PRIME MINISTER
CHECK AGAINST DELIVERY EMBARGOED AGAINST DELIVERY
ADDRESS BY THE PRIME MINISTER
TO A PUBLIC MEETING AT CANOWINDRA NSW
SATURDAY 31 MAY 1986
Mr Chairman, Ladies and Gentlemen
Today I want to talk about the Labor Government and the
bush. Farmers are businessmen and women, people who are prepared
to take the risks. They are usually self-reliant. They are
realists, people who do not usually make extreme demands. I
do appreciate, however, that at times such as now many of
you do feel some sense of being left to carry your many
problems alone.
This is a product-of isolation and of the sense of
powerlessness to control such things as the weather, the
middlemen, the markets, the unions and governments.
I know many of you are feeling the pinch of higher interest
rates, of farm cost pressures and of income shortfalls.
Let me put it plainly that the problems facing Australia's
rural sector are problems for all Australians.
My Government understands that clearly, and accepts it
absolutely. There have been demonstrations around Australia by which you
have endeavoured to put your message to your fellow
Australians. you have exercised your democratic rights as
Australians. You have been right to do so.
And it is a message which has always been fully understood
by my Government.
The Australian farmer is no stranger to adversity. It has
been, throughout our history, the very act of winning the
struggle against adversity and the trials imposed by a tough
land that has made the Australian farmer the most efficient
in the world.
And in this struggle, imposed this time not by the
Australian environment but by the international economic
situation the Australian farmer has this Government's full
support.
And I want to say this my Government backs the family
farm. It is the family farm that is the backbone of the
farm economy.
We, as a Government are listening to careful and rationally
thought out proposals from rural interests. We will always
be receptive to proposals which recognise the reality of the
situation, that have been subject to detailed analysis, and
which have a clear-cut sense of purpose and direction.
This is precisely the approach that John Kerin and the
Government adopted in the recent Economic and Rural Policy
Statement.
That statement set out the Government's views on economic
and rural policy in Australia. I thought it essential that
the Government lay down such a statement so the community
could know the Government's overall assessment of the very
difficult rural situation.
I believe it is important for all Australians to appreciate
the dimensions of our rural problems and for people such as
yourselves to recognise where progress can be made towards
realistic solutions.
Let us take a moment to look at the realities.
It goes without saying that the economic well-being of
Australia depends on all sections of the economy making
their contribution.
F,
Because Australia has long had a dominant and efficient
rural sector its importance has often been taken for
granted.
The rural sector not only generates a high proportion of our
export income but also generates employment both in
supporting industries and throughout the service sector.
Indeed agriculture is directly responsible for 7 per cent of
the nation's employment. Taking into account those
indirectly involved, this increases to as much as 20 per
cent.
While agriculture has declined in relative importance in the
Australian economy since the 1950' s, it has in recent years
maintained its share of GDP in a growing economy.
In spite of the recent poor returns from world markets,
rural products account for 37 per cent of our export income.
The sector clearly has a vital role to play in our economic
life.
The problems of the rural sector are now among the most
important on the Government's agenda.
We are all aware of the sharp falls in international prices
for our major rural commodities. Wheat prices have fallen
by around 29 per cent since 1980/ 81; wool has fallen by 21
per cent in the same period and, in the last two years, beef
prices have dropped 24 per cent.
This parlous state of international commodity markets
markets heavily corrupted in recent years by the subsidy
practices of some of the major producers is a cause of
particular anxiety to all Australians.
M
My Government's strength and this is where we are
different to our opponents is to recognise the true nature
of the rural sector's contribution and the true nature of
the causes of the rural problem.
The only policies that are going to work are the ones that
are aimed at securing the long-term health of the sector and
that are attuned to market realities.
Individuals who are in need can be helped effectively only
by measures that are properly targeted to those individuals
not by broad brush handouts that were such a common
feature of past so-called solutions to rural problems.
Not all people who live in rural areas are dependent upon
farming for their livelihood. But all people who live in
rural areas do face the same problems in regard to access to
a range of Government and other services that are taken for
granted in the cities.
It is for this reason that the Government has deliberately
not confined its rural policies to farmers alone.
I do not intend here today to present a whole series of
facts and figures. But there are a few that I think bear
repeating.
The current rural difficulties to a large extent are the
result of adverse world markets. This has meant that the
farm sector has not been able to share fully in the growth
of Australia's national income.
Average export returns from our primary products have
increased by only 5 per cent in the two years to 1985/ 86,
despite a currency depreciation in order of 25 per cent.
Unfortunately there is little prospect for any immediate
improvement. Projections for 1986/ 87 suggest that there
will be little improvement in world commodity prices.
Negotiations for the elimination of subsidies will
necessarily be drawn out.
