PRIME MINISTER
CHECK AGAINST DELIVERY EMBARGOED UNTIL DELIVERY
SPEECH BY THE PRIME MINISTER
AUSTRALIAN FINANCIAL REVIEW POST-BUDGET DINNER
SYDNEY 24 AUGUST 1988
As my friend and colleague, Paul Keating, and I have always
agreed, economic management has always been the main game in
town. May I say this has been and remains true, as a solid basis
of our prosperity, as a sound basis for higher levels of
targetted sustainable social justice and let me add, as
Prime Minister as a sure basis for political success.
The political scene in Australia in the last few weeks has
been dominated by the morally unacceptable and economically
dangerous opportunism of our political opponents.
My Government will continue to fight and we will beat
that make-or-break threat to Australia's well-being.
And with last night's Budget we passed the make-or-break
point for the Australian economy.
Under Labor's policies the economy is going to make it
Australia is going to make it.
Last night the Treasurer brought down the second instalment
of the Government's economic measures of 1988 the first
having been the May Statement.
Taken together these statements demonstrated once again the
Government's complete mastery on the central issues facing
the Australian nation the issues of economic policy
making. They provide the policy framework needed to maintain the
momentum of economic reconstruction which is underway in
Australia. They promote a sustained high level of investment.
They ensure demand does not unduly hamper the pace of
improvement in our current account position.
They maintain the downward trend of inflation.
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They promote increased productivity, flexibility and
adaptability. They preserve true social cohesion by t he dedicated pursuit
of social justice.
With those policies, Australia will make it.
There is a number of interconnected strands to that policy
approach : fiscal restraint, initiatives to reduce
inflation; initiatives to accelerate economic reconstruction
and major advances in social justice.
Last night's Budget, the culmination of years of work,
achieved a real decline in budgetted outlays of 1.8 per cent
an unprecedented third year of decline, bringing the share
of outlays in GDP back to its lowest since 1973-74.
As a result the Budget surplus has now been lifted to
billion. Equivalent to 1.7% of GOP, that represents a
turnaround of about 7% of GDP from the anticipated deficit
of $ 9.6 billion which we inherited in 1983.
Note that none of this Budget's surplus growth is due to
increased asset sales.
Moreover, contrary to those who assert it is all done with
tax mirrors, budget revenue now forms a lower share of GDP
this year than last for the second year in a row.
In other words this year's achievements principally reflect
the hard graft of earlier years namely real outlays cuts.
Combined with the restraint exerted by the Commonwealth on
other levels of Government, our surplus will reduce the net
call of the public sector as a whole on the domestic savings
to zero.
I say it again: the Public Sector Borrowing Requirement
will be zero.
This year, for the first time ever, the saving of
Australians is available entirely to finance productive
investment in Australia.
Indeed the Commonwealth is now able to repay public debt.
The Budget's reforms to our economic infrastructure have
been delivered in several stages.
The breadth and significance of the package introduced in
May should not be underestimated.
No longer will investment decisions be determined by
artificial props from the tax or tariff systems. They will
increasingly relate to underlying economic returns the
returns which equate to the growth of national wealth.
Coupled with progressive reform of Government Business 1375
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Enterprises such as Telecom and Australia Post to make them
more responsive to change, the measures will also help to
contain business and consumer costs.
The effect of such measures will naturally build up slowlytheir
benefit will be felt increasingly in years to come.
There have been further initiatives since the May Statement,
with a particular emphasis on education and training.
The reason we have been paying such intense attention to the
education and training systems is because if we get them
right we get right the basic building blocks of our future
economy, its workforce to say nothing of personal
fulfillment. This Budget provides for a massive expansion in higher
education places some 40,000 places by 1991. Funding
those places will be a major task for any Government.
The Higher Education Contribution Scheme will assist in that
task as well as help disadvantaged students put themselves
through higher education using Austudy.
Under the scheme those for whom higher education is a means
to higher income the students will repay a small portion
of the costs of their education but only if and when they
have the financial capacity to do so.
The scheme is fair. It is sensible. It deserves the
support of the whole community.
It complements steps already taken to lift the quality,
relevance and efficiency of our schools, TAFEs and higher
education institutions.
However the process of economic reform must not rest there.
Although there are many enlightened employers, Australia's
attitude to training and retraining has too often been
short-sighted. Too often training has been regarded as a
cost to be avoided in economic downturn, leading to
shortages when activity has recovered.
The Minister for Employment, Education and Training, John
Dawkins, will be consulting with representatives of business
on options to remedy this deficiency and I take this
opportunity to encourage your active involvement in
addressing it.
An improved training effort will have to accompany any
serious attempt to improve the adaptability of our workforce
through better design of jobs, nulti-skilling and the like.
With the review of awards initiated by the Conciliation and
Arbitration Commission in its recent National Wage Case
4.
Decision, and the Government's review of funding of
training, those matters have been placed firmly on the
industrial agenda.
