOR THE FUTURE.
A MAJOR CONTRIBUTOR TO OUR " TRIPLE A" RATING IS ANOTHER
TREBLE: THE TRILOGY. THE TRILOGY, ANNOUNCED JUST ON A
YEAR AGO, REPRESENTS A PRECISE AND DEMANDING COMMITMENT
TO BUDGET * ARY RESTRAINT. A COMMITMENT, NO PREVIOUS
GOVERNMENT HAD DARE IMPOSE ON ITSELF.
MANY DOUBTED OUR COMMITMENT, BUT THEY WERE WRONG. WE
HAVE HONOURED THE TRILOGY COMMITMENT IN FULL.
OUR THREE BUDGETS HAVE PROGRESSIVELY REDUCED THE
DEFICIT, BOTH IN DOLLARS AND AS A PROPORTION OF GDP.
INDEED THAT PROPORTION IS NOW HALF THE IRRESPONSIBLE
FISCAL LEGAC) OF OUR NOW DISCREDITED PREDECESSORS.
WE HAVE ALSO BEEN ABLE TO PERSUADE THE STATE
GOVERNMENTS TO EMULATE OUR OWN BUDGETARY DISCIPLINE.
THE RESTRAINT IN STATES' BORROWING HAS BEEN FORMALISED
UNDER AN AGREEMENT BETWEEN THE COMMONWEALTH AND THE
STATES KNOWN AS THE " GLOBAL APPROACH", NOW IN ITS
SECOND YEAR. CONSEQUENTLY, THERE HAS BEEN A DECLINE IN
THE BROADER MEASURE OF PUBLIC SECTOR BORROWING, THE
PSBR, WHICH HAS BEEN CUT BY [ l 1/ 2] PERCENT OF GDP OVER
THE LAST 2 YEARS.
WITH ONE YEAR OF SUCCESSFUL ADHERENCE TO THE TRILOGY
UNDER OUR BELT, AND IN THE SECOND YEAR OF STATES'
ADHERENCE TO THE " GLOBAL APPROACH", BUSINESS KNOWS WE
ARE SERIOUS ABOUT RESTRAINT. THEY CAN GET ON WITH
THEIR BUSINESS OF EXPANDING AND CREATING JOBS WITH
CONFIDENCE THAT RESOURCES WILL NOT BE COMPETED AWAY BY'
THE PUBLIC SECTOR.
AND OUR POLICIES ARE RESULTING IN JOBS, JOBS AND MORE
JOBS. REMEMBER THAT IN THE YEAR BEFQRE WE CAME TO
GOVERNMENT 160,000 JOBS DISAPPEARED AND UNEMPLOYMENT
INCREASED BY OVER A QUARTER OF A MILLION. UNDER LABOR,
IN JUST 28 MONTHS, 430,000 JOBS HAVE BEEN CREATED.
I DO NOT BELIEVE THAT THERE HAS BEEN A COMPARABLY
IMPORTANT SOCIO-ECONOMIC ACHIEVEMENT IN AUSTRALIA FOR
OVER THREE DECADES. OUR SUCCESS SO FAR PLACES US WELL.
ON THE TRACK TO MEETING THE TARGET OF 500,000 NEW JOBS
IN OUR FIRST THREE YEARS OF OFFICE.
WE ARE HONOURING THE REVENUE SIDE OF THE TRILOGY AT THE
SAME TIME AS IMPLEMENTING THE MOST AMBITIOUS AND
RADICAL TAX REFORM PROGRAM FOR OVER FORTY YEARS. MAJOR
CRITICISMS OF THE OLD SYSTEM ARE THAT IT IS GROSSLY
UNFAIR, THAT IT DESTROYS INCENTIVES AND THAT IT CREATES
INEFFICIENCIES. UNFAIR BECAUSE TAXPAYERS AT SIMILAR
INCOME LEVELS OFTEN PAY WIDELY DIFFERENT LEVELS OF TAX
DUE TO DIFFERING CAPACITIES TO EXPLOIT UNTAXED FRINGE
BENEFITS. DESTRUCTIVE TO INCENTIVES BECAUSE A CRUEL
PERCENT MARGINAL RATE CUTS IN AT LESS THAN TWICE
AVERAGE WEEKLY EARNINGS. AND I NEFFICIENT BECAUSE IT
DISTORTS PRICES, COSTS AND INVESTMENT DECISIONS IN THE
PRIVATE SECTOR.
