PRIME MINISTER
CHECK AGAINST DELIVERY EAREDUNTIL DELITVERY
SPEECH BY THE PRIME MINISTER
LAUNCH OF THE GARNAUT REPORT
" AUSTRALIA AND THE NORTHEAST ASIAN ASCENDANCY"
SYDNEY 22 NOVEMBER 1989
When I commissioned Ross Garnaut last year to write a report
for the Government on Australia and Northeast Asia, I did so
with two thoughts in mind.
First, I knew that Ross, with the depth of his experience in
academia, government, diplomacy and commerce, was
extraordinarily well placed to recognise and analyse the
fundamental changes taking place in Australia and Asia.
Second, I wanted him to write a report that would, wherever
he saw necessary, provoke further debate in the Australian
community and suggest further policy initiatives for the
Australian Government.
I wanted an expert report and a stimulating report. I got
both. This report is a landmark that can and should profoundly
influence the way Australians think about our country and
its place in the region.
It is a report for all Australians. Its analysis and
recommendations are not directed solely at the Commonwealth,
or to Commonwealth and State Governments alone. Rather it
is a report designed to encourage community discussion and
debate including by governments on Australia's place in
the region and how we might best go about adapting our
country to realise more fully its almost unbounded economic
potential. It is a report whose impact reaches into virtually every
aspect of Australian society just as the process of
economic internationalisation it describes and advocates has
triggered far reaching change in attitudes and practices
throughout the Australian community.
And that is why some of the key recommendations of the
report relate to our education system, to our industries, to
our infrastructure, and to the capacities of the bureaucracy
to analyse and advise on change in Northeast Asia.
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The report is a product of, and a further spur to, the
process of economic reconstruction and enmneshment with the
dynamic Asia Pacific region that has been a principal focus
of my Government's activities since we came to office in
1983. Ross Garnaut's vision is of an Australia that grasps, in his
words, " the prosperity, self-confidence and independence in
an interdependent world that earlier Australians in
expansive times had hoped for their country". In this, he
is articulating a goal that I wholeheartedly embrace.
Much that he recommends has already been done indeed, such
is the pace of reform in Australia at present that, as Ross
himself acknowledges in several important areas,
recommendations have been overtaken by policies.
Yet there is of course much in this report that is new,
forward looking, stimulating and refreshing.
The key elements of this report, and certainly its
underlying philosophy, must form part of any forward agenda
for an Australian Government looking into the 1990s and
towards the next century.
So I say at the outset that I welcome this report and,
although I am not of course in a position today to give a
comprehensive response to its the recommendations, I can
assure you that they will receive close and very sympathetic
consideration by me and my Cabinet colleagues.
I want to describe in a moment the specific measures I
propose to set in train in response to the report.
But first I want to comment on the way in which the debate
in Australia about economic policy-making has changed since
1983.
When we came to office we were confronted by a situation
Ross Garnaut describes in the following terms:
" For the first seven decades of the Federation a
fearful, defensive Australia built walls to protect
itself against the challenge of the outside world, and
found that.-it had protected itself against the
recognition and utilisation of opportunity".
In other words, we had walked down the gentle path to
economic mediocrity.
Ladies and gentlemen 3 151 31
Let me make this brutally stark and unarguable point. When
we came to office in 1983, for 30 of the 33 previous years
the conservative parties had governed this country. The
institutions, the attitudes, the assumptions, the practices
of the Australia we were elected to govern were those that
had emerged from, and that we inherited from, that
governance of timid and unimaginative mediocrity.
For three virtually uninterrupted decades there had been a
haphazard and short-term response by conservative
Governments for which surrender to sectional interest groups
had become the operating principle.
That was the dimension of our challenge our challenge
together as a Government and a community.
No one can realistically suggest that it would have been
possible to change the effects of that legacy overnight, or
indeed in one or two years.
But I do say to you that, together, we have changed the
perceptions, the horizons, the sense of direction. Today,
the long-term direction in which we have to travel is clear
to all: we have to internationalise.
The only rpai debate is about how we go about the process of
reform and how fast we do it.
Putting accuracy before modesty, let me say my Government
can take much of the credit for the fact that Australians
are far more outward looking, more comfortable with, and
more effective in, the region than they were just seven
years ago.
