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Australian Industry Group National Industry Forum, Canberra, 6 March 2000: address\n

Australian Industry Group National Industry Forum


Kim Beazley - Leader of the Opposition


Address - Canberra - 6 March 2000


Check Against Delivery


Ladies and Gentlemen:


I would like to begin today by thanking the Australian Industry Group for the constructive role it plays in the national economic debate.


I was interested to note in your annual submission to the government on what should be in the Budget, in contrast to other business groups, the A.I.G. asked for a modest increase in spending, targeted at research and development, and towards better skills in the workforce.


While still urging a tight fiscal ship, your director Heather Ridout said there should still be some increases in spending on promoting the nation's long-term economic interests.


I see this as far-sighted economics, and I will return to the theme later in this speech.


Ladies and Gentlemen:


Since well before the least election, I have been travelling around Australia to tell the story of the new economic reform agenda this country needs - with education, innovation and new technology as the focus.


We need to get away from dusty debates about the old issues - fights that have mostly been won.


We all now agree on the need for fiscal discipline, an independent monetary policy, deregulation of financial markets, the floating of the dollar, low inflation, and a more open economy.


You and I agree that these are essentials if Australia is to prosper.


You won't get an argument from me about this. After all, I was a member of the successive Labor governments which introduced these reforms - reforms that modernised the Australian economy, putting us in good shape to weather storms like the Asian financial crisis.


We did these things because we believed they were right. We showed leadership on these issues, even if they were unpopular at the time.


We knew that the success of these reforms depended on most Australians believing they were sharing in the benefits, and we ensured that they did, through the tax system and through the social wage.


There are a few issues on the old economic agenda on which we are still arguing. I don't dispute that.


As you well know the Australian Labor Party opposes the G.S.T. and the full sale of Telstra.


We think we are right on equity and on economic grounds. We will be pushing our views on these issues forcefully over the next two years.


One of the things that most concerns us about the G.S.T. is that it may be robbing us of the opportunity to pursue more important policies.


Before the Howard government came to power we had the foundations from which to launch the new agenda. We were making progress on R&D, on research funding, on education and on labour market programs. But after it came to power in 1996, the Howard Government made cuts of nearly $2 billion to labour market programs; shaved nearly $3 billion from education; and over $2 billion in innovation incentives to modernise our industries.


The Howard government is now engaged in spending around $20 billion of the surplus over three years in an attempt to compensate for the G.S.T.


What the Government has done is rob the new policy agenda to pay for the old.


Our position on the G.S.T. in no way takes away from our economic reform credentials. In truth there is an enormous arrogance on the part of those who say we are not committed to economic reform simply because we don't agree with changing the tax mix, or selling a further tranche of Telstra.


We agreed with the government on major changes for the business tax system, with some reservations. But on the G.S.T. we do not agree, and we plan to roll it back.


We are committed to giving full details of our economic policies closer to the election - still about two years away - once we see what the economic circumstances are at the time.


Ladies and Gentlemen:


We were all combatants together in the big battles of the old economic agenda. But I repeat - these battles have largely been won. No sensible government is going to retreat. What worries me is that so many of the elites in this county in media, politics and business still act as though this is the real battleground.


There are new and bigger battles ahead - battles we need to focus our full firepower upon - like how to become a Knowledge Nation, with a highly paid, highly skilled workforce using the best technology to improve the production of goods and services.


Vodafone Pacific chairman Rob Ferguson wrote in The Australian last week, that on return from the World Economic Forum in Davos, Switzerland he found the political debate in Australia was still on the 1980s issues of G.S.T. privatisation and industrial relations. He said he felt he was in a time warp. "These issues are long gone from the Davos agenda and yet we are still bogged down with them in Australia," he said.


We in the Labor Party believe strongly in creating a new economic reform agenda for Australia. My ideas are based on the fact we are now undergoing a revolution with the huge changes in information technology, telecommunications, and scientific discoveries particularly in the area of bio-technology.


This revolution goes hand in hand with globalisation, the growing integration of national economies and markets around the world.


Today I want to talk about how we can build on the reforms we have already won, while preventing a serious popular backlash against globalisation.


We have already seen signs of this backlash with the outbreaks of Hansonism in Australian politics in recent years. We saw it when a perplexing conjunction of interests managed to derail free trade talks by the World Trade Organisation in Seattle late last year.


A recent book, Globalisation and History: the Evolution of a Nineteenth Century Atlantic Economy by Kevin O'Rourke and Jeffrey Williamson, is instructive on this point.


