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PRIME MINISTER
31 January 1997 TRANSCRIPT OF THE PRIME MINISTER
THE HON. JOHN HOWARD MP
ADDRESS TO THE COMMITTEE FOR ECONOMIC
DEVELOPMENT OF AUSTRALIA, SYDNEY
E& Thank you very much Mr Chairman, ladies and gentlemen. It is, as was remarked the
case that I do have a long association with CEDA. Those politicians in Australia who
have memories like elephants have particular relationships with different organisations,
and it tends to vary in direct proportion to the extent to which the orgaunisation still
invites you to address them. When you are out of fashion and I have spent a
considerable part of my political career being sort of successively in and out of fashion
having gone through a significant period of time when I wasn't entirely flavour of
the month either electorally or in party political terms, CEDA was one of those
organisations that built up its credit for future changes by continuing to invite me along
and I also of course have a sentimental attachment to the Intercontinental Hotel. It
was the place that I spent election night cautiously simply booking some
accommodation for family and very close friends against the possibility of despite the
confidence I apparently displayed at the National Press Club although I should
confide with the Chairman that that address at the National Press Club was followed
immediately by what went down in the history of that campaign as being the ' Willis
Letters Affair'. I went back to the National Press Club to be confronted with these
letters that had allegedly been written by the Victorian Premier about some secret tax
plan I had. Nothing seems to change but we got over that and we won the election
and today I want to say a few things to you about where I see the Government's
political position and also some thoughts with you about the future prospects of the
Australian economy.
Politics is always a mix of getting the policy right as well as getting the politics right.
It is true that good policy is normally good politics but I would have to say to you on
the basis of more than 20 years experience that is not always the case. You can never
be a total slave to economic or industrial policy or industrial relations theory and
expect to continually succeed in politics. Equally, if you don't pay proper cognisance
of the importance of maintaining a forward momentum in policy development, you are
rightly over a period of time judged negatively and that over an equal period of time
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has a very negative effect on the political fortunes of the Party that you may be a
member of or you may lead.
So, over the I1I months that we have been in office we have endeavoured quite
unashamedly to get a right mix of intelligent, reformist policy, not only in the economic
area and also to try and understand and accommodate the right political mix between
the policy imperative and also the political imperatives. Ultimately of course it is for
others to make a judgement about how successfu we have been in that. I like to
believe that in just under 12 months the Coalition Government that I had the privilege
of leading has got that mix about right, not of course completely right. There are
inevitably some people who say we should be going faster on the policy reform front.
There are some in the community who think we have gone too far. There are some
who believe that we haven't been politically sensitive enough. I think the mainstream
view, if I can call it that, is probably that we have got the mix about right.
I think there are subtle mood shifts in the Australian political community and the
political mood of Australians in the 1990s and what existed in the 1980s. There is
undoubtedly a sense of community unease about the way in which life in so many ways
has changed and that is a very, very difficult challenge for any government and for any
political leader. When you know that further change is needed in the national good,
which I do and I assume that most of you do and would share that view. But so much
of our lives have changed in the last 20 years. They've changed economically, they
have changed socially, they have changed between men and women, they have changed
so far as the power balance of nations is concerned. We no longer have a Cold War.
We have only one superpower in the world and that is the ' United States. We have the
fastest growing economic region sitting cheek by jowl in the area where Australia is.
We have vast changes as many of the retailers know in the consuming habits of
Australians, I think one of the great changes to have come out of the recession of the
late 1980s and early 1990s was a permanent change in the attitude of Australian
consumers. They became tougher buyers and I think have assumed the cultural attitude
of the Americans and many others around the world in determining to drive much
harder bargains and the buying habits of the young are very different now from what
the buying habits were when many of the people in this audience could describe
themselves as being in their late teens or early
I mention those things, ladies and gentlemen, because you can never get as a Prime
Minister or as a government an intelligent mix between the economics and the politics
of the decisions you take unless you have some understanding, and an on-going
understanding of the changes that are occurring in the community. It is just not real
life to imagine that you can't ignore fashion swings broadly defined in the attitude of
the young in OUr community, the broad changes in the moods of consumers. If you
continued to react according to the assumptions of even a few years, let alone a couple
of decades earlier then inevitably many of the attitudes that you strike are going to be
wrong. I speak to you today feeling very strong and very positive about the economic outlook
for Australia. I think at the moment Australia has a rare conjunction of very positive
circumstances so far as our economic future is concerned. We have very low inflation.
