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Speech to the Association of Consulting Engineers Australia Federal Conference - Hayman Island



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MINISTER FOR FINANCE

EMBARGO

PRESS RELEASE X_ _ _ _ _ _ _ _ _ _ _ _

NO: 66

SPEECH TO THE ASSOCIATION OF CONSULTING ENGINEERS AUSTRALIA FEDERAL CONFERENCE - HAYMAN ISLAND, THURSDAY 11 OCTOBER 1979

Mr Chairman,

Thank you very much for the invitation to address you this

evening.

Tonight my speech will fall into two parts,

To begin with I will touch on issues of specific interest to

the Association with a view to clarifying Government thinking

oh those issues.

Later on I propose to talk to you for a time about the state

of the Australian economy today as I see it and the likely

direction we are heading in as we approach the 1980's.

TRADE PRACTICES ACT I

I have noted from the papers distributed before this conference

that the Trade Practices Act is a matter of concern to members.

You will all, of course, appreciate that my prime responsibility

is not in this area; and for ,obvious reasons it would not be

appropriate for me to comment on the Trade Practices Commission ; '

decision on your Association's application for authorisation or

the appeal to the Trade Practices Tribunal. .. · «-

I would nevertheless like to put to you some challenging thoughts

oh the Trade Practices Act and to explain its importance to the

Government's commitment to free and fair competition within a

free enterprise economy and to ensuring the greatest freedom

of choice for business and consumers. '

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The Trade Practices Act is not an instrument of Government

regulation in the ordinary sense.

It serves to remove the need for direct regulation of business

by striking down abuses of market power.

Regulation in the ordinary sense involves detailed and

continuing regulation of particular industries.

Market forces are supplanted by Government controls.

This Government is convinced that competitive markets are the

best regulator of business conduct and the most effective means

of ensuring the most efficient allocation of the nation's

resources in the public interest. i

But measures must be taken to promote and preserve competition

if reliance is placed on competition as a means of allocating

resources.

This is the objective of the Trade Practices Act.

The competition rules of the Trade Practices Act operate to

restrict attempts by participants in the market to insulate

themselves from market forces and to avoid the rigours of

competition.

I am sure you will be aware of the debate in the United States

concerning deregulation.

There are strong moves to deregulate sectors of American

business that have for many years been subje.ct to detailed

regulation. . .1 .

You will be aware of the success of those moves within the

airline industry.

In the United States it is argued that the only supervision in

many industries should be that control exercised by the

administration of antitrust legislation, the United States

equivalent to the Trade Practices Act.

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The deregulation debate is currently being carried on in

Australia before the Inquiry into Australia's Financial

System.

It is Government policy that the Trade Practices Act should

apply to all business activities.

Consistent with that policy the Commonwealth has made its own

business activities subject to the Act.

If some sectors of the business community are to be given an

exemption they are no longer subject to the disciplines of

I the marketplace. >

The result is to strike at the heart of the free enterprise

market system; the freedom of choice of businessmen and

consumers is limited and distortions will occur in'the

allocation of resources. .

|

Is it desirable for one section of the community to insulate

itself from pressures for change where nothing can be done to

relieve those pressures and failure to respond to those pressures

will result ultimately in greater dislocation?

I think it is useful to reflect on the changes that have

occurred since the advent of modern restrictive trade practices

legislation.

Conduct previously traditional in many industries has now

largely disappeared. '/

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! : . ' · % /

In the 1960's elaborate systems existed to restrict competition,

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Price competition was discouraged if not prohibited.

Restrictions in supply channels were rife.

People were tied to particular suppliers for their requirements.

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Frequently they were prevented from having free access to .

inputs such as raw materials, capital and most often, access

to markets in which they thought they could compete effectively.

Businessmen now expect competition among their suppliers;

consumers expect and anticipate competition between retailers.

Competition benefits the economy and hence the community at

large.

It maintains pressure to keep prices and inflation down by

requiring efficiency at the production,. distribution and

management levels. >

Efficiencies in the domestic economy are also reflected in

Australia's export performance.

Many of you will be aware of competition that has been

stimulated by the Trade Practices Act in tyres, liquor, ·

groceries, electrical goods, pharmaceuticals and to some

extent in bread.

However, it would be unrealistic for me to assert that

competition is painless.

If competition is to operate to bring about efficient

structuring and marketing the less efficient will suffer .

while the efficient and the community benefit. ..

It is important to realise that the Trade Practices Act does ■ - ■ /

not compel anyone to engage in price competition.

It merely operates to remove impediments to competition.

It ensures that the individual has complete freedom to determine

the manner in which he operates his business.

He must determine the extent to which he will compete on price

and service or a combination of both. '

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His choice will reflect both market conditions and the nature

of the industry.

The Trade Practices Act protects him from any unfair practices

on the part of his competitors.

I would also like briefly to touch on the role of the Trade

Practices Commission. '

The Commission is an independent statutory body.

