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Speech at the Collingwood Football Club Post-Budget lunch, Melbourne



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PRIME MINISTER

SPEECH BY THE PRIME MINISTER, THE HON P.J. KEATING, MP

AT THE COLLINGWOOD FOOTBALL CLUB POST-BUDGET LUNCH, HYATT HOTEL, MELBOURNE, 20 AUGUST 1993

It's a pleasure to be here again for another Collingwood. Football Club Post-Budget lunch.

I suppose there are a few among you who this time last year would have laid odds that someone else would be doing the honours today.

Well if you were going to gamble on it you should have asked me. I could have told you which way the fickle finger of fate would point.

It would point at John Hewson. And it is still pointing. In fact, there are several of them pointing.

But of course with John Hewson it was only a finger -Allan McAlister copped the full bone.

And when he did I was determined to ring him at once and give him a bit of advice. But Allan had already taken his own advice, and scooted off to the Northern Territory to build some bridges to the Aboriginal community.

I was going to speak from a bit of personal experience.

I was going to tell him that it is possible to say things you. shouldn't have and survive.

But he seems to have known this - and so he should have. After all what is Collingwood if not black and white. Both.

I might extend the metaphor to say that Australia's identity is built on both as well, and the country will be better and stronger when we all recognise that.

Now it's customary at times like this to draw comparisons between football and politics. Between Question Time in the Parliament and a scrimmage in the centre of the ground - or a brawl in the outer; between the qualities needed to win an election and those required to win a

Premiership; between myself and Leigh Matthews.

COMMONWEALTH

PARLIAMENTARY LIBRARY MICAH

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But these are not the comparisons I want to make - they are not fair to either of us.

What I can say is that for a couple of years the bone has been pointed, albeit waveringly, at Australia.

We've had a recession and with it a dramatic increase in the number of unemployed. We've had poor commodity ;prices. We've had other countries sliding into recession and slowing down the process of our recovery. We've had a.productivity -laden recovery, meaning that employers have learned to extract more product from fewer employees.

and continuing unemployment has been a consequence.

This is also the experience of other countries - most of our recent experience has been or is now the experience of other comparable countries.

But even if there are externally imposed limits to what we can do, it remains our responsibility to deal with our immediate problems and create the conditions for future success and prosperity.

The solution lies with ourselves.

We could have fallen into gloom. We could have said there is nothing for it but to sit and hope. The option is alwaysthere to panic or despair.

Or we can do what we might call a McAlister.

We can go to the seat of the problem. We can confront ourselves. We can change and show the world we've changed.

And in truth that is what we have done in Australia.

Not just now - what we are now doing is a continuation of changes begun in Australia a decade ago. Changes which I think too few Australians acknowledge.

Because, as I have said on other occasions, there is one pre-eminent reason for confidence in Australia in 1993 -and that is our proven resources of strength and

adaptability. Our proven capacity for change. Our record in the last decade or more.

For all the talk about the Australian economy, I think its size and shape is not well-comprehended. Our strengths and capacities are not as well understood as they might be.

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For the purposes of painting a more accurate picture of our circumstances, let me list some of them: In the gloomy climate which media and some business organisations quite regularly manage to create, these

figures may surprise some people - not because they paint a picture of nirvana, but because they give greater cause for confidence and pride than is generally recognised.

And as I said so often in last year's contest with Dr Hewson, it is both dishonest and destructive of our chances to talk down Australia's achievements and our standing in the world.

So let me give your some of the team stats.

The Australian economy is roughly the same size as all the economies of the ASEAN nations combined. It is the third largest economy in Asia, behind China and Japan.

:It is the tenth largest economy in the OECD, the twelfth :Largest in the world.

The services sector accounts for 65%, the second highest proportion in the Asia-Pacific, behind Hong Kong. Agriculture accounts for 5% - though agricultural products account for 25% of exports.

In the period 1982-83 to 1992-93, exports of Australian goods and services rose by 110% in real terms.

