21 May 1997 U
TRANSCRIPT OF THE PRIME MINISTER
THE HON. JOHN HOWARD MP
SPEECH TO RYDE BUSINESS FORUM, SYDNEY
E O E
Thank you very much Ian for those very warm words of introduction and to Cath
King, to Jim Hull, the Mayor of the city of Ryde, other very well known and
distinguished guests, ladies and gentlemen, it's a great pleasure to be back at the Ryde
Business Forum wearing my new hat and carrying my new responsibilities. Some
things of course go on from year to year and one of those is the dedication of John
Booth to the community of Ryde and I want to congratulate John and TWT on its antiunemployment
initiative. The more small businesses that can do that, the better. The
more small businesses who commit themselves out of a sense of social obligation and
civic pride to reducing unemployment the better.
Of course it would help ladies and gentlemen if we could even further reform the unfair
dismissal laws which have acted as a barrier for a long time against small business
employing more people and if I can say at this stage one of the small business
initiatives of which I was particularly proud after we were elected was the
implementation of our commitment to reform the unfair dismissal laws that we had
inherited from the former Government, laws which actually worked as a disincentive
against small business taking on staff We reformed them a lot and then a few weeks
ago when I announced a package of measure for small business we decided to go even
further and to completely exempt all small firms employing fewer than 15 people in
relation to staff they'd had for less than 12 months, a proposal that I think every man
and woman in this room who runs a small business would see the great common sense
of and something that would make it easier for you to take a punt about employing one
or two more people in your business, and as you all know, the solution really to
Australia's unemployment problem lies more in the small businesses employing three
and four, making that five and six than in any sort of expectation that the large
corporations of Australia that are still into downsizing are going to pick up the
unemployment slack.
The only problem is that our political enemies in the Senate say they are going to
disallow the regulations to bring in that under 15 rule and I have to say that if that
regulation is disallowed then we will roll it back in the form of a bill and it's an
illustration of some of the road blocks that lie along the path to economic reform and
change in Australia.
But John, again congratulations on the TWT initiative. It's a great example of a public
spirited commitment to things that really matter about the community of Ryde and also
the broader community of Australia. I am delighted to be here today to say a few
things about the business climate, not only here but throughout Australia and also
about some of the responses to the Federal budget. Can I say, I hope without any real
hyperbole but a natural tone of optimism that I believe general business conditions in
Australia now are good and they are strengthening. If you look at the fundamentals
we do have a much lower rate of inflation than we've had for many years. We do have
significantly lower interest rates although they are not as low for small business as they
are for housing and I know that's something that is in the minds of many people in
small business all around Australia.
What is more we have the prospect of maintaining low inflationary conditions in this
country for some time into the future. I don't think it's an exaggeration to say that we
appear as a community in common with other industrialised countries, we appear to
have turned the corner and moved away from those years when we seem to have
entrenched in our system high inflation and high inflationary expectations.
We do have by world standards a very high level of economic growth. The Economist
will argue about it. It's 3.5 Some will say it's 3 and a quarter. The best advice
we have is that by year's end in budget terms we will be looking at a rate of about 4%.
Now historically, that's very good. We're into the sixth year, I think, perhaps the fifth
of recovery out of a very deep and a very damaging recession. The omens
internationally are strong. The Asia Pacific region where we send most of our exports
is still growing at a very strong rate. The American economy is very strong indeed and
the news this morning that the Federal Reserve had decided not to increase interest
rates in the United States has given a great deal of confidence to not only the markets
in the United States but also the markets here in Australia. And the rate of growth in
the US is good. Japan is not growing as strongly but certainly better than was the
situation several years ago. The scene in Europe is more mixed, with the British
economy being by far in gross terms, in inflation terms and unemployment terms the
strongest of all the major European economies.
Now I paint that international picture to put the point across that the general climate is
quite conducive. There are of course a number of areas where there are still major
concerns. Unemployment in this country remains high, and unacceptably high and the
focus of policy must remain on unemployment and every time we think of reform,
every time we think of change, we have to ask ourselves, will it make a contribution
towards reducing Australia's level of unemployment? Generally speaking, it is a good,
positive, optimistic climate for business. Now I don't deny that in some areas of the
Australian economy, particularly in the small business sector, it's a mixed scene. I talk
to a lot of men and women in small business and I get a different feedback. I wandered
around today. Just about every second person I spoke to, I said how's business, and I
got a mixed reaction, some very positive, some doing all right but it's tough, others not
so good. Now I understand that and one of the great values of a gathering like this is
to actually hear people making those comments and to feel that you are in touch with
what they're saying and what are their concerns.
