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In a speech in Tokyo, Treasurer claims his economic strategy is on track and that reform of the labour market and movement towards enterprise agreements will enhance Australia's economic environment

PETER THOMPSON: In Tokyo, Mr Keating has turned his attention to Japanese concerns about Australia's rising foreign debt. He describes the problem as a managed consequence of Government policy aimed at making the economy stronger. The Treasurer says that corporate borrowings will turn the economy around but it will take time, and he says that interest rates could remain tight for several years. From Tokyo, Walter Hamilton.

WALTER HAMILTON: The Treasurer faced questions on why high interest rates hadn't brought down Australia's foreign debt and the current account deficit. Japanese investors see Australia headed for recession and want to know if Mr Keating can make it a soft landing. Instead, the Treasurer put trade and economy not off course but performing to orders. Mr Keating said lower wages and public sector spending in Australia had triggered the investment surge now showing up as debt, but that was the price of high living standards in the future.

PAUL KEATING: What would we rather live with? A once in twenty year re-equipment of the economy or a flat, languid, chloroformed economy, which is producing modest rates of GDP growth and high unemployment. An eighth percentage point shift in the domestic savings balance will definitely stabilise the debt to GDP ratio, it just will take time, as we make the economy so much more robust and so much more strong. That's point one.

The second point is this. Our private debt on-shore, is about $73 billion but since we removed exchange controls in 1983, we've built up 70-plus billion of private assets off-shore, so our private off-shore assets are now as large as our private on-shore debt. Now what this means is that in the 1990s, we will have a countervailing income stream of very large proportions, coming back to Australia by way of dividends, to match off the interest stream leaving Australia on our debt.

WALTER HAMILTON: Several times, Mr Keating suggested Labor's economic strategy was to make Australia more like Japan. Touching on the pilots' dispute, he embraced another free enterprise hero.

PAUL KEATING: Ultimately, I believe this airline pay claim will come to be seen in the same light as was President Reagan's victory over the air traffic controllers, early in the period of his office.

WALTER HAMILTON: Australia, he said, was undertaking fundamental reform of the labour market, replacing the craft based union structure.

PAUL KEATING: So instead of a welder welding, and a fitter fitting, and a crane driver driving a crane, we will have one person doing all three, or all four jobs, or all five jobs. They will be paid more money but they will be multi skilled and as we change the award structure, we will then be moving towards what we call enterprise agreements, that is, instead of having 15 or 20 unions as an enterprise, the Australian Council of Trade Unions will agree to have one or two.

WALTER HAMILTON: Mrs Thatcher in Britain had failed miserably in this task through confrontation, Mr Keating added. New Zealand hadn't even started to dismantle its craft unions, but Australia was succeeding because, like Japan, it used consensus.

Walter Hamilton, AM, Tokyo.