It enforces the competition provisions and the consumer

protection provisions of the Act - not by prohibiting conduct

itself but by instituting proceedings in the Federal Court of

Australia.

It is only the Court, if satisfied that the Act has been

contravened, that may order that conduct be stopped or order

the payment of damages or penalties.

The Commission also has the function of making determinations

regarding authorisation applications of notifications of

exclusive dealing.

I think you will all agree that if a body is to be given power

to authorise conduct in the public interest that would otherwise

contravene the Act it should only do so after careful scrutiny

of all the issues involved. . .

The arguments of both the proponents and.opponents of

authorisation must be probed and analysed in the light of

available evidence.

The decisions of the Commission to a large extent will reflect i . . . .

the quality of arguments and material put before it. .

I would like to reiterate that the Government in approaching

the management of the economy has a duty to protect the

"public interest".

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To ensure the continued operation of the free enterprise

system regulated by market forces there must be a mechanism

to protect the public interest. ■

If businessmen believe their conduct is in the public interest

that assertion must stand up to public scrutiny.

AUSTRALIAN AID WORK AND CONSULTING ENGINEERS

Australia's contribution to developing nations through goods

and services provided through the Government's Australian

Development Assistance Bureau (ADAB) has provided an important

opportunity for the work of Australian engineers to become

known overseas.

Likewise the Government's Consultant Services Feasiblity Study

Fund (CSFSF) has provided a similar facility for Australian

consultants to become visible to potential clients in other

countries and to also develop their overseas knowledge.

In excess of one third of all consulting fees funded through

ADAB find their way to Australian private consultants; about

' one third are expended by the Snowy Mountains Engineering .

Corporation (SMEC) and the balance by the Government's own

construction agency (the Department Housing and Construction)

Departments and instrumentalities of Commonwealth and State

Governments, and Universities.

Australia's engineering reputation overseas has certainly been

enhanced by the successful design and construction of the

Snowy Mountains scheme. v,£

The name and reputation of SMEC has continued this respect

and is of considerable value to the whole Australian

engineering consultancy industry. .

- V

It is true that individual private consulting firms in

Australia are becoming increasingly recognised in other

countries and are building further the good name and reputation

which SMEC has heir ^ to establish for engineering work.

7

It is also important to remember that the bureaucracies in

under-developed and developing nations are much more

entrenched as a "way of life" than in Australia and that

many of these countries look to Australian Governmental

bjodies to manage projects.

Possibly this is a thought that you might care to debate among

ypurselves.

If Australia can win engineering consultancy commissions by

having its Government's agencies being seen to be managing

engineering consultancy projects, while the actual engineering

work is carried out by> your members, then Australia may develop

further what is at this stage an infant but important export

industry. "

IN-HOUSE ENGINEERING WORK BY THE PUBLIC SECTOR

The Government has required that the Department of Housing and

Construction significantly increase the proportion of its design

work carried out by private consultants and this proportion has

continually increased since coming into office.

Other actions by my Government are to increase the proportion

of repairs, maintenance and minor new works carried out by

private constructors. \

I am certain that you would applaud this action and you may be

assured that it is this Government's intention to continue this

line. .

You are concerned that a similar practice is not being so

rigorously followed in the States.

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The Commonwealth Government does not seek, nor does it have the

appropriate powers, to dictate to a particular State, on how it

should administer its share of moneys gathered on its behalf

from the Australian public.

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I put it to you that it rests with you to convince State

Governments of the advantages to them in having an increasing

part of their work carried out by private enterprise.

Mr Chairman, I would now like to turn my attention to the

Australian economy.

We are now on the threshold of the 1980's.

I believe we can all look forward to the 1980's with a good

deal of optimism and confidence.

The fruits of the Fraser Government's economic policies are

now becoming increasingly evident.

The uncompromising attack of the Federal Government upon

inflation over the past four years is now yielding results ,

The philosophy behind our last four budgets has at all times

been to reduce inflationary pressures and by so doing to

promote sustainable recovery in economic activity thereby

creating job opportunities for those Australians who wish, to

work.

The Government continues to view inflation as the most

fundamental and enduring cause of the economic problems this

country has had to face over the last decade. '

We make no apologies for the continuance of policies designed

to continually bear down on the root cause of our economic

difficulties. ■

As a result of our policies, there has been a substantial

improvement in our country's economic condition over the past

four years.

There is a plethora of economic indicators I could quote to

underscore this statement.

9

I will mention a few of them'.

. Inflation has been reduced from a peak of 17%

in 1975 to about 9%.

. Our Balance of Payments situation has improved .

largely occasioned by a strong growth in exports

of all categories. In fact, a record trade surplus

occurred in September.

. Private Capital inflow for 1978/79 was the largest

for seven years - indicative of overseas confidence

in the Strength and stability of the Australian

economy.

. A marked rise in the number of major investment

projects is foreshadowed.