THESE AND OTHER PROBLEMS HAD TURNED OUR TAXATION SYSTEM
INTO A JOKE: AVOIDANCE AND EVASION HAVE BECOME
NATIONAL HOBBIES. BUT EXPERIENCE HAS SHOWN THAT IT IS
NOT ENOUGH TO SIMPLY LEGISLATE TOUGHER PENALTIES. A
NEW SYSTEM, W4HICH IS WIDELY SEEN TO BE FAIR AND
REASONABLE, HAD TO BE INTRODUCED. WE ALL KNEW THIS; WE
ALL TALKED ABOUT THE NEED FOR REFORMA; BUT TALK IS CHEAP
AND EASY.
THIS IS THE ONLY GOVERNMENT WITH THE COURAGE TO DELIVER
TAX REFORM.
THE NEW TAX ON FRINGE BENEFITS AS UNPOPULAR AS IT
MIGHT-BE WITAt-THE FREE LUNCH BRIGADE IS UTTERLY
NECESSARY IF-. WE ARE TO MAKE ANY SIGNIFICANT PROGRESS
TOWARDS A FAIRER SYSTEM. FURTHER, THE BROADENING OF
THE TAX NET WILL BRING TO AN END THE ERA WHERE SCARCE
NATIONAL RESOURCES ARE MOBILISED TOWARD INDUSTRIES
MERELY TO EXPLOIT TAX LOOPHOLES, NOT BECAUSE THERE IS
ANY INTRINSIC DEMAND FOR THEIR PRODUCTS. IT WILL ALLOW
US TO SCALE DOWN PROGRESSIVELY THE HIGH MARGINAL RATES
WHICH BITE SO VICIOUSLY INTO INCENTIVES.
ONE REASON FOR THE DIFFICULTY OF TAX REFORM IS THAT
PEOPLE USUALLY EQUATE REFORM PROPOSALS WITH AN OVERALL
TAX INCREASE. THERE IS A WIDESPREAD PUBLIC CYNICISM
THAT GOVERNMENTS ONLY TALK ABOUT TAX REFORM WHEN THEY
WANT MORE MONEY. THIS WAS CERTAINLY TRUE OF OUR
PREDECESSORS. IT IS NOT TRUE OF US. THIS GOVERNMENT
IS DIFFERENT: WE GENUINELY DO WANT REFORM AND WE
GENUINELY DON'T WANT ANY MORE MONEY THAN IS NECESSARY
TO RESPONSIBLY FINANCE EFFICIENT, COMPASSIONATE AND
RESPONSIVE GOVERNMENT SERVICES, SERVICES DEMANDED BY
OUR COMMUNITY. OUR TAX PACKAGE DOES NOT INVOLVE A NET
ADDITION TO GOVERNMENT REVENUES.
ANOTHER IMPORTANT CONTRIBUTOR TO OUR " TRIPLE A" RATING
IS THE PRICES AND INCOMES ACCORD WITH THE TRADE UNION
MOVEMENT. FROM THE VERY BEGINNING, THE ACCORD HAS BEEN
A CORNERSTONE OF OUR ECONOMIC POLICIES AND AUSTRALIA'S
ECONOMIC RECOVERY. IT HAS DELIVERED A PERIOD OF WAGE
RESTRAINT AND INDUSTRIAL DISPUTATION NOW AT THE LOWESTLEVEL
IN 17 YEARS. IT HAS UNDERPINNED THE PRESENT
SUSTAINED GROWTH IN EMPLOYMENT 4. ND OUTPUT AND SUSTAINED
LOW INFLATION.
WE HAVE RECENTLY CONCLUDED A NEW AGREEMENT WITH THE
ACTU UNDER THE ACCORD WHICH WILL ENSURE THAT AUSTRALIA
OBTAINS THE MAXIMUM LONG TERM BENEFITS FROM THE RECENT
DEPRECIATION OF THE AUSTRALIAN DOLLAR.