In 1983 who would have thought that by 1989 we would have a
floating dollar, a deregulated financial sector, a program
that by 1992 will see most tariffs at either 10 or 15 per
cent, an end to the two airline agreement, dividend
imputation and a 39 per cent company tax rate, new
competition in areas of telecommunications, deregulation of
oil marketing, the removal of most foreign investment
regulation, the deregulation of air charter policy, moves to
enterprise employment on the waterfront and a clear program
of manning redqctions on coastal shipping to OECD levels?
And that is by no means a complete list of our microeconomic
reforms. But it is a list which establishes another
irrefutable fact no other period of Australian peace-time
history has come within cooee of that range of microeconomic
reforms.
In 1983 who would have foreshadowed Australia heading a
Cairns Group of fair traders that has taken a leading role
in the current round of multilateral trade negotiations; and
who would have-foreshadowed Australia hosting the Inaugural
Meeting of Ministers from 12 Asia Pacific countries aimed at
closer economic co-operation in the region?
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Our domestic and foreign policy, the political and economic
components of foreign policy, and our bilateral and
multilateral approaches in seeking to implement those
policies, have been and must continue to be
complementary, consistent: as Ross has put it to me a
seamless web.
To illustrate, we have given credibility to our
international campaign for trade liberalisation by
implementing substantial cuts in domestic protection and,
to take the other side of the coin, our domestic campaign to
open the economy has been strengthened by our success abroad
in securing market access for efficient Australian
producers. It would have been inconceivable for Australia to have
hosted the APEC Meeting had we still been operating under
the regime of-protection and introspection we inherited.
-Nobody would have turned up.
There is no simple division between bilateral, regional and
multilateral spheres of diplomacy. Lack of co-ordination
between any of those, or between them and domestic policy,
is a deficiency that could only reduce the effectiveness of
all policy.
Let me also make it clear that in commissioning this report
I did not have in mind that Australia's future lies
exclusively in its relations with the countries of Northeast
Asia. But the historically unprecedented growth that has
occurred in Northeast Asia over the past four decades has
spurred growth in Southeast Asia and the rest of the world.
The impact on Australia of growth in Northeast Asia has
been, and will continue to be, profound.
Throughout that growth process there has been a remarkably
close complementarity between Australia and Northeast Asia.
The early stages of Northeast Asian growth required natural
fibres for textile industries, and we benefited from this;
mineral raw materials were necessary for later heavy
industrialisation, again bringing benefits for us; then more
processed raw materials were needed of us; and today tourism
and other high quality services, that Australia is well
placed to provide, figure prominently in the consumption of
a prospering Northeast Asia.
As we enter the 1990s, Australia's need for highly skilled
migrants and foreign capital will further reinforce that
complementarity. In his letter submitting his report to me and to
Gareth Evans, Ross takes all this together to conclude:
" Development in Northeast Asia, together with the
progress that has been made in recent years on the
internationalisation of the Australian economy, make
the next few years a time of great opportunity". ' 533
Ross Garnaut has actually endeavoured to quantify that
opportunity, and arrives at a figure of around $ 20 billion
in export earnings that could become available to Australia
largely through the sale to Northeast Asia of processed raw
materials and of services, particularly tourism and
education. Australians have heard many a false promise of economic
expansion and imminent resources booms. But Dr Garnaut
paints a very different outlook for Australia today:
" Australia's advantages this time are a wider community
perception of the magnitude and complexity of the task,
and a recent record of solid achievement on policy
change in the directions that are necessary for longterm
success. A start has been made on reform in most
of the areas where change is necessary."
The investment boom we are currently experiencing with
business investment at its highest levels in 40 years and
the new investment in the pipeline or under consideration
all indicate that the process is well underway.
Access Economics recently surveyed large investment projects
with the potential to earn foreign exchange. It found
projects worth $ 49 billion that are under construction or
committed, and other projects worth an additional $ 41
billion in an advanced stage of planning.
The survey identifies six major committed investment
projects which in a few years are expected to generate close
to $ 5 billion a year in exports.
This is equivalent to about 30 per cent of our current
account deficit.
Australia needs this investment if it is to re-tool; if it
is to have new factories producing new goods; if it is to
have new hotels, new planes, new tourist resorts; new ships
carrying Australian natural gas; if it is to take full
advantage of the enormous growth opportunities available in
the region and beyond.
