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Transcript of address to the Newcastle chamber of commerce

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Leader of the Opposition ft j*9





Thank you very much Paul, for those very kind words of

introduction, and might I say, very pointed words of

introduction about the importance of the Hunter and I'll come back and say something about that in my formal remarks. To my Parliamentary colleagues whose names have been listed, but, in particular, to Senator John Tierney, who's a most valuable

recent addition to our team in Canberra. A very important appointment because it has given us a base here in the Hunter and as was said, John is the first Liberal north of the

Hawkesbury. The future of our Party in the next election will very much depend on our performance north of the Hawkesbury. I think the election could be won or lost between the

Hawkesbury and Cape York, five seats in New South wales in that great area and there are eight seats under the margin of five per cent in Queensland which are all winnable and so its very important that we establish the base that John has

started to establish in this area. scott, I felt sorry for you when you started to call me senator and fumble around about Dr Who, having just been subjected to Pixey Anne Wheatley on Fast Forward I've now become an expert on Dr Who,

and I look for Daleks everywhere I go. I think they're now employed by the a l p .

I welcome very much the opportunity to be here in the Hunter and to have the chance to talk to you a bit about business issues. It's an important time to do that, as the

Government's just brought down its Budget, but one could only be disappointed, I think, when you looked at the Budget because it was a blatantly political document. It really didn't contain the normal economic assessments that we look

for, it didn't have any sense of direction for us as a nation, and it didn't really address what most of us would see as the basic economic problems in Australia.

Parliament House, Canberra, A.C.T. 2600 Phone 77 4022 COMMONWEALTH P A R L IA M E N T A R Y LIBRARY M IC A H


In an electoral sense, the overwhelmingly important issue is, of course, unemployment, and the prospect of further unemployment and related to that, job security. a fear, in fact, that if you lose your job you may not get a job back in

any reasonable period of time, indeed, you may need to change your career, is one of the fears that people have now, in order to get back into the workforce.

In economic terms, behind that though, is the massive debt built up by a succession of balance of payments deficits over the years and an economy that has seen its basic wealth generating sectors, particularly the small to medium sized business community, destroyed in the course of this deep recession, the deepest recession, I believe, since the Great Depression of the 1930's.

At a time where you would have thought that the Government would have tried to give us a sense of strategic direction, I was very disappointed that they failed to take that

opportunity. To me, looking at our country as an Australian who has travelled an enormous amount internationally, I am embarrassed by the extent to which a country like Australia, with the wealth of natural resources and natural advantages

that we enjoy, has made such a mess of things in the course of the last decade or so and missed so many opportunities which are now showing up in that very high level of unemployment.

We are looking this year at an unemployment level of one million Australians unemployed, on the Government's numbers. If you go behind those numbers and look at other people who have been pushed off onto other benefits, or people who are

now working three or four days rather than five because the number of shifts have been cut, or people that can only find less than fifteen hours work per week, the number becomes two million Australians that fall into that category, twenty per

cent of our workforce, and something that ought to be a major concern to everybody.

And we are moving into an era under these policies of

sustained high and entrenched unemployment, which will, it is a problem of course to the age group that I see predominantly in the room, but an even bigger problem for our children. Youth unemployment, already at a record level, near thirty per cent, is very high in some parts of Australia, approaching

fifty per cent in some parts of Australia. That's one in two people leaving school this year will not find a job.

And against that background we really do need to, I believe, recognise the magnitude of our current economic predicament and get on and do something about it. I think political leadership today is all about setting that agenda, being prepared to argue the case, fight for the policies that you


know are right, even if they are electorally difficult or unpopular, and try and change attitudes in this country, which has slipped so dramatically in the course of the last fifteen or twenty years, that we have built ourselves a monumental problem. We are inclined to believe that we are the lucky country, we have certainly been the lucky country for a large part of the Post War period.