As a percentage of GDP, exports of goods and services :rose from 13.3% in 1982-83 to 20.2% in 1992-93.

In the last three years the volume of manufactured exports has grown by nearly two thirds.

Exports of elaborately transformed manufactures rose by 217% over the last decade, by 104% over the last five years.

Almost two thirds of our exports are going to the fastest growing region in the world - the region nearest to Australia, East Asia.

In 1983-91 research and development personnel in Australian industry experienced the second fastest growth among industrialised countries. We are ranked fifth among

industrialised countries for the sufficiency of our in-company training. In the Asia-Pacific, only Japan can boast a greater rate of literacy than Australia's.

Some of these facts are measures of the change in size and shape of the Australian economy. Some reflect how we are changing: how we have opened the economy and become better placed to compete with the best in the world.

We now have:

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an economy 30% more competitive than a decade ago;

the end of high inflation and the beginning of an era with inflation at an historic low;

the lowest interest rates for twenty years;

profits up nearly 12% in the past year;

reforms to the education system which have, among other things, nearly trippled the number of Australians finishing secondary school and made education an Australian export of substantial dimensions and even larger potential;

a comprehensive and affordable child care system which recognises that women's work and skills are essential to the future growth of the Australian economy;

the change in the industrial culture from a general assumption of inevitable conflict to a search for the means of cooperation and creativity, a change which has led to the lowest rate of disputation in a

generation and allowed the development of enterprise bargaining and the highly successful Best Practice program.

Enterprise agreements are changing the face of Australian industry, actively fuelling the productivity and creativity of business, improving the working and living standards of employees - and as with this week's Commonwealth Bank enterprise agreement, delivering better products and services to the public.

I might interrupt the statistical resume here because I want to clear up one misconception about these reforms to industrial relations.

I have heard it said that our proposals will weaken traden unionism in Australia: specifically that to allow registration of enterprise agreements where a trade union

is not a party but where the majority of the employees in the workplace want: the agreement will weaken it.

Let me say immediately that if I thought for a moment our provision would have that effect, I would not have a bar of it. I believe that a strong trade union movement is

one of the reasons we have been able to remain an equitable and fair society, a robust healthy democracy, as well as an adaptable and ambitious society.

Far from being designed to weaken unionism, the enterprise agreement reform is designed to confer upon the great majority of employees who are not unionised the protection of the legal framework of the Industrial Relations Commission.

The Commission will be able to approve agreements and ensure their terms are observed - but it will only be able to approve agreements if the agreement leaves employees no worse off than the relevant award.

While unions will not have a veto over such agreements, they will be guaranteed a right to be heard in any IRC proceedings. The agreements will be open to public scrutiny and unions will continue to have their right of

access to the workplace to recruit members.

I:n almost all circumstances employees - and for that matter, employers - will rapidly see that it is cheaper and more effective to make agreements with the assistance of unions than without.

So in other words, the reform is designed to assist those workers who are not protected by a trade union - and in a way that encourages union membership rather than hinders it. .

The more than 1000 Enterprise Agreements we now have are a means of raising our competitiveness.

And of that story there is more to tell.

In the last eighteen months we have legislated one of the most competitive business tax setups in the world.

Company tax has been cut from 39 cents in the dollar to 33 cents.

Under a plan we introduced after the election, businesses are now able to deduct one tenth of the cost of investment in plant and equipment from their taxable income, so long as the equipment is ordered this year and installed by 1 July 1995.

Some big projects will be able to deduct 20% of the investment.

So the business tax regime is now highly favourable to investment and so is the economic framework in which investment decisions. are made.

There are some encouraging recent signs - more encouraging than any we have had in the past two years.

Housing finance approvals have climbed to a rate just short of where they were in the boom of the late eighties.

Over the year to June dwelling investment was 12.6% higher than the year before.

Over the year to June the economy grew overall by 3.3%.

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Manufacturing output increased by more than twice that.

Since April we have created more than 80,000 additional jobs.

In the last few months we have been seeing more job advertisements.

'These are real improvements, not inferred or speculative ones.