But the investment must be financed. That this investment
financing has contributed very greatly to the growth in
Australia's external debt is reflected in the composition of
our net debt: 63 per cent private, the remainder being owed
by statutory authorities and State Governments. The
Commonwealth, through the series of Budget surpluses we have
run up, is a net nrsditny abroad.
3, 53
Reinforcing the internationalisation of the Australian
economy is the upsurge in equity investment by Australians
in overseas companies. The outstanding value of this
Australian investment abroad has jumped from less than
$ 7 billion in June 1983 to $ 49 billion in June 1989. If my
Government had not freed up opportunities for this
Australian investment abroad, Australia's net foreign debt
could be up to $ 42 billion, or nearly 40 per cent, lower
than it is now.
But this investment will yield rfuture income for Australia:
already the country is receiving $ 3 billion a year in income
from Australian investments abroad, more thanr double the
inflow of only three years ago.
And our investment abroad is playing a critical role in more
fully integrating Australia into the world economy
generating markets, technology, ideas.
This is not to say we should be complacent about Australia's
indebtedness, but neither should we be unduly pessimistic.
We could not reconstruct the Australian economy without it.
As the Garnaut Report demonstrates, the countries of
Northeast Asia ran large current account deficits when
reconstructing their economies.
Australia's indebtedness is financing arguably the most
dramatic reconstruction of the Australian industrial base in
the nation's history. It would be better if we could do it
all on domestic savings but we haven't before and we can't
now. So let's get the debt in perspective: it's by no
means all bad news as the jeremiahs suggest.
Certainly if Australia is to chase the $ 20 billion extra
exports that Dr Garnaut identifies, additional investment
will be required.
So too will further policy changes.
We have never pretended economic restructuring is a simple
or rapid process and the Garnaut Report has given valuable
advice on how to proceed.
The Structural Adjustment Comittee of Cabinet the engine
room of economic reconstruction in my Government will have
the task of deliberating on all aspects of the report.
It will, very significantly, consider carefully and in
detail the step that Dr Garnaut describes as " the most
important single step" the abolition of all Australian
protection by the beginning of next century.
I can say at the outset that this recommendation is one with
which I have considerable sympathy. 8535
Our industries can only be internationally competitive
exporters if their cost structures are not inflated by
domestic protection, and if they operate domestically at
world prices.
As we continue to liberalise the product market, so too will
we encourage and implement further labour market reforms.
The current process of award restructuring is a unique means
of tackling some of the barriers to improved industry
efficiency and productivity.
It provides both the opportunities, and the necessary
safeguards, on overall wage outcomes.
It will cater for a more concerted move away from interindustry
or occupational awards and fragmented, craft based
unions to arrangements that better reflect the needs of
individual industries and enterprises.,
Ross Garnaut says his second most important set of
recommendations after further trade liberalisation are
those concerning education.
His report calls for a much greater commitment at both
secondary and tertiary levels to the study of Asian
languages, history, culture, economics and politics. It
recommends filling important gaps in lin~ s with the Republic
of Korea and Taiwan.
The aim essentially is to educate the community about
Northeast Asia.
My Government takes pride in the fact that our policies and
programs in education are the first of any Australian
Federal Government to recognise the importance of Asia.
we will use the impetus of this Report to do much more.
The Asian Studies Council, established in 1986, and the
Languages Ins titute of Australia, established only this
year, will contribute significantly to the study of Asian
languages. Funding for growth in student places, research funding from
the Australian Research Council and scholarships worth $ 1.25,
million this year will also support the spread of knowledge
in Australia of Asian cultures.
A working group will report to SAC after examining the
Garnaut education recommendations in detail. But some
initiatives can be implemented immediately.
We will immediately invite submissions for the establishment
of a Korean Studies Centre and provide core funding of
$ 300,000 in 1990 and $ 200,000 for three years thereafter.
We will immediately fund twelve scholarships for high
quality postgraduate research students from Korea and
Taiwan. We will also fund teacher development and exchange programs
to upgrade the skills of Australians through foreign country
exposure, to upgrade the skills of qualified native speakers
of Asian languages, and to fund teacher and research
exchanges. Ross Garnaut's third set of recommendations is on
infrastructure policy particularly focussing on the
waterfront, coastal shipping, civil aviation and electricity
generation. He recommends opportunities for private investmen t in ports
to increase competition in the provision of these services.
