PRM bM; TER
CHECK AGAXNST DELIVERY EMBARGOED UNTIL DELIVERY
SPEECH1 BY THE PRIME MINISTER
OPENING OF MTIA HOUSE
SYDNEY 24 FEBRUARY 1987
Jim Dowrie
Barrie Unsworth
Members of the MTIA
Ladies and Gentlemen
The Meta~ l Trades Industry Association stands today as one of
the nation's foremost industry participants in the great
econom'c transformation sweeping Australia.
I have had occasion in the past to pass on to you my and my
Governmnt's unqualified praise for the role you are playing
in thiG dramatic and historic change.
It is a pleasure to be here again this evening to repeat and
reentphasise our recognition of your efforts and to do so
in the now MTIA House which I trust will serve you well for
many years to come.
Nearly three decades have passed since your old premises
were officially opened a few doors down the road. To
consider the changes in attitude which have taken place in
the MTIA over those decades is to realise the enormous scope
of the changes which have taken place, and Must continue to
take place, in the Australian economy and in the Australian
community as a whole.
With hindsight, we can see that those easy decades of growth
in Australia after the Second World War sowed the seeds for
many of the problems we must solve in the 1980' s and 1990' s.
Due in large part to the foregone opportunities and the
neglect of the governments of the time, the Australian
economy became imbalanced and inward looking. It became
overly reliant on agricultural and mineral exports, while an
artificial environment was created for our manufacturing
industries through heavy protectionism.
In those days, the MTIA was one of the nation's staunchest
advocates of protectionism. To your great credit, you have
since recogniscd that protectionism does not hold the key to
real growth that it was in fact an obstacle to real
growth, because it encouraged a manufacturing industry which
catered almos' exclusively for a small domestic market
instead of ec1. ppl ing itself to perform the greater task of
competing abicx,, A.
Like many othi't-sectors of the economy, employers in your
industry were content to hold the comfortable but
fundamentally lawed position that increased government
hand-outs and a-, sured isolation from the region and the
world were th,, best guarantee of jobs, profits and security.
Australia was lulled into the complacent feeling that there
would always be a world market for the seemingly-scarce
commodities which our farms and mines effortlessly produced.
There was a fzllure, too, of political vision, as short-term
electoral coni ide rations again and again stymi-ed change and
fettered the development of a comprehensive and durable
strategy for S:: owth.
These attitueo:, were not ones which my Government held when
we were elected3 to office in M4arch 1983. Right from the
start, we recoqinised we had been presented with a great
challenge, and a great responsibility: to be the first
government to reorient and restructure the economy and so
set the path for sustained economic growth in the 1990' s.
Right from thz 3tart, we tackled the problem of reducing the
expected $ 9.6 hilllion deficit our conservative predecessors
had bequeathed. us; of slashing inflation; of creating with
the cooperatio:-i of the trade union movement a wages and
industrial reiv. ations policy capable of restraining labour
costs and restoring harmony in the workplace so as to make
us competitive with our trading partners; of building an
education systemn which would allow our children to develop
the skills they need to find satisfying and productive work;
of freeing the financial institutions of needless regulation
so as to attract capital to our shores and to allow our
currency to find its real value; of rescuing the steel
industry and puzting it on a firm foundation for future
growth; of wiri'Ang back protectionism.
In all the important measures of economic performance, this
determination to take the long-term view yielded results.
Jobs grew; inflation fell; growth was restored after the
recession of thn early 1980' s.
Yet we knew we , ere still not out of the woods. When the
agricultural trade war broke out between the US and the
European Community, and when the oil market collapsed and
took down with~ it the prices of other commodities, the
Australian economy underwent a severe trial but one which,
as I have said, was not a surprise to anyone who understood
the inherited aeaknesses of our economy.
our terms of trade collapsed. overseas buyers made it
painfully clear they were no longer willing to pay the same
prices for the commodities which we produce so efficiently
and on which we relied for our prosperity. our national
income fell by $ 6 billion, with the consequence that our
living standards had to fall.
As a result, my Government's mission of structural
readjustmcnt has become even more pressing. To restore
prosperity, it is imperative we diversify our economy, and
learn to export. We must continue to achieve modest growth
in labour costs and wind back our inflation rate. We must
continue to restrain public sector spending.
I should cay that as we are about to celebrate four years in
office we have some cause for real satisfaction that the
sacrifices we have made as a nation are beginning to bear
fruit. Wc are starting to turn the economy around. But I
must add this hard fact: that more hard choices await us
and further sacrifices will be necessary.
In all this period of restructuring, the MTIA has proven to
be a creative and positive force.
You have been active in encouraging your members to search
for new markets and to help each other identify new export
opportunities. You have not just paid lip service to the
goal of a vigorous and competitive sector of manufacturing
exports; you have actually gone about the task of building
such a sector.
