PRM MINISTER
CHECK AGAINST DELIVERY EMBARGOED AGAINST DELIVERY
SPEECH BY THE PRIME MINISTER
AUSTRALIAN FINANCZAL REVIEW LUNCHEON
OTHE THIRD HAWRE GOVERNMENTO
BRISBANU 16 JUNE 1987
When I announced last month that Parliament was to be
dissolvod prior to an election on 11 July, I said that
" Australia's greatest need is certainty, stability and
continuity". Events since then have only confirmed the accuracy of that
statement and have only strengthened my conviction that the
Labor Govornment alone offers those vital ingredients to our
future prosperity.
in particular, the release of the Opposition's tax policies
has undi'lined those sentiments.
Today z want to highlight some of the holes that emarga, day
by day, 2n that tax poiicy
But I also want to take this opportunity of outlining to you
what I see as the broad goals of a Third Hawke Government.
It is a story in which those qualities of certainty,
stability and continuity are paramount a strategy which
addrescec the real, as opposed to the illusory, challenges
facing this nation as it enters the 1990' s.
It should be apparent by now that, unlike the Opposition, we
are not in the business of jeopardising our achievements
through reckless campaign promises.
There is no disputing that Australia cannot indefinitely
seek to naintain standards by borrowing from abroad at the
rate that we have been.
We can roduce our dependence on external financing only by a
combination of lower consumption and higher investment in
the production of exports and import replacing goods.
The key to that is sustained fiscal restraint. And that
does not just mean restraint in government spending.
Fundamentally it means progressively smaller budget deficits
as a share of GDP, to reduce the public sector's call on
savings.
2.
This is a , reality which has informed Labor's approach to
fiscal policy for some time. It will remain the central
feature of the third Hawke Government for as long as
economic conditions require it.
But what of our opponents?
Last week John Howard unveiled the Liberals' now tax policy.
It is a campaign policy in the truest sense of the word it
did not exist before the campaign.
it is economic madness and political cynicism.
For the third time in ten years John Howard has acquiesced
in a budgot-blowing grab for power based on illusory tax
cuts. In 1977, tho Liberals offered a fistful of dollars and as
Treasurer, John Howard promptly withdrew them after the
election, putting in their place a retrospective tax
increase. in 1982, with John Howard still as Treasurer, the Liberals
blew out the deficit to pay for an unaffordable program of
election promizes. That loft us with a legacy og a
billion budget deficit some 5 to 5 1/ 2 per cent of GDP.
N~ ow, in 1907, consiatent with his five year cycle of
cynicism, ho is trying again to buy votes with tax promiisor.
in the oi days since it was launched, however, the real
facts of John Howard's tax policy have gradually come to
light.
We know nowy that when Mr Howard said a 20 percent tax rate
for persons earning $ 20,000 or so, he really meant
38 percent.
We know now that when he talked about cracking down on tax
fraud he re( ally meant restoring the rorts for the privileged
and opening up a gap between business and personal tax
rates, both of which erode the tax base.
We know now that when he talked of cuts in the health area
he really aant increased costs for all families:
You would still pay the Medicare levy; you would also have
to pay up to $ 250 a year extra; hospital insurance premiums
would go up; and Medicare would be dismantled.
We knowy now that when he said that outlay savings would be
billion, he has not the slightest intention of telling
the people where cuts would be made because he knows that
the nature o! the required cuts is such that they could not
be made.
Indeed, Hr Carlton, the Shadow Treasurer, has admitted as
much, on television on Sunday night, when he said:
3.
" The reason why we're not giving what you might call a
detailed hit lict for over twenty departments is that we
would alert every single pressure group in the country"
Mr Carlton knows that the required outlays cuts cannot be
delivered. In short, Er 1oward is concealing a deficit which on an
interpretation which is generous to the Liberals, is at
least $ 8 billion higher than he is claiming.
As MaA Walsh wrote in the Sydney Morning Herald last week,
John Howard pretends he can pay for tax cuts by slashing
government sv) ending to a degree unprecedented in the
inductrialisred world.
