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Speech notes for address to the Institute of Company Directors, Melbourne



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Speech Notes for Address

by Mr Ian McLachlan, MP

Shadow Minister for

Industry and Commerce

Institute of Company Directors

Melbourne 28 July 1992

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Mr President, Sir Eric, ladies and gentlemen.

I wish to raise three subjects with you today. Last night one of my friends said you're not selling this package of yours. He said it's too complicated, not simple enough and people don't really understand it. I thought in retrospect that really up until now business really doesn't have to buy or understand or particularly absorb

the package that the Coalition has put together but from now on, very soon in fact, there is a decision to be made.

It's a decision about which way. And perhaps with his words in mind I should try and explain first of all, the first of the three subjects I'd like to talk about, what those arrangements are as simply as I possibly can.

For a long time before those arrangements were announced last November we racked our brains in the Opposition to think what it was that we could do being part of the political process which would be of the major benefit, or benefits to the Australian economy. Already the industrial relations policy had been up for some years. It was recognised by us as being central, absolutely vital to any changes that

were going to take place in Australia, but it relied on not only us changing the rules but other people taking up the new rules and acting on them. So the question still remains what was it that we could do which would make change as quickly and as vitally as possible. And that decision was of course to get business costs down.

■ Something that would happen, the results of which were patently obvious straight away. And of course they were in the area of tax changes. Those tax changes were a result of all the thoughts and the suggestions that many of you, if not all of you, have espoused for some time. The major input taxes of business. The taxes that we

are currently paying to Government in this room, or Governments, which are input costs in the cost of making up an Aussie widget. The big ones of course are payroll tax, nearly $6 billion worth, wholesale sales tax which Treasury says the initial incidence of that tax is $8 billion, on business that is, out of $9.4 billion that was paid the year before last, fuel tax, about half of the fuel tax paid by business, $3.3 billion our of $6.5 billion, customs duties and one or two others which you know

about.

But the reason for cutting those taxes, apart from getting Australian producers' costs down, was the effect that it would have, having got those costs down, on Australian exporters. When you think about it, Australian exporters will be in a better position

the day after those tax changes are made than their opponents at the other end of the world who will be in exactly the same position as they were the day before. And of course the second reason for making those changes was to get down the costs of those Australian producers, in whatever endeavour, manufacturing or primary production, mining, mineral processing, who are competing with importers, because

as I said those people at the other end of the world will have exactly the same costs as they had the day before, but Australian producers will be less.

And if that is successful we can start to change that balance around, then it must have some effect on the current account arrangements which have been going in a rather depressing direction for far too long.

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Now to do all that of course you have to get the tax from somewhere and therefore it is proposed that we will levy the tax at the consumption end, having compensated for those who are disadvantaged on the way through. At the same time we will reduce personal rates of tax by an average of about 30%.

So that is as simply as I can explain the main thrust. We will in fact, as well as cuts in personal income tax, cut the fuel tax so that people will have a little more in their pocket, about $11 or $12 a tank, and cut government expenditure.

But we are sometimes accused of not having an industry policy. Well I would just like to say to you th at I'm quite clear about what our industry policy is. It is not as hitherto taking $36 billion from business all around Australia in our Federal and State tax and giving back $2 or $3 every year in a polyglot of measures which you use a number 10 chop to hit most people or some people, albeit it lightly on the side, and everybody feels quite warm inside. What it is about is leaving business with about half, or just over half, of that $36 billion to do with it what it will. And so I say if we can add up that there is one that's slightly more preferable to the other.

Included in those taxes of course brings me to my second subject. There are customs duties, tariff taxes, protection if you like, a misnomer called protection. And I would like to give you two examples perhaps where I think it is a misnomer. One an . international example and it's the best one I know because it's probably the biggest, and that is in the area of agricultural. In 1986 the American taxpayer and the European taxpayer each paid to agricultural producers one way or another around about $26 billion US in some form of subsidy, bounty, or other payment. And they were the ones you could see. At that time our protection in this country was 4 or 5 percent perhaps, negligible by comparison to the EEC and the USA which was enormous. One would have to give some credit to the USA I suppose as they have dropped their farming protection quite substantially, but nevertheless are still perpetrating policies which make it very difficult for the rest of the world.

The point I wanted to make to you is this. Between 1976 and 1986 where most of those enormous protection policies had been in place in both those great continents, they'd lost 14% of farmers in the EEC, 15.5% of farmers in the US, and we'd lost 6%. The reason of course is that they've built their costs up on the back of the idea that they were going to make a lot of money out of this protection, and when things went wrong they fell off a much higher cliff.

The second example is that of the TCF industries in this country. Now I hear and read a lot about the complaints in this State, mine as well, but more noise in this State, about the deleterious effect of the lowering of protection on jobs over the last 4 or 5 years, since 1987 when these plans were put in place. And you would think

from all the noise that it has been very disastrous from the point of view of those industries and I must confess that between 1987 through to 1991 18,700 jobs were lost in the TCF industries in Australia, textiles clothing and footwear. The figures go up and down enormously as we know but they were the net figures at the end of that time, so in other words we lost about 4,000 jobs on average per annum. From

1991 to 1992 we lost another 4,000 jobs, a little less in fact, 3,700 jobs.

