IP D PRIME MINIISTER
STATEMENT BY THE PRIME MINISTER THE HON P J KEATING MP
SPEECH AT THE NATIONAL PRESS CLUB, CANBERRA, 9 FEBRUARY 199
" INVESTING IN THE NATION"
When I opened this campaign on Sunday I said that the main issues were going to be the
economy, unemployment and the protection of our way of life.
The statement we have released today goes to the heart of those issues.
If we are to reduce unemployment the revolution in our economy must continue.
But we must take the people with us. Our ambition must remain a fair, just and cohesive
democracy. That is why we must confront the realities of unemployment.
But the reality is that unemployment will not be easily reduced.
Growth is too slow. It is slow here. It is slower still in most other parts of the world.
And at the same time our work places are changing.
Employers are replacing the people who once worked for them with new technologies and
new systems, more people are working part-. time, there are more -women in the workforce.
Confronting the reality of unemployment means providing a social net to ease the
hardship. It also means providing all the training opportunities we can.
But above-all -else it means we* must create more-growth.
Squarely faced, our problems are daunting, without question.
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But the same realistic appraisal of our position, gives every reason for confidence in what
we can do, and pride in what we have done.
We have real strengths on which we can build.
We have them particularly in the enterprise of private companies in the energy and
initiative of small to medium sized businesses who are now showing the way in
Australia's drive to develop an international export-oriented economy.
This is where we can provide a spur to economic growth and employment.
Today's statement offers new incentives to business in Australia small, medium and
large. It offers an environment for free enterprise as competitive as any in the OECD, and
competitive with most in Asia.
The Statement is modest in size but because it is so focussed, so targetted, it can mark a
new age for Australian business.
The One Nation statement we brought down nearly a year ago was designed to increase
investment through public spending on projects of long term value to the nation while
private investment was subdued.
One Nation reflected our determination to marry social and economic imperatives. To
meet short term needs without sacrificing our responsibility to the long term interests of
Australia. Today's statement reflects the same deermination.
The vast majority of the measures outlined in One Nation have been enacted or
implemented.
As a Labor Prime Minister, I am proud of the decisions we made in One Nation and at
other times during the year watershed decisions, such as the establishment of a National
Training Authority, the deregulation of civil aviation, the construction of a National Rail
Highway, an environmental overhaul of our greatest inland river system.
These are great projects of enduring value to Australia
I am equally proud of the decisions announced in the Youth Statement and the Budget that
directly assist the unemployed.'
-It-is partly as a result-of One-Nation that the Australian economy has grown in the past
twelve months, while other economies have slipped back.
Modest as the growth is, we might take some small measure of satisfaction in the fact that
what we achieved last year we achieved ourselves and against the odds: against the
international trend and with much of our corporate sector concentrating on reducing debt
and cutting costs.
There can be no onc now wbo does not understand how imperative it is to be competitive,
to be international, to go into the world, and to go especially where the world is growing
fastest the Asia Pacific.
The truth is that the race for competitiveness never ends. This time five years ago it was
the goal. It is the goal now. It will be the goal, we can be sure, in five years or ten years
time. The thing to remember is that we are now in the race. Unlike a decade ago, we are
competitors. And each year we are doing better.
Amid the hardship wrought by the recession and the blow to our confidence it delivered,
in times when many of the signs are negative and might be read as indicating the necessity
for retreat there are also sure signs that we can advance.
We are more than twenty five per cent more competitive than we were a decade ago.
We have the lowest inflation in the world and, Victoria notwithstanding, the lowest
number of industrial disputes for thirty years.
These are the changes which have put us in with a chance a better chance in many
respects than Australia has ever had before.
The evidence is manifest. We produce one third as much again as we did in the early
eighties. Our exports have doubled and are now nearly a quarter of everything we produce.
More and more of them go to Asia.
We are now a much more competitive country by virtue of conscious decisions, by virtue
of conscious decisions by Government, business and workers.
It is the result of our choosing not to drift, but to take up the challenge. It is what
Australians have done by and for themselves.
A recent McKinsey Report to the Australian Manufacturing Council attests to the success
of a large number of Australian businesses which have grown up in the past few years.
McKinsey found 700 high value-added manufacturing firms in Australia playing a
significant part in Australia's exportgrowth.
The Report says:
The entrepreneurship and ingenuity of these firms is exciting. Throughout the
study, we have been constantly amazed and inspired by the stories of these
individual firms, their determination and their success.
The authors point out their success has largely gone unnoticed in Australia.
Yet these firms were responsible for over $ 8 billion in exports in 1990-91 and
McKinsey's estimate the figure is likely to double by 1997.
