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A statement which will not make Australia strong again

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John Hewson Leader of the Opposition M e d i a R e l e a s e

61/91 12 March 1991


The Prime Minister's Statement on Industry Policy fails to come to grips with the reality of our economic crisis and with the magnitude of the policy adjustment required to eliminate inflation, to boost production, to boost exports and to boost

import replacement activity so as to stabilise and ultimately reduce our debt.

While there are some welcome measures in the Statement, the Government has only gone as far as the trade union leadership and their Accord would allow them to go.

That is why there is no labour market reform, no privatisation, no reduction in the role and influence of the public sector, no genuine reform in taxation, transportation, shipping, and on the waterfront.

These are all areas where union leaders have an effective veto over the Hawke Government.

They are all areas, therefore, where they have an effective veto over structural reform.

Yet unfortunately for Australia these are also all areas which imply major cost disadvantages to Australian industries which are thereby ultimately reflected in higher prices to Australian consumers.

Of the full-blooded reform agenda identified by the Business Council and the Industry Commission - which promised about a $43 billion boost to national production - the Government has basically only taken the decision to lower protection with a

$4 billion boost to production.

So they have done about one-eleventh of the task that has to be done.

Before Mr Hawke wrote this statement he should have walked the factory floors at Ford and Nissan, or he should have spoken to the workers and management at SPC and Black & Decker.

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At Ford he would have learnt about the massive cost disadvantages under which that Company operates:

• I was told by the management that 30% of their cost

disadvantages have been due to interest rates and exchange rates and 40% due to labour market and other human resource disadvantages.

At Nissan he would have heard of the 40% cost disadvantage that flows to them from the components industry.

At Black & Decker he would have heard of the way in which

infrastructure cost disadvantages have forced the Company to close.

At SPC he would have been moved by their attempts at enterprise bargaining to keep their jobs, but most obviously by the 48% increase in productivity which has come this canning season from the shift in worker and management attitudes.

The workers and management at Ford and Nissan and Black & Decker and SPC are crying out for the Prime Minister to listen. So are they across most other industries.

He obviously is not!

Among the decisions that we welcome are:

. the proposed tariff cuts which is basically the adoption of our policy announced last year;

. the attempt to lower taxation of business inputs, although it is really a peripheral attempt, cutting about

$200 million next year from over $11 billion of revenue collected under the Wholesale Sales Tax. The first best alternative would have been to adopt our policy of

introducing a broad-based Goods and Services Tax to replace the Wholesale Sales Tax which should have been an easy political decision, given that the Opposition has been advocating it.

. accelerated depreciation, although the details of the legislation will need to be scrutinised;

. the direction of decisions on anti-dumping and DC


. the emphasis on resource security - but we remain to be

convinced that the legislation as proposed will achieve it, especially given that that legislation will not "fetter or override" the taxation and foreign investment review powers of the Commonwealth and it only relates to a few large pulp


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. the tax deductibility of the costs of environmental impact studies; and

. the shift of Austrade to the Minister for Trade and

Overseas Development.

Apart from the Statement's failure to embrace a genuine process of structural reform (as described above):

. it fails to show any understanding of the magnitude of our current problems;

. it supplies no new forecasts which would reflect the

seriousness of our situation;

. it offers no explanation as to what went wrong in the past

- indeed, little or nothing seems to have been learned from the past;

. it offers no adjustment to macro policy - indeed the

measures are as yet unfunded and thereby further ease fiscal policy at a time when Commonwealth and State

finances are out of control and moving into significant deficit;

. it foreshadows the development of a venture capital fund which is nothing short of a complete worry.

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