CHECK AGAINST DELIVERY EMBARGOED UNTIL DZLiVERY
SPEECH BY THE PRIME MINISTER
HOUSING INDUSTRY ASSOCIATION CONFERENCE
BROADBEACH 23 APRIL 1988
It has been three years since I have had the pleasure of
addressing the HIA Conference. They have been momentous
years for the Australian economy and for all Australians.
They have been a testing time for our community a time
which has required a degree of sustained restraint
unprecedented in peace time.
And it is pleasing to be able to say that the hard work is
beginning to pay off.
Three years ago the headlines were trumpeting the falling
dollar, falling terms of trade, a blow out of the balance of
payments and rising inflation.
Today each of those indicators is moving the other way.
Our current account deficit has fallen by one-third,
relative to GDP.
our currency has stabilised.
Our terms of trade stopped falling in 1987 and actually
increased. Inflation ig'trending down from a post-depreciation peak of
almost ten per cent to an expected 6 per cent or so by June
with a prospect of getting down to around 5 per cent a year
or so later.
Moreover: The economy continues to grow strongly;
Investment is picking up;
The Budget is in surplus; 006002
2.
We have created over one million jobs since April 1983,
over 80 per cent of which were created in the private
sector and we have halted and reversed the growth of
Commonwealth employment; p
The unemployment rate has fallen further and now stands
at 7.4 per cent comparded with 10.1 per cent in April
1983. But if the massive explosion in workforce
participation since then had not occurred, the
unemployment rate would now be 4.3 per centl and
Most importantly for this group, the housing industry is
expanding rapidly.
That is an enviable record of achievement one that we can
all take pride in.
It would be tempting to say that, having acnieved so much,
we can now afford to sit back and relax because there in
nothing more to do.
But the fact is that it will be some years yet before we
reach so comfortable a position.
It now takes four times the export effort to service our
international debt than it did in the early eighties.
And our current account deficit is still high enough to
ensure that our international indebtedness continues to grow
each year as a proportion of GDP.
The reality is that we need to stabilise our indebtedness so
that we can maximise the extent to which our productive
effort can be used to increase our living standards rather
than those of our creditors. To do that we need to reduce
the current account deficit further.
What does that require of us at present?
Let me outline for you today the essential tasks required of
Government and the community to achieve that goal. while
these are tasks that involve all Australians, these are some
particular ways in which the housing industry is
contribueing, and can continue to contribute, to the overall
effort. First it requires that Government fiscal policy remain
appropriate to the task.
This Government's record of fiscal management needs no
recounting in detail here.
Having turned a prospective $ 10 billion deficit to a surplus
and having turned back the real growth of Budget outlays,
our fiscal achievements are second to none.
The May Statement, which Paul Keating will deliver on may
will continue the task. 0060013
The current indicators suggest that domestic demand has been
running a little faster than we would have desired.-
Government policy notably our fiscal policy is already
set to tighten progressively, which will help moderate
demand growth.
Nevertheless, we recognise that", more needs to be done to
contain public sector demand and the assoc9ited drain or
domestic saving.
Accordingly the may Statement will have to incluce some neow
cuts in Government spendina.
And when we convene the Premiers Conference and Loan Council
earlier in may we will be looking to a further contribution
to restraint by the States.
However let me make it clear that, because we in the
Commonwealth have achieved so much in recent years and
because of the improvement under way in our current account
and revenue positions the massive spending cuts of recent
years are not required on this occasion.
Our objective is to ensure that real outlays growth in the
Commonwealth Budget remains negative.
The States must recognise that the overall mix of borrowing
and spending by the public sector as a whole must also be
kept consistent with modest growth in public sector demand
and with a further reduction in the Public Sector Borrowing
Requirement. Such an approach will moderate demand without recourse to
excessively high interest rates.
It is an approach therefore which will help to sustain the
pick up in investment and, not least, investment in
housing.
The second component of what ' we as a community need to do
now is to continue the overhaul of our industrial structure
to enable it to meet the needs of the world economy today
and tomorrow.
As we promised in the last Federal election campaign, this
task is proviae3ng the focus of much of the activity of the
Government in particular, through the work of the
Structural Adjustment Committee of Cabinet.
it will also provide a major theme of the May Statement.
