PRIME MINISTER
CHECK AGAINST DELIVERY EMBARGOED UNTIL DELIVERY
SPEECH BY THE PRIME MINISTER
COMBINED ANNUAL DINNER OF THE
HEAVY ENGINEERING MANUFACTURERS' ASSOCIATION
AND THE
HEAVY ENGINEERING PROJECTS
CORPORATION OF AUSTRALIA
CANBERRA 4 OCTOBER 1989
Heavy engineering today is a very different industry from
that of just a few years ago.
After the so-called resources boom was found to be largely
illusory, despite the feverish overselling of the previous
Government, your industry faced up to and confronted a
number of deep-seated structural problems that had been
swept under the carpet by policy makers far too long: over
capacity, restrictive work and management practices,
increased import competition in a contracting domestic
market. In short, you confronted a classic, and an urgent, need for
industry-wide rationalisation.
The dramatic transformation your industry has wrought, and
the manner in which you have achieved it, demonstrate your
resilience and the newfound commitment of your management
and workers to co-operate in pursuit of essential reform.
Your story also illustrates the Government's uncompromising
determination to play its part in revitalising Australian
industry. Let me say at the outset tonight, the Government remains
determined to achieve the goal of a restructured,
competitive Australian economy and we will look to your
industry, as we have in the past, to meet your
responsibilities and fulfill your potential in this great
national tai,
The message has to be clear: reconstruction of the
institutions and attitudes of the Australian economy is the
essential, the only, path to sustainable prosperity for this
nation. If you're not part of it, you'll be left behind and, worse
still perhaps, you'll act as a drag on the rest of the
economy.
I start out with those direct words because your industry
faces a particularly critical time ahead.
When I last spoke to your annual dinner in 1984, the Heavy
Engineering Adjustment and Development Program was yet to
come into being.
It was in July 1986 that we, together, forged a tripartite
agreement to develop a long term strategy to rehabilitate
the industry to achieve improvements in the efficiency of
this vital industry so you could enhance your local market
position and upgrade your competitiveness on export markets.
For our part, we said we would provide assistance for labour
retraining and relocation, management enhancement, and
concessional finance for capital stock upgrading
conditional upon real progress being made in the removal of
restrictive work practices.
We made it clear that this support required a commitment
from both management and unions to fundamental reform.
As you know, the heavy engineering plan had its teething
problems and, at the start, progress on the crucial work
practices issue was slow.
But I think the plan is now generally viewed as having done
much to help restructuring in the industry as have our
efforts to abolish discriminatory state purchasing
agreements. Heavy engineering still has a great number of internal and
external problems to overcome before it achieves a
satisfactory level of efficiency and profitability, but we
can look back on this plan as a major contribution to the
restructuring that has taken place.
The plan has also brought about what I believe have been
some remarkable attitudinal changes in your industry
changes which originated with the formation of consultative
management and union groups and which have continued through
to the Metal Industry Agreement and the award restructuring
process. These are truly path-breaking developments, whose
significance is hard to overstate. Through award
restruct ring we are achieving real and enduring
productivity improvements, and we are doing so in a way that
builds trust and confidence in tl iorkplace where before
there was too much confrontation.
As you know, my colleague John Button recently announced a
new program, the Metal-Based Engineering Program, to focus
further assistance on two aspects of the industry that will
be vital to your future identification and exploitation of
export markets and adaption to technological change.
This is a $ 15 million four year program that recognises the
reality: the heavy engineering industry of 1989 is a key
strategic industry manufacturing the capital investment
goods needed for the development of the Australian economy.
Make no mistake: that development is taking place, and you
are playing a central role in it.
In steel, for instance, BHP has five projects, at different
stages of completion, involving expected capital outlays in
excess of $ 600 million, which will not only cater to the
domestic market but service niche export markets.
In the smelting and chemicals sectors, four projects ( Risdon
zinc smelter, Kemerton silicon smelter, Gladstone sodium
cyanide/ chlorine plant, and the Bunbury titanium dioxide
plant), involving total capital outlays of around $ 500
million, are all due to come on stream by the end of the
year. The twin staged Bell Bay wheel Plant, involving expected
total capital outlays of $ 100 million, will have a strong
export focus.
