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Millennium Banker Awards Kim Beazley - Leader of the Opposition

Address - Sydney - 17 October 2000

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Check Against Delivery

Labor's vision for Australia is for a modern economy and a fair society.

We believe that both these goals are essential for the nation's future - that you cannot have one without the other.

In this sense, today's Labor Party is operating in the tradition of the reformist Labor Party of the 1980s and 1990s. The reforms we undertook then to modernise our economy while preserving Australia's fair society had a particular relevance for the finance sector, such as:

Deregulating the finance sector, and opening it up to international competition; ● Floating the dollar; ● Maintaining strong prudential regulations; ● Strengthening corporate law; and ●

The move to inflation targeting in monetary policy; ●

And since coming into Opposition, Labor has continued to support sensible reforms in the finance sector. We supported the Wallis reforms. We supported the Ralph business tax reforms. We support the Corporate Law Economic Reform Program (or CLERP) process.

We take the view that a strong financial sector is one of Australia's greatest national and economic assets. It is not the product of unfettered market forces, but the product of intelligent cooperation between a responsible, forward thinking Government and a responsible, dynamic, competitive private sector.

Australia's strong finance sector was a safe port for our economy during the storms of the Asian economic crisis.

In the same way we can be justly proud of how well our strong financial sector served us during the Asian economic crisis, we in the Labor Party are intensely proud of the reforms we undertook in the 1980s and 1990s.

We are proud, because those reforms have delivered.

The reforms to the finance sector, and the broader reforms within the economy to make it more open to the world, more competitive, and more innovative all delivered a substantial economic legacy for Australia which we are enjoying today. Australia has been surviving for some years now on the productivity boost provided by those reforms.

Between March 1996 and March 1999, we enjoyed an excellent labour productivity performance, courtesy of the reforms of the 1980s and 90s. Average quarterly growth over this 3 year period was just under 1% every quarter.

There is some concern that this growth is petering out now. Productivity growth in the year to June 2000 was only 1%, compared with 1% a quarter previously.

If this is the case, my concern is that the productivity game is moving on, and we are falling behind. Our microeconomic and labour market reforms and the exposure of the economy to the rigours of international competition have delivered and will continue to deliver productivity gains. But the big productivity increases in the future are in my view likely to come from other reforms.

There is a growing international consensus that the next major tranche of productivity growth will come from research and development; from innovation; from the production and application of new technologies - in short from the shift to a Knowledge Nation.

If this is the case, how are we placed in Australia?

The short answer is that those countries with whom our labour productivity was competitive during the 1990s are now far better placed than we are to capitalise on the next tranche of productivity growth coming from Knowledge Nation reforms. In other words, when the international productivity league table is drawn up again in 10 years' time, we may no longer rank so highly.

Consider four of the countries which ranked slightly ahead of Australia on labour productivity, and look at how they perform on one crucial indicator of progress towards the Knowledge Nation, and that is business expenditure on research and development (or BERD) as a percentage of GDP:

Top of the table was Finland, where BERD to GDP went from 1.45 in 1995 to 2.15 in 1999; ●

Over the same period, Denmark went from 1.05 to 1.26; ● Another contender - Ireland - lifted its BERD to GDP from 0.97 to 1.03 between 1995 and 1997; and ●

Sweden managed 2.57 to 2.77 over the same period. ●

And Australia? We fell between 1995/96 and 1998/99 from 0.86 to 0.67.

What this means is we managed to stay up with the leading pack during the 1990s through past reforms, but with the productivity game changing, we are poorly placed, and falling backwards.

The reforms of the past I have already discussed. Let me now move to the new agenda which does not replace, but stands on the shoulders of the old one. Let me break it down into five elements which I think are the most crucial ones.

1. Investing in education and training to build our human capital, both the building blocks in schools; and the high skill end in universities and TAFEs.

2. Crucially, broadening our skill base too through apprenticeships and retraining opportunities for workers.

3. Maintaining and expanding our world-class research base to generate the ideas of the future.

4. Encouraging innovation to build new industries and modernise existing ones, with a particular focus on the commercialisation of innovation - which means adequate access to venture capital and the funds to develop businesses in Australia.

5. And, finally, fifthly, taking advantage of the great opportunities presented by the converging technologies of communications and information technology.