Further, ycu deserve congratulations for the way in which
you have sou.' ght to create, with metal industry unions, a
cooperative approach to the central issues of improving
productivity by eliminating inefficient work practices and
establishing workable procedures for settling disputes.
It is appropriate then that I share with you at this forum
my responses to the latest economic indicators and to reveal
some broad details about our strategy for managing the
economy up to the budget and beyond.
Let me take as my starting point the December quarter CPI.
An increase of 2.9 per cent in a single quarter is not to be
dismissed lightly especially at a time when many other
countries fail to post that level of increase in a year.
But the explanation for the high December result is to be
found in the conjunction of a number of separate forces
which are not expected to operate as powerfully in coming
quarters. of greatest importance among them is the continued effect of
higher prices of goods and services affected by the
depreciation of the Australian dollar.
Of course our annual inflation rate will be held up for some
quarters yet by the high CPI figures of the September and
December quarters.
But that will bn a measure of inflation past. A better
guide to our prospective inflation rate in 1987 will be
found in the quarterly movements in the CPI which the
Government confidently expects to run at levels sharply
lower than in the second half of 1906.
one reason for that confidence is the greater stability of
the currency si'-nce mid-1986 which should gradually reduce
the external ;,) roissure on domestic prices.
Another is our expectation of continued wage restraint.
Workers in Australia have contributed magnificently over the
past four years to the task of securing prolonged economic
recovery.
on present indications real unit labour costs will have
fallen by soma~ 3 per cent by the end of 1986-87.
And there is every likelihood of a further decline in
1987-88.
In the current National Wage Case, the Government has firmly
put its view that continued modest outcomes for labour costs
overall, consistent with achieving a workable industrial
system, are essential to continued job security and
Australia's longer term prosperity.
In the last analysis, it is for the Conciliation and
Arbitration Commission to make its determination on the
basis of the evidence put to it.
Clearly not all parties can, or ever will, be fully
satisfied by the eventual determination.
Nevertheless all parties must abide by the decision of the
Commi ssi on.
I am utterly convinced that centralised wage fixing offers
the nation its best hope of securing economic prosperity,
industrial harmiony and social equity.
In our delicately poised economy we cannot afford the
reckless experiment of open wage bargaining suggested by our
political opponents, since that could only be a recipe for
renewed industrial instability and higher inflation.
Under the Accord, this Government has won the cooperation of
the overwhelming majority of trade unions in working towards
our goal of restraining wage increases to broad
comparability with that of our major trading partners.
I scarcely need add that the fruits of our industrial
relations policy falling real unit labor costs, the more
than halving of numbers of working days lost, increased
competitiveness, increased profit share, increased
employment, increased attractiveness to overseas investors
and buyers could never have been won by our conservative
opponents had they been in office.
Just as we cannot afford to dismantle the Conciliation and
Arbitration Commission, so we cannot afford to accede to the
renewed pressure for wage increases outside Commission
guidelines being experienced in some industries.
The Government acknowledges that, after 4 years of sustained
wage restraint, pressures are building up for some of the
stronger groups to seek the kinds of wage increases which
their market power could allow.
But the country needs wiser heads to prevail if we are not
to pay the price in lost jobs of excessive wage claims and
industrial disputation.
Naturally we look to price setters to practice restraint
too, and to adhere to the voluntary pricing guidelines
promulgated by the Prices Surveillance Authority. That is
as much the secret to sustained competitiveness as wage
restraint itself.
In the samae way, Australia has as much to lose from
industrial disputation induced by insensitive or unthinking
management as it has from unjustified industrial pressure
applied by workers.
That point has more than usual significance at this time for
several reasons, only one element of which is the apparent
lawlessness of the so called New Right.
The proposed new two-tier wage structure is intended to
provide an element of flexibility in wage bargaining. But
that flexibility cannot be invoked without disputation if
managements are not prepared to discuss proposals with
workers. of course such proposals would need to be consistent with
the guidelines to be developed by the Commission in respect
of the second tier. Ultimately Australian workers as a
whole cannot afford increases inconsistent with those
principles. In the area of reform of work practices, we again look to
both management and employees to address the task seriously
and cooperat;. vely.
The only sure way to sustain the growth of Australian jobs
and living standards is a thorough reassessment of many of
our traditional attitudes to productivity improvement,
product quality, innovation and reliability.
6.
This simple fact was recognised explicitly by all of the
peak employer and employee bodies which attended the special
meeting which T convened last September to discuss the
issue. Those groups have continued to work to give greater momentum
to the movemant for reform. What is needed now is a greater
recognition at workpl~ ace level that reform is not only
needed but is needed now.
