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Share prices Investment and inflation



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PRIME MINISTER ^ < 3

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SHARE PRICES, INVESTMENT AND INFLATION . . Thursday 10 October 1:

Vfhat the shAbe markets are saying/ here and overseas# is that. ■ - " the ALP have no credibility as economic managers of Australia.’ ; ' . ·

That is why share values have fallen. · - . " ’ - -

Incredibly- Mr Keating thinks all this" .is a joke. . . . *

He s a y s , he is sitting back "cheering on the sidelines." ': - Believe me# it*s no joke. " ‘. , . .

""WHat-'i's involved "is" the- savings- -of·-, hundreds of thousands ~ο·£- -u. . Australian shareholders# including numerous small Shareholders.- . i Mr Keating needs to brush up on his facts# To suggest that they

are just speculators is to completely misread what has been . /

happening. * . - . . . .

We are talking about" the confidence of/. Australia# .and overseas business people to carry out nev? enterprises^ to build factories, p l a n t s , towns, p o r t s , smelters, mines, buildings," s h o p s , offices; : „ and farm development. -

W e are talking about fcho widlingness of overseas people t o ' lend" us money to help build Australia. ’

Labor apparently wants to cheer when Australia slides ‘ down the ‘ ' -_ scale in the eyes of overse’ as and international commentators« - · ■ ..

Mr Keeting ' ■ & response is completely un-Australian. Is. Mr. Keating . . -really on Australians side? ’ - .

If "there is one lesson which anyone with eyes to see could have .­ read in the international events In recent years, it is that". .; ; . international and Australian investors can sniff out the- first . - • suggestion of a country which is abandoning the fight against- ·

inflation. - . -

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The fact is that investors know that the ALP has no seiablance of .

a policy to fight inflation. . . " . . ·-. - '

The so called social contract is a sham, a farce, a·deception^ - absolutely useless as a weapon in the anti--i#£lationary armoury. ;

The President of the ACT5J, Mr Dolan, disclaimed the agreement alisos at o n c e . ' .· -

yet, in the face of this.failure, the ALP is proposing - on their own costings - a massive increase in the Government, demand for - resources of some $1 ,'ΒΟΟ million in a full, year, . " ." "· .

Their particular proposals to χ-aka in an additidirsnr^950-T!frtTt^n"" in specific tax measuresf ^including closing off tax avoidance? are highly unlikely to be realised. " -

No Treasurer, has tried harder than Mr Howard' to stop tax . avoidance. . ·

The fact is that when Labor was in office they did not try. " ·

Mr Hayden failed when Treasurer to legislate to" stamp out the· m o s t prevalent avoidance schemes. --------· ----- — — :---

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But even if we assume unrealistically that Labor were- successful.· in bringing in an. additional $950 million in tax— from thsir-- -— : — announced proposals, that would still leave soma $1,000 million· of unfunded government spending. ·'

And the realistic figure would in fact be double that on goyerrsaeni departmental costings.

No.wonder investors have taken fright. . .

The prospects of such an immense, a catastrophic increase in thg de£idit'r"are alamlng"....... ""....... ........... .;v;vr T r"~..- -

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Inflation would soar; and so would interest rates , __ __ .

The collapse in share prices which we are now seeing would b e . only the beginning. - _____ ________ ' "

But the position is even worse; because it. is clear ‘ ‘that the ALP is committed by its platform to 100% tax indexation and 1G0% wage indexation on top of the announced spending programme. ·

And the ACTU has also, repeatedly, demanded both full wage indexation and tax indexation on top of the kinds o e ap'ehei the ALP is proposing. · ·

The ACTU goes further, and. wants: " —

. a 35 hour week - · ·

. the right to productivity increases ------ - --

. the continuation of work value decisions .

. the right to collective bargaining . · "

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Investors know all this.· They cars do their.sums. They kaow Australia caiVt conceivably afford such a surge of extravagance.

They know the proposed, tax cuts would be rapidly eaten·.up back in higher inflation. - · · '

stolen

Investor* are giving Australia another and timely warning about th Labor Par t y laying claim to Government without any anti-inflationa •Strategy. ■ · . · ' ___ - _____ ____

We' must heed , that warning.