A number of other reports and reviews which affect business
costs and thus our capacity to adapt to change are still to
come before the Government. These include the results of
IAC and other inquiries into our shipping industry and
waterfront, into Government charges and into tourism and the
services sector.
It may be necessary after those reviews, for some of us to
shoulder a greater share of the burden of change.
All of us unions, business people, the community at large
-simply cannot afford to fail to address these reviews
co-operatively and positively.
Our children will rightly indict this generation of
employers, unions and governments if we do not, together,
make the most of the opportunities now before us.
Ladies and gentlemen
Inflationary expectations are easy to entrench, difficult to
break. This Budget introduces a circuit breaker.
This is possible because the overall Budget outcome is
consistent with the restraint am demand which is necessary.
The reform of excise tax arrangements on beer, costing
$ 400m, are socially responsible and, given the expected
budget surplus, fiscally sound.
This follows several price-cutting initiatives taken in may.
The 2 per cent revenue duty has been abolished,. returning
$ 250m to reduce private sector costs.
A further $ 240m is being returned because of reduced tariffs
on cars and other imports.
Each of these measures is a rational reform to promote
greater economic efficiency.
And together they have the major additional benefit of
knocking down the CPI this year by over 1/ 2 per cent..-a
shock which will secure an inflation rate of about 4 1/ 2 per
cent by this time next year, and even less in the following
year. We aim to convert that achievement in 1989-90 into a
wage-tax trade off which will achieve the slower wage growth
needed to keep inflation low without the need to sacrifice
the real living standards of ordinary workers. 1377
Personal tax cuts will be introduced from 1 July 198g.
They will be structured to pay particular regard to the
needs of lower and middle income earners the people who
have borne the real brunt of economic reconstruction so far.
But the scale of those cuts necessarily must depend on
achieving appropriate wages growth in 1988-89 and on a
suitably restrained prospect for 1989-90.
After five years of sustained wage restraint there is
understandable impatience on the part of many workers for
further increases in disposable incomes as quickly as
possible.
Those legitimate aspirations can and will be net.
But we must go carefully and sensibly.
The reason, of course, is that we simply cannot afford to
risk all that we have achieved so far by either excessive
wage-price pressures or by a renewed burst of
import-generating demand prompted by ill-timed tax cuts.
This year we need an orderly progress of wage rises,
consistent with the Conciliation and Arbitration
Commission's recent Decision.
Next year we will give as large a tax cut as cam be
afforded, in the context of arrangements to ensure
appropriate wages outcomes.
Having laboured so hard to get Australia back on its feet it
would be reprehensible to put jobs and living standards
unnecessarily at risk by a less disciplined approach.
La dies and gentlemen
Too often social justice concerns are greeted with a yawn by
a lot of economic commentators.
That is economically and socially short sighted.
. The Leader of the Opposition is fond these days of posing
under the banner of social cohesion. Unfortunately, as his
incursions into the immigration debate have shown, his
posing is more likely to encourage disharmony than cohesion.
Labor's social justice achievements are designed to promote
real national cohesion in a way that only Labor can.
Our approach these past 5 1/ 2 years has been based on the
reality that commitment to economic change is likely to be
greater, more enduring and more readily achieved if all the
members of our community perceive it to be fair.
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It recognises also the essential dignity of all Australians
and the right of the disadvantaged to a decent quality-of
life. our impressive record so far in promoting greater fairness
in tax, in education, in health services, in income support,
indeed in access to the full range of Government programs
was spelt out in a publication which I launched in April
called " Towards a Fairer Australia Social Justice Under
Labor". That document also set out the Government's priorities for
further improvements.
I am proud to say that, in this Budget, we have made
substantial progress on each of those priorities.
This Budget will sustain durable employment growth. We will
add significantly to the 1 million jobs we have already
created, and at least preserve the reductions we have
already achieved in the unemployment rAte.
The Budget also includes further steps to meet our child
poverty pledge that by 1990 no Australian child need live
in poverty. That pledge will be honoured in full next
Budget. Last night, we increased the Family Allowance
Supplement and foreshadowed new arrangements to obtain
maintenance from non-custodial parents.
The Budget includes new programs to assist sole parents and
the long term unemployed to break out of poverty by
obtaining meaningful employment.
It includes phased increases in rent assistance for low
income households renting in the private market, recognising
that housing costs are a major contributor to poverty.
It incorporates substantial increases in funding for
Medicare, nursing homes, hospitals and the Home and
Community Care program.
It includes substantial real increases in funding of
programs designed to improve the living conditions and self
esteem of our Aboriginal peoples, including by a major
expansion of self-help programs. Funding has been increased
by about 20 per cent in real terms in this Budget, so that
we have more than doubled real funding in this area over the
life of this Government.
These social justice initiatives show the Budget has a
particular focus on the needs of women and this is
furthered by additional expenditures to promote better
health and an unprecedented expansion of child care places.