It is simply not on to lay all of the blame, as many farm
leaders and activists would like, on the Government's
doorstep. Our overall economic policies cannot be blamed
Australia's general economic performance has been
impressive. our policy on tariffs cannot be blamed. The general
direction of tariff assistance has been downwards. our
broader industry policy has encouraged greater productivity,
costs containment and reduced Government regulation wherever
possible. At the same time, we have to reduce tariffs and
other forms of assistance at rates which recognise the
burden that such downward adjustment imposes on those
investing and working in protected industries.
Nor is the problem only one of high rural debt levels the
use of debt finance is less in the rural sector overall than
in other sectors.
Nor is it high interest rates alone. Though, of course, I am
aware that interest costs are by far your biggest immediate
concern, the problem is that high interest rates have
coincided with a period of low prices, exacerbated in some
areas by a series of poor seasons.
I know that here in the Canowindra area many of you have
experienced only three good years in the past eight. I hope
the recent rain makes it four out of nine.
The question remains: what are we and that means not just
the Government going to do about the obvious problems in
the rural sector.
The first step in coming to an answer is to appreciate that
proposed solutions must be realistic.
They must recognise the constraints that Governments face in
terms of budgetary considerations, the impact on other
sectors of the economy and whether they are in the long-term
interest of the sector.
6.
These are the essentials. Rural policy cannot be seen in
isolation from the rest of the economy and society.
Let me spell out what the Government's rural policy is
about. It was set out in the Government's Economic and
Rural Policy Statement of 15 April. In a nutshell it aims
to do three things to strengthen the sector's long-term
competitiveness, to assist those in most need, and to
complement our general social and economic policy approach.
These policies do, however, need to be set against the
background of an understanding of the market environment in
which the sector operates.
Farming is a business activity and therefore should be
treated like any other business activity. All markets
involve risks and all market participants should know the
risks.
This does not mean that the Government is not prepared to
give specific assistance to a single commodity industry when
it is required. Recent assistance to the sugar industry is
a case in point.
Essentially, the Government's strategy is to deal with the
rural sector's problems on five broad policy fronts. this
strategy has been warmly welcomed in many quarters. let me
quote the National Farmer's response to the April 15 package
:" the most broad-ranging and thoughtful package of
measures aimed at securing agriculture's future role in the
economy amid tough world market conditions to be tabled by
any Australian Government in years".
First, we set the right general economic climate through our
macro-economic policies.
The benefits to Australia of our approach are there for all
to see : our performance in respect of competitiveness,
inflation, wages growth, output growth, employment and
industrial disputation have each been vastly superior to the
record of the previous Government. .77 P4..
Just let me briefly give an indication of how the
performance of this Government compares with that of our
predecessors. I shall just quickly go through six
indicators. Firstly, I refer to economic growth. in the
Fraser years what was the annualised rate of economic
growth? It was 2.6 per cent. What has it been under this
Government? It has been 4.2 per cent. That is the
comparison. I go to inflation. What was the average annual
rate of inflation under the Fraser Government? It was 10.4
per cent. What has it been under us? we have had an
average of 6.5 per cent. What happened to profit share? It
was 13.9 per cent. Under this Government it is 15.1 per'
cent.
What was the position in regard to employment under the
previous Government compared with this Government? in the
Fraser years, there was an average annualised rate of growth
in employment of 0.8 per cent. Under this Government, the
rate has been 3.5 per cent. The actual numbers of jobs
created in the seven years under the Fraser Government was
339,000. In three years under this Government 669,000 jobs
have been created almost double the number of jobs in
three years under this Government compared with the seven
years of the previous Government.
What was the legacy with regard to unemployment? It was
10.2 per cent. Under this Government the rate is 7.9 per
cent, despite a rise of 2 percentage points in the
participation rate.
Finally, with regard to industrial disputes, what was the
record of the previous Government? The average number of
days lost was 3.02 million days per annum. Under this
Government to December 1985 1.4 million days were lost.
This Government will not only compare itself and be
compared favourably with other countries; most importantly,
when it comes to a community judgement, it will compare the
performance of my Government with that of our predecessors
most favourably.
while I do not share the alarmist views of those who claim
that Australia is headed for recession, I cannot pretend
that there are no problems in, the macro-economic area at
Australia has to manage the transition from the phase of
very rapid growth in the middle quarters of 1985 to a growth
rate more in keeping with sustained non-inflationary growth
and a realistic balance of payments.
As the figures released with the National Accounts this
Thursday show, the task of improving our balance of payments
has been made very much harder by the decline in the prices
received for our exports relative to what we pay for
imports.
8.