Anyone who has been through the gruelling and assiduous
process of the May Statement would appreciate the fact that
saying you will find billions of dollars of savings is
considerably easier than actually finding them.
we have shown where the sacrifices are to fall we have
shown our hand in the difficult question of spending cuts.
The August budget contains no further horrors.
We have steadily, consistently, done the job the nation
required of us.
We inheritc a deficit of 5 to 5 1/ 2 percent of GDP. This
year we have it down to about 1 1/ 2 percent and our May
Statement initiatives will allow a further fall to less
than I perco: nt in 1987-80.
It took unpTecedented and sustained fiscal restraint to
achieve tizose reductions.
And they we: e achieved while also making room for tax cuts
worth cone $ 4 1/ 2 billion to Australian families or
per week to the person on average earnings.
They are real tax cuts affordable, paid for, and already
delivere6T-The contrast between our record and their
pronices could not be clearer.
The price cf John Howard's $ 8 billion credibility gap on
taxes would be a falling dollar, massively higher interest
rates, the reacceleration of inflation and prolonged
uncertainty for business.
Mr Howard talks long and often 6f the need to provide
incentive. But where is the incentive to business in such a
prospect? Where is the fairness to families?
Australiaø 3 chance to claw back its place in the world and
restore its living standards through sustainable economic
growth lies with reconstruction of the economy. That chance
would be irreparably derailed if the Opposition's tax cuts
were seriously attempted.
Four years ago, I made the Australian people a promise on
behalf of the Australian Labor Party.
That promise was to bring national reconciliation to what
had become under the Liberals a divided and discordant
society; to bring about national economic recovery in a
nation suffering its worst recession in 50 years; and to
achieve reconstruction of an economy which was poorly
equipped to compete in the world's markets.
No more telling statistic of our record in achieving
national reconciliation can be quoted than this: under
Labor, strike days lost have declined by a massive
percent.
And our success in achieving national recovery was also
clear. In hr Howard's last year in office the economy contracted.
One quarter of a million people were thrown on the
unenployie. zt scrap heap.
Labor's economic recovery has been so strong and sustained
that some 3/ 4 million jobs have been created. That reflects
the fact that each year jobs growth has averaged almost four
times the rate of the Coalition when last they were in
Office. Unemployment is down to 8.2 percent compared to the 10.5
percent c. t about the time we came to office.
Though eri' 2. yment growth has zenained strong, economic
growth slowzd a little through the middle of 1986 and
necessari. ly so if we were to give ourselves a breathing
space to allow the current account to begin to turn around.
But the signs are now unmistakable that growth is picking
up, in lin') with the improvement in the balance of payments.
What is most pleasing is that the main engine of this
recovery io the external sector.
The externl sector has accounted for virtually all of
economic growth in 1986-87. It is also expected to
contribute substantially in 1987-88.
That is pzecisely what is required to cure our balance of,
payments problem precisely what is required to continue to
deliver sustained growth in jobs and living standards for
all Australian families.
In other iords, the evidence is accumulating that our third
goal national reconstruction is being achieved.
Unlike the Liberals, who chose to ignore the warning signal
of a modest fall in the terms of trade early in their last
seven yea s period in office, we knew from day one that
Australia's long term prosperity was at risk because of the
inadequaclos of its manufacturing and service sectors.
we knew that Australian industry had to bqcome more
diversified, more competitive, more attuned to the realities
of world trade, more able to survive the steady shift of the
world trading focus away from our traditional commodity
exportG, more capable of finding niches in the emerging
markets in manufactured goods and services.
Labor sut about putting in place the policies that would
encourage Australian industry to restructure, permit
Australian workers to become more productive, and allow
Australia to perform to its real economic potential.
We never pretended that the task would be easy.
Nor die, we suggest that it would be achieved quickly.
But we knew that, if a start was not made immediately, the
task would overwhelm the nation.
And the start we have made, together as a nation, is a solid
one. Let me pay a special tribute to John Button, who as Minister
for Industry, Technology and Commerce has played a loading
role in kormulating the most far-sighted and comprehensive
package ol' industry policies that this nation has seen cind
in negotiating its implementation.
IndustriOG which just a couple of years ago were either
stagnating within confined domestic boundaries, or were
facing ruin, have blossomed.