That expansion will take Commonwealth child care provision
in significant new directions. 1379.
It will mean that within 4 years Labor will have trebled the
number of child care places that we inherited.
In co-operation with the States, 20,000 of the 30,000 places
to be provided over the next four years will be concentrated
in the all too neglected area of out-of-school-hours care.
There is a further new element in the program of particular
relevance to a business audience.
The Commonwealth is seeking to forge a partnership with
business and is offering a new deal in the provision of
child care facilities for employees.
Employers willing to provide work-based capital facilities
and to contribute to running costs are able to take
advantage of tax concessions, including in certain
circumstances against liability for fringe benefits tax.
Users will now become eligible for fee relief up to a
ceiling of $ 70 per week, with the greatest Commonwealth
subsidy directed to those most in need.
Of course there is no suggestion of compulsion. Employers
are free to take or leave this offer.
Details have been released by the Minister for Community
Services and Health, Neal Blewett.
I urge all employers to look constructively at these
proposals. Ladies and gentlemen
I must at this point call upon the indulgence of my hosts to
pick a bone with them.
Today's Budget editorial in the Australian Financial Review
is seriously wide of. the mark.
We are not relying on faith and hope. We have policies and
results. And social justice is not about charity.
After five years of effort, the Australian economy has the
most favourable base on which to build that it has enjoyed
for some years a base built up painstakingly but
determinedly by the Australian community since 1983.
We do not need faith to forecast, as we do, that at present
commodity prices, we expect a current account deficit of
$ 9 1/ 2 billion in 1989-90. That represents 3 per cent of
forecast GDP less than half the peak of 1985-86.
We do not need faith to demonstrate that inflation is
trending firmly downwards.
We have the evidence, not faith, that business confidence is
high.
We have the evidence, confirmed by no less a commentator
than Brian Noakes of the CAI, that business investment will
grow rapidly this year.
Indeed on current indications, by the end of 1988-89
business investment will have increased by almost 25 per
cent in real terms in just two years, with a heavy emphasis
on the traded goods sector.
Ultimately it is that kind of investment response,
concentrated on the traded goods sector, which is needed to
secure our future.
Our success to date in winding back the current account
deficit, our renewed international competitiveness, and our
determined fiscal record are eroding the risk premium which
once was attached to investment in Australia.
That erosion can only accelerate.
But we do not have a Panglossian view of the future.
We recognise that if we are to remain competitive,
Australian industry will need constantly to reassert its
flexibility and adaptability.
For too long we have relied on rules of thumb from the past.
The only rule of thumb for the future is that if we want to
make a quid we will have to earn it the hard way by
meeting the demands of the world market place.
For example, our history shows that our real exchange rate
fluctuates with real commodity prices. We don't have the
power to abolish the world's commodity price cycle. But we
do have the power to develop within our manufacturing and
services sectors the flexibility and resilience that other
countries have to maximise competitiveness by lifting
productivity. And as a consequence, we do have the power to moderate our
dependence on primary commodity exports. Already,
manufactures as a share of total exports have risen by 3
percentage points to 26 per cent in 1987-88.
That's what we've been working to achieve consistently for
five years.
That is the purpose of our pathbreaking approach to policy
making in this country.
Each of our Budgets and May Statements has gone to the very
heart of what it is that we in the Labor Government want for
Australia a fair and prosperous country, confident in its
future. It is now well accepted that in the early eighties these
aspirations had been thwarted: 1381
Australia's social cohesion was under threat;
The tax and social welfare systems were seen to be
unfair; The dice was loaded in favour of the relatively
privileged; The legitimate needs of the genuinely disadvantaged were
being ignored;
much of Australian manufacturing was insular and
inefficient in world terms.
Our wage bargaining systems concentrated on the short
term balance of industrial power, which tended to shift
with the commodities cycle, and less with the needs of
the longer term;
And our industrial relations system had degenerated into
an arena of futile Government confrontation and
counterproductive punitive legislation.
What we have done since 1983 is to break the mould which
concentrated Australian minds on confrontation, on the short
term, and on the domestic market. We are lifting our
national sights beyond our shores and beyond the short term
and beyond the purely sectional gain.
Since the fiasco of the Liberals' tax policy in last year's
election campaign, the Federal Opposition parties have been
notable only in their failure to advance a comprehensive and
relevant economic strategy.
Their recognition of their failure in the central economic
arena explains their recent foray into social issues, such
as their breach of bipartisanship on immigration policy and
by their rejection of the policy of multiculturalism.
But within this Budget,.,. political debate in Australia
returns to the mainstream of policy issues: the issues of
fairness and prosperity determined by economic policy
making. Labor intends to continue in this vein until we have
stabilised our debt, solved our balance of payments
difficulties and set Australia on the path to steady
improvements in living standards.
Australia needs, deserves, and from us will get, no less.