When we went into recession, when we had difficult economic circumstances, we were saved by something, a boom in the mineral sector, a boom in the wool market or the wheat market or whatever, tended to see our exports recover and that way

drag us out of the difficult circumstances. This time, however, we've gone into recession ahead of the rest of the world, and they don't look like turning around very quickly at all, they're still flattening out. The United States is double dipping as an economy, the Japanese economy is moving

into its lowest growth period in the whole Post War period. A very significant recession in Canada and the united Kingdom and large parts of Europe, and, of course, you have all the turmoil and uncertainty of Eastern Europe. Nobody's going to

save us this time. We are going to have to save ourselves.

To me the Budget should have begun with setting a very clear- cut strategic objective for Australia. We all have to decide where our future lies, what industries are going to get off the ground, and where our capacity to start to turn our

economy around really lies.

Today there was a balance of payments number released, $1.5 billion if you don't seasonally adjust it, $1 billion if you do. It just rolls off the tongue, doesn't it, 1 billion, 1.5 billion. The complacency about that is staggering. When you sit on a debt that is $165 billion, in terms of what we

owe foreigners, we recognise that last year we paid

$17 billion overseas just servicing that debt. When you reduce to the level of the individual its $8,000 for every man, woman and child in Australia. Every time there's a new baby born, that baby is already $8,000 in debt and it has to

produce $800 a year just to service the debt.

Why are we complacent about another balance of payments number when that problem will see this generation of Australians leave a lower standard of living to their children than they enjoyed themselves. You do the exercise, I've got a son

that's leaving school this year, doing his HSC, I compare my opportunities in 1963-64 leaving school and going out off to university and into the job market with the opportunities that he faces today. You think about how much they have sunk, and asked yourself how, given all our resources and opportunities.


So I see our future as one that is particularly in the

Asia\Pacific region, one where we can carve a niche really right across the board, the Asia\Pacific region will be the fastest growing region of the world. We might find it

difficult, in a business sense, to make headway in Asia but we ought to look at the reality of Asia. In forty years time the Aaian\Pacific market will be more than twice the size of the European and the American markets added together. There will

be four and a half billion people in the Aeia\Pacific region, and that's where we've got to make our mark, that's where we've got to start to pay our way.

And if you look at the detailed economic analyses you find that there are opportunities across the board. In our traditional agricultural sector we can, sure, supply, export a lot more traditional agricultural commodities. The mining potential into the Asia\Pacific region, given the growth

that's forecast, is also incredible. But importantly we should be looking at adding value in both those areas. Those opportunities are there, too, on the numbers. Instead of just exporting grains, why not processed foods. Instead of just

exporting bauxite, alumina, why not take it to the next stage or the subsequent stages of the production process.

And there are opportunities in other manufacturing, and, importantly, there are opportunities in the service sector. Tourism is already our biggest export sector, we haven't even scratched the surface of the potential that exists for us in the Asia\pacific region if we get off our tail and do

something about it.

And quite simply, we take, just to use tourism as an example, we take two million tourists a year in Australia, against a population of seventeen million people, in a country which must be one of the best tourist destinations in the world. We

compare ourselves to Singapore. Singapore, I don't think of as a tourist destination at all, it's one large shop. But they take five and a half million tourists on a population of two and a half million. Now, I'm not setting a strategic objective of thirty five million tourists to Australia, but

somwhere between two million and thirty five million, gives you an idea of the magnitude of the opportunity that's there. If we look at just one of the tourist countries in our region, Japan, twelve million Japanese travel overseas a year. You

know how many of those we see, 350,000. I just put it to you, if we want tourism to be a key industry, the potential is enormous, but we have to ask ourselves what is that we've got to do to make our tourism industry grow. Let's say we put a strategic objective of doubling the number of tourists in the next five years, or tripling it in the next ten. What would we need to do to turn that around.


And that' a the sort of analyeia that government has got to be prepared to facilitate# industry by industry# so that people can see what they're going to have to do to match best

international practice. If you stay with the tourism example it's simple# isn't it. You know what the problems are. We can't bring enough planes in because we have a restricted access policy on foreign aircraft# so we need to open up our aviation policy. And if they get here they get ripped off with the cost of domestic air transport# so we need to

generate a more competitive and efficient domestic air transport system. When they stay in some of our hotels, they don't get the service they need, the don't get twenty-four hour service# they don't get a service mentality in a lot of our hotels and tourist facilities. A lot of that's waste in the labour market, your penalty rates and the fact that you can't keep people on extended shifts because you go into penalty loadings which make it an unprofitable exercise.