These companies are exemplars of the change in the business and industrial culture of
Australia. They are marked by the dynamism of their leadership; by their flexibility; their export
orientation and their success in capturing niche markets, particularly in Asia.
These are the Australian companies of the future. The companies which will provide
work rewarding, interesting work for our children.
A large percentage of these companies were " born global", meaning that they considered
the world as their market from the first day of their existence.
There is no better evidence of the emergence of an international business frame of mind.
They are the off spring of a new export culture.
The McKinsey Report is a significant indication of the direction economic policy should
take. A sign that recovery will be hastened, and jobs created, by the rapid expansion of
vigorous and innovative small and medium sized businesses in the main, companies.
That is on the assumption that the number of these firms continues to increase at the
present rate.
A principal aim of today's statement is to Increase that rate.
The national quest upon which we are now embarked is for two things production and
employment. One Nation promoted these things with public investment through an ambitious program
of infrastructure spending.
But the private economy has been slow to respond and we have not had the large
ncemetsto production and employment which we need.
But One Nation never pretended that the large and continuing increments to production
and employment Australia needs could be delivered by or in the public sector.
These things must come from the private economy, from private investment, from private
businesses like the ones McKinsey has described.
A large part of today's Statement focuses on this the role of the Australian company in
the dynamism of Australian business.
The measures I am announcing will make the Australian company a more effective
device, playing a more effective role as an instrument of national achievement and
enterprise. The Australian company, large and small, will be the basic device that powers our
innovation, marshals our capital and our productive power.
And we all know when that happens the other thing marshalled is employment.
We have decided that the simplest and most effective way to encourage Australian
companies to work for Australia is to lower their tax burden.
So, under a Labor Government, on July 1 this year the company tax rate will be reduced
from 39 cents in the dollar to 33 cents.
Coming on top of the accelerated depreciation allowances announced in One Nation, this
will make the Australian corporate tax system highly competitive within the OECD
countries. But, more importantly, we will also be competitive with the countries in our region.
Australian companies will thus be much better placed to trade with Asia the region
where it is going to matter most-
I might add that it should give Dr Hewson food for thought: under Labor a business tax
rate of 33 per cent, under Fightback a rate of 42 per cent, plus a 15 per cent GST.
in One Nation we introduced a Development Allowance for projects involving
investments of $ 50 million or more.
By the end of December 1992 we had received applications to a value well in excess of
$ 100 billion $ 130 billion in fact.
This of course is a wonderfully encouraging response.
We intend to bring forward -the development of as many of these projects as we can.
But we are also determined to enlist new ones. I-
To do this a Labor Government will establish a generalised Investment Allowance which
will help small to medium sized companies invest in job creating industries.
It will also help bring forward the enormous stock of projects which are already seeking
the development allowance.
Increased investment is the key to economic expansion and the key to higher employment.
But the corporate sector has not been investing enough.
It has been cutting costs at the same time as the banks have tightened their lending
guidelines. New businesses and businesses wanting the necessary finance to grow have been
subjected to more stringent tests.
As business stirs the banks must respond. Australian business must have access to finance
when it needs it.
In a speech late last year I outlined the need to encourage a new culture in Australian
banking.
The consequences of lending based on the value of security have been all too evident in
recent years, as first inflated asset prices saw credit expand rapidly and then collapse as
asset prices fell.
Instead, we need a culture which lays more stress on establishing close relationships
between banks and their customers.
I encouraged the banks to provide extra training for staff so that they can better evaluate
the risk and potential of proposals; and to be much more prepared to lend on cash flow.
If we are to develop and expand innovative small and medium business in Australia, this
sort of closer relationship banking is essential.
If Australian banks can develop their skills of evaluation and monitoring, the rewards for
business will be very considerable.
So too, obviously, will be the rewards for banks.
In this we have something to learn from the German and Japanese banking systems.
While we should not be imitating their systems, it does provide another lesson in the
strength to be derived from partnerships in the economy.
In future, to ensure that our banking system is working effectively, under a Labor
Government the Reserve Bank will establish the machinery to regularly monitor the
conduct and patterns of bank lending.
In addition, the Reserve Bank will conduct quarterly surveys of small businesses to
establish a better understanding of their relationships with banks.
To provide the RBA with more detailed information and advice, the Reserve Bank will
also establish a large and representative Advisory Council whose members will be
principals of small and medium businesses.
To encourage banks to establish the appropriate structures and to increase the lending to
small and medium business, the Reserve Bank will pay market interest rates on bank
deposits it holds, thereby increasing the revenue of banks by about $ 140 million.