The Budget, ladies and gentlemen, was designed to reinforce the fairly positive
optimistic outlook for business. It wasn't a budget that went for gimmicks and rabbit
out of a hat tricks. We didn't need in this budget, because of the expenditure
reductions that we had made in the first budget, we didn't need to repeat that. I mean,
there has always got to be a purpose to economic change. There's no such thing as
economic reform being an end in itself You don't change the industrial relations
system to make yourself feel better. You don't change the tax system to make yourself
feel better. You change it for a purpose and the purpose of economic policy is always
to generate jobs, to improve the competitiveness of the Australian economy and to lift
the living standards of the Australian people.
Now they're the three things that you should judge every measure against. Does it
help to generate jobs? Does it improve the competitiveness of the Australian economy
and does it build the living standards of the Australian people? Now the greatest thing
that I think the budget that Peter Costello brought down last week did, the greatest
thing it did was to lay down a pathway to this country being back in the black at the
end of the third year of the first term of my Government. I mean, we did inherit a
deficit of $ 10.5 billion and by year three of my Government's first term, we will have a
surplus of $ 1.6 billion and of all of the, and as I went around the business community,
whether it was big or small, before the last election they had a lot of advice to give me.
I always get advice and I understand that it goes with the territory and I don't object
to it. I welcome it but one of the things that I was always told before the last election
is that we can't live beyond our means. There's a limit and somebody bells the cat on
us and so it ought to be with the Government. In 1995 just under 20% of the annual
wealth generated by Australia each year, just under 20% of our gross domestic product
was represented by the accumulated national debt of this country and that is all the
money that over earlier years governments have borrowed to make up the difference
between what they have raised through taxation and what they have spent on the
various responsibilities of government and in 1995 if you said our GDP was something
like, you know, let us say, for example, I can't hold myself to the exact figure, if it was
$ 400 billion, then 20% of that would be, what, $ 80 billion this year, roughly what the
debt was.
Now the message I bring you today is that by the year 2000 that almost 20% will have
been reduced to 10% and in proportionate terms it would be exactly half of what it
was in 1995. Now that is not the sort of thing that gets people dancing in the streets.
It's not the sort of thing that gets people popping the corks out of the champagne. It's
not the sort of thing that gets people absolutely lyrically but in the long run it does
more for stability and it does more for a prosperous, stable Australian future than just
about anything else that a Government can do. I mean, your first responsibility as a
Government is to make sure that the accounts of the nation are in order because
without that you can't help people. I mean, you can't help pensioners. You can't help
the underprivileged. You can't attack the fundamental problems of say, Aboriginal
health unless you've got the wherewithal to do it and you don't have the wherewithal
to do it unless you are living within your means so I am very proud of the fact that we
did that and I would defend on that ground alone the enormous contribution this
budget has made to the future economic stability of this country and I am very happy
to say that by the turn of the century on present projections we will have the spending
levels of the present government back to what they were in proportional terms in the
early 1 970s, just after the Whitlam Government came to power and given the added
responsibilities of Government through higher levels of unemployment and greater
social and family disintegration than was the case 25 years ago I think that's a quite
remarkable achievement.
I am also very proud of the fact that the Federal Budget contains something that the
rest of the Australian community, as well as the business community have been asking
for for years and that is an incentive to save. I mean, I listen to the radio, I go around
the community and over the last 20 years people have been saying to me year after
year, meeting after meeting, lunch after lunch, lecture after lecture, they've been saying
to me, why don't you do something to relieve the double taxation on savings? They've
been saying to me, it's ridiculous, I pay tax when I earn my money, I put it in the bank
or I do something else with it and I pay tax on the interest. That's double taxation.
Now people have been saying that to me for years and for the first time we've got a
government that's actually done something about it and it's not limited to savings.
If you make a personal contribution to superannuation you can claim the 15% on that.
If you get a rental return from a business investment you can claim the 15% on that
and so the list goes on. It's an across the board, comprehensive savings initiative and
for the first time you've had a government that's nailed its colours to the mast and said
we believe in savings, we believe in encouraging and procuring a savings culture and
that is why we've done it.