The new Submarine and ANZAC ship projects are underway.
Last but by no stretch of the imagination least the
North West Shelf Project has generated very considerable
work for your industry. As I observed last month in Perth
when I attended the inauguration of the LNG Phase of this
great project, about three quarters of the $ 6 billion
already spent on this project has been spent in Australia.
Taken together and I have not been exhaustive projects
such as these amount to an investment boom in which your
industry is and will remain a major participant and from
which you will be a major beneficiary.
Having said all that I think we should be realistic about
what Australian industry can and cannot do.
We are today witness to an annual increase in business
investment of over 15 per cent in real terms in each of the
last two years as a share of GDP, business investment is
at record levels. We have industry telling us of
billion in planned investment in major manufacturing
projects across the broad spectrum of industry.
These projects will provide your industry with a base level
of demand and the opportunity to develop new skills and
techniques which will in the future enhance your ability to
compete, both here and overseas, for more-specialised work.
But it would be unrealistic to expect that Australian
industry would have been able alone to fulfill this
dramatically increased demand or to expect that Government
should provide artificial assistance to help local industry
do so.
We are looking to you to make a greater contribution to
import replacement.
In the meantime, such imports as are necessary contribute to
our current account deficit. But when these projects come
on stream they will translate into export growth and import
replacement, and in so doing help alleviate our external
balance problems. For example, the North West Shelf project
will yield exports worth up to $ 2 billion a year from 1994.
At the same time, heavy engineers in this country are
finding new markets for Australian products overseas.
I pay tribute to the active role of HEPCA in promoting
Australian involvement overseas through encouraging the
formation of suitable consortia of Australian engineers,
contractors and manufacturers to bid for major contracts
abroad. I know you have a good number of projects underway and that
you are working closely with AUSTRADE on them. I am always
pleased, on my own overseas visits, to give what support I
can to the efforts of Australian businesses to develop new
investment opportunities and I applaud you on the success
you are having.
These initiatives show the buoyancy of activity within the
heavy engineering industry and they show, too, that
Australia is heading in the right direction with the
development of a mature export culture.
But let me take up a very serious and important point that
emerges most recently, from your latest annual report.
You call there for " a co-ordinated national policy to ensure
that the bulk of design, engineering and manufacturing work
on major Australian projects is carried out in Australia by
Australian companies under licence or in joint venture with
overseas technology holders". I note also your criticisms
about our recent changes to DIFF and mega-DIFF funding.
One reading of your suggested guidelines covering domestic
project work is that you are concerned to ensure that you
get a fair go and that you want only to show that your
industry can deliver on major construction undertakings. If
this is all you are saying then let me assure you that my
Gover-ment would view very dimly indeed any systematic bias
against Australian industry participation in large scale
project work.
However, I would be concerned if your strategy of maximising
Australian industry involvement, and the suggested licencing
system referred to, were to operate as a de facto local
content scheme.
Because I would have hoped that if we have learnt anything
from our past experience of protectionism and intervention
it would be that such policies have failed to foster the
development of the sort of outward looking, entrepreneurial
and self-sufficient industry Australia needs if we are to
make our way in an increasingly integrated world economy.
Artificial guidelines would not in practice help either your
industry or the national economy. They would serve more as
a serious disincentive to major projects coming to Australia
in the first place.
You don't need me to tell you that the best way of building
a truly capable domestic industry is not through a resort to
some sort of new protectionism but through genuine and open
competition in world markets.
Let me just add this point, in the light of three years of
the Heavy Engineering Adjustment and Development Program and
the current Metal-Based Engineering Program.
These programs were not intended to be open-ended nor were
they intended to be substitutes for genuine industry
reconstruction.
I have expressed my appreciation of the restructuring that
has already taken place in the industry. But I have to say
as well that if the industry doesn't take advantage now of
the opportunities offered for reform within the stable
framework we have provided, then it will find the task that
much harder when it has to be performed after existing
measures have run their course.
In relation to the recent changes to DIFF funding and
administration, your annual report comments that Governments
must be mindful of the industry support offered by
competitor countries, and must take into account the size of
Australia's industrial base and access to and distance from
international markets.
