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Mr President, my parliamentary colleagues, your Excellencies, ladies and gentlemen. Can I start by congratulating the Australian Chamber of Commerce and Industry on 10 years of very fruitful and effective representation of an enormous spectrum of the Australian business community. As I look back over that 10 year period I particularly remember the contributions that your organisation has made to the development of economic reforms and the process of economic policy debate within our community.
Your President spoke earlier of the economic strengths of Australia and I'll deal with some of those later in my remarks but it's fair to say that the economic strength of Australia at the present time, the fact that we still have one of the fastest growing economies in the developed world, the fact that we have low rates of inflation, low rates of interest, an extraordinary low rate of Federal Government debt, that that economic strength is the result of cumulative economic changes that have occurred in this country over the last 15 to 20 years. And if I had been a guest or addressing a gathering such as this 15 to 20 years ago in the old Parliament House, 20 years ago we'd have had still a fixed exchange range and a highly regulated financial system, we'd have had very high tariff levels, we'd have had a completely unreformed taxation system, we'd have had budget deficits instead of budget surpluses and, worst of all, we'd have had a totally arthritic labour market.
I heard Peter Hendy this morning on AM and he was talking about the cause of labour market reform, a cause that many of you know has been very close to my heart in the many political positions I've held over the last 15 to 20 years, and he likened it to a journey between Sydney and Brisbane. The only thing that I baulked at a little bit, I liked the analogy, very graphic, very Australian, the only thing I baulked at, he said that we'd only sort of got to Albury. I was a little bit…I thought he might at least concede that we got to Canberra or Sydney. But what he was talking about was, of course, that it's a journey begun but it's a journey not completed. And what I'd like to say to all of you is that your organisation and its predecessors have played a major role along the various journeys that we've travelled. And particularly in the last 10 years the support that you've given to the cause of labour market reform and the very strong commitment you gave to the cause of taxation reform, something that many of us thought, while not dead and buried, almost unachievable six or seven years ago and as we, from the vantage point of 2002, look back over that 15 to 20 year period we can see some milestones of economic reform. And I've never been reluctant to acknowledge the contribution in one or two of the major areas of reform made by the previous government and particularly by the prime ministership of Bob Hawke in relation to both financial deregulation and tariff reform. Because the message out of all of this is that countries that don't maintain the momentum of economic reform squander the gains of earlier reforms and, over time, return to positions of uncompetitiveness.
Australia is performing strongly at the moment because we have reformed our economy. We'll only continue to do so if we maintain the momentum of reform. And whilst at this stage I';m not in a position to endorse the particulars of the 10-year blueprint that you have laid down for further labour market deregulation, let me say that I strongly support further labour market deregulation. I would like to see the further reforms currently stalled in the Senate go through and I would like further reforms to occur in that area.
One of the strengths of the Australian economy in the last five years has been that we've had very high levels of productivity. We were talking at the table a few moments ago about the level of the Australian dollar. We don't have a low dollar, we have a highly competitive exchange rate! And that highly competitive exchange rate has not had inflationary consequences in Australia, which in a sense is the old, conventional wisdom in relation to the impact of exchange rates. And the reason why it hasn't had an inflationary impact is that the domestic economic environment is now less regulated, more productive and more competitive and as a consequence we have been able to absorb the impact of that exchange rate without inflationary consequences. And that is a very vivid and live example particularly to Australian exporters and domestic manufacturers of the value of living in a less regulated, more competitive Australian economy.
The Australian economy continues to perform very strongly. There are two clouds. One of those is the very severe drought, the other is the uncertain state of the international economy. It's a very bad drought. It's approaching the dimensions of that in 1982 and in the years immediately after World War II and immediately after Federation. About 70% of the nation is suffering a severe or very serious water shortage and the most reliable estimates at this stage indicate that there won't be any significant change in the weather pattern until about March or April of next year. Fortunately some measures put in place several years ago will cushion the impact of the drought for a lot of Australia's farmers. The farm management deposit scheme, which encourages through tax incentives farmers in good years to put away money to draw out to live on and to fund their operations in bad years, that has been extremely successful. And about 43,000 Australian farmers have taken advantage of that. There's about $2 billion in the deposits and the revenue foregone this year is estimated to be in the order of $500 million.