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We have as the Treasurer said a couple of days ago returned to an era quite decisively
of very low inflation. We really do have to go back to the pre-APEC days of the early
1970s to find the very low inflation that we have at the present time and it's not
confined to Australia, I read an article in The Spectator last night which indicated that
even a country such as Brazil that had experienced hyperinflation for most of its
modern experience had an inflation rate last year of iess than 10% and it is to be found
throughout the industrialised world and increasingly also into other parts which will
not be so described, The mid-year economic review, and I'll come back to that in a
moment, also told us that we have very strong by world standards and manageable
and it's important to link the strong economic growth that we have with the fact that
we have low inflation. So often in the past we've never been about to that double.
We have strong growth and that has spilled over into higher inflation which in turn has
produced tightening measures through monetary policy which would then in turn stifle
the growth. We do have a quite strong world economy. The United States economy
because, but not only, due to its remarkable flexibility enjoys very strong economic
growth and very strong business confidence and a very low level of unemployment, not
only by historic standards but also by world standards.
The European scene is more mixed but overall in reasonable shape with the British
economy probably performing better than others. The Asia Pacific region continues of
course not only to be tremendously important to Australia but also to be the strongest
regional performer in the world, and the significance of that in Australia is very widely
understood throughout the business and the political community. The mid-year
economic review which has set a new standard in political transparency so far as
economic policy is concerned in Australia it ran to something like a hundred pages
the mid year review of the former government ran to something like 6 or 9 pages. This
is the first illustration of the new charter of budget honesty which as a matter of law
when it goes through the Parliament will require the production independently by the
Treasury and the Department of Finance at the time of the next election, of a statement
of the economy's situation in sufficient detail to ensure that both sides of politics
respond in a way that is seen by the community as being responsible. What I think this
charter of budget honesty has done is to impose new disciplines on everyone. It's
imposed a new discipline on the Government, it's certainly imposed I'm happy to say a
new discipline on the Opposition as well. I like to be even-handed when it comes to
disciplines of this kind. And it has also, I might say, imposed a new discipline on the
bureaucracy, because the detail of the mid-year review has inevitably thrown the gaze,
enabled the gaze of so many of the professional economists in the private sector to
examine in detail what has happened against the projections of the Treasury and the
Department of Finance.
So. overall I think the new high in political transparency is an extremely good thing
and it can only make for better policy, more responsible policy, and a far better
understanding throughout the broader community of just bow the economy is
performing. Now it is true that there was a downward revision in company tax
collections and as a consequence we will need to undertake some further fiscal
tightening in the May budget. But as Peter Costello has indicated it is nowhere nearer
the dimension that was carried out at the time the last Budget was put together. And
the important news to emerge from the mid-year review is really the positive news and
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that is that inflation projection is on the underlying front something like one percent
against 2% forecast in the Budget.
Business investment has been revised upwards, and the economic growth projection
that was thought by many to be a little optimistic has been confirmed. Now that does
really lay a very solid and a very positive and a very optimistic base. Now, I've been
in politics and having been Treasurer for a number of years and held other positions
long enough to know that it is never credible for a Prime Minister to say that or
indeed a Treasurer to say that everything about the economy functioning perfectly of
course it is not. But we do have and I think we would be selling ourselves short and I
think as a commuunity, particularly the business community, we would be failing to take
advantage of fortuitous circumstances if we didn't recognise that many of the
fundamentals in Australia at the present time are very very sound indeed and they do
provide a very very sound basis of optinmismn for the future. And all of you know that
psychology is an important element in economic decision making. Not everything is
made in a completely arithmetical and rational fashion. Hunches and instincts and
psychology and gut feelings all play a significant role, and I think we do have a very
fortuitous conjunction of circumstances.