Just to illustrate the problem the decline in these relative
returns over the 15 months to the March quarter is now
adding about $ 6.5 billion to our anpual current account
deficit. The Statistician has also estimated that the
deterioration in the terms of trade has diminished gross
domestic product at constant prices by the equivalent of 2.9
percentage points over the year to the March quarter.
Of utmost importance for Australia and, particularly the
rural sector, is that we should ensure that we maintain the
improvement in international competitiveness brought about
by the currency depreciation. This becomes even more
significant in the light of the figures which I just gave
you. The Government recognises this and is accordingly retuning
its policy settings to make the achievement of this
objective mo're certain.
That will require continuation of a firm approach to
Government spending one which, while tough, will
realistically recognise as much as possible the legitimate
needs of particular groups for assistance.
It will also require a continuation of realistic but firm
wages restraint.
of particular concern to farmers such as yourselves has been
the level of interest rates over the past year or so. Let
me first say that high interest rates are not unique to
farmers but affect all people who have borrowed money.
Interest rates rose late last year because of the unexpected
strength in domestic demand and the need both to moderate
the growth of demand and to provide some temporary support
to the dollar at a time when markets were uncertain about
its short-term prospects.
If we had not accepted this market discipline we would have
risked persistent unacceptably high inflation levels and
entrenched balance of payment difficulties, with perhaps
even higher interest rates.
Interest rates generally have declined substantially since
the end of 1985. The highest prime overdraft rate, for
example, is now 3.25 per cent lower than four months ago..
I acknowledge that, even so, interest rates remain higher
than we and you would like. And it is for this reason that
we have deliberately set about to rebalance economic policy
to place even greater emphasis on budgetary restraint and
continued moderation in wage claims.
The Accord is producing the goods.
Inflation has accelerated over the last year but
overwhelmingly because of the effects of depreciation of the
currency on the prices of imported goods.
The Accord will ensure that inflation declines sharply as
these effects pass, and as the impact is felt of lover oil
prices. The second element of the Government's approach is the
adoption of industry policies aimed at developing a more
vigorous and outward-looking industry structure.
The Government accepts that the tariffs and quotas imposed
by past Governments have resulted in higher farm costs and
the exchange rate being at levels higher than they might
otherwise have been.
It is also necessary for the rural sector to acknowledge
that the costs arising from protective assistance are not
all attributable to protection of the manufacturing sector.
The latest estimates from the IAC for 1983/ 84 show a range
in effective assistance for the rural sector from minus 9
per cent for the pig industry to 250 per cent for the egg
industry. This Government is working toward long-term and sustainable
reductions in protection. we have been doing this through
sectoral plans for the steel industry, the car industry,
textiles, clothing and footwear. And we have been
converting tariffs to bounties where feasible.
Secondary industry protection is not the cause of the
farmers' current problems but our policies to reinvigorate
secondary industry, including by programmed reductions in
protection, will certainly contribute to the solution.
The third key element of the Government's rural strategy
comprises policies aimed specifically at reducing on-farm
and off-farm costs and encouraging improvements in ruralsector
efficiency.
As I pointed out earlier, the Government is having
considerable success in reigning in the growth in farm
costs. The annual rate of increase in prices paid by
farmers for their inputs reached 11 per cent in 1982/ 83.
Under this Government's economic policies it fell to an
estimate 8 per cent in 1985/ 86 and is forecast to fall to 3
per cent in 1986/ 87. This in part reflecets-dereisions taken
in last year's Budget and in the Rural Policy Statement
which were aimed directly at reducing the costs of farm
inputs. Fuel prices to primary producers have fallen significantly
as a direct result of our decision in last year's Budget to
fully rebate the excise for diesel used off-road by primary
producers. we have maintained the full rebate even while
fuel excises have been increased in recent months. Primary
producers are the only users in receipt of this full rebate.
This is in addition to the benefit to primary producers,
like all users, from the recent petrol price reduction.
These decisions are saving farmers around $ 300 million per
year. 1-11
The Government at present provides assistance to fertiliser
consumption through subsidies costing some $ 55 million
annually. We have also provided a $ 10 million subsidy so as
to exempt farmers from the effects of anti-dumping action on
certain fertiliser imports.
Both these measures are currently the subject of review.
The Government has decided that the overall cost of
fertilisers to farmers will not increase as a result of any
decisions which may flow from these reviews.
The Government has also moved to minimise the impact of
tariffs on farm Costs. Agricultural tractors have long been
assisted by bounties at a cost of around $ 7 million a year
in order to minimise the impact on users. In last year's
Budget it was announced that the tariff on grain harvesters
will be replaced with a bounty, reducing farm costs by some
$ 14 million per year.
The Government, in the Rural Policy Statement, took further
action to reduce tariff-affected farm input costs.