The depreciation of our currency has given Australian
suppliers of manufactures a massive boost in competitiveness
compared with producers in Japan, the United States and
Europe.
Many Australian manufacturers now have the opportunity to
make significantly increased sales at the expense of these
producers. Even excluding some irregular items like the export of
aircraft, the value of manufacturing exports in the first
seven months of this financial year was 30 per cent higher
than in the corresponding period last year.
But the improvement in Australian competitiveness can
quickly be lost if our attitudes to work and product quality
do not at least match those of our competitors.
That point applies with even greater force in the case of
some of the newly emerging exporters of manufactures in our
region. In some instances the realignment of our currency against
these countries has not yet been as sharp as against the
more established exporters of manufactures.
In these instances in particular we will need to rely
heavily on " home-grown" competitiveness won through real
improvements in our productivity.
Before leaving the issue of competitive exports, may I note
in passing that a delegation of officials from China is in
the audience this evening, headed by Mr Lin Zongtang,
vice-Chairman of the State Economic Commission.
I believe the friendly relations between China and
Australia, and our shared position on the Pacific rim the
fastest growing economic region in the world offers great
opportunities for expanded trade between us.
I wish to turn now briefly to a second aspect of our
economic performance which is equally indispensable to
Australia's future prosperity that is, the need gradually
to shrink the relative importance of the public sector.
Last week the 3tatistician told us that Australia's gross
external debt had passed $ 100 billion. It had increased by
130 per cent over the June 1984 level to reach 43 per cent
of GDP.
To put this into perspective, one must note:
first, that Australia's holdings of assets abroad amount
to some $ 20 billion, so that our net external debt is
somewhat lower at $ 80 billion or 34 per cent of GDP; and
second, our indebtedness has been growing in large part
because of the effect of depreciation on our existing
oversea~ s debt denominated in Australian dollars.
40 per cent of the increase since June 1984 can be
ascribed to this factor alone.
Nevertheless, the debt figures give added point to one of
the principal planks of our economic policy making: the
need, over time, to reduce the public sector's call on the
savings poo-.
If we do not accept that option, the inevitable result will
be slower growth and much higher unemployment.
It is to avoid the economic and social debilitation of
prolonged high unemployment that this Government has opted
for consistent, realistic fiscal restraint at all levels of
Governmenz. It is with this objective in mind that the Commonwealth is
approaching a crucial series of economic decisions
culminating in the 1987-88 Budget.
From the Commnonwealth's side we are faced with a substantial
savings task to produce a responsible budget outcome.
But we are determined to meet the challenge and to
distribute the burden of adjustment fairly.
Against this; background, Cabinet has agreed to prepare an
expenditure savings statement for release by the middle of
May. This will allow the full effect of the measures to be felt
in the 1987-88 budget since savings will be able to take
effect from 1 July.
Our approach to the States at the Premier's Conference, to
be held this year in late may, must also reflect this
continued restraint.
Over recent years the Commonwealth sought and has obtained
reductionr in the gross borrowings of State authorities over
recent years. But States have had sufficient cash reserves
to avoid the intended fiscal constraint.
At the sane time, we have brought the Commonwealth Budget
deficit down from the enormous 5 per cent of GDP in prospect
when we camce to office in 1983 to about 1 1/ 2 per cent in
1986-87.
8.
The Public Sector Borrowing Requirement of the States,
however, adjusted for use of cash balances, has increased
by a full one -per cent of GDP over the past three years.
We will be telling the Premiers that that situation cannot
continue indefinitely.
Ladies and gejntlemen,
Let me make this observation in conclusion.
we have been in office now for nearly four years.
Our economic management over that time has been clearheaded,
decisive and utterly consistent. we have taken hard
decisions that previous governments shirked or fudged
because they ware more concerned with the prevailing
political winds than with the fundamental needs of the
nation. Our commitment to the continued rational management of the
economy cannot be doubted. our commitment to an equitable
sharing of the burden, and the protection of the
disadvantaged, cannot be questioned.
We recognise of course that we could not have advanced this
task of restructuring without the cooperation and
understanding of the entire Australian community, including
the trade union movement and including, as I have
acknowledged, the Metal Trades Industry Association.
That cooperation lends us hope that the task of
reconstruction may be completed successfully.
The success to this point, I know you will agree, has
depended upon not just the concept but the practice of
consultation and cooperation between government, business
and trade unions. Again I pay your organisation unqualified
tribute for youjr part in this process.
The completion of our jointly shared commitment to a
restructured, vital and vibrant economy depends upon a
continuation of this environment. My Government offers
precisely that. we reject the alternatives of divisiveness,
confrontation and ' Alice in Wonderland' arithmetic not
inappropriately described by Mr Steele Hall as " snake oil"
proposals. That is not our way I believe it is not yours.