It reminds us that globalisation is not a new event in world history. A similar period of openness in trade, with rapid movements of capital and labour across national frontiers, took place in the late nineteenth century.


This period of expansion came to a sudden halt early this century, and only returned again around 1950, when a new period of globalisation began.


Most analysts have concluded it was the Great War of 1914 that halted this period of openness. This book says they are wrong, and that's what makes it so interesting.


The authors, speaking of the earlier globalisation period, warn:


• ...a political backlash developed in response to the actual or perceived distributional effects of globalisation. The backlash led to the reimposition of tariffs and the adoption of immigration restrictions even before the Great War. Far from being destroyed by unforeseen and exogenous political events, globalisation, at least in part, destroyed itself.


Here's an extract from the book. Ask yourselves which period of history the authors are describing.


• Farmers voiced populist complaints about railroads and bankers. Rich landowners demanded protection from cheap farm products. Workers pointed to unfair competition from imports made with cheap foreign labour and claimed that their jobs were being robbed by immigrants. Capitalists in declining import-competing industries argued that it was only fair that they get compensation for the losses they suffered on sunk investments. And domestic policymakers began to feel that they were losing their ability to manage prices, interest rates, and markets; they felt increasingly vulnerable to financial panic, industrial crisis, and unfavourable price shocks generated in distant corners of the globe.


Sound familiar? It is a description of the western economies from the mid-nineteenth century to the Great War of 1914.


O'Rourke and Williamson say we would be foolish to think globalisation is here to stay. They suggest that: "unless politicians worry about who gains and who loses, they may be forced by the electorate to stop efforts to strengthen global economy links, and perhaps even to dismantle them".


If the authors' arguments are correct, it's a timely warning. In democracies we operate through consensus. It is essential that people believe the system is working for them.


Allow me just a short digression into the 1980s, to explain what I mean.


Since the early 1980s, constant economic change has produced widening market income inequality in most countries.


In Australia too, there was growing inequality of market incomes.


But what set Australia apart was that growing wage inequality was offset by advances in what we called "the social wage" - the full package of benefits available to the poorest workers.


A study last year by National Centre for Social and Economic Modelling showed that between 1982 and 1993, real after tax incomes of the poorest 20% of Australians rose by more than $15 a week. Its most important finding was, and I quote:


• "Changes in the tax-transfer systems appeared sufficient to fully offset growing inequality of market incomes, resulting in little change in the aggregate distribution of disposable income".


The point about this was that right through a decade decried for greed and inequality, Australia stood out against the international trend. We did so because of a government actively promoting social justice.


Now fast-forward to today. The danger we face is that a government retreating from the field of social provision will rapidly produce rising inequality. Say what you like about the Howard government's record in office, - the social wage - the provision of child care, public health, education and training benefits - has not been a priority.


Since coming to office, the Howard Government has cut some $5.3 billion from health and social services. This undermined those aspects of the social wage most important to Australians' acceptance of globalisation - most important to their sense of security if economic change leaves them worse off.


We all need to guard against the growth and spread of a "winner take all" mentality.


Unless we all think about the social consequences of the huge changes taking place in society, people will turn against globalisation in increasing numbers and this will narrow and impoverish our nation's future.


It's not that we want to engage in a phoney social coalition between business and government, such as John Howard is offering. You and I both know that won't work, because John Howard's vision is about fewer responsibilities for government, and expecting business and others to pick up the tab.


It is the job of government, not the job of business, to create good education and training policies, to create the conditions for business to prosper, to put in place the social safety net for those who feel left behind by the forces of history.


Business leaders need to be aware of the importance of these safety nets, and the fragility of the consensus on globalisation.


Just as government leaders need to be aware of the effects of closing government support offices in country towns, business leaders need to think about the symbolic effects of closing bank branches and other services in deprived areas.


One thing that really worries me is the growing practice of trying to shift the risk which shareholders and managers rightly carry, to their workers. We see the same sort of sentiment when industry spokespeople support insuring shareholders against all types of risk, and their directors against their legal personal liabilities, and yet speak out against insuring their workers.


We all need to think about the effects of this behaviour.


We need to think also about the disparities between country and city, white collar and blue collar workers, indigenous and non-indigenous Australians.


And it is important for business leaders to keep an open mind on government investment in education, communications, innovation and research.


Instead of automatically opposing a greater role for government, business leaders should be supporting sensible investment in these areas.