If you can get more planes into Australia# they have

restricted opportunities to land. We've only debated the third runway at Mascot for eighteen years, so if we get more planes up# and have them coming in# we can queue them all outside because they won't be able to land at Sydney airport.

Yet if we were serious about developing tourism# we would have built the third runway years ago and the second airport would now also be completed for Sydney as well. But we aren't prepared to face the reality of any of those decisions.

I don't think that anything I've just said is all that

difficult for a Government to provide a bit of a lead to get a job done. We have debated the third runway for 18 years, as I say. If you stack up all the reports and environmental studies and so on - this is a very high roof - it would

probably go right through there. Surely we have got enough information to make the decision that it can be done. There will be a few Greenies and others that will come by and say, hang on John you can't really do that. But we just have to be

prepared to say# you've had 18 years to put your case# you lost# we are doing it.

Until we get that sort of attitude and leadership based on strategic thinking in Australia we aren't ever going to turn our country around.

When I look at our current circumstances today people say# right you focus on unemployment# you say that the government shows phoney compassion, they talk about jobs and they deliver unemployment, they talk about reform and they deliver

stagnation. What are you going to do about it?


My answer is that I think right now there are about eight things that we ought to do as essential elements of a

strategic response to that problem. They are also consistent with the medium term objective I just gave you of building Australia as a major player in our region, the Asia-Pacific region, let's say by the turn of the century, by the Year


The first thing I would do would be to produce price

stability, to get a clear cut commitment in this country that we do not want inflation and we will do what has to be done to eradicate inflation from the system. That would mean formally

adopting an objective of 0-2% inflation as price stability, as most other major industrial countries have done and then be prepared to put in place the policies and in particular give

the Reserve Bank the independence it needs to actually carry out that policy, or to do its part in achieving that

objective. It is the only way that business decisions will ever be taken with confidence, is if we can eliminate

inflation from the system. By inflation the Government is simply defrauding the people of Australia, their savings are being frittered away by inflation. People complain about our

goods and services tax proposal, I think it is particularly Important to note that since 1972 Inflation alone on average has imposed a 10% tax on savings right through that period. So first stage eliminate inflation by a firm commitment to price stability.

Second, you need labour market reform, the single most important structural reform we need in this country is labour market reform. Can you imagine the lunacy of the present system being accepted day after day by people in Australia. And I say lunacy, isn't it lunacy that somebody can sit down

in Canberra and decide, or Sydney or Melbourne - wherever Bill Kelty happens to sit - that person can sit down and know that there is a wage increase of say 6% that can be given at every workplace in the country irrespective of the conditions or the

profitability of the workplaces, say here in the Hunter, Irrespective of the performance of the individual workers, we can just have one person sitting down there saying 6% is what we can do this year. It is absolute nonsense, lunacy to think

that you can run an economic system based on a unified wage increase for everyone. And they say that we have trouble boosting productivity in Australia. Why would you work any harder or smarter, or longer? Why would you be more

productive if Bill Kelty is going to give you 6% a year

anyway? Until that lunacy is addressed we are never going to trade our way out of our problem.

We have already started, over the last 10 years to pay

ourselves double, on average, relative to productivity what our trading partners pay themselves. So we want to be an exporting nation and we price ourselves out in terms of labour


costs year after year. So you need a commitment, second stage, to decentralise the labour market, to break down the centralised system, to move negotiations back to the workplace level, to abolish compulsory unionism, put employers and employees on an equal footing so - that they can actually

negotiate sensible wage deals, sensible hours ... (inaudible) ... and other terms of conditions of employment. So they can have profit sharing schemes and equity participation schemes and so you can get at one, a commonality of purpose on the part of the employer and the employee, not a them and us sort of attitude that dominates the centralised system.

