CHECK AGAINS.. DELIVERY EMBARGOED UNTIL DELI1VERY
SPEECH BY THE PRIME MINISTER
ADDRESS TO FEDERAL CHAMBER OF
AUTOMOTIVE INDUSTRIES
CANBERRA 6 MAY 1991
These are times of great change in your industry and in
the economy generally. In such times it is important that
communication between industry and Government be frank,
informed and totally open. Certainly from my Government's
point of view, our door is always open to you and for the
same reason I'm grateful for your invitation to address this
dinner and to outline to you my perspective on the many
issues facing us.
Not the least: important of these is the new chapter that has
been opened In Australia's economic history with the
watershed tariff reductions I announced on 12 March.
In my statement, I put to the people of Australia several
fundamental propositions. I made the point that the world
does not owe, and will not give, the Australian people a
free ride. A~ s a nation we must face the challenges of
improving the productive capacity of our economy so that it
will be more internationally competitive.
For years, the Australian economy sought to deny those
truths, preferring instead to closet its manufacturing
sector behind high tariff walls, insulating it from the
challenges and the opportunities of the international market
place. The so-called " assistance" offered by tariffs to industry
turned out to be no assistance at all : it was no assistance
to be confined to the smaller domestic market; no assistance
to efficient industries to pay higher input cuts; no
assistance to be isolated from new technology and new work
and management practices.
At the end of the day, it was no assistance to the community
as a whole who footed the bill for tariffs through higher
taxes; who paid again in the form of higher consumer prices;
and who ended up with an economy less efficient that it
could otherwise have been.
My Government has tackled this problem consistently and with
determination. And the results already registered are an
impressive demonstration of the effectiveness of tariff cuts
as a means of expanding the manufacturing sector and
boosting manufactured exports:
most of our merchandise exports 83% in 1988-89 are
goods that do not ' enjoy' any tariff assistance at all;
most of our very substantial growth in manufactured
exports 118 points of the total 148 per cent since
1983-84 has come from the unassisted sectors of
industry; since we took office we have slashed tariffs by over a
third and, since 1985, employment, output and exports
from the manufacturing sector have all grown at a rate
faster than the OECD average.
It was on the basis of evidence such as this that the
Statement I made on March 12, in conjunction with
Senator Button and the Treasurer, provided for further
tariff cuts as the basis for taking Australian industry,
including the automotive industries, successfully into the
next century.
With these latest cuts, we will, by the end of the decade,
have brought the average nominal rate of assistance to the
manufacturing sector down from 13 per cent to 3 per cent;
and the average effective rate from 22 per cent to 5 per
cent. Specifically in the automotive sector, this latest decision
will continue the thrust of the Button car plan by providing
policy certainty through to the end of the decade.
PMV tariffs will be phased down from 35 per cent in 1992 in
annual steps of 2.5 per cent to 15 per cent in 2000.
That is the measure of our determination to ensure the
increasing competitiveness of Australian industry and the
increasing internationalisation of our economy.
At the same time, new arrangements under the duty free
entitlements, export facilitation and minimum volume
requirements will continue to further the Government's
objectives of seeking an industry more internationally
oriented and better focussed on viable production for the
domestic market.
We recognise that results cannot be achieved overnight. But
we are determined to capitalise on the reforms and
restructuring that have already taken place.
At the same time, we will continue to work with industries
and trade unions to ensure the transition is as smooth as
possible.
The tripartite relationship that we have created for the car
industry since 1983 is a good example of the benefits of
this kind of cooperation.
Under the Button car plan, production has already been
rationalised, so that the number of models produced has
decreased from 13 to eight, and average production runs have
risen from 28,000 to 45,000. Exports have improved
dramatically with total automotive industry exports rising
from $ 370 million dollars in 1984 to Just under a billion
dollars in 1990.
Today, the Australian car industry is exporting cars to the
United States and car parts to Germany and Japan that's a
significant achievement and I applaud it.
So while there will be significant pressure on car markers
as a result of these new tariff cuts, this needs to be put
in its proper perspective.
According to the Industry Commission, the share of the
domestic market supplied by domestic producers has been
essentially static over the last 15 years. Australia's
vehicle fleet: is ageing.
The Commission's conclusion was clear: " the high price of
new vehicles in Australia, as a result of the very
significant price raising assistance provided to the
domestic industry, has been an important factor" in causing
the static sales by domestic producers.
By the same token, as the price of new vehicles falls with
the reduction in industry assistance, domestic producers can
expect to benefit from a more dynamic market.
Certainly, sales figures this financial year are
disappointingly low, and lower than expected.
But the fundamental point must be that the prospects for car
making in Australia are sound both in the short term, as
demand rebounds from its current trough, and in the longer
term as the industry adapts to the more competitive
environment being created.
And let me stress too that the March Statement was never
intended to stand alone; rather it is supported by, and has
to be judged with, the range of other reform initiatives we
have underway.
In particular, it must be seen in the context of the
Government's overall economic management and in the context
of our continuing micro-economic reform momentum.