In particular, the Statement will initiate further reform of
the business tax system and further progress in the-gradual
winding back of protection, which is sapping our export
potential.
We seek a lea~ er, more efficient, more flexible, more
outward looking economy.. 006004
The Government~ s record of reforw his area is
unsurpassed. our major achievements include deregulation of the financial
sector, the foreshadowed ending of the two airlines
agreement, reform of public administrrtion, progressive
reduction of protection in the context of Industry plans, a
start to reform of education and training systems, reduced
regulation of business wherever possibli. ind not least of
all substantial tax reform.
Reflecting the importance which we attach to this sector,
the housing industry has had a special place in this
process. Deregulation of the financial sector, coupled with our
decision in March 1986 to let interest rates on new
mortgages follow market trends, unlocked a large reservoir
of loan funds for home buyers.
Demand for loans has accelerated markedly in recent months,
in line with the sharp decline in mortgage rates.
So much so, indeed, that the Indicative Planning Council
expects 1988-89 to see nearly 148,000 starts, which compares
with the annual record of 153,000 we set in 1984-85.
However the task of reforming our economy is far from over.
We still have work to do towards minimising our domestic
cost structures, maximising the incentives for improved
efficiency and encouraging Australian suppliers to seek out
and win markets against the best of our foreign competitors.
Last week Senator Button announced substantial, immediate
reductions in protection for passenger motor vehicles.
Further reductions are to be phased in between now and 1992.
The benefits of greater efficiency and ultimately, lower
vehicle prices are widespread and accrue to industry and
individuals alike.
These reforms are a substantial first instalment on the
packaqeoi" measures which the Treasurer will be announcing
in the MayStatement.
Its thrust will be clear: to build a better Australia.
one which has the verve and flexibility to cope with a
rapidly changing, highly competitive world.
one which is less reliant on raw materials exports and
thus more reliant on value added processing,
manufactures and services. 006005
There is always a risk when programs of ma~ or reform are
implemented that individuals or groups will Beek to champion
those elements which favour them and disparage the
remainder. Such a narrow, sectional approach in this t,. x
would be shamefully short-sighted because it wouldtimpe..
the task of reconstruction which ultimately is essential If
we are to rebuild our living standards.
our policies have produced an economy which is competitive
and which is experiencing rapid employment qrowth and
falling unemployment.
This provides the context in which we can undertake the kind
of phased fundamental restructuring which we now require
without the massive dislocations which attended the attem'
of less far-sighted Governments.
while we are so heavily in hock to our creditors we simply
cannot afford to let this golden opportunity pass.
Ladies and gentlemen,
Our third taGk as a nation is to remain competitive.
Through the continuing coope ration of the union movement,
real unit labour costs have declined by more than 10 per
cent since 1983.
Sustained wage restraint, coupled with massive depreciation
of our currency, has dramatically improved the
competitiveness of our manufacturing and service industries.
This is particularly so compared with suppliers from Japan,
the United States and Europe.
The pleasing thing is that so many manufacturers and service
industries are taking advantage of it.
The volume of manufacturing exports has risen by more than
per cent over the past two years.
The volume of exports by the services sector has also
recorded a strong increase, so much so that our services
deficit has fallen by around 25 per cent over the last two
years. Our tourism sector has of course made a major contribution
to this but the efforts of large numbers of other
entrepreneurs have also been rewarded with a niche overseas.
And I am pleased to be able to say that the housing -y
has made an important contribution to this trend.
Clearly the key to maintaining the competiti'venessa which has
allowed those successes is firm control of costs.
Appropriate wiages outcomes and the conscientious pursuit of
higher productivity remain crucial to our fight to retain
competitiveness so we can regain lost living standards. 006006
But as Prime Minister I am also aware ot the more immediate
human implications of an economic strateav which has meant
real wage declines.
The increases in our economic competitiveness have been won
at the expense of increased, hardship for many Australian
workers. That is a fact which we have attempted over the years to
compensate through a series of measures aimed at increasing
socialsjustice within our society within the
responsibilities of our steadily reducing budget deficit.
These have included an unprecedented assault on child
poverty through the new Family Allowance Supplement, real
increases in pensions, the introduction of Medicarp and the
creation of a fairer taxation system.