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PRESS OFFICE TRANSCRIPT FRIDAY, 10 OCTOBER. 1980

PRIME MINISTER'S ADDRESS TO LIBERAL DINNER, HAMILTON, VICTORIA

(AS DELIVERED) ___

Tape begins as follows:'

...Eastern Europe, they were saying quite plainly if this goes on much longer, they are not going to stay in Australia because they have seen this sort of madness happen before, and they were not going to sit around and watch it happen in this country.

But it could happen again if people do not make the right judgement on October the 18th. I have-enough confidence in the commonsense and judgement, and the sense of responsibility, of the majority of Australian voters to believe, with all the strength

that I can, that Australians will not allow it to happen again. Because it does not matter what people might say before an election, if you look at the policies, if you look at what our friends in the Australian Labor Party propose" to do if they have-

the opportunity, it is just the same old re-cycled Whitlam years; - the same madness; the same irresponsibility. The first assault on the economy, on the enterprise, on the initiative of Australians, will again be through greatly increased Government expenditure.

I do not know how long it is going to be before all politicians will understand that if Governments are going to spend something they have to take it from· people first. Governments do not. have anything of their own. Their is no cargo cult tree up in the sky which they can just go and pluck. They have to take it from people

first. They either take it by taxes, or they take it by inflation. But take it they have to; take it they will one way or another. So if a political party is offering to spend much more, it has to mean higher taxes or it has to mean inflation, or both.

Even if you take Labor's own costings - which happens to be inaccurate - but even if you take their own costings, they want to spend about $1,000 million more. Some people might think that is a (inaudible), but to most people it is a lot of money. A tax cut which you might pretend costs only $300 million, which.in fact costs $1,900 million, shows that they are going to have a financing problem of $1,900 million on their own figures. That is a pretty .

large sum. And add that on to the deficit; it means more inflation for a very substantial time. '

But let's have a look, on their figures," about how they think they want to raise it. $600 million out of tax avoiders. Well, unless you made some legislation retrospective for about 10 years, you would have no way of getting that. John Howard, as a Treasurer, as one who has really gone around the traps on tax avoiders - and I am

not too sure that there is all that much left for anyone to pick up - the money just cannot be found. Then $250 million on an investment allowance which goes to farmers- and small business and to manufacturers; and you all know what it is for. But he is going

to get the money immediately so he is going to knock it off retrospectively. That means you bought the equipment expecting to get the investment allowance, but if the Labor Party go in, you would not. Retrospective abandonment of the investment allowance.

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Hamilton, 10/10/80 2 -

But even if you could collect these funds, which I believe you could not, that still leaves about a billion dollars not funded in any way at all. That puts the deficit up. It puts the domestic deficit up. It does happen to-matter, because it is the

same as a family just spending more than it can earn, spending more than it can afford and if a nation does it it is just as bad. ■ ■

Is it any wonder, when people saw the polls, that Australian investors and overseas investors started to take fright on the share market. Then what did Paul Keating say? Virtually that he is going to be laughing all the way to the bank, and he hopes they all take a belting. But he was not talking about one or two speculators, he was talking about hundreds of thousands of small Australian investors who have put their dollars into Australian firms, backing Australia, backing Australia's development,

investing in Australian companies. They are the people who were taking the loss, as a result of the threat - only the threat - of Labor's policies. And if those policies were ever to come into

effect, they would take a much larger loss and it would be a permanent loss. .

What about other aspects of their policy? There is meant to be an agreement with the trade unions, but the new President of the ' ACTU has said there is no agreement whatsoever. The Unions want 100% wage and tax indexation every three months. They also

a 35 hour week. They want productivity increases and work value decisions, and they are both different names for getting higher wages, and they want everything they can get out of collective bargaining on top of that. They treat all these things separately

although they are different bites of the cake. Mr. Hawke formed this policy when he was President of the ACTU. But does anyone think that he just changes his position - he is going to turn around and oppose the ACTU in the pursuit of policies which he developed, which he proposed? It is a nonsense. And those wage demands would unleash a further thrust to inflation. I think he

sometimes forgets that in 1975 Commonwealth award wages under the policies of the Labor Party went up by nearly 40% in one year. What farmer could stand that? What small businessman can stand that? What exporter could stand that? The result would be

obvious. The only result, or the only conclusion you can draw from that is that that good Australian Bob Hawke wants to do to the whole of Australia what he has so successfully done to Bourke's store.