And in another area that I'm particularly proud of, that this budget has looked to the
future and that is the establishment of the Federation Fund. One of the things that I
recognise both in my present position and in past positions, one of the things I have
recognised for a long time is that some of the basic infrastructure of the Australian
community is starting to wear out. We do need some more capital investment and one
of the responsibilities of government is to make certain that we have a strong level of
basic infrastructure and that is why we have established a Federation Fund which in the
lead up to the centenary of federation will make available about $ 1 billion for major
capital projects.
It's not going to be a slush fund for a thousand provincial and municipal obelisks.
Now I am sorry, there may be some people in this room who are disappointed about
that but I have got to tell you, this is a fund about large projects. This is a fund which
is meant to support major projects that are going to change some of the basic
infrastructure services of the Australian community.
So I speak to you today therefore ladies and gentlemen as somebody well pleased with
the important job that the budget has done. It has put us in the pathway to being back
in the black. It has turned around a $ 10.5 billion deficit into a $ 1.6 billion surplus by
year three, and that's a monumental achievement by any measure. Yet at long last has
broken through in relation to giving a broadly based savings initiative. And also it will
look to the future particularly to the centenary of the federation of our nation in
recognising the need for additional infrastructure support and infrastructure spending.
I am of course somebody who has spent a lot of years of his political life campaigning
for the cause of small business. I came out of a small business environment and one of
the things I learnt as a child was the belief in the importance of small business and the
notion that there's nothing you can do more nobly in your life than to start with
absolutely nothing and build up a business through the efforts and entrepreneurial flair
that you might have.
I do want to share with you for a moment some of the important initiatives that we
have introduced for the small business community. Our industrial relations changes are
very valuable to small business. They significantly reduce the role, the compulsory role
of the trade union movement in the negotiation of workplace contracts. They have
encouraged the development of workplace and enterprise agreements and contracts
which are far more amenable to the average small business enterprise than the more
complicated and cumbersome awards system. We have reformed the unfair dismissal
laws. We would like to go a lot further if only the Senate would allow us to do so.
From the 1 st of July we will introduce, from the I1st of July this year that's only a
little over two months, indeed only a little over one month we will introduce what is
the biggest single change to the capital gains tax system since it was introduced in
1985. And this is a provision that will give enormous rollover relief to every small
business in Australia. And under this provision if you sell your small business you can
invest the proceeds of that sale up to a maximum of $ 5 million, up to a maximum of
million in the purchase of another business, it doesn't have to be the same kind of
business. In other words you can sell a computer software company and buy a
newsagency or buy a little manufacturing business, whatever you like. And up to
milIlion of the proceeds of sale will be completely exempt from the payment of capital
gains tax.
Now that will over time, it will completely alter the attraction for investment into small
business. What it effectively means is that in some many areas of small business there
can be an indefinite deferral of capital gains tax liabilities. And on top of that we have
a more modest but nonetheless valuable measure that says when you retire up to
$ 500 000 in relation to the sale of the business will be completely exempt from any
kind of capital gains tax.
Now that fulfils, more than fulfils the commitment we made before the election about
what we were going to do in the area of capital gains tax We have through
responding to the recommendations of the Bell Report, we have bought about major
reductions in the paperwork burden, particularly in the area of fringe benefits tax
where from a date soon, any firm that has less than $ 5000 of fringe benefits will not
have any obligation to keep any records at all and we are exempting another number of
areas completely from any obligation in relation to fringe benefits tax.
We have of course in the small business area implemented a number of other changes
and reforms including our commitment in relation to the provisional tax uplift factor
back to where we reduced it from 8 per cent to 6 per cent in relation to last year and
this year.
So I go over those things ladies and gentlemen, some of you would be aware of them,
I hope many of you are, some of you would not be aware of them. But they do in a
period of 14 months tell a very strong story and represent a very solid list of
achievements in the area of small business. And when you add to that those who have
received the benefit of reductions in official interest rates of about 1.5 per cent over
that period of time. All of those things are together will be very valuable to small
business. And in the last budget we announced as from the 1 st of July next year, we
will be extending up to a period of three months the time in which small businesses
may remit the proceeds of deductions in relation to PAYE tax payments and other
payments of a similar kind. And in cashflow terms that will be of very great benefit to
small business. I think the period of time now is less than a month and it will go to
three months from the 1 st of July 1998.
We are trying at every point, we are trying to make changes that are of benefit to the
small business community, because I remain very strongly of the belief, ladies and
gentlemen, that energising small business, giving small business more initiatives, taking
the paperwork burdens away from them, reducing where you can the taxation burdens,
all of those things will contribute to the capacity of small business to employ people.
And going back to what I said a few moments ago, it is all about measuring what you
do against the benchmarks, the three benchmarks, the first and most important of
which is job generation.