The revitalisation of the finance sector is one instance,
though perhaps the most celebrated is the steel industry.
Labor's i.. iitiative in co-operation with the management and
unions con~ cerned brought this industry back Zrom the brink
of closure to the position where it is now amongst the most
cost ef~ icient in the world.
Labor has progressively reformed our most highly protected,
our most insular industries: chemicals, motor vehicles,
textile3 clothing and footwear, heavy engineering and
shipbuilding.
Labor apreciates the importance of a high level of
investment to Australia's economic reconstruction. Economic
policy is being conducted to maximise the environment for
business investment.
It was announced two years ago that the investment allowance
would be phased out by 30 June this year. However, some
companies have experienced difficulties in completing
projects in time to qualify for the allowance. Accordingly,
the Government has decided to give an extension of time to
the end of this calendar year to put investment in place in
order to cualify for the investment allowance.
6.
Labor has paid particular attention to policies to encourage
innovation and skills formation. Australia was being left
behind in the world markets for new products and processes.
Our most abundant resource, the skills of our work force,
was being squandered.
The 150 per cent tax incentives for research and
development, which leads the world, has been eminently
successful. To quote just one example, I was in Perth on
the weekend at the research establishment run by Ralph
Sarich, one oT the largest recipients of this assistance.
They are world loaders in their field and are already
signing up foreign buyers for their technological advances.
Because of the incentive, business expenditure on research
and development in 1986-87 is expected to be $ 1.25 billion
treble its 1933-84 level.
The Liberals have not said what fate will befall this
concession. The third Haw! te Government will continue to give high
priority to te need to foster new and innovative products:
from communications to high-tech to agriculture.
To meet a wor. d characterised by constant structural change
and fierce cooet ition, Australia needs a skilled and
adaptable worfforce. Labor has embarked on a full scale
effort to ensure that we have the skilled workforce capable
of meeting thiat need. We have introduced programs:
to encourage our young people to stay at school longer;
to lift the quality of our education system and make it
more relevant to their needs and the needs of industry;
and to give young people constructive opportunities and
incentives to opt for work or training rather than the
dole.
It is particularly pleasing to me to note the success of
these program3. Under Labor's policies the retention rate
for students in Years 11 and 12 has been increased from
36 per cent to almost 50 per cent. As a result some 39,000
young people have chosen to stay on at school who, had the
Coalition's policies continued, would have left before
completing their secondary education.
But Labor is going further. We want to ensure that skills
formation does not stop at the school gate. In the May
Statement it was announced that some $ 32 million has been
set aside for additional training programs in 1987-88,
rising to $ 63 million in 1988-89. In conjunction with the
other initiatives which this Government has already taken,
this will double the allocation to post-school training
under Labor.
But until John Howard announces otherwise, training programs
must be considered as under threat from the Liberals' stated
plan if elected, to cut some $ 2.5 billion from government
progranis. One area which John Howard has specifically singled out for
the elimination, however, is export assistance. Both the
Export Market Development Grants Scheme and Austrade are
slated to be cut by Nr Howard.
In what is an extraordinarily visionless statement by the
Liberals, this would have to be one of the most short
sighted suggestions of all.
I can cnly whole-heartedly endorse the recent statement of
Daryl George, Chief Executive of the Confederation of
Australian Industry:
" Stability and certainty in the formation and implementation
of industry policies are crucial. Industry assistance
policies must therefore be allowcd to run their course.
Export assistance programs are particularly valuable to
small and medium sized businesses attempting to enter
foreigri~ arkets.
" Positive assistance measures such as export incentives, the
150 per cent tax deduction for R& D expenditure and bounties
are investments in the long-term competitiveness of this
nation.' What Australia desperately needs now is more exports.
For companies, especially small companies, which have never
exported or which are trying to break into new markets or
new product lines, the task can be daunting indeed.
The Export Market Development Grants scheme and Austrade
give these exporters a vital helping hand when help is
needed. That is why the third Hawke Government will retain them
both. The third Hawke Government will continue to pursue the
far-sichted industry policies needed to remove barriers to
trade, improve our trade competitiveness and maximise our
chances to become prosperous again through trade.