INDEED, BECAUSE OF THE ACCORD, AUSTRALIA HAS ITS BESTCHANCE
FOR A DECADE TO ACHIEVE A SUSTAINED PERIOD OF
GROWTH IN OUTPUT AND EMPLOYMENT WITHOUT PRECIPITATING
RUNAWAY INFLATION. AND THAT IS INDEED OUR AIM. WE
HAVE SET OUR SAILS FOR GROWTH DURABLE GROWTH; GROWTH
WITHOUT DEBILITATING INFLATION. AND OUR " TRIPLE A"
POLICIES ARE DELIVERING JUST THAT.
THE NEW AGREEAENT UNDER THE ACCORD ANNOUNCED LAST MONTH
IS A SIGNIFICANT VICTORY FOR THE CONSENSUS-BASED
APPROACH OF THIS GOVERNMENT, AND FOR THE CENTRALISED
WAGE FIXATION SYSTEM BASIC TO THAT APPROACH. THIS
AGREEMENT OFFERS A SUBSTANTIAL TAX CUT TO ORDINARY WAGE
EARNERS IN THE NEXT BUDGET COUPLED WITH UNION
ACCEPTANCE OF A TWO PERCENTAGE POINT DISCOUNT TO BE
APPLIED TO WAGES IN THE APRIL 1986 HEARING; DELAY AND
MODERATION IN THE NATIONAL PRODUCTIVITY CLAIM; AND A
CONTINUED COMMITMENT TO NO EXTRA-INDEXATION WAGE
CLAIMS. NO WONDER THE RECENT OECD EMPLOYMENT OUTLOOK ENDORSES
AN ACCORD-LIKE APPROACH TO MACRO-ECONOMIC POLICY.
NO WONDER THE OECD FORECASTS AUSTRALIAN PERFORMANCE TO
BE STRONGER THAN ANY OTHER OECD COUNTRY IN 1985 AND
1986.
BUT LET THERE BE NO DOUBT ABOUT OUR COMMITMENT TO
FISCAL RESTRAINT. THIS GOVERNMENT IS WILLING TO ACCEPT
THE EXTRA DISCIPLINE REQUIRED TO FINANCE THOSE TAX CUTS
BY CONTAINING BUDGET OUTLAYS SO AS TO ENSURE THAT
FISCAL POLICY REMAINS ON TRACK.
A THIRD CONTRIBUTOR TO THIS GOVERNMENT'S " TRIPLE A"
RATING IS OUR INDUSTRY RESTRUCTURING PROGRAM. THIS
PROGRAM HAS BEEN DEVELOPED BECAUSE THE ECONOMY WE TOOK
OVER IN 1983 WAS TOO TIRED AND TOO INTROVERTED TO
MAXIMISE AUSTRALIA'S PROSPERITY INTO THE NEXT CENTURY
AND BEYOND. AUSTRALIANS WANT INDUSTRIES CAPABLE OF
STANDING ON THEIR OWN TWO FEET WITHOUT DEPENDING FOR
THEIR EXISTENCE ON SUPPORT FROM THE GOVERNMENT.
INDUSTRIES -AUSTRALIAN INDUSTRIES -OF WHICH WE CAN BE
PROUD. SUCH INDUSTRIES WILL BE EXPORT-ORIENTED AND RECEPTIVE
TO TECHNOLOGICAL INNOVATIONS IN PRODUCTS AND PROCESSES.
INFORMATION TECHNOLOGY IS AN OBVIOUS EXAMPLE OF SUCH AN
INDUSTRY. BUT IF AUSTRALIA IS TO GAIN BENEFITS FROM
OUR OWN NATURAL ABILITIES AND ADVANTAGES IN THIS AREA,
WE WILL NEED FIRMS PREPARED TO EXPLOIT THEM. FIRMS
PREPARED TO TAKE THE RISK.
I MIGHT ADD THAT, IN THIS REGARD, IT IS PLEASING TO SEE
THE LAUNCH OF tTRIPLE A" A NEW PERIODICAL WHICH FULLY
REFLECTS THE GROWING ORIENTATION TOWARDS INFORMATION
AND SERVICE BASED INDUSTRIES.