We have also, through the First Home owners Scheme :,. nd
through real increases in public housing spending, helped
put a roof over many families' heads a fact which the HIA
readily acknowledges.
Perhaps most significantly, we have created nearly oa;-
million new jobs since we came to office a rate of Jobs
growth twice that of the industrial world.
However it is true that many Australian families are still
finding the going tough.
In particular, there are families who, while not being
wealthy, are earning more than would entitle them to
Government assistance, such as the Family Allowance
Supplement, which is aimed at low income earners.
They are the * families who are putting their financial effort
into buying their own home and thus are not entitled to
rental assistance.
They are families who are working hard, including doing a
lot of overtime work, to win security for themselves and the
best possible chance for their kids.
We recognise these middle-income earners have made their
sacrifi-tes over the years of essential restraint and now
deserve Government efforts to seek to repay those
sacrifices. I'm not saying we can or should lift the lid on wages.
That would be self-defeating because it would postpone the
day when we can reduce our national dependence on
international creditors.
What I am saying is that the Government recognises that now
is not'the time for further massive cuts in real wages.
Barring unforeseen calamities, those days are behind us. 006007
7.
In current circumstances of gradual improvement in our
underlying economic condition, including falling inflation
and a shrinking current account deficit, we can expect that
over the next year or two real disposable incomen 411 h
maintained and gradually increased.
That will provide the basis for the Government's approach to
the Conciliation and Arbitration Commicair-the time of
the next National Wage Case.
However, nominal wage gains are only part of the living
standards story We will deliver sig~ nificant personal tax
cuts in the lie of this Parliament
The combination of wages increases consistent with fallin9
inflation and personal tax cuts consistent with responsible
fiscal outcomes can provide the relief which wage earners
particularly the middle income earner seek and deser"'. a
a pace which the economy can afford.
Of course ultimately the only sure way to sustained rapid
growth in living standards is through rapid productivity
growth. This is a task for both employers and employees. In
this industry, like all others, we need a firm resolve to
use the available mechanisms to achieve genuine and on-going
improvements in productivity.
Ladies and Gentlemen,
Government policy has a major -in some cases the major
role to play in each of the three areas for community action
that I have identified so far: fiscal restraint, economic
restructuring and international competitiveness through
wages policy and mechanisms to encourage productivity
increases..
The principal responsibility for the last element that I
wish to address today, however, lies elsewhere.
Without forward looking business attitudes we cannot hope to
meet and conquer the challenges of today's highly
competitive world market.
There is much we in4* Government can do to facilitate change
and we will do whatever we can. But in the end it is up to
individuals and business planners like you to identify
opportunities and seize them.
As a community we need the preparedness to take risks and to
search for new investment opportunities.
We need a willingness to innovate, to develop new products
and markets and to explore new opportunities both at home
and abroad.
We need a greater commitment from workers and
entrepreneurs alike to training and skills formation. 00G008
8.
AS this industry knows well, myopic approaches to
apprenticeship and other forms of training may save cash
flow in a downturn but only at the subsequent cost of labour
shortages and inflexibilities.
we need a hard look at our collective attitudes to quality,
design and reliability of tupply.
It is heartening to see that so many employers and workersboth
in this industry and elsewhere appreciate both the
gravity of theae tasks and the rewards which come to the
brave. Indeed many of the firms represented here today are
spearheading our national drive to diversify our export
effort by selling housing and construction services abroad.
In part icular, the Australian housing industry has " on tap"
the professional people and the products to contribute to
the housing development of our neighbouring countries.
I urge all of those involved in this industry to seek out
opportunities in this area. There can be no doubt that
whether the Australian industry regains the status of a
world champion performer hinges on its ability to take up
this challenge.
In the end it is up to you, the manufacturers, suppliers and
builders to recognise long term advantages and seize the
opportunities. For our part, we in Government will continue to do our best
to nurture and foster this outward-looking approach.
Ladies and gentlemen,
I have been asked before concluding my keynote address to
perform one small task.
Your National Executive has invited me to launch the
inaugural issue of your Association's monthly national
newsletter, " National Housing Update".
The newslietter promises to be a valuable, and probably from
time to time controversial, new means of communication
within your industry and so I have much pleasure in
launching it. 00( 3009