Now ladies and gentlemen in the last few days there's been a little bit of debate about
taxation reform in Australia. And I make no apology for talking about and recognising
the need for taxation reform in Australia. I'm very proud of the reforms that we have
already implemented. The capital gains tax reforms in the area of small business. The
$ 1 billion family tax package that gave a great deal more justice to low and middle
income families brought in on the 1 st of July. The personal tax incentives for private
health insurance that will come in operation on the 1 st of July this year. And oh what a
shame it is that those incentives weren't brought in 5 or 6 years ago when we had
about 40 to 41 per cent of the Australian population holding private health insurance.
It is now because of the lack of incentive for people to take out private health
insurance to climb to a figure of about 34 per cent. Now I believe that those measures
will be begin to turn that around and they'll be highly beneficial and they'll provide a
very strong incentive.
But it's an enormous pity and an indictment on my predecessors that the advice of the
former Labor health minister, Senator Richardson, in 1990 that something should be
done about giving people incentives to go into private health insurance wasn't taken up
on that particular occasion.
I don't think anybody would argue that we have a perfect taxation system in this
country. I've not met anybody in business or in the professions who believe that. We
have made some improvements and some reforms. And if we are thinking forward, if
we are to be a forward thinking nation, if we are to be truly competitive, if we are to
maximise the incentives for job generation in this country well you can't leave out of
that examination or leave out of that picture a taxation reform.
Now I made certain commitments about particular taxes before the last election and I
intend to honour those commitments in full. But I do believe that we need as a nation
to talk about and to think about and to debate the desirability of tax reform and the
form that that should take. And in doing so, we should always remember those three
benchmarks. We should ask ourselves will the reforms help to generate jobs? Will the
reform improve the competitiveness of the Australian economy and will the reforms
contribute to an increase of the living standards of the Australian people?
Tax reform in its own right is not a goal. What is a goal is reform to the taxation
system that matches those three benchmarks. We need a tax system that makes it
easier to create jobs. We need a tax system that improves the competitiveness of the
Australian economy and we need a taxation system that improves the living standards
of the Australian people. Now what we do on this issue in the years ahead will be
judged against those three benchmarks. I think it's profoundly disappointing that the
reaction of the Labor Party on this issue has been so negative and backward looking.
People who say there is no need for any taxation reform in Australia are indicting
themselves as yesterday's men chained to yesterday's taxation system. Because
anybody who understands the competitive pressures that are weighing in on the
Australian economy, despite all the changes that we have made, and others that are in
the pipeline must recognise that if you are to compete effectively in an increasingly
global economy, you must be absolutely certain that the taxation system that we have
is adequate to that task. And that is why I have quite openly and deliberately
embraced and talked about the need for debate on the future of Australia's taxation
system. And I invite people whether they're in the business community, whether
they're in the welfare sector, as private citizens, those in academia and those in the
government service, and I invite all of them to participate in a very important debate.
We do have to be sufficiently courageous and mature as a nation to recognise that
although we have come a long way in the reform area, and although by in comparison
with the rest of the world we are very richly endowed nation, that if we are to maintain
that position we must be willing to examine and where necessary change some of the
economic structures of our country. But don't change it out of some kind of blind
commitment to ideology. I'm not interested in that. I'm not interested in an
econometric model of an Australian taxation system, I'm interested in a people's and
job generating model of an Australian taxation system. And if we can design over the
years ahead a system that matches those three great benchmarks then I think we will be
doing ourselves, the future of our nation and the future generations of Australian
people a very great service.
It is the role of the Government, it is the role of those who have been elected to
leadership positions to combine a patient understanding of the concerns of the
Australian community with a need on occasions to point a goal and point to an end
direction to which the community should strive and aspire. And I believe we do need a
debate on this issue and I invite people who are concerned about a positive future for
Australia instead of a negative, backward looking, smug, complacent, ' she's all right'
approach, of complete lack of realism. I invite people to join in that debate.
And finally ladies and gentlemen, can I say as the Member for Bennelong how pleased
I am to be here, how pleased I am to share a few thoughts about the budget and about
the future of the Australian economy with people who represent the commercial and
small heart of my electorate. I mean this is a cross section of what small and medium
size business in Australia is all about and it's a great privilege to be amongst you again.
I wish you well. I congratulate the Ryde Business Forum on what it's achieved and
what it's doing to represent the small business and commercial aspirations of the City
of Ryde.
Thank you.