OUR PROGRAM IS DIRECTED AT FOSTERING CHANGE IN KEY
INDUSTRIES, CHANGE WHICH WILL BE A CATALYST FOR A MORE
SPONTANEOUS RESTRUCTURING IN OTHER AREAS OF THE
ECONOMY. WE HAVE ALREADY MADE AN IMPORTANT START WITH
OUR STEEL AND , CAR INDUSTRY PLANS. BUT BY FAR THE M4AJOR
INITIAL SUCCESS HAS BEEN THE FINANCIAL SECTOR: AND IT
HAS BEEN A CRUCIAL SUCCESS BECAUSE WITHOUT THE CATALYST
PROVIDED BY CHANGE IN THIS SECTOR, THE REACTION
ELSEWHERE WOULD HAVE BEEN EXCEEDINGLY SLUGGISH.
THE SPATE -OF INDIVIDUAL DEREGULATORY MEASURES
INTRODUCED OVER ALMOST TWO YEARS BEGINNING WITH THE
FLOAT OF THE DOLLAR IN DECEMBER 1983 HAS UNLEASHED AN
UNPARALLELED PERIOD OF STRUCTURAL CHANGE IN OUR
FINANCIAL SYSTEM. I BELIEVE THIS PERIOD WILL BE LOOKED
BACK UPON IN YEARS TO COME AS A MAJOR EVENT IN OUR
ECONOMIC DEVELOPMENT.
THIS PERIOD OF CHANGE IS NOW REACHING ITS CLIMAX WITH
THE ENTRY OF THE FOREIGN BANKS. THE FIRST " BANK OFF
THE RANK" WAS THE NEW CHASE AMP BANK, WHICH OPENED ITS
DOORS LAST WEEK. SEVERAL OTHERS WILL FOLLOW SUIT
BEFORE CHRISTMAS AND, AT THIS ' STAGE, WE EXPECT ALL
SIXTEEN TO BE OPERATIONAL BY THE END OF MARCH NEXT
YEAR. THE INCREASED COMPETITION WHICH IS ALREADY EVIDENT WILL
USHER IN AN ERA OF NEW AND INNOVATIVE POLICIES IN
FINANCIAL INTERMEDIATION IN THIS COUNTRY. POLICIES
THAT WILL FACILITATE DEVELOPMENT AND RESTRUCTURING IN
OTHER INDUSTRIES. POLICIES THAT WILL ASSIST
AUSTRALIANS TO GROW AND PROSPER.
MONTHS BEFORE THE SUCCESSFUL FOREIGN BANK APPLICANTS
WERE EVEN ANNOUNCED, THE MERE PROSPECT OF ADDITIONAL
COMPETITION HAD PRODUCED MARKED CHANGES IN THE
PRACTICES AND PRODUCTS OF OUR EXISTING BANKS. JUST
IMAGINE THE SHAKE UP WHEN THE ADDITIONAL NEW BANKS
ACTUALLY GET GOING.
SUCH RAPID CHANGE IN THE FINANCIAL SYSTEM HAS
CATAPULTED THE GOVERNMENT AND PARTICIPANTS IN FINANCIAL
MARKETS INTO A NEW WORLD OF MONETARY AND FINANCIAL
MANAGEMENT. THE AUTHORITIES AND PARTICIPANTS ALIKE
HAVE ALL LEARNT SOME NEW TRICKS. ONE SUCH TRICK
CONCERNS THE INTERPRETATION OF THE MONETARY AGGREGATES
UPON WHICH WE HAVE LONG RELIED FOR INFORMATION ABOUT
MONETARY POLICY AND CONDITIONS IN THE FINANCIAL
MARKETS. ALL PUBLISHED MONETARY AGGREGATES ARE NOW
DISTORTED TO A GREATER OR LESSER DEGREE BY THE
STRUCTURAL CHANGE NOW OCCURRING: CHANGE REFLECTING IN
AN INTENSE BATTLE FOR MARKET SHARE BETWEEN BANKS AND
NON-BANK INTERMEDIARIES; A BATTLE TO INCREASE FINANCING
THROUGH BANKS AND NON-BANK INTERMEDIARIES AS A GROUP
VERSUS DIRECT FINANCING; AND, OF COURSE, A CHANGE IN
STATISTICAL STATUS AS SOME OLD NON-BANKS BECOME
RECLASSIFIED AS BANKS.