. Domestic investment is up.

. Corporate profits have improved - in some cases

very substantially.

. Civilian employment has grown by over 60,000

over the past 12 months.

. Private dwelling construction has picked up.

. Importantly for the first time in six years,

employment in manufacturing industry 'has increased.

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. Farm incomes have increased substantially.

These signs, Mr Chairman,are good signs, very good signs indeed

We as a nation and you as businessmen should not hesitate

to proclaim them.

All too often the pessimists seem to hold sway.

10 ί

And why - when we have before us the list of economic

indicators which should increase our national confidence.

Our new improved economic outlook has, as I have intimated,

not occurred fortuitously.

It has been brought about by the development and continuance

of economic policies which have had but one objective.

Namely to restore the strength of the Australian economy -

specifically the strength of the private sector.

The task of restoring .the economy has not been an easy one.

We underestimated the difficulties before us when we came

into Government in December 1975.

However, I do not wish to dwell on the past.

Great progress has been made.

Economic responsibility and professionalism in Government

have been of obvious advantage to the Australian community.

Confidence is rising - although not as swifly as we would

have expected and would have liked.

You as a responsible professional Association, have a role to

play in this respect. .

Cpmmunity expectations are also important.

Your Association is part of the Australian community and for

this reason if your voice is added to that groundswell of

growing confidence, you can play an important role in

reinforcing the real reasons for optimism before us as we

approach the 1980's.

I do not state for one moment that all our problems are over.

11

Far from it. ,

We are now facing intensifying inflationary pressures due

largely to world wide commodity price increases, principally

that of oil.

However, due to sound and stable economic management we are

now better prepared to face the effects of these inflationary

pressures than ever before.

The Australian ecohomy is perhaps the strongest it has been

for some six years.

The single most important factor in our economic success has

been our capacity to reduce inflation.

Inflation in Australia today stands at about 9%. ,

Inflation in the United States is running at 14% and is close

to 20% in the United Kingdom.

It is true that Australia's rate of inflation in recent months

has slightly increased.

However, this must be seen in the context of a worldwide

■ resurgence in inflation.

In fact, the acceleration in the rate of inflation in many

other countries, such as Japan and Germany, has been far more

dramatic than the increase in inflation in Australia,

Australia., therefore, has an enormous advantage on world

export markets.

Notwithstanding the likely increase in Australia's inflation,

to about 10% by the end of this year, Australia is t

in a much better position than most of its major trading

partners to meet this pressure.

12

The fact that Australia has abundant energy sources, such

as coal, natural gas and uranium will further strengthen our

export performance. .

It is pleasing to live in a country which is in such a strong

position to assist in meeting the energy needs of the

international community.

There will also be substantial export earnings accruing to

Australia^as a result of our fortunate energy position.

Mr Chairman, ' ~ .

From what I have said there is indeed real reason for

confidence in this country today.

The pessimists have had their day. .

The Fraser Government does not seek to bury its collective

head in the sand over the employment problem.

It is a problem and it will not be quickly resolved.

However, with the continuance of our economic policies and

with the continuing strengthening of the economy, particularly

within private enterprise, there is real reason to believe that

the 1980's will see a sustained improvement in this area.

I have to make one important qualification, however, and that

is that there must be commonsense in the wages area. .

If wages are permitted to blow out as they did during the

Whitlam era, then our economic recovery will indeed be

prejudiced.

The lid must be held on wages.

Our newfound economic strength will not sustain wage rises

which are out of kilter with productivity and the capacity

■ of the economy to meet them.

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Our policies have been designed to create sound and enduring

economic conditions for Australians who wish to participate

in the workforce in future years.

We should never forget that in 1973/74 wages rose to a level

which simply priced workers out of the labor market. '

No one would wish to see this occur again.

The Fraser Government is utterly determined to prevent this

situation recurring.

Therefore, Mr Chairman-, with commonsense in the wages and

• industrial relations area, Australia can continue to build

upon the gains it has made.

Coupled with the continuance of economic policies designed to

further bear down upon inflation we will also be able to

further improve our manufactured exports performance - an

area within which further improvement is necessary.

Let us never forget the number of jobs lost in the manufacturing

area under the previous Administration.

This is the area where the jobs must be regained.

They will be regained if we can ensure that we remain

competitive. . .

It has taken political courage on the papt'df this Government

to maintain economic policies designed to restore our

international competitiveness.

The Government is not prepared to see the gains made, the

sacrifices the Australian community has made over the past

three years, dissipated.

What is required is a consensus amongst Governments, unions

and private enterprise as to what is best for Australia and

Australians.

14

The active cooperation of all sections of the Australian

community is essential if we are to face and meet the

challenges of the 801s . .

The Government has provided the economic climate for sustained

improvement in the economy and it is now up to all sections of

the Australian community to play their part in realising the

Government's earnest desire for a better Australia for all

Australians.

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