The Exceptional Circumstances arrangements will increasingly be needed by different areas of Australia. And the sad thing for many Australian farmers about this drought is that it has followed a number of good years which was the first they'd had for a long time and at a time, of course, when world prices for many commodities are very high. So that's going to have an impact and the weakness of the international economy is also going to have an impact. And later this month the Treasurer will be releasing the mid-year economic review that we'll respond in more detail to the impact of those things. But, fundamentally, I want to reiterate what was said by the Governor of the Reserve Bank two nights ago that despite those challenges the Australian economy does remain very, very strong indeed and likely to do so over the years ahead.
There are one or two specific things I would like to turn to and they arise very much out of the commitments that the Coalition made in the election campaign just over a year ago. In launching the Government's business policy I made a number of specific commitments. One of those was a review of the competition provisions of the Trade Practices Act. The inquiry being conducted by Sir Daryl Dawson is now well advanced and I would expect to receive the report, or the Government expects to receive the report, by the 31st of January 2003. We also committed ourselves to the establishment of an office of the Inspector-General of Taxation recognising some concerns about the relationship between the business community and the Australian Taxation Office. Legislation to establish that office has passed through the House of Representatives. It's gone to a Senate committee. There is some suggestion that it may be opposed in the Senate. I hope that that doesn't prove to be the case. The Treasurer is proceeding with the review of Australia's international taxation arrangements and in August he released a consultation paper on that issue and the review is examining whether these arrangements are consistent with the increasingly global outlook and global behaviour of so many Australian companies. In September of this year the Government announced measures giving effect to the commitment to expand venture capital tax concessions. And the Government has also introduced legislation to give effect to certain changes to the tax treatment of foreign expatriates recognising the importance for Australian companies operating globally to have access to highly skilled workers from around the world. And in the important area of winning investment the Government has responded to the Blackburn report and Invest Australia is being revamped under its newly appointed CEO, Mr Garry Draffin.
But tonight I want to announce the details of the implementation of another important government initiative, fulfilling an election promise. I';m pleased to say that the very distinguished Australian businessman, Mr John Uhrig, a former chairman of Westpac and former chairman and director of many Australian companies, will conduct a review at the request of the Government into the corporate governance of Commonwealth statutory authorities and office holders. As you know the performance of statutory authorities and office holders is critical for business and the overall health of the Australian economy. This is particularly so in the areas of taxation and regulation where businesses have the right to expect the highest levels of efficiency, fairness and transparency in their dealings with the Government. The objective of the proposed governance review is to improve the performance of statutory authorities and office holders and, most particularly, their accountability frameworks.
The review will examine structures for good governance as well as the relationship between statutory authorities and office holders and portfolio ministers, the Parliament and the public, including the business community. The specific focus of the review will be on a select group of agencies with critical business relationships including the Australian Taxation Office, the Australian Competition and Consumer Commission, the Australian Financial Regulation Authority, the Reserve Bank of Australia, the Australian Securities and Investments Commission, the Health Insurance Commission and Centrelink. In addition to examining existing governance arrangements the review will also address the selection process for board members and office holders, the mix of experience and skills required by boards, their development requirements and their relationship to the Government. And expected outcome of the review, which should be completed within six months, is the development of a broad template of governance principles. As a second stage to the process and following the review the Government will assess statutory authorities and office holders against these principles and reforms will be undertaken on a whole-of-government basis.
As you are aware, ladies and gentlemen, today marks a very important day in the bilateral relationship between Australia and the United States. The United States' special trade representative, Ambassador Bob Zoellick, informed me and my Cabinet colleagues this morning that he'd been authorised by President Bush to give the required statutory notification to the American Congress as a prelude to the commencement of negotiations between Australia and the United States for a free trade agreement. This opens the prospect of a momentous forward movement not only in the economic relationship between Australia and the United States but also in the further broadening and further globalisation of the Australian economy.