IN ORDER FOR US TO MAKE SENSE OF THESE DEVELOPMENTS,
RATHER THAN BE MISLED BY AGGREGATES ARTIFICIALLY
INFLATED BY CHANGING MARKET SHARES, THE MONETARY
AUTHORITIES 4RE PROVIDING MORE INFORMATION ABOUT THEIR
OWN ACTIVITI& S AND INTENTIONS. FOR EXAMPLE, THE
RESERVE BANK'NOW PROVIDES DAILY INFORMATION TO
FINANCIAL MARKETS ON ITS DEALING INTENTIONS. FURTHER,
THE RECENT BUDGET INDICATED FOR THE FIRST TIME THE SIZE
AND APPROXIMATE TIMETABLE OF THIS YEAR'S BOND SELLING
PROGRAM.
OF COURSE, THERE IS MORE THAT COULD, AND WILL, BE DONE.
WE ARE ALL LEARNING. FOR OUR PART, WE WELCOME
SUGGESTIONS FROM THE INDUSTRY. THE CHALLENGE FOR
POLICY RAISED BY STRUCTURAL CHANGE WILL OUTLAST THE
IMMEDIATE PERIOD OF RAPID CHANGE.
EVEN THOUGH THE GAME IS DIFFERENT AND THE RULES HAVE
CHANGED, THE OBJECTIVES OF MONETARY POLICY REMAIN
UNCHANGED. AS THE TREASURER AND I HAVE SAID ON SEVERAL
OCCASIONS IN RECENT MONTHS, THE GOVERNMENT WILL
CONTINUE TO ADMINISTER A FIRM MONETARY POLICY: ONE THAT
KEEPS A TIGHT REIN ON INFLATION BUT, AT THE SAME TIME,
ALLOWS ROOM FOR THE ECONOMY TO KEEP GROWING.
MONETARY CONDITIONS ARE CONSISTENT WITH THIS OVERALL
APPROACH. BY ANY STANDARD THE PRESENT LEVEL OF
FINANCIAL IN4TERMEDIATION IS VERY HIGH AND IT WOULD BE
RIDICULOUS TO SUGGEST THAT GROWTH PROSPECTS ARE UNDULY
DAMPENED BY OUR MONETARY POLICIES. YET THE PRESENT
LEVEL OF INTEREST RATES SHOWS CLEARLY THAT POLICY IS
F IRM.
LADIES AND GENTLEMEN, THE TRILOGY, THE ACCORD AND THE
INDUSTRY RESTRUCTURING PROGRAM ADD UP TO AN IMAGINATIVE
AND EXCITING " TRIFECTA' OF ECONOMIC POLICIES, WITH
THREE PRINCIPLE OBJECTIVES:
FIRST, THAT OF IMPROVING OUR SHORT TERM ECONOMIC
PERFORMANCE. OF ENSURING THAT THE CAPACITY OF THE
AUSTRALIAN ECONOMY TO GROW AND GENERATE JOBS IS
NOT HOSTAGE TO THE FORTUNE OF THE INTERNATIONAL
BOOM-BUST BUSINESS CYCLE;
7.
SECOND, THAT OF MAINTAINING AUSTRALIA'S
COMPETITIVENESS IN THE MEDIUM TO LONG TERM, SO
THAT OUR CAPACITY TO DEVELOP BY IMPORTING CAPITAL
IS UNDERWRITTEN BY EXPORTS AND NOT BORROWING; AND
THIRD, THAT OF UNDERWRITING OUR LONG TERM
PROSPERITY AND JOB PROSPECTS BY ENSURING THAT
PRIVATE ENTERPRISE IS EQUIPPED TO MEET THE
COMPETITIVE AND TECHNOLOGICAL CHALLENGE OF THE
FUTURE.,,
THIS " TRIFECTA" REPRESENTS A " TRIPLE A" STANDARD OF
ECONOMIC MANAGEMENT BY THIS GOVERNMENT. AND WE INTEND
TO RETAIN OUR " TRIPLE A" RATING.
I HAVE MUCH PLEASURE IN LAUNCHING THIS NEW PERIODICAL
AND HOPE THAT IT, TOO, WILL RAPIDLY ACHIEVE " TRIPLE A"
STATUS. THANK YOU.
A