They are reasons why I am not just hopeful but confident.

And given the patterns and policies I have already described I believe there is good reason for Australians to be confident.

We have now had two years of economic growth - more growth than most other countries.

But the rate of growth has been disappointing - less than we or the OECD were predicting through the course of the last two years.

It has been slow going here, as in the United States. Slower still in Europe and Japan where recovery has not even yet begun.

We don't have much influence over events in those places but we have done things in Australia to support and sustain our own recovery, and prepare us for the stronger investment and exports which have to underpin our growth

in the next decade.

As you know we have tried to speed the recovery with an expanded budget deficit and sharply lower interest rates. The policies embraced in One Nation and the Youth Summit have had some success - as much or more than any other country.

So what's the Budget's role in all this?

The Budget has been crafted against the background of a world economy that is unlikely to recover noticeably until next year and business investment in Australia that will increase from its current low levels, but not

strongly for some time.

What is needed, then, is further stimulus from the Budget this year - and as the private sector picks up the deficit will come down.

This is just what the Budget delivers.

It boosts spending and brings forward the tax cuts. And it reduces the deficit to 1% of GDP within four years.

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This is responsible policy.

At the time of the election I stressed that the issue on which this Government will be judged - and should be judged - is unemployment. On our success at reducing the number of unemployed Australians and on our training and

retraining programs and on the quality of the social net we extend to see them through.

As we and the world have learned, there are no easy solutions - unemployment will remain high for some time yet.

.Last year we set up a number of labour market programs for the unemployed, most of which have proved very successful. This year's Budget provides for labour market programs to assist over 500,000 unemployed Australians.

We have also established a Committee on Employment Opportunities to produce a Discussion Paper and a Regional Development Taskforce which together will ,provide the Government and the broader community with a

comprehensive understanding of the problem in Australia and that will mean a better understanding of how to tackle it.

In the end, however, what we need is stronger growth. The stimulus from this Budget will help employment to progressively recover while others around the world could well see unemployment further deteriorate.

We have also now established the platform for a long-lasting quality recovery, one with low inflation, a highly competitive environment and strengthening business investment.

In delivering this budget strategy it has proved necessary to modify the timing of the tax cuts.

Prior to the Budget I announced that, in view of present economic circumstances, the tax cuts we committed ourselves to in One Nation would still be delivered in

two parts, but with, .the first of them brought forward as a stimulatory measure - the second put off until around 1998 when they can be more readily afforded.

The Budget has set 'the date for the first round at 1 November.

The tax cuts - it has often been forgotten - are measures of social justice. The fact is that middle income earners are due for tax relief.

For a decade, quite properly I think, our attention has been on Australia's low income earners.

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In the 1980s the social net expanded to the point where sophisticated in the world. were raised by nearly 14%.

single adults went up by ov low income families by well

in Australia was considerably it ranks among the most The real value of pensions Unemployment benefits for er 20%; family payments for

over 70%.

Tax rates for low income earners were lowered from 30 cents to 20 cents and the tax free threshold was raised to $5,400.

The Budget preserves all those elements in the social net. All benefits - those for families, unemployed, pensioners - are indexed, and this will fully compensate for the increase in indirect taxes.

And the Budget provides all low income earners with a $100 tax rebate.

The Budget also provides $60 per fortnight to spouses at home caring full time for children. Over 840,000 parents will get the new Home Child Care Allowance, including 55,000 low income families who do not currently receive

the full dependent spouse rebate.

While assistance to low income earners will always remain a Labor Government's social priority, we also have a clear responsibility to Australians in the middle income range.

It is simply unreasonable that people on incomes of $20,700 and above should be paying tax at the rate of 38 cents in the dollar.

The tax cuts are both just policy and good policy. It is responsible policy.

It is fairer and it will also provide an economic stimulus at a time when we need it.

No one involved in the drawing up of this Budget - least of all John Dawkins - imagined for a moment that it would be popular. Few budgets in history have been popular.