Where they can, governments must provide leadership to create the climate in which innovative, entrepreneurial people work together to bring about new knowledge and translate ideas into economic growth.


As O'Rourke and Williamson make clear, in the earlier period of globalisation education did not play a great part, mass migration was more important in providing the sort of workforce needed in the steelworks and cotton-mills of the late 19th century.


This latest phase of globalisation is different.


The information revolution, and the knowledge economies it is spawning, requires a different type of worker. We are already seeing big skills gaps opening in the IT industry, coinciding with record numbers of our brightest young people leaving our shores permanently to plug gaps in higher-paying economies.


We need innovative ideas on how to keep this knowledge capital in Australia. We have begun to outline our plans on some of these issues with the release of what we call Workforce 2010.


Our major themes are that we will encourage more students to finish school and to obtain post-school qualifications. Labor will strive to ensure that by 2010, 9 out of 10 young people leave their teens with a year 12 equivalent qualification, and that all young Australians achieve a formal education or training qualification.


The report done for us by the Centre for Policy Studies at Monash University shows that there will be no job growth over the next ten years for those without any post-school qualifications. Currently 60 percent of the adult Australian population is in this category.


We are talking about the future pool of workers which you will choose from. So you can see how important this work is.


But perhaps equally important is how we treat the people whose jobs are at risk, who feel like victims of the major events shaping our times.


Labor will set up a National Workforce Forecasting Council to look at workforce needs, to see where the skills gaps are. We will identify workers most at risk of unemployment because of lack of skills, and, where possible, get them into re-training schemes.


We want to get those who would once have gone straight onto the dole, instead get into an apprenticeship; to encourage those in low skill jobs to learn a trade; to encourage more students to get into TAFE courses and more school-leavers to go on to university.


There is more to it than this, of course. We want to use our understanding of the information revolution to inform all our policies.


In broader terms, governments must come up with regional policies that take as a fundamental commitment the provision of enough bandwidth so that, through the Internet and other online methods, new industries can get started, along with the revitalisation of manufacturing, mining, food processing and agriculture.


In health it means the improvement of services by way of video-conferencing, tele-imaging and tele-pathology. By these means the tyranny of distance can be overcome, information can be shared instantly.


In this digital era, we need to explore ways to get greater diversity in our media. We need to encourage the use of new technology, such as datacasting, in a way that can benefit all Australians.


In addition, Labor is as concerned as the Australian Industry Group that this government has been responsible for the first decline in business expenditure on research and development since records were collected.


Restoring a decent incentive for research and development will be at the very centre of Labor's policies to build the industries of the future and modernise and strengthen Australia's traditional industries. In this context, we are considering the role of tax concessions, but will do so along with several other options in developing our industry policies for the next election.


We also need a population policy that brings in skilled immigrants to boost our workforce in key areas. I see that John Howard at the weekend has finally signed up to this idea - one I have been promoting for years. Labor's Shadow Population Minister Martin Ferguson will be speaking to you later today on this issue.


We will be putting more flesh on the bones of these ideas over the coming months with our policy statements.


Ladies and Gentlemen:


Before concluding today, let me make one thing absolutely clear: the new economic reform agenda is not - and will not be under Labor - an excuse for backsliding on the old agenda.


Properly conceived, the new economic reform agenda stands on the shoulders of the old. We retain our unwavering commitment to the economic fundamentals: low inflation; an independent Reserve Bank; fiscal responsibility.


In particular, we remain committed to what Shadow Treasurer Simon Crean and I have called the golden rule of sound economic management under Labor: that governments must not borrow to finance current spending, and they must save in the good times so that over the cycle the budget balances.


Let me close with this thought: while we agree with you on these issues, we believe there is a role for government in presenting a powerful new economic reform agenda for this country. And I'm pleased to note The Australian's editorial writer last Friday showed he had finally caught up with my ideas - ideas I've been promoting for years.


It's not just that we have to embrace the new economic agenda, as The Australian urges - it is also absolutely vital that all Australians feel they have a stake in the new economy. Public support for economic reform is always a fragile prospect, and I understand that equation better than anyone in this room.


If we cannot create an economic order that begins to show tangible benefits for average Australians, we can expect even existing reforms to start unravelling.


We will pursue these efforts not just because they are good for business, but because they are good for the entire country.


Thank you.


Authorised by Gary Gray, 19 National Circuit, Barton ACT 2600.