As I have said on other occasions, I expect the economy to
start to recover this year. Since January 1990, the
official cash rate has been reduced by 6h percentage points
to 11 Disposable income was boosted by tax-cuts in
January. Businesses will soon begin to rebuild stocks, and
the housing industry is poised to move into its cyclical
upswing. However, this recovery will be very different from the
recovery from the 1982-83 recession. We will emerge from
this recession freed of many of the structural problems
which have impaired previous recoveries. Since we came to
office we have deregulated financial and exchange rate
markets, introduced tax reforms and restored the share of
profits in national income, to name just a few of our
achievements. We are continuing to implement policies
designed to increase productivity and flexibility in the
economy. And, not least, we will have a lower inflation rate and
current account deficit.
Most forecasters now expect inflation close to zero in the
March quarter and less than 5 per cent over the next few
years. Importantly, inflationary expectations have fallen
significantly. We have seen a swift adjustment in longer
term inflation expectations in financial markets, affirmed
by the decline in the 10 year Treasury bond to under 11%,
its lowest level for more than 10 years. Business decisions
and wage claims are now being based on lower inflationary
expectations. Lower inflation will help to improve our efficiency, foster
a better functioning price system, lower interest rates and
induce better saving and investment decisions. It will also
reduce the remaining distortions in the tax system, enhance
the quality of information available for business decisions
and allow a more equitable distribution of income and
wealth. The improvement in the current account has been encouraging.
The current account deficit for the first nine months of
this financial year was 24% lower than the same period last
year. There has been a merchandise trade surplus for 10 of
the last 12 months.
This means that while we still make considerable interest
payments on our overseas debt, we are now adding less to our
monthly stock of debt.
So as growth returns to the economy, we will emerge with a
fundamentally stronger economy, better placed to compete in
the international market, better placed to provide the means
to achieve our wider social objectives.
Recent developments on the Australian waterfront show our
capacity, as Australians working together, to make progress
towards this goal.
What we have seen in recent days on the waterfront is the
process of negotiation yielding positive results results
that represent not a win for any particular party to those
talks so much as a win for Australian competitiveness.
This afternoon-Commissioner Sweeney conducted a private
conference of the parties and has released a statement
setting down 23 and 24 May as the dates on which the matters
will be brought back to the Commission.
The reform process is continuing unabated and the deadlines
that we have set for the waterfront will be met.
It is a result that could not have been achieved with the
Opposition's confrontationist approach. This way, we have
got progress without the chaos of full-scale industrial
warfare. Those who would recommend confrontationist tactics really do
bear the onus of explaining how that approach could possibly
yield better results than sitting down at the negotiating
table and hammering out an agreement that sticks.
Because the labour market lies at the very core of our
economy and because changes in it affect the lives of
everyone of us, the evolutionary change we are presently
witnessing there is naturally causing some concern in the
community. The Government is pursuing the development of a more
flexible approach to the National Wage Case decision so as
to accommodate the pace and breadth of microeconomic reform
we consider essential. In this, the Accord will continue to
be, as it has been for the last eight years, central in
providing unprecedented stability in the wages system and
avenues for fundamental reform to awards and work practices.
Federal Cabinet discussed this issue only this morning and
our conclusion is that while we believe the AIRC will have
an important and continuing role, both the Government and
the Commission must each consider more precisely what this
role will be in the more decentralised wages system of the
future. Ladies and gentlemen
In the new atmosphere of competitiveness and productivity
that is being created, the ultimate responsibility for
success lies with individual firms.
You don't need me to remind you of the criticisms that the
Industry Commission has levelled at the automotive
industry's work and management practices, its industrial
relations record, and its inadequate performance in training
and in quality.
These issues need to be addressed, urgently, by individual
firms if they are to survive in this new atmosphere.
International best practice needs to be the target not
merely honoured as a worthwhile concept but assiduously
pursued as a real and ultimate goal.
Without it without better management, product design and
workplace practice the Australian car industry can never
be competitive.
With it, you will have a strong base from which you can
compete with the best, exploit new markets, develop new
products and at the same time respond to the changing
requirements placed on industry by the community. For
example, an increased commitment by industry to adopting
world standards in product design and production will
ultimately be of commercial advantage to you as well as
helping the community achieve better road safety and lower
greenhouse gas emissions.
I don't pretend that the future of the automotive industry
is devoid of complex issues awaiting resolution.
But I do know, on the basis of what is now a long and close
working relationship with you in Government, that the kinds
of changes currently underway are producing the only
framework in which the industry could prosper.
I believe you will prosper.
But I am certain this can only happen if we keep our eyes on
the goal of creating that framework a framework of
increased competitiveness and productivity for the whole
Australian economy.
In concluding, I want to pay particular tribute to Ivan
Deveson, who has made an outstanding contribution to your
industry over the past decade, and who has been a
significant partner with the Government in the development
of the policy framework I have discussed this evening.
He has not always been in agreement with everything the
Federal Government has said or done, but he has been
reliably frank and constructive in what he has said and done
as we work through these issues together.
I offer him my congratulations and I have been asked to
announce that the Federal Chamber of Automotive Industries
has decided to award Ivan Deveson life membership.