My Government-would welcome such investment. Indeed, our
-historic moves to enterprise employment will facilitate
removal of a hitherto significant practical impediment.
The productivity, reliability, efficiency and price of
operations on the Australian waterfront will be monitored,
as Garnaut recommends, . to ensure substantial progress
towards international levels over the next three years.
We have already established the Waterfront Industry Reform
Authority for this purpose and appropriate measurement
indicators are being developed.
We will ensure continued progress is made and that the
public is kept informed.
Ross Garnaut recommends that producers should be given
access to bulk carriers of raw materials on the Australian
coast at international costs.
Through consensus we have already achieved:
a decline in average crew levels from 33 in 1983 to 21
by 1992 as I remind you again, down to the average
OECD level;
investment in new more efficient ships; and
the acceptance in specific circumstances of foreign
ships carrying goods along the coast.
These are important changes. With assistance from these
moves we will, in responding to the Garnaut Report, address
particularly the needs of new raw material projects that
will be reliant on coastal shipping.
The report identifies " the systemic and physical
infrastructure of Australian civil aviation" as the greatest
single barrier to expansion in international tourism. 3 5-37
It proposes the introduction of differentiated and flexible
pricing of landing slots, private investment in the
establishment of new airport facilities, acceptance of
higher levels of foreign investment in civil aviation,
acceptance of mergers to facilitate improvement in domestic
and international links and more flexible allocation of
landing rights, including designation of additional
Australian carriers.
Clearly we have very substantially liberalised this industry
with the ending, next October, of the two airline agreement
and the deregulation of air charter policy. These changes
will provide a further boost to tourism.
The SAC will shortly consider the traffic management regime
at Kingsford Smith Airport, and will examine the
appropriateness of flexible pricing of landing slots at
other airports.
My colleague Ralph Willis, the Ministeis for Transport and
Communications, this year announced a considerably more
liberal approach to the negotiation of international
aviation rights.
But more can be done. Private capital can play a greater
role in providing additional airport facilities. And we do
need to ensure that international aviation competition and
domestic linkages fully serve the interests of tourism and
related industries.
A SAC working group will consider all these issues, looking
initially at flexible pricing of landing slots and the scope
for additional private investment, before moving to the
other, more complex issues.
On electricity generation, Garnaut recommends further
improvements following receipt of the Industry Commission's
report. He suggests State Governments accept private power
generation and transmission through the public grid to
large-scale users.
My Government-would welcome this, and will pursue the idea
with State Governments now and, if more still needs to be
done, after we receive the Industry Commission's Report.
The Industry Commission's reports on both electricity and
rail are seen as vital by my Government. We will ensure
action follows.
And let me add this: I do not necessarily regard our recent
over-riding of existing differing States' legislation on the
handling and transport of grain as a precedent for all
occasions: but there should be no doubt that we will act as
required to ensure that recommendations vital to this
nation's future are implemented.
A fourth set of recommendations concerns foreign investment.
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The general thrust of the report supports my Government's
liberalisation of, and our commitment to a
non-discriminatory policy in, foreign investment.
Australia now has one of the most liberal foreign investment
systems in the world.
Ross Garnaut points to a degree of fear, apprehension and
prejudice about foreign investment from Northern Asia.
Better and more widely disseminated data on foreign
investment are needed to allay what I believe are
unjustified fears.
I have therefore asked my colleague, Treasurer Paul Keating,
to report to SAC on how best to achieve this u~ ing, for
example, the resources of the Australian Bureau of
Statistics. Fifth, the report recommends that environmental standards to
be met by new processing projects be established well in
advance. It has also pointed to the desirability of
agreement between the Commonwealth and the States on the
standards to apply and the importance of consulting
conservation and other interest groups in the process. I
strongly endorse these recommendations.
I have already announced in my Statement on the Environment
that the Commonwealth will be examining approval processes
with a view to improving both definition and timeliness. In
one particularly contentious area, pulp mills, we are moving
to draw up guidelines which should be announced in the next
few months after close consultation with State Governments,
industry and conservation groups.
When they are in place, proponents of new mills will know
from the start what is expected of them.
Within a year or so I ' hope we can have guidelines in place
in all major industries.
