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

49/91 24 February 1991


The Labor Party is turning itself inside out as it seeks to come to grips with the stark reality of Senator Walsh's observation that the Government has "massively stuffed up" the economy.

The outcome of the factional infighting led by Keating, Button, Kerin, Dawkins, and Crean will have to be resolved by the Prime Minister this week as he seeks to pull together the mishmash of measures to be announced in the March 12 Statement.

But it is a futile debate as none of the factions involved in the infighting are prepared to countenance the comprehensive structural reform programme required to deal with our worst economic circumstances since the Second World W a r .

As the Business Council of Australia has demonstrated in its latest publication "Developing Australia's Competitiveness", we must implement all of the structural reforms identified by the Industry Commission and we must move rapidly to embrace

"international best practice" standards of performance in all our industries. As the BCA shows, such programmes would boost GDP by $43 billion dollars via a strong expansion of mining and resource sectors and further expansion of most other sectors,

including a de-protected automotive industry.

As the BCA also shows, these measures must be combined with action to boost domestic savings through public sector savings, superannuation, tax and other changes.

The Labor Party, however, cannot contemplate such a programme since its constituency, including especially the union movement, simply will not wear the extent and speed of change required.

Genuine enterprise bargaining, full blooded privatisation, comprehensive efficiency measures within Government, reshaping of the tax system and removal of the mad-cap work practices which dominate the waterfront and a host of other infrastructure

industries simply cannot be countenanced by the Labor movement.

That is why the debate this week will be about third or fourth- best options.

On the one hand, we have Paul Keating looking for silver linings in the recession he has engineered. He argues that since the economy has been "stuffed up", we should seek to benefit from this error by eliminating inflation (something he previously eschewed for seven years as Treasurer). He argues that low

inflation, of itself, will yield benefits if combined with his limited concept of structural reform.



He has put his credibility, and that of his chief advisers, on the line to support his case by forecasting a strong recovery in the economy from the beginning of the second half of this year - something that is simply an article of faith with no demonstrated base.

As I have repeatedly warned, this is likely to be a rolling

recession. Mr Keating cannot claim credit for the up-rolls while denying responsibility for the downturns. There is nothing in current policy settings which guarantees any

sustainable improvement this year.

Not surprisingly, therefore, he has a large bunch of sceptics within Government arraigned against him, all arguing for some degree of intervention.

But intervention is not the way to go. As the BCA publication shows, what we need in Australia is more firms that can compete globally. The BCA points out:

"The most important factors in breeding more such firms are not targeted Government interventions, but the supply and quality of human resources and all the basic infrastructure and institutions which shape the competitive environment

for Australian firms."