The third thing you have got to do is reform the tax system. At the moment people are crazy to work hard or crazy to save because the tax system zaps any initiative in that regard. If

you earn a bit over $20,000 a year you start paying nearly 40 cents in the dollar tax and $20,000 is two-thirds of average income. At $36,000, a bit above average income, you start to pay nearly 50 cents in the dollar tax. So why would people work? Why would they save? A combination of inflation and

that sort of tax system the average Australian goes backwards if they save, yet we are a country that needs savings - so you have got to have tax reform.

I'm staggered to hear the Government say that our problem, as they described it in the Budget, is we spend too much and we save too little relative to what we produce. So I so okay, let's change the tax system, let's start taxing spending and encouraging savings by moving to a broad based goods and

services tax - and they say no it can't be done. It is crazy that you can't have a rational debate about an issue like tax reform which is overwhelmingly consistent with what we have got to do in this country. So again tax reform is

fundamental, labour market reform gives people a chance to earn more, tax reform gives them a chance to keep more. To make sure that is the case we want to cut back on the size and influence of Government as well. You have got to cut

Government expenditure across the board if you are going to start to give people genuine tax reductions. The worlds greatest lie, as you have seen it listed so many times, is that I am from the Government and I'm here to help you.

Government expenditure is killing this country, I just looked at the numbers the other day, I looked at the PAYE tax payer, the average Australian, tax taken out of their pay packet before they go home, don't have opportunities to minimise tax, about 85 or 86 cents of every dollar of PAYE tax goes to

support the social security system in Australia. You think about it, those people who are lucky enough to have been left with a job are paying tax to support those who can't or won't work. I defy anyone to argue that we shouldn't go in and

review the Social Security budget and make sure that those who can work do ultimately work and those who can't work or who are genuinely disadvantaged are cared for better than they are under the present system.


The fifth thing we have to do ie improve our infrastructure. We can ask some simple questions, what does it mean to be the most efficient wool producer in the world; or the most cost effective wheat grower in the world; or the most efficient miner in the world if you can't get your goods past the

waterside workers' federation when you try to ship them overseas. If you have got massive cost disadvantages on the waterfront, how on earth are we ever going to achieve best international practice. The fact is, the very sad fact is,

that as those goods leave the mine or they leave the farm where they are cost effective, they pay away the cost

advantages in transport, be that land transport or in some cases depending on the products, aviation, they pay away in telecommunications cost disadvantages, they pay away in the waterfront cost disadvantages, then that infrastructure has to

be reformed, fundamentally reformed by injecting competition, by eliminating inefficient work and management practices, by cutting back on Government Business Regulations and so on. It can be done, ... (inaudible) ... lower costs. You want to

make sure that if you are efficient you maintain that

efficiency when you hit the international markets.

The sixth thing we have got to do is address the problem of immigration. Immigration has been a matter of debate now for a year since we raised it as a public issue in Australia and urged people to assess the economics of immigration. The reality is in current circumstances we have to live with a

significantly lower immigration intake. Now to be clear, I'm a person who believes in the long run we have to have a larger immigration intake. But in the short term, for two reasons, we have to live with a smaller one* one, there are fewer migrants who want to come to Australia, the numbers have

fallen off, they don't find Australia so attractive in a recession, there has been a 50% fall off; and two, we don't have the capacity in the midst of the worst recession in 60 years to absorb migrants, what on earth is the good of taking

in new migrants to add them to the social security list, for crying out loud. So we have to be prepared to argue that case and accept the reality of lower immigration. If we are worried about jobs and rebuilding the business sector and

rebuilding investment, it is an essential element of what has got to be done.

The seventh thing we have to do is actually have a long, hard look at our education system and our training system. The single most important thing there is to re-establish excellence in that system. We let our school kids compete on the sporting field but we don't allow our education

institutions to compete and that way raise the quality of their output and that way raise the excellence in our

education system.


to individual institutions; funding individual students rather than those institutions; making institutions compete for students; compete in the quality of their output, then you will start to get an excellent education system.