You say that to question Australia's export support and
encouragement measures on the basis of perceptions of
resource allocation or on the basis of what you call " simple
cost cutting measures" is " unrealistic and
counterproductive" Let me point out that DIFF funding has increased
dramatically from $ 16 million to over $ 90 million in the
past three years. My Government will accommodate DIFF
outlayt. ( if up to $ 100 million in future years. The changes
we made to DIFF administration are designed to sharpen its
trade and aid performance and to ensure that DIFF funds flow
to the most deserving projects.
I think it is important for you to accept that the
Government cannot, and in my view should not, attempt to
match the concessional finance packages which other
countries may make available on a fairly indiscriminate
basis to support overseas project work.
This is just the sort of beggar-thy-neighbour attitude that
has led to the impasse between the EEC and the US on
agricultural support policies.
And again, it runs the danger of cultivating the dependence
that has dogged Australian industry for too long and that we
are trying so hard to shake off.
My Government has done more than any other before it to
encourage the development of an export culture in this
country. Eventually, however, industry must identify its strengths
and look to markets and activities where they can go it
alone. on a more general level, my Government is doing all that it
can to promote the trading performance of Australian
industry. on the world stage, we are vigorously promoting
policies aimed at securing an open, liberalised,
international trading system. In my Government's view, such
a system will best enable us to fully develop our resources
by they primary, mineral, manufacturing, or services.
Australian industry is today less inclined to view the
prospect of greater trade exposure as a threat to be
resisted and more as an opportunity for growth and
diversification. If we are to succeed there is a need for
industry to respond flexibly to global market developments
and to demonstrate a willingness to adapt to the rapid pace
of technological change.
In this regard I am encouraged by the obvious change in
outlook in your industry and the instrumental role played by
both HEMA and HEPCA in bringing about this change.
Ladies and gentlemen,
There is, as is perhaps inevitable in this great endeavour
of national economic reconstruction on which we are jointly
engaged, one further challenge that awaits us.
Last week the ACTU held its Biennial Congress in Sydney.
That Congress considered a report posing the question,
Can Unions Survive?
And it endorsed, with support across the spectrum of the
union movement, a sweepin lan for reform for the
Australian trade union movement and for the Australian
economy. The key element of the plan is the creation of fewer, larger
and better unions. Bill Kelty has said he wants to reduce
the number of unions in the ACTU from 308 to
With this plan the ACTU is declaring its commitment to
ensuring the Australian economy continues to grow in
competitiveness, efficiency and quality, by removing one of
the deep structural inefficiencies of our economy.
I hope this message was not lost on your organisations or on
the employers and companies you represent.
This audience will need no reminding about the significant
role that the trade union movement has already played in the
crucial task of national economic reconstruction.
The transformation that has taken place in heavy engineering
matches the transformation that has taken place in the
economy as a whole.
That transformation has not been an easy one and it is
certainly not one that can be described as complete.
However the achievements are real:
the creation of 1.5 million jobs;
significant improvements in the social wage;
and the undertaking of sweeping workplace reforms
such as award restructuring.
The Accord between the trade union movement and the Federal
Government has been a critical instrument in the achievement
of these goals.
I do not wish in any way to understate the significance of
the contribution made by employers, individually and
collectively, or by the wider community.
But the significance of the last ACTU Congress is that the
trade union movement has shown its readiness to embark on a
new phase of economic reconstruction in this country.
This blueprint for sweeping change in the structures and
attitudes of the union movement will ensure the survival of
the trade union movement as a relevant and constructive
player into the next century.
Employers in your industry and throughout the economy
should recognise that an unparalleled opportunity now exists
to assist and support this task and to ensure thereby the
continued force and strength of Australian industry.
The deliberate and determined reduction in the number of
unions can only provide a massive assistance to both
employers and employees by reducing the number of
demarcation disputes and negotiation difficulties.
8.
Ladies and gentlemen,
I congratulate you on the tangible progress your industry
has made over the last few years. But there is still room
for improvement in work and management practices and in
enhancing our skills base and technological capabilities.
We cannot afford to become complacent or to ignore the
challenges of the increasingly competitive environment
confronting Australian industry.
I am confident that your industry realises what it will take
to succeed and will shoulder its responsibilities in shaping
its own destiny and so contribute to reshaping Australian
industry.