Last September I convened a meeting between employers and
the ACTU. The issue was how to disseminate to the
enterprise level the message that work and management
practices have to be reformed if we are to have any lasting
improvement in living standards.
The meeting produced an historic communique in which each
side agreed that the need for change is urgent and agreed to
work together to achieve that change.
The evidence is mounting that that message is being heard. X
For example, employers are increasingly accepting the need
to raise their commitment to worker training. Employees
increasingly are coming to accept the need to become
multi-skilhed, more flexible.
All those ouccesses have been built on co-operation and
consultation, in the context of the fairness and officioncy
of the contr-lined wage fixing system.
The history of industrial relations in this nation has shown
that change . jill be faster, more effective and less costly
if it is implemented cooperatively.
Labor is pledged to continue the promotion of cooperative
workplace reform through, for example, the Industrial
Relations Bill.
This Bill prcposes refinements to the existing system
intended to improve its operation for all parties.
However, ito original provisions concerning secondary
boycotts, access to common law and the scale of monetary
penalties bo: zime a source of conflict between the parties.
This was inzoisistent with our original intentions in
reforming tho existing arrangements.
Accordingly, 2v Ralph Willis has announced, those provisions
will not be reintroduced. Labor will retain the provisions
of the existing legislation in each case.
But where do our opponents stand on industrial relations?
Quite simply, they would dismantle the industrial relations
machinery which has worked so successfully for decades and
replace it with the law of the jungle.
Instead of ei-oible wage restraint they have consistently
argued for the socially destructive and ultimately
counterproductive bludgeon of the wage freeze and their tax
policy is the latest proof of that.
The Liberals hope to grab back most if not all of the
benefits of their alleged tax cuts by denying workers access
to the expected 1.5 per cent wage increase later this year.
The Liberals hive argued for a wage freeze at 18 of the last
wage casec. Why should workers expect them to change
their tune in Government? What would be the cost to
business of t inevitable dislocation which so
short-sighted a policy could produce?
And the LiberFJs have not, of course, reconciled the glaring
inconsistency inherent in all that: how to impose a wage
freeze after dismantling the centralised wage fixing system?
9.
Labor wi. l continue to pursue wages policies which are
consistent with sustained competitiveness and lower
inflation. Labor does not believe that a wage freeze is
either necessary or desirable to achieve these ends.
The Oppovition's confrontationist tactics failed this
country dismally, especially in 1981-1982. This nation
cannot afford to have them wreak this kind of economic
vandalisw_-again.
A sensible, constructive wages policy and a responsible,
restrained fiscal policy are essential to national
reconstruction. Without them the nation can only balance
its books through the self-destructing spiral induced by
ever higher interest rates. That is not the way which Labor
intendo for Australian business, or Australian families.
Labor is offering Australia a clear choice.
For the third Hawke Government, we offer the united team
with the proven policies to see Australia through.
We make Australian business and the Australian people tho
promise ICat we will carry on the job of national
reconstruction which we began 4 years ago.
We don't ask you to trust us to meet a bevy of wildly
improbab o promises. We don't promise feats of magic that
no world leader either contemplated or has been able to
perform.
We simply ask you to judge us by our proven capacity to take
the decisc ons necessary to continue the reconstruction of
the Aus'Crcalian economy.
The urg~ ln'y of that task makes John Howard's commitment to
the pri-, i-,( y of tax cuts profoundly wrong, in economic and
political terms.
He has z: esorted to the oldest trick in the book tax cuts
unsuppocted by hard details about where the money would come
from.
His wish i. s that the campaign be turned into an auction. He
has fail" cA to understand that the campaign is, and must be,
a test of credibility.
That ic why he is now on the back foot because his
policies znd his leadership are simply not credible.
By contrast, we have built up our credibility over four
years in office by telling the Australian people the truth
about the economy, the bad news as well as the good by
taking tha Australian people into our confidence about what
was required to restore economic growth by calling on
their com. T. onsense and their maturity in implementing those
solutiono.
Australia car'iot risk putting those solutions at risk by
changing horSc G in midstream.
I have absolt: e faith in the maturity of the Australian
electorato a~ nd absolute confidence that they will l0t Labor
get on with the job of rebuilding this nation. Because only,
Labor can do it.