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The truth of the m atter is that between 1987 and 1991 protection in the TCF industries went up not down. And if anybody doubts me I'm quite happy to give them the figures, because what happens when measured in effective rates, that is really the effect of all the measures, tariffs, bounties, quotas and the rest, in 1987/88

in textiles the effective rate, as measured by the Industry Commission, was 65%, marginally up to 68% by 1991. In clothing and footwear it was 174%, marginally up to 176% by 1991. So all of the blame that we have heard over the last few months, in fact I venture to say that a minor seat around here was won on the basis of this sort of conversation, is probably more fiction than fact.

And I'd also say th a t of recent times the Reserve Bank report has shown that in fact there are other industries in this State which have lost many more jobs than the TCF industries, and particularly overall have lost you more jobs in manufacturing. Manufacturing has lost just about the same percentage of jobs as has the retail and wholesale trade and not as much as construction, and not as much as one or two other areas.

So I think it's very important that when taking up a view, whatever view we take, that the facts are correct and not synthetic and the facts are th at in this particularly industry that protection up until 1991, losing jobs at a rate of 4,000 a year, went up and not down.

Can I just perhaps turn to the last subject that I wish to raise because we again are sometimes accused of not having put sufficient weight upon the changes that we wish to make in the area of industrial relations. We're going to get this country on the track to being productive, competitive with our international friends. I think we

all know in this room what the debate is really about. It's about whether we're going to stick with the current formula, the system of Awards and Accords, whether we're going to stick with a system which you, as the rest of us, up until now have really little input into because you cannot negotiate, not freely in any case, you

cannot negotiate freely with those who work for you. You will not be able to talk to them freely about your own performance and the rewards that you and the company should get as directors. You cannot freely talk to them about their performance and the rewards that they will get. The choice really is made accordingly to a series of formulas and I believe that is time th at th at was changed.

The debate has been going now seriously for I suppose 6 or 8, 10 years, veiy seriously for 4 or 5 and the alternative has been spelt out for the last 3 or 4 years quite clearly. It's quite clear in my mind that unless we move to a system of industrial relations where we are all free, relatively free with one or two minimums,

to make those arrangements that will produce the most productive result for our particular enterprise, then we will not get the maximum reward for Australia as a whole and the businesses in particular.

If we don't move to a circumstance where productivity is given a chance and whilst I'm hesitant to raise the subject of New Zealand, what you will find is that New Zealand will increasingly be a place where some of our businesses go to make things, whether we like it or not, and I don't particularly.

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If we don't move to a circumstance which frees up the arrangements so that we are all able to make Australia a winner then quite frankly I think then we will all be losers.

And why I raise this subject in the general rather than in the particular, because you are all clear what those alternatives are, is to go back to where I started. I actually don't think that business has made th at decision yet, some people have, some people are actually doing it quietly out there under the table. But I don't think business has made the decision that it wants to make those changes. I don't think that some of those who have made the decision to make the changes have made the decision that they're going to stand up and say so.

And I do say to you Mr President and to the people here that the time for decision is pretty soon. You actually have to make a decision. You cannot any longer absorb the ideas of Opposition and the ideas of Government in the end, very quickly, certainly before the next 9 months, everybody in this room has to make a decision one way or another. And I believe that there ought by now to have been a

groundswell for change, especially as so many of the ideas th at we're putting forward are your ideas, but I notice that there's a hesitancy there, a hesitancy to actually put one's life, or if you like one's future on the line.

' Now it's quite often said to me that it's an extraordinary thing to do to put this document of yours out 18 months ahead of time and why would you do that and allow people to get into the nitty gritty and criticise it so much, take every little bit of it out. Well the answer to that is one word, believability. You have to these days, or we felt that it was important to stick it on the line, put it out there, lay it all 750 pages of it out there knowing nobody would read them all, but put them out there where people can see them so that at least if there were any tricks in there they

could be understood. All I can say to you is we put that document down so that if there were any trick in it you can see them. That is why it was done, it was done for that very reason.

I'll just say I think the choice is upon us now, not in the next election after this, not in 2 or 3 years time. We shouldn't any longer sit in the bleaches as I say to so many people and quite frankly many in this room. You can't sit there in the bleaches watching the game anymore because it's time, it's going to be time in the near future to pick the team. So if you don't go out and push for the things you want, if you don't start a groundswell for the things that you want changed then there is a danger that this mightn't happen.

So I just say to you in conclusion ladies and gentlemen we've heard the sounds of this debate about changing the way of the world in this country, the way we do business to make optimism more of a normal event in Australia's business so that optimism will create not only jobs but profits. We've heard the noises of that debate

on business reform and business tax and business employment, we've heard the sounds of the debate for nigh on 10 years but I just suggest to you th at now is the time to make the decision and if we make the right decision th at the echo of that debate will ring in this country for generations to come.