And can I say, I hope with no immodesty, that another factor bodes well for the
economic future of Australia and that is that I believe that we have a government that
is willing in an intelligent persistent fashion to tackle the major areas of economic
reform. I know there are some who say the reforms should be more numerous. That
will always be the case. And that's part of the system and that's a good thing. You
should never have a situation where people are universally happy with what you are
doing. It breeds complacency, it breeds smugness and I think it is very very important
to have people breathing down your back from time to time as long as you reserve the
right to remind them from time to time when they may get some of that criticism
wrong. We were elected with commitments to a number of areas that were very important to
Australia's economic future. None of them was more important than Industrial
Relations reform. It took us a bit longer than we'd hoped to get it through the Senate
and we may have lost an amendment or two along the way but the great bulk of what
we took to the people was passed through the Senate, I'm very happy to say, and
those new changes, those laws came into operation, the first batch of them, only on the
first of January, a bare month that they have been in operation. Already we see I
understand a reduction of something like 8O*/ o in the number of unfair dismissal claims
made as a consequence of the new legislation. 1 have to say as I travel around
Australia in the year leading up to the election, no issue more frequently was the
subject of complaint to me from big companies, and small and medium ones, than the
operation of the old unfair dismissal laws, regularly paraded to me as a reason why
people weren't taking on more staff, Now, it is early days, but if the early signs are
borne out then that will prove to have been a very very important reform.
I think the industrial relations reforms over time will make a hugely significant
contribution to creating a better balance between labour and business, a better balance
which will better accommodate the right of employees to make free choices between
either being represented by unions or some other arrangement or indeed representing
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their own interest$, as many of them wish to and many of them are eminently capable
of so doing. I have great hopes for the industrial relations reforms. I believe the
awards simplification process which I am delighted to see companies are already taking
advantage of, and the new compliance measures that many companies are taking
advantage of; I think all of them will create a far more contemporary and a far more
competitive industrial relations climate.
We have of course embarked upon a very very committed programme of fiscal
consolidation. The $ 7 billion or more that was announced in the Budget of last year
has been subject to only minor marauding although significant in itself by the Senate
and I should say in that context that when Parliament resumes next week, we will be
re-presenting to the Senate and pressing ahead with some of the changes that have
been injected including the measure to impose a two year waiting period on the
payment of certain benefits to newly arrived people in Australia. We do believe very
strongly that a further tightening of fiscal policy will be needed, but as I mentioned at
the beginning of my speech, not of the dimension that was undertaken at the time of
the last budget. The end of last year saw us pass through the legislation to sell into the
private sector one-third of you sponsor and I'm very happy to see that the progress is
well underway with arrangements for what will prove to be the largest float in
Australia's history. And, of course, out of the proceeds of that will come $ 1.1 billion
which will go into the Natural Heritage Trust of Australia and that will represent the
larg~ st capital investment by any government in post war Australia in our
environmental future. And I am particularly proud of that commitment. It was a
commitment that was put together in the days leading up to the caling of the election
last year. And I think for a government, for a political party that over the years has
taken more than its fair share of flack about an alleged indifference to the environment,
I'm especially proud that we over the next two years will be able to demonstrate long
term credentials in the area of the environment that I believe have very, very strong
support through the Australian community.
I spoke earlier of mood and attitudinal changes within the community, Over the last
years Done has been more emphatic than the embracing by all generations of
Australians across the political divide, across the socio-economic divide, of a concern
for and a commitment to sensible policies which preserve and strengthen Australia's
environment. Nobody, I hope, of intelligence embraces radical environmentalism but
most Australians now want to see a sensible balance between economic development
and care for the environment. Sustainable development most Australians very, very
strongly support and our commitments in that area will be very, very strong evidence
of how we feel on that particular subject.
We also took to the last election campaign some very strong commitments to assist the
small business sector. I spoke a lot during that election campaign of the link between
job creation and small business. I still remain quite passionately of the belief, as I did a
year ago, that greater small business activity and a better climate for small business will
more than anything else provide the hope of greater job generation particularly for the
young within our community.
Unemployment, as everybody knows, remains too high. I don't pretend that the
8. 5 per cent rate will dissolve quickly, I do believe, however, that as the impact of
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some of the policies that we've implemented already, and others to be implemented
this year, work their way through there will be a reduction in that level. You will
understand me being a little dismissive of and impatient with my political opponents
who after 13 years left us 8.5 per cent having taken it to 11I and then bang the table and
say how shocking, how terrible, you've had I11 months and you haven't got rid of it.