There is no desire on the part of this Government to
frustrate development, and once guidelines reflect community
views, uncertainty and conflict will subside. We will
certainly be devoting our considerable energies to this
effort. And let me make this point. My Government does not accept
the simplistic dichotomy development or the protection of
the environment. We must have both. And our record shows
that we can have both. Under my Government:
the rate of economic growth has been above the OECD
average, and twice the rate of that under our
conservative predecessors; 385 3 ' It
employment growth has been twice the OECD average and
five times faster than our predecessors; and, at the
same time
the World Heritage Bureau has said that no country has
done more to advance world heritage values than
Australia.
Finally, the report claims there is a weakness in Canberra's
analytic capacity in the management of our bilateral
relations with the countries of Northeast Asia. It calls
for the provision of additional resources both in Canberra
and in some overseas posts. We accejpt this recommendation
in principle and will move quickly to address it.
Presently, a Standing Committee of Deputy Secretaries is
responsible for overseeing Australia's bilateral economic
relationship with China.
This Committee is now to be extended In membership to
include my own Department of Prime Minister and Cabinet, and
Treasury, and its focus is to be enlarged to include all of
Northeast Asia.
The Committee will be asked to examine and report to SAC on
the best means of implementing the recommendations on
improved analytic capacity, and on international policy
matters. Of course the Tiananmen events reversed in the most brutal
way the developments of the previous decade, which had made
China a more open and indeed more prosperous society, and a
country with which Australia had very close relations.
China remains unquestionably one of the key countries in the
Asia-Pacific and it is in all our interests that the decade
of openness and reform is not lost irretrievably to the
Chinese people or to the region.
As you know, the Government took certain actions in relation
to China following the massacre and will be reviewing the
relationship-' again in the near future.
Ladies and gentlemen
It has to be understood that for all the progress we have
made for all the opportunities that await us in Northeast
Asia if we get our policy responses right we could still
see it all unravel.
The achievement of creating an open, international economy
is not happening by accident.
Success is not inevitable. The opportunities offered by
Asia-Pacific economic dynamism will not just fall into our
laps. The Australian community will not automatically
accept change of the magnitude required.
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It all needs deliberate policy design; careful negotiation
of consensus; leadership; vision and guts.
And it needs constant and tireless communiity education of
which this Report is a striking example.
Without these factors our progress can disappear just as
fast as it has been made with traumatic and devastating
results. I am not going to engage in overly partisan analysis in this
forum. But it is essential to say clearly, so that everyone
understands the issue at stake no political party deserves
the trust of the Australian people unless it can demonstrate
it has been able to commence, can continue, andt will
complete this vital process.
The implication of this assertion speaks for itself: only
Labor has the past record, present policies and the future
strategy and commitment to reverse the accumulation of
neglect from previous conservative Governments, and to avoid
the threatened chaos of the current conservative Opposition.
Ladies and gentlemen
The Garnaut Report paints a picture of opportunity in the
1990s5 that Australia must and, if we are careful, will
realise. I was impressed by a comment published recently to the
effect that the Garnaut Report's message that we should
enmesh ourselves in Northeast Asia would, if implemented,
represent the most substantial reorientation of Australian
attitudes since Curtin turned to the United States in 1941.
I don't disagree. But I make this important point.
In 1941, Australia's new relationship with the US did not
mean the end of our traditional British links expressed in
our demography, political traditions and practices and
culture. Si milarly, enmneshment with Northeast Asia will not take
place at-the expense of our existing and valued economic,
political, and cultural ties with Europe, North America or
other parts of the Asia-Pacific region.
Indeed one very important element of Garnaut's analysis is
that we carry into our relations with Northeast Asia many
positive and influential assets.
These include I name only a few of the most important
our proud, vigorous and deeply entrenched democratic
traditions, our standards of human rights, our multicultural
tolerance, our principles of free trade unionism. 3541
Such assets will, in Garnaut's words, provide opportunities
to influence the shape of our relations in ways that are
favourable to our own interests.
Far from being in some way at risk in our relationship with
Northeast Asia, such assets will provide the basis for a
richer and broader relationship, not restricted to dollar
values, not caught up solely in balance sheets, not reduced
purely to traded goods but capable of enhancing the
intangible, yet supremely important, concepts of quality of
life and cultural understanding.
And let me say this in conclusion. I have long regarded Ross
Garnaut as a great Australian. With this report you have, I
believe Ross, placed all Australians considerably in your
debt.
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