Finally we have to do something about our attitude to business and our attitude to development in Australia. This Government is totally anti-business and has now become totally antiĀ­ development. You think about it. You think how many

development projects are being knocked back in the course of the last few years. Why? Not because they weren't good projects. Not because they were environmentally unsound projects. Simply because the Government has done a deal with

some extreme Greenie leader to buy preference support in some marginal seat in Sydney or Melbourne or somewhere else around Australia. That is ridiculous. The whole process of

development in Australia has now ground to a holt. It is tied up in red tape, or green tape, or black type, or some

combination of all three bits of tape.

You just look at the recent examples. Wesley Vale, a pulp mill, a major potential export capable of matching the best, the toughest, environmental standards in the world was blocked on a foreign investment issue so that the development didn't

go ahead and that Greenie was happy and the rest of Tasmania and the rest of Australia suffered.

Look at Coronation Hill - approved to go ahead on the basis of environmental consideration but blocked because of Bulla. Bulla, an Aboriginal spirit emerged as an issue in relation to that project in the middle 1980's, in the early 1980's, and the decision was made by white politicians in Canberra, that they knew better about Bulla then the Jawoyn people did. The

logic, you think, was for the white politicians to get out of the way and let the Jawoyn people negotiate with the Joint Venturers on that project. I've met a lot of the Jawoyn people. I have no doubt that the In the end that project would have gone ahead - but it has been blocked in the name of Aboriginal heritage considerations.

In the last few months I've visited dozens and dozens of mineral projects and other business ventures all over Australia. None of the ones that I have seen would go ahead today. One that sticks in my mind was Hamers ley iron Ore in

the Pilbara. In 18 months they built two towns, open two mines, built 320 kilometres of railway, opened a private port and shipped their first iron ore. How does that stack up against 18 years to decide about the third runway at Sydney

and they've been no closer. You wouldn't get to the first stage of the environmental assessment process, today, in 18 months and yet the country is sitting there is desperate need of exports and export potential.


An eight point plan I just put down for you in, admittedly, quite quick and simple terms just to make the point that you don't have to sit on your hands in Australia. You don't have to sit back and say you know something has got to come along and save us because there is nothing more we can do.

There is a hell of a lot more we can do. The Government can provide the lead. The Government can put those policies in place and we are all going to have to change our attitudes if we want to turn this country around.

There are two points that I would emphasise about that sort of package.

1. No one part of that package is a panacea. But every part of the package is fundamental if you are going to turn this country around.

2. You can't tinker. You can't start talking about a waterfront reform agenda, like the Government has done in recent days, and then do nothing about it. We are three years into that waterfront reform

process and we are going backwards. We have now got 700 people on the waterfront who are idle time. That is, they are paid not to work - seven hundred waterside workers. They were to finish enterprise

agreements on the waterfront last December there has only been one - the National Terminals Agreement - and it is up for renegotiation because it is not satisfactory. No net progress, millions of dollars

spent in redundancy programs and no improved efficiency on the waterfront. You can't tinker.

If you want to open up telecommunications you don't restrict it to just one new player. I mean, poor old Aussat is going to be the basis of the new

telecommunications plague. How on earth is Aussat going to compete or the new competitor going to compete. Aussat has already lost $500 million and they have to acquire access to the Telecom land network; they have to price Telecom terminals and

that price has to include all the community service obligations, all the cheap phone calls to pensioners and the disabled and so on that Telecom supplies. That competitor is not going to get off the ground. They are not going to make a substantial


Compass is out there struggling because they haven't properly opened up the domestic aviation market. You cannot tinker.

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There Is no alternative in current circumstances but for fundamental detailed structural reform. The best way I can summarise that point to you is to think of a Government decision in the following terms. Let's suppose the Government decides that it would like to change the side of the road in which

the traffic travels. You could begin by tinkering. You could decide that you will just move the heavy trucks across in stage one. It will be counterĀ­ productive. It is exactly the point I am making. Sure, if you decide to do it all at once and you do

it at midnight on a particular day, there might be a bit of a hiccup here and there at the particular change over point, there may not, but you will achieve the structural reform almost instantaneously

if you do address it as a quantum leap. If you

tinker the heavy trucks are going to do real damage. They have done it on the waterfront, they've done it in telecommunications, they've done it in the tax system, they've done it in the labour market. You

can't tinker, you have got to have fundamental structural reform.

Thank you.