And I think a willingness to reject that sort of criticism is very, very understandable.
But the policies that we've implemented to help small business include, in the words of
the Business Review Weekly who I'm happy on this occasion to give quite a free plug
too include changes to the capital gains tax regime which the editor in chief of that
magazine described as the most important for the business comminunity in 30 years. The
impact of those changes will be that any small business can be sold in the proceeds up
to the tune of $ 5 million can be invested in any other business, not just into a like
business, we have abolished the like business test, but indeed into any other business
resulting in a deferral of capital gains tax liability. That change will come into
operation on the I1st of July next year and it will have a major impact in my view and in
the view of many on small business activity and the attractiveness of small business to
investors. There are other changes that we have made in that area including of course the
changes in the provision tax uplift factor. And the ben efits of the industrial relations
changes and the unfair dismissal changes are most marked indeed when it comes to the
small business sector,
There are many items on the agenda for the months ahead of us. The response in
February to the Charlie Bell committee on small business deregulation will be another
opportunity for the Government to demonstrate its credentials in the small business
arma We'll have the report of the Wallis Inquiry. I think I read somewhere that
there's a productivity commission report on the motor vehicle industry which will
attract, as reports dealing with tariff protection in Australia always do, a great deal of
interest. We will need and we will address the issue of waterfront reform in 1997. It
goes very much to the heart of the competitiveness of the Australian economy and it's
very important to the export sector.
So we have a very significant list of items ahead of us. And in drawing my remarks to
a close Mr Chairman, can I say that one of the many things that we have endeavoured
to do in the time that we have been in government is to develop and retain an
intelligent dialogue with the business community of Australia.
We were elected I think very proudly on the platform and on the vote that we were a
political party that was owned by nobody and that what we sought to do was to
represent the mainstream of the Australian commnunity. And if I may have a party
political com~ mercial, one of the characteristics of the Liberal Party, particularly its
modern manifestation, is that it is not really owned or dominated by any one section of
Australian society. I was especially proud that we were able to attract support from
many people at the time of the last election who would describe themselves as
traditional Labor Party voters, who described themselves as typical Aussie battlers,
people who were attracted by many of the more socially conservative policies that
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were espoused by the Coalition and who'd grown weary of the special interest group
pleading that had been so successfu~ l under the former government.
Now, naturally, as an instinctive politician and as somebody whose prime responsibility
to his party is to preserve its electoral fortune, my responsibility is to achieve a mix of
outcomes that accommodate all of those responsibilities, I can't only govern for the
business community, I can't only govern for the consumer, I can't only govern for the
battler, I can't only govern for this or that section of the community, but what I can do
is endeavour in achieving the right mix of outcomes and the right mix of policies is to
achieve a fair distillation of those responsibilities.
A strong and growing economy, and I believe we have a rare conjunction of
circumstances that is going to produce that, is a fundamentally important element in a
contented community. When I made the mistake, I suppose, in politics of uttering a
spontaneous phrase and that was when I said I wanted Australians to feel relaxed and
comfortable I meant a few things a little more subtly than some of my critics have
suggested in response to that. But what I really did, more tban anything, have in mind
is that I wanted Australians to feel very, very confident about their past, very confident
about their current identity and also particularly buoyant and optimistic about the
future. I don't believe that every dragon has been tackled and slain over the last year but I do
believe that we have made a very and promising start, a sensible realistic start to
achieving those goals and at creating the kind of Australian community that I think.
most of us aspire to, whatever our political beliefs may be and wherever we may sit in
the Australian community. I think we have made a good start. There is much to be
done. I have greatly valued the cooperation and the candour of the business
coinunity in Australia. We are at heart a pro-business party. We won't always do
what you want. You will criticise us. You will be unhappy, as many of you were with
some of the measures contained in the last budget, but as the overall impact of our
Government is to create a low inflation, strongly pro-business investment environment
and improving international competitiveness and a more level playing field in industrial
relations then I think we are delivering very real benefits to the Australian business
community. Thank you very much.