Let me just dwell on this last area of convergence for a moment, and ask what Australia needs to get right in this area? I think there are four key issues:

We need a massive training program to get the skills of our people right to feed the domestic ICT industry in Australia; ●

We need to provide adequate access to IT and communications hardware for all Australians; ●

We need to get the ICT capacity right - and that means having enough bandwidth across Australia to enable all to participate in the opportunities offered by new technologies; and

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We must get the regulatory and legal issues right. We must have the correct intellectual property regime; clarify the legal issues; and, unlike this government's restrictions on datacasting, we must not put regulatory roadblocks in the way of new economy progress.

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If we get these things right, I think there are five revolutions in store for Australia courtesy of new technology in this area. They are:

1. A revolution which will finally overcome the tyranny of distance for rural and regional Australia, opening it up to a world of opportunity hitherto available only in the big cities;

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2. A revolution in education, delivering education at a greater quality than ever before, at a lower cost than ever before, to a greater number of people than ever before, through the use of new technologies;

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3. A revolution in government services by moving them online; making them not only better but also cheaper; ●

4. A revolution in health care through the use of tele-medicine which opens up the opportunity for all Australians, no matter their wealth or geographical location, to benefit from advances in medical technology; and

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5. The revolution in business that is e-commerce, be it business to business or business to consumer. This is a challenge each of you is living every day. ●

I hope you can see in all of this, as I can, a new reform agenda for Australia, but crucially, a reform agenda that is at its core an economic reform agenda every bit as radical as the one we underwent in the 1980s and 1990s, and with much greater potential to unify our people to give all a share in the prosperity we hope to reap from it.

I don't think in all honesty that current government policies have truly grasped this agenda.

For example, to reap the full economic rewards of innovative activity and innovative product, it is not enough to be just a user of new technologies. You must be close enough to the knowledge frontier to adapt new technologies to the conditions of Australian business, to pick them up and run with them. These things demand that you be a producer and an

innovator, not just a passive consumer.

The issues I have just discussed are quite obviously essential for modernising our economy, but how do they tie into the other point which I said was mutually reinforcing Labor's agenda and that is how they make Australia a fairer place as well?

No-one here will be surprised at me mentioning the issue of fairness. Fairness has always been the core concern of the Australian Labor Party.

None of you will be surprised also because you know that particularly in this time of prosperity there are more people than ever believing that the benefits of prosperity are not being shared fairly. And what's more, we all know they are right. We all know that incomes have accelerated at a far greater rate for the top end of our society than they have further down the scale.

I was astonished to learn recently from a National Centre for Social and Economic Modelling report that - taking account of both liabilities and assets - the richest 50% of Australians owns 95% of the nation's net wealth.

Whatever your moral or political views, the implications are obvious. We cannot expect those missing out on their fair share of prosperity to support the reform processes which are driving prosperity forwards.

Let me make it clear, I am not talking about a hand-out mentality either. I am talking about people who work hard, longer hours than they ever have before - and who see themselves falling behind.

You know, as I do, that in a modern democracy, any system, any reform agenda stands or falls by its popular support.

This is the market reality that we politicians deal with every day.

But what I do believe in passionately is the need to show Australians that the losers from economic change are looked after properly, and that the opportunities to benefit from economic change are shared fairly among all Australians.

Because we should know from history what happens if we do not demonstrate that change and reform are in the interest of the majority of people. A recent book "Globalisation and History: the Evolution of a Nineteenth Century Atlantic Economy" by Kevin O'Rourke and Jeffrey Williamson shows that the popular belief that the globalisation of the early part of the 20th century was brought undone by the First World War is wrong. It was brought undone by a popular backlash against globalisation before the First World War.

I think the same point was well made by The Economist's editorial two weeks ago which said, and I quote:

International economic integration is not an ineluctable process…..it is only one, the best, of many possible futures for the world economy….governments, and through them their electorates, will have a far bigger say in deciding this future than most people appear to think. The protestors are right that governments and companies - if only they can be moved by the force of argument, or just by force - have it within their power to slow and even reverse the economic trends of the past 20 years.

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Now let me come to why I am saying this to you today.

Some in the finance sector, particularly those of you in the banking sector, have a more obvious and immediate interest in this debate than most.

The banking sector is suffering some public pressure at present, driven by concerns about things like branch closures and fee increases. This view is bolstered by things like the recent ACCC and Reserve Bank Report Debit and Credit Card Schemes in Australia: A Study of Interchange Fees and Access.

You would be aware that Labor has called publicly for the Government to formally direct the ACCC to monitor bank fees and charges.

Let me say that Labor believes that banking is an essential service and that banks do have social obligations that are broader than other commercial organisations.

The licensing of banks provides both responsibilities and privileges.