The United States economy is, of course, the biggest in the world. Some estimates have said that a free trade agreement, if negotiated, could add something like $4 billion annually to Australia's gross domestic product. We will enter these negotiations very committed to achieving a positive outcome. We will work very hard to do that and we are greatly heartened by the Americans indicating to us that they would like the negotiations completed during the next 18 months. There is no incompatibility between negotiating bilateral agreements and also pursuing further progress in the multilateral area, particularly the World Trade Organisation Doha round. And, indeed, Ambassador Zoellick's visit to Australia is primarily to attend a mini ministerial meeting of Trade Ministers, convened by Mark Vaile and to be held in Sydney tomorrow.
I don't underestimate the challenges that will be faced by us in negotiating an agreement and we are particularly conscious of the importance of it being comprehensive and, therefore, of the importance of agriculture. And no Australian Prime Minister is ever unmindful of the imbalance of existing arrangements concerning agriculture around the world and the way in which they work to the disadvantage of Australia. Let me illustrate - subsidies in Australia represent 4% of total farm production in this country. In the European Union they represent 35%, in the United States, 22% and in Japan, 59%. We believe that Australian farmers are entitled to a better go on the world scene. We will ensure their interests are properly and vigorously pursued in our bilateral negotiations with the United States but the opportunities, given the complementarity of the Australian economy and the United States' economy in so many areas, the opportunities that a free trade agreement opens up are very considerable indeed.
The last thing I want to mention, ladies and gentlemen, is one touched upon by your President and that is the question of the environment and, most particularly, the debate surrounding the Kyoto protocol. At present we are unwilling to ratify the protocol because we believe that would not be in Australia's national interest. We are on track to achieve the emission targets allocated to Australia under Kyoto. We remain very committed as a government to achieving significant reductions in greenhouse gas emissions. Concern for the environment is a mainstream political and social issue in our country. We are aware of that and we remain very strongly committed to achieving improving greenhouse gas outcomes. But the present cast of the Kyoto arrangements with the differential treatment and more liberal treatment being afforded to many of Australia's competitors, given that we are almost uniquely placed being a highly developed country, which is also a net exporter of energy and we don't have the advantage, for example, that the bubble arrangement affords to the member countries of the European Union and given the absence of the United States from the Kyoto protocol agreement at this stage we remain unconvinced that it is in Australia's national interest to sign.
We would like to have a very open and frank dialogue with the business community on this issue. There are a range of views in the community and there's also, I gather, quite a variety of views in the business community. And in August the Government began an extensive dialogue with the business community on reducing greenhouse gases. It received widespread support from industry and this is a valuable opportunity for industry to work with the Government on ways to reduce greenhouse gases while also protecting our competitiveness. Industry has long and legitimately called on governments to consult them in formulating greenhouse policy rather than handing it down from on high. And our willingness to have an open dialogue with the business community represents a significant opportunity for business to work with the Government on this very important issue. And I urge ACCI and, indeed, all other business organisations to take advantage of it.
Can I finish my remarks, ladies and gentlemen, by again thanking your organisation for the contribution that its made over the last 10 years and its predecessors before that in the very important area of dialogue with the Government. I lead a Government that I';m very proud to say is not beholden to any one section of the Australian community but I do lead a Government that has a very deep commitment to private enterprise, has a very strong commitment to what I choose to call competitive capitalism, a Government that believes in wealth generation and believes very strongly that the foundation of national wealth is private, competitive business activity, risk taking and entrepreneurial flair. We don't always do things that please the business community, we haven't in the past and we won't in the future but we'll always be very mindful of your views, we'll always stand ready to talk to you, to listen to you and to work with you in achieving common objectives. That's a commitment I make on behalf of all of my ministerial colleagues and I make it confidently believing that it's a view that all of them share. We are fortunate to be living in a time, economically, that has been so favourable to Australia. Sadly, that circumstance is challenged by non-economic issues which have thrown a cloud and a shadow over our nation and over our people. In responding to terrorism, in responding to the new security and intelligence and defence demands that inevitably have been put upon us over the last 12 months and very recently over the last five or six weeks the strength of our economy will be something that will aid us very greatly. It's never easy to respond to those sorts of challenges but if you are responding to them from a vantage point of economic strength and economic achievement then the solutions are more readily at hand.
I thank all of you for the personal and corporate contributions that you have made to Australia's economic condition. Without cooperation between the business community and the Government of the day nothing can ultimately be achieved and I am very conscious of the contribution that all of you have made. Thank you.
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