Mr Chairman
As you will see there are more measures in this Statement than it is possible for me to
address here. Let me mention just two two which illustrate the broad front on which we
have to work.
The solutions to our problems depend on both on our continuing willingness to change
and our ability to adapt to change.
Let me mention just two examples. There is a trend towards part time work in the
economy and there is a need to provide for unemployed people as much access to this
work as possible.
Consequently today's Statement changes existing programs of assistance for the
unemployed to provide greater incentives for recipients of allowances to take part-time
and casual work.
These measures have the dual purpose of enabling people to supplement their allowances
and maintain their links with the labour market, which means increasing their chances of
gaining permanent employment as the economy improves.
To become a truly competitive nation we must ensure that our workforce is adequately
educated and trained, and able to adapt to the needs of an evolving economy.
We must also recognise that in some cases it is appropriate to devise special policies or
programs which encourage people to look for work.
One such group is women with young children.
The level of women's participation in the labour market is remarkable: it ' has doubled in
the post-war period, and is now increasing at a faster rate than men's.
These measures move child care into the 21st century.
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The future growth of the Australian economy and the living standards of Australians will
benefit from the participation of women in the workforce.
But there are barriers to this.
For the more than 50 per cent of women with children under 12 in the workforce, child
care is a paramount concern.
Since 1983 we have increased the number of child care places more than four-fold, and
our program of fee relief has made child care affordable for low and middle income
families. Nevertheless almost two-thirds of working women who use child care use informal care,
often because they are unable to find, or afford, places in the formal child care system.
It is time we began to treat the needs of working parents with the same seriousness as
education or aged care.
It is time we faced up to the implications of child care as an employment related program
and recognised that it is a cost necessarily incurred by parents in the earning of income.
In recognition of this we have decided both to greatly expand our child care program and
to fundamentally reform its design.
First, we will dramatically increase the number of funded places with the aim of meeting
projected demand for work-related child care by the year 2001. We have set an interim
goal of meeting 84 per cent of demand by 1997.
Second, in recognition of the high cost of care, we will introduce a 30 per cent cash rebate,
in addition to existing fee relief arrangements, for all families using child care while in
employment, training, studying or looking for work.
This cash rebate, which will be claimable through Medicare offices, is vastly superior to a
tax rebate. The amount received will depend on child care expenses actually paid, and not
on how much tax is paid. And unlike a tax rebate which can only be claimed once a year,
parents will be able to collect their cash rebate as often as once a week.
The maximum cash rebate will be $ 1466 a year for one child, or $ 3182 a year for two or
more children.
-1Tdijto ensure that-child-careis safe and secure,. and that it provides children with a
stimulating envirornent, we have decided to introduce a system of national accreditation
of child care centres.
Taken with other child care initiatives outlined in the Statement, they mean that Australia
becomes the first nation to put together a coherent and integrated program which caters to
the needs of the working parents.
It is a program to be proud of, and one that I hope will make the often stressful job of
juggling work and family responsibilities easier for working parents.
Ladies and gentlemen
As said before, today's Statement is modest in size. It will add $ 692 million to the
Budget in 1993-94, declining to $ 387 million by 1996-97.
We will achieve these modest costs principally by reorganising company tax
arrangements and reducing our holding in the Commonwealth Bank to 51 per cent.
We remain committed to maintaining a majority stake in the bank. We think there is a
place in the banking system for a majority Government -owned major bank.
Ladies and gentlemen
It remains to urge you to read the Statement. It contains much more than it is convenient
for me to talk about just now.
The salient thing is this. The Australian economy undoubtedly has in it the potential for
growth. Being close to the most rapidly growing markets in the world offers a potential we have
never known before. Already new Australian companies have emerged to seize the
chance. The Asia-Pacific region is one great advantage. Much that we have done here, as these
new companies testify, has created a number of others.
Having a robust democratic system, a broad consensus on the need for social justice,
including justice in the labour market, and believing as we do in social improvement gives
us an even greater advantage. It gives us both strength and incentive.
My belief is that these things must never be threatened that we will not make progress of
any kind by subjecting these values to attack.
GXood policy-freats -the economy and -society. in concert.
Today, I believ q, is an example of good policy.
4. What we propose for the Australian company should help create levels of energy and
excellence we have rarely if ever seen in our history companies suited to the
opportunities available.
It should liberate the private sector for growth and employment.
By our radical improvements to our child care system we also recognise the social needs
which change creates.
That is the essential thing radical change where it is necessary, but always sensitive to
social needs and our social goals.