The tariffs on agricultural and horticultural machinery for
soil preparation and cultivation will be replaced with a
bounty providing equivalent assistance. This decision took
effect on 15 April, and will cost an estimated $ 39 million
in the first year.
In last year's Budget Speech, the Treasurer also indicated
that the Government was disposed to replace tariffs on
agricultural chemicals with bounties when considering the
IAC Report on the chemicals industry.
A final decision will be made in the context of the IAC's
final report. However, the Government is committed to
reducing the price of these chemicals for farmers, either by
bounties or the reduction of tariffs or a combination of the
two. In the meantime, we have decided to remove immediately the 2
per cent revenue duty where it now applies to agricultural
chemicals, at a cost to revenue of $ 0.4 million in a full
year. As well we have announced plans to establish a Royal
Commission into the costs and efficiency of the national
grain handling system. To proceed with this Commission will
require strong support from the industry and State
Governments. The fourth element is policies aimed at tackling directly
adverse developments that affect the demand for specific
rural commodities, both at the international and domestic
level. My Government has been most active in expressing Australia's
concerns on the international scene about the subsidisation
practices of certain major agricultural producers.
11.
We have had some successes in this regard. Last year we
were able to negotiate the " Andriessen Agreement" with the
European Communities which protects our major Asian beef
markets from the intrusion of subsidised European beef.
This year, the Government was also successful in securing a
US Congressional decision to reduce the size of their export
enhancement program. Important assurances were also
provided to me by President Reagan on the operation of both
that program and other aspects of the 1985 Farm Bill.
Agricultural subsidisation practices featured prominently at
the Tokyo Economic Summit, in part due to direct
representations made by the Australian Government.
John Kerin will be going to Europe and the USA next month to
see what further progress can be made.
Effective and innovative marketing is also essential to a
more competitive and successful farm sector. Since becoming
the Minister for Primary industry this is an area to which
John Kerin has devoted a considerable amount of time and
effort. For example, a comprehensive White Paper on Statutory
Marketing Reform has been prepared and published by the
Government. This has formed the basis of a program of
reform of the statutory marketing arrangements. Marketing
authorities are being given the necessary freedom from
Government red tape, stronger commercial expertise at the
Board level and more effective accountability to their
industries.
While it is difficult to estimate the gains from this reform
it is interesting to note that an improvement of even one
per cent in our rural export returns translates to a figure
of some $ 100 million.
In order to encourage a new approach in this area the
Government has agreed to the establishment of a special fund
of $ 25 million over five years in order to stimulate
innovation in the marketing of agricultural products. This
encompasses marketing systems, the differentiation of
products, quality control and new product development.
Finally, the Government has developed policies that address
tewelfare problems of the rural sector and
non-metropolitan areas generally.
This Government is vitally aware of the flow-on effects to
country towns and remote settlements of the difficulties
facing farmers. Moreover, it acknowledges that country
people often have difficulty in gaining access to education,
welfare and community services. Unemployment is also higher
in rural Australia.
In response to these problems the Government has announced a
series of measures to aid rural and provincial Australia.
A Rural and Provincial Affairs Unit has been established in
the Department of Primary Industry.
We are to establish a pilot Country Centres Project to
enable investigation of the development potential of
selected country towns. It will also help develop
strategies to assist regions to adjust to change.
A Rural Women's Access Program is to be established to
improve the access of women to services and employment in
rural areas. In this regard let me pay particular tribute
to the constructive co-operation of the Country Womens'
Association and their President Miss Dorothy Ross in
developing policies and programs in this important area.
we are also concerned at the low level of participation of
country youth in senior secondary and tertiary education.
Senator Ryan will shortly be bringing forward proposals to
increase educational services and to improve retention rates
in country areas.
These measures will also assist in improving and maintaining
the quality of life in the country.
13.
Mr Chairman, ladies and gentlemen.
The people of rural Australia have been going through a very
difficult period.
It brings me no joy to see you and your families facing such
difficult circumstances. I nevertheless have great faith in
your strength and determination to pull through these hard
times. In exercising that strength and determination, let me assure
you that you are not alone.
I do not, nor I believe does anyone, have a panacea for all
your problems. You and I both know this.
We all know that the Government alone cannot solve your
problems. But we also know that you alone cannot solve them.
We must work together to get through these tough times and
to lay down the foundations upon which the future prosperity
of rural Australia will be built.
My Government has an unequivocal commitment to work with you
in this great task.
There is a brighter future for rural Australia. We will win
that brighter future only by facing today's problems
together.
We may have a long battle on our hands. But you have the
courage to face that battle. So does my Government.
Together we can build a better future for Australia's rural
communities. I can assure you no Government in the history of Australia
has fought alongside you with greater courage and
determination than this one is doing, and will continue to
do. I commend our approach to you.