No one imagined, for instance, that we would be applauded for increasing the tax on leaded petrol.

But drawing up a budget always involves decisions like this one.

If I can explain it in broad terms. The indirect tax :base has been declining rapidly since the mid-80s, principally because of the decline in revenues from Bass Strait and the lowering of tariffs. Without action, the

indirect tax base would continue to decline.

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We are not attempting with this Budget to restore the base to mid-80s levels - far from it. We are increasing indirect taxes by about $3 billion by 1996-97, but this does no more than to arrest the decline and return

indirect taxes as a proportion of the economy to their 1991-92 levels.

Now I don't think that anyone questions the need to raise revenue to provide the kinds of social services which Australians enjoy and which play a very large part in maintaining social cohesion and harmony in this country.

Our taxes are already the lowest in the OECD, they are lower than last year, and lower than they have been at any time since the early 1970s - and we use them to provide services very effectively.

While we do this, I do not believe there is widespread opposition to maintaining our tax base. I also believe that it is recognised that petrol prices in Australia are lower by virtually any standards - in fact, the third

lowest in the OECD after the Budget increases.

It is also true that Australia has unacceptably high levels of lead pollution by international standards. And it's true that a lot of this pollution derives from that fact that 50% of the cars on Australian roads are presently using leaded petrol. One third of those could start using unleaded petrol tomorrow and another third could be readily converted. So about 18-20% of cars are

irredeemably leaded petrol users.

Now if the only issue was revenue-raising there would be no question - we would apply the indirect tax across the board. But revenue raising is not the only issue. The differential is a question of health - everyone's health.

So we made a judgement. I suppose we could have made other ones - we could have decided to make only those people using unleaded petrol pay more tax, or we could have made everyone pay the same. Had we done the first, we would have been imposing a penalty on people for doing

the right environmental thing. Had we done the second, we would stand accused of failing to take the Australian environment and people's health seriously into account.

Politics is never easy, and Budgets are just about as hard as politics gets.

There has, as usual, been an immense cacophony about this Budget. We've had the gruesome spectacle of both the Liberal Party's present leaders delivering addresses in reply, and heard them both, in remarkably similar

language declare that Australia was all but finished as a nation and that it was all Labor's fault.

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Senator Bishop, who spoke at lunch time, quoted Ronald Reagan and an ordinary Australian in defence of her alternative policies. Dr Hewson, who spoke seven hours later, spoke in precisely the same ideological terms and he also quoted an ordinary Australian as if this ordinary Australian had more claim to be the mind and soul of the

country than any ordinary Australian who disagrees with Dr Hewson.

We now have all this mock indignation from the Opposition about new taxes. These tax increases raise $3 billion at their peak in a few years time. The tax cuts cost $3.8 billion in a full year - that is, $800 million

And'even with the tax increases this year, the revenue to GDP of the Commonwealth will be falling - going down from 23.6% last year to 23.5% this-year.

Revenue to GDP is actually going to fall and yet Dr Hewson is fulminating about tax increases which he says are unconscionable.

The Government is collecting an extra $3 billion when the indirect taxes are up and running - three extra billions per year.

Dr Hewsori's GST was to collect $24 extra billion every year - eight times as much. $8 billion - and their give-]backs via payroll tax and petrol were not to the people who paid the GST.

$3 billion compared with $24 billion and with the $3 billion covered by $3.8 billion of tax cuts.

Dr Hewson who lost what the Liberal Party believed was an unloseable election is now going to make Senate thuggery his long suit.

Instead of practicing what he preaches - that the Government deficit should be reduced to make way for private investment in the middle 1990s - and remember this is what he was saying just a few weeks ago - he now

says he will seek to defeat the very measures which can make this happen.

If business in this country wants a good fiscal scene when investment really gets rolling, it should be on to Dr. Hewson to remind him of what the national interest

requires.

We've had the Liberal Party and we've had the media commentators relentlessly encouraging the view among Australians that they will all be ruined - that there is no cause for hope, only despair.