I believe that it is critically important, not just for social justice but for economic efficiency, that Australians are able to access banking services no matter where they live and no matter what they earn.

The banking sector has an opportunity to address its social obligations by working with community groups such as pensioners, consumers, trade unions and farmers to establish a social charter of community obligations.

I believe that if the banking sector were to establish a social charter it would benefit not just consumers, but the public perception of banks who would be seen to have addressed legitimate public concerns.

So let me bring this back again to my core argument here.

The Labor Party is about a modern Australia and a fair Australia.

We take the view that you cannot have a good economy without a modern reform agenda.

We also take the view that you cannot sustain a modern agenda without showing that it is a fair one.

This is why we have announced policies such as the following as a demonstration of our commitment to the Knowledge Nation:

Education Priority Zones to make the Federal Government an active partner with schools and local communities in dealing with problems facing young people; ●

A Learning Gateway information site on the Internet to provide parents, teachers and students with a range of information on school curricula; ●

A proposal to double the number of Commonwealth funded fellowships available at our universities and Cooperative Research Centres over the next 3 to 5 years; ●

A new fellowship to attract high flying researchers back home, or stop them leaving in the first place; ●

Teacher Development Contracts to lift teacher quality by better training our teachers in using and teaching information technology; ●

Teacher Excellence Scholarships to encourage high achieving school leavers to study education with a focus on areas of under-supply, currently maths, science and IT; ●

A National Workforce Council to give Governments, schools, parents and children the information they need about the jobs of the future; ●

Workforce Skills Profiles to identify workers at risk of unemployment and give them the targeted training and retraining they need before they lose their jobs; and ●

A commitment by Labor to strive to ensure that by the end of the decade nine out of ten young people leave their teens with a year 12 equivalent qualification, and that all young people achieve a formal education or training qualification of some kind.

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These are just some of our policies in this area, and there will be more to come before the next election.

We as politicians must demonstrate bona fides to deliver the vision that modernisation and fairness can live together. That's the job of leaders.

Increasingly - and this is a positive development - the community sees a greater leadership role for people in business. I would suggest that this means you in business need to be part of this fairness agenda, just as you have been part of the reform agenda in the past.

So how do I see business becoming part of the fairness agenda in Australia?

Well let me give you a few ideas.

For the finance sector I think we all know that the greatest challenge and the greatest contribution you can make is in striking the right balance between customer service; investment in your employees; performance for shareholders; and the interests of the wider community.

I don't pretend that this is not a difficult challenge. And many businesses are rising to meet that challenge.

But let me mention another agenda just as an example. Labor will pursue the Knowledge Nation agenda as a new economic reform agenda. But we also believe that you in business have a vital interest in that agenda succeeding.

Australia has aspirations to be a global centre for financial services. The key to achieving this will be the skills of our people.

You have a big interest, for example, in the current debate we are having with Dr Kemp about school funding. You have a vital interest, as parents, as citizens, and as business leaders in the funding of the schools where 75 per cent of Australian kids are educated, and that is in the public system.

You have an enlightened self interest in their education being the best it can possibly be. And properly conceived, you can no more support than we do a system under which $56 million per year is to be handed out to the wealthiest 61 schools in Australia.

A further example is provided by the recent debate around Employee Share Ownership Plans. You know we have been critical of the recommendations the government now has before it. For the same reasons of fairness I have been speaking about already, we believe that the admirable goal of giving employees a share in the success of their businesses must

not be compromised by opening these schemes to abuse by so-called aggressive tax planners and the like.

We believe that a modern economy is advanced by employee share ownership, but we believe a fair society requires any scheme be fair and not open to abuse. Labor is currently examining the options for increasing employee share ownership and genuinely democratising it. I believe you have an interest in both of these things - that those who genuinely believe in the goal of increased employee share ownership have a vital interest in remaining vigilant to guard against the abuse of such schemes.

In conclusion, the message is simple. Labor was a reforming Government in the 80s and 90s and we will not go back on that agenda.

We remain committed to balancing the budget over the economic cycle; to low inflation and interest rates, delivered through an independent Reserve Bank; and to an Australia open to the world, and competitive in the international marketplace.

We will also have a new agenda which marries a modern reform program for Australia's economy and society with a crucial concern for fairness for all Australians - the Knowledge Nation which we believe is the new economic reform agenda for this nation.

This is an agenda all nations around the world are grappling with, and which we believe Australia must too if we are to guarantee our prosperity into the future.

Thank you.

Authorised by Geoff Walsh, 19 National Circuit, Barton ACT 2600.