But the position of course is worse than that, because Labor's actual costings are over twice the costings that they claim they are. I have not the slightest doubt that inflation would go to 20 per cent under the policies that they now propose. Putting that another way around, if you have a $45 bill at the supermarket, that very soon goes up by $9, and then where is the $3 a week tax cut? It is taken away almost before you feel it.

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H a m i l t o n , 10/10/80 3

So under Labor's policies, income would.be stolen either by inflation or by higher taxation. The only way to avoid inflation and to avoid higher taxation is to contain Government spending. That is the one thing which Labor does not propose, and never will propose, because it is not in their philosophy.

We really do need to understand the threat of Labor's new taxes. ■ I would just like to go through their own words just for moment, so that it can be understood. There have been repeated promises for a capital gains tax, a wealth tax, re-imposition of death duties, · or all three. Now, their own words, Mr. Hayden's statement:

"I have committed my organisation", he says, "to a capital gains " tax, a resource rental tax, a levy on domestic oil producers",which Mr. Keating has said would collect more than our levy,"a number of initiatives in the tax area and other measures of that nature". That is a very broad phrase which could cover any sin at all. Mr. Willis spelt out the other measures as being a capital gains

tax, a wealth tax, or death duties, a combination of these or all three. Surely, people have been warned. But it was ' Lionel Bowen who said that the wealth tax, a realistic wealth tax, could raise $1,500 million a year. Then Mr. Hayden again said,

"we propose without any apology at all the introduction of a capital gains tax, a resource rental tax, a re-structuring of the tax scales, to raise more revenue". People think they have been promised a $3 a week tax cut, but Mr. Hayden earlier committed himself to a re-structuring of those tax scales to raise more revenue.

And so there it is. But on the tax scales, who would be paying more to collect that extra revenue, and what is a wealth tax? You just add up the value of your house, the belongings in the house, (inaudible) any assets in the savings bank or any assets

or deposits in' a building society; add it all together and you pay a tax on it every year, year after year. And if you are a small businessman and you do not have a good trading year, and you do not have enough income to pay the wealth tax, you sell off your stock and your equipment at a loss so that you can pay the

tax. Or if you are a farmer and you have a drought or a bad price year, and you do not have any income, do you have to sell a paddock to pay the wealth tax? Because that is how wealth taxes work.

And for a capital gains tax, you pay so much for a house and sell it later for a higher price - a higher price might be induced only by Mr. Hayden's inflation - but you pay capital gains on the difference. That is a capital gains tax.

And death duties. We all know what they are. Not only content to tax people while they are alive, the Labor Party would hound people into the grave again and follow them into the grave. Well, we think those sorts of taxes ought to be put aside. They are a tax on all of us; on the enterprise, the initiative, of the Australian people. They are taxes which would strike right at the heart of everything we hope for and everything we want to build onto this country in the years ahead.

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H a m i l t o n , 10/10/80 - 4 -

Three or four days ago, about three days ago, Mr. Hayden said that he was not going to introduce any new tax in the first three years of a Socialist Government. But he is on record as saying 'they are new taxes and they are overdue taxes, and we are introducing

these new taxes to avoid jacking■ up the old taxes.' So if he is not going to have the new taxes, does that mean he is going -to jack up the old taxes and if so, which ones? But then it is worth noting that after he said he was not going to introduce those particular taxes in the first three years -just put it off for a

little while - somebody got at him on an ABC programme, talk-back programme and so it must be accurate - and the questioner said, "Mr. Hayden, I would like to ask you as the elected representative of the Labor Party, whether you will be prepared to state on oath"

- he wasn't prepared to take his just plain old word for it, he wanted him to state it on oath - "that you would faithfully carry out to the letter all your prior election policies". And that

clearly meant all those statements and commitments about increased taxes. .Mr. Hayden said "certainly", of course he would, unless world war broke out. But putting that aside, would introduce them all and do it all within the first three years. So there again

we have been warned.

He has also said in relation to those taxes, "I say quite bluntly that we won't retreat. We propose these taxes without any apology at all". I believe that it would virtually be the end of Australia if the Labor Party with the expenditure plans, with the

lack of a wages policy, and with the taxing policy, ever had an opportunity to get into power in Canberra.