Well, as I have pointed out today, the facts simply do not support this view. The facts support a quite contrary view.

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The facts support the view that over the last decade the Australian people and their organisations have risen to confront the challenges that face them and now, despite

very difficult circumstances, are poised to reap the rewards for their efforts.

The facts support the view that had not the Government and the people made the changes they did the country would indeed be in dire straits.

Imagine - to instance just one change - if we had an industrial culture still built on the conflict of the late 1970s.

Imagine if we had not lifted the level of our manufacturing exports. Imagine where we would be now.

Imagine if there were not those 700 or more new companies created from the high tech, export-oriented, Asia-Pacific oriented culture of the eighties.

Imagine if all the companies in Australia talked down the economy like a lot of the ones we hear from do.

In fact, I believe we will see in the very near future -I: think we are already seeing it now - a new breed of business leader emerge.

It is not every business leader who complains. A lot of the very successful ones are never heard from. I don't remember the CEOs from those 700 companies referred to in

the McKinsey Report declaring that the country had no future on its present course.

It seems to me that what distinguishes these business leaders is that they recognise the opportunities that exist and get on with the business of grasping them.

Like those facts I have recited today, these business people and their companies give me confidence: because for all that government does, and all that government is held accountable for, and for all the undoubted

responsibilities which fall upon the government's shoulders, the economic future of this country, our success in the world, and most importantly, our success in putting Australians back in work depends on these companies and their leaders - and the emergence of

thousands more like them.

It may be that we don't hear from these business leaders because they recognise that the Government has made decisions favourable to their success, that the Government is doing a good deal to facilitate their

export initiatives and their capacity to match the world in technological excellence.

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This may be the reason we don't hear much from these companies, but I'm inclined to think it more likely that it is because of their more positive attitude, both to business and to Australia.

The opportunities are undoubtedly there. I believe the right climate to seize these opportunities now exists. And I believe that, despite the echoes of all the riaysayers, the spirit is also there.

I believe we will find evidence of this, for instance, as the regional development taskforce goes about its business.

On Monday I will be in Tasmania inspecting Pacific Dunlop's Edgell-Birdseye operations at Ulverstone where a new farm Best Practice program is being established with the aim of getting processed Tasmanian potatoes into Asian markets.

It is an operation no one would have dreamt of a decade ago.

I could name other initiatives and successes around Australia and I will be visiting several of them over the next few weeks.

But today I need not look any further than this room because I know we have with us today David Powers and his team from Merino Gold.

Wool comes naturally to Australia and has done for nearly two centuries.

But well as we have grown it and sold it, we have never really got full value for it.

Merino Gold aims to get full value.

They are producing worsted and knitwear apparel of a quality right up there with the best in the world.

A product - I might say - I'd be happy to wear on my back.

Merino Gold has found a market niche for high quality knitwear from superfine Merino fleece and is now releasing a worsted suited fabric of exceptional fineness produced from 15-16 micron wool.

The secret to this success has been the application of innovative total quality management for the breeding, processing and supply of high performance wools to export markets as finished garments, yarns, tops and raw wool.

Merino Gold is already exporting garments to the US, Europe and Asia and with the hope of bigger contracts on the horizon.

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From all I've been told, Merino Gold symbolises the sort of company which will make this country's future.

I do not think there could be a more appropriate way on which to end.

Let me thank Allan McAlister from the Collingwood Football Club who invited me here today. It is always a great pleasure and a privilege to be here.

I said in the beginning that the comparisons between football and politics were generally invidious, yet of course a lot of them are also irresistable.

Though most irresistible of all is that we both crave success. And as people like Allan McAlister crave it for Collingwood, I crave it for this country.

We have that in common. And we also have this: we both know the pendulum will swing for us and against us; that vie will cop a lot of criticism; that pessimists, detractors, and whingers abound; that horrible luck and profound disappointment will occassionally afflict us;

that terribly hard decisions will have to be made; and that sometimes we will have to overcome our own mistakes.

But we also know that we are better than the other mob and we have absolute faith that we will succeed.