RIW/ 1
PRIME MINISTER
TRANSCRIPT OF OPENING REMARKS TO THE PREMIER'S CONFERENCE,
CANBERRA, 18 MAY 1989
E 0 E PROOF ONLY
PM: Premiers and Chief Ministers, I extend a welcome to all
of you, a very warm welcome. There's some special features
about this meeting. Of course it's the first to be held
here in the new Parliament House. It's also the first
meeting to be attended by a representative from the new
Government of the Australian Capital Territory. So we
extend an especially warm welcome to you, Rosemary. Of
course there's another aspect to that particularly warm
welcome, not only because you're the first representative of
the Australian Capital Territory Government, but Rosemary
becomes the first woman in a State or Territory to sit at
the Premier's Conference table. That's a particular first.
Also welcome Marshall Perron, attending for the first time
-as Chief minister of the Northern Territory, and welcome to
you Marshall. David Parker attending as Deputy Premier and
Treasurer of Western Australia.
Now as you will see this year the agenda has been restricted
to five items only so that we can focus on and in fact
progress a limited number of important issues which affect
all States. That I think is an improvement from the
previous situation where we've deluded ourselves by having
the long agenda items that we're going to deal with and of
course we never do.
0 The key issue on this occasion colleagues, is the
achievement of responsible fiscal outcome. We're meeting at
a time when I think you appreciate some very difficult
economic decisions must be taken so that we can ensure that
the hard won gains of recent years -particularly the
achievement of 1.4 million new jobs -that those
achievements can be maintained.
Now put simply the problem that we have at the present time
the context within which we meet is the problem of
excessive growth. The level of domestic demand has been
running at a point which is not capable of being satisfied
by domestic supplies and that's meant that almost half the
growth in demand in 1988 was satisfied by imports. And
that's generating in the simplest of terms an unsustainable
outcome for the Balance of Payments.
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We might like to try and ignore that, avoid it, say it's not
happening, but we can't do that. Those are the facts and so
we've got to all play our part in achieving a momentum
towards a position where can have a level of activity which
is sustainable and that's going to require adjustment. As
far as Governments are concerned which we represent here
the Governments of Australia that requires a moderation in
Government demand. It's as simple as that.
Now I'm not trying to pretend in saying that colleagues,
that Governments have not already been making contributions
towards that adjustment. I know that looking around the
table you've had to make all of you have had to make
some difficult political decisions in order to live within
the reduced funding and the reduced borrowing capacity which
has been agreed as a result of earlier Premier's
S Conferences, we know that. I must say that having said to
you that I recognise that you've had to make some tough
decisions as a result of the previous Conferences, that I'm
somewhat bemused and not a little annoyed by some who seek
to convince the public and the media that there have been no
hard economic or political decisions required of the
Commonwealth in recent years, now that's a nonsense.
The Commonwealth Budget surplus of $ 5.5B this year which
is the second year in a row it didn't come out of thin air.
Put very simply since the collapse in our terms of trade in
1985 the Commonwealth and I want to emphasise this the
Commonwealth is spending around $ 10B less on its own purpose
programs. That's excluding payments to the States. We're
spending since 1985 some $ 10B a year less on our own purpose
programs. So let's not have any nonsense that the
requirements are being placed simply upon other Governments.
That's what we've done ourselves $ 10B less each year.
While the Commonwealth has as you very much appreciate also
cut payments to the States. The fact is that the strength
of State revenue has allowed you to increase your
Governments' own purpose spending by about 6% since 1984-85
when as I say during that period our own purpose payments
have declined. If the States own purpose general Government
sector had matched Commonwealth outlays restrained over the
that period, that fact is that States borrowings would be
this year about $ 3B lower than in fact they are. On our
current estimates that would be sufficient to wipe out the
States nett borrowing requirement and to put the public
sector as a whole in a position to repay substantial
outstanding debt.
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In talking about our position it also ought to be understood
colleagues that the improvement in the Commonwealth budget
to which I've referred can't be attributed as some people
sometimes try to do, can't be attributed to the so-called
soft option of increasing revenue, because the fact is that
the Commonwealth revenue of the share of GDP has remained
virtually stable for the past five years. In other words
our deficit reduction is not attributable to fiscal drag.
Indeed the tax cuts of the first of July more than
compensate for that.
The other point that I want to make is to say to you that
you are going to be significant beneficiaries of the April
Statement, of the $ 5.5 billion tax-wage package that was
brought down then because as you know the purpose of that
package was not simply to do what needed to be done in terms
of assistance to Australian families but also it was part of
a wage trade-off whereby as a result of that $ 5.5 billion
package the pressures for higher wage increases were
reduced. And so we were able to look at a 6.5% wages
outcome for 1989-90 which is significantly less than it
would otherwise have been if we hadn't had that package.
And to give an idea of what that means to you the fact is
that every one per cent in wage restraint achieved through
our economic policies saves your governments well over $ 200
million each year. The simple fact is that if wage growth
had repeated the experience of the last boom at the
beginning of the ' 80s then the States would have been the
sufferers. So we need also to restrain our overall call on debt. The
Commonwealth has cut its call and as you know is repaying
debt. The States in aggregate are continuing to acrue debt
at broadly unchanged levels and that needs to be changed so
that the private sector has the resources it needs for
export expansion and import replacement.
We don't in any sense seek to deny to you colleagues that
the restraint that we are talking about is going to cause
difficulties. So I know you want to tell us about those
difficulties and I have no doubt that you will. We know
that there'll be problems. I simply want to say to you what
is unavoidably, unarguably true, and that is that if we
don't take these difficult decisions now as governments with
a combined sense of responsibility for the future of this
country then the long term difficulties and penalties will
be considerably greater and will be more enduring. So we're
not in a situation of easy choice.
So in summary colleagues before asking Paul to go into more
detail into the economic context I simply want to say this
to you, that we are meeting at a time when restraint by
governments is absolutely necessary. We are in the
document we've put in to you, making it clear that we want
you to join with us in exercising very considerable
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( PM cont) restraint and that restraint is absolutely
necessary if we're going to discharge our responsibilities
to the people of this country and we believe that the
strategy, the overall strategy of which this is part is the
only strategy which is capable of addressing these
fundamental external problems that we have of moderating the
level of demand in Australia in a way which is going to
enable us to meet those external problems. We trust that
you'll understand that and be prepared constructively to
play your part in the strategy which is necessary to deal
with these challenges.
Having said that I'll now ask the Treasurer to speak in some
greater detail about the economic outlook to set the
environment within which we will consider the items on the
agenda of our meeting today Paul.
ends
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