Dr. Blewett, . who is their health spokesman, had one or two things to say only yesterday. He said they were going to put up taxes to help pay for their health programmes. . That was not said in the policy speech. So now we are getting a picture of the real Labor Party; putting up taxes all around the place,and spokesman after spokesman indicating that taxes are going to go up. One of the greatest frauds of all time is the suggestion that the Labor Party is a lower tax party. It is a party which is a high expenditure party, and we know it is a high expenditure party. Being that, it has to be a high tax and a high inflation party.·

And so, if we want the kind of Australia that we think is important, if we want the kind of free Liberal society, if we want an Australia where people with enterprise and initiative can get up and do things, create a business for themselves and for their

families, then we need to work and vote against the Australian Labor Party - because there is not the slightest doubt that the policies of the Labor Party can so destroy the well-being of this nation, that I doubt very much if Australia could recover from those policies inside the year 2,000. So, there is a great task ahead of us. And not only that, I think we need to understand also there

is a great responsibility on all of us as Liberals, and of those in the National Party, to see we work in a very close coalition, because over the years since 1945 the good and the responsible Government of this country has depended totally on the strength of

that coalition; has depended totally on the capacity of the Liberal Party and of the National Party to govern in Canberra.

H a m i l t o n , 10/10/80 5

There has been one sharp experiment. It was almost total disaster for so many thousands of people in Australia. It was almost total disaster for the industries of this nation.

The Labor Party: they always talk about cutting up, they always' talk about dividing things in a different way. They never talk about creating, they never talk about building, they never talk about establishing a greater, a larger, a more productive country.

If people want higher standards of living, that is exactly what you have to have: a country that is growing, a country that is expanding. If Governments are going to have the kind of things - State or Federal Government - what people want of State or Federal Governments (inaudible) those resources can only be provided

if the country as a whole is growing, if the economy is growing. This indeed, is what we seek to do', what we seek to achieve.

One of the things we did not, I believe, expect in 1975 was that in the years ahead of us the world would economically become as sick as in fact it has. I do not think anyone then expected that the economy in the United States would start to shrink; that the United Kingdom economy would shrink; that interest rates in America would go to 20 per cent; that inflation in Britain would go to 20 per cent or a touch above it. But these are things that have happened. In the advanced industrial countries, taken overall,

there will be no growth at all this year. But in Australia we moved in the reverse direction. While their inflation has been rising, ours has moved down below the average of all those other

countries. Our economy is growing where there's is shrinking. But that is only because we have pursued policies that have sometimes been difficult (inaudible), but which have been very important indeed to this country.

I have not the slightest doubt that the policies we have pursued over the last five years have been the right policies for Australia. I also have not the slightest doubt that these policies continued

into the 1980s will give us opportunities in Australia which I think cannot and will not be equalled in any other advanced industrial country that I can name. I can also say without the slightest doubt, without the slightest hesitation - and in no danger of being proved wrong - the policies of the Australian Labor Party, if they were applied to this nation in the early years of the 1980s would do so much damage that I do not know when this nation would be able to recover from it. If you destroy productive enterprise, you do destroy the capacity to employ, the

capacity for families to have the kind of lives they want, ■ and the capacity of Governments to provide the kind of services that people expect. ■

Therefore, if, as I think we all do, we believe that the sensible government of Australia depends totally upon the maintenance of the present government, well we have a job to do. We have a job to prove those polls totally and utterly false; to make sure.that

the Labor Party does not get an opportunity to damage this nation again. That is a great trust and it is a great charge, but I am sure that people of our faith, working together in this State and

right around the country, will rise to the occasion in a very adequate way. I do have great confidence in the way in which Australians will cast their vote on October 18, because this

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H a m i l t o n , 10/10/80 6

country is by no means ready for suicide yet. And to vote for Labor is to vote for the suicide of this nation.

But it is up to me, it is up to my Ministers, it is up to all of us, to make sure that as many people as possible understand that over the next few days, and make sure that nobody takes the shortsighted view of their own future and of Australia's future.

I would like to end by thanking you all for coming here tonight and making this a festive occasion, on this 25 years as your representative in Wannon. Somebody once told me that it is only the first 25 years that are difficult, that the second 2-5 years are easy. I do not know how Tamie would think of that. I am not

sure what I would think of that either. But Paul, and Dr. Lewis, thank you both very much for what was said earlier, and thank you all very much for being here tonight.

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