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Australian Industry Group dinner, Great Hall, Parliament House: transcript of address: Australian industry, economy, tax, employee entitlements, SA Government, industrial relations.

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6 August 2001


Subjects: Australian industry, economy, tax, employee entitlements, SA Government, Industrial Relations.


Mr Ivan James, the Acting President of the AIG, my ministerial and parliamentary colleagues, your excellencies, ladies and gentlemen. Could I first of all thank you Mr James for your kind welcome, and if I may say so a very thoughtful and reflective speech on many of the challenges that face Australia at the present time.

Tonight is an opportunity for me to express my gratitude to the AIG on behalf of the Government for the contribution it’s made to the development of policy and for the partnership we’ve had together over the last five-and-a-half years. If my memory serves me correctly it is almost three years ago to the day that I launched the AIG representing as it did an amalgamation of two other great industry associations. If my memory also serves me correctly again, two days after that I launched the new tax system. I’m not promising you that we will in two days time, although we are a government that prides itself on surprises from time to time, launch a policy initiative quite as momentous as that.

But it is a reference point to what has happened over that period of time and it’s a reference point for me to respond and comment upon a number of the issues which were raised in Mr James’s address. As I listened to what he had to say and agreed with so many of the points that were made, particularly his reference the inexorable forces of globalisation within our community. I was reminded that during my well publicised and important meeting with Mitsubishi in Tokyo last Friday that my interlocutors were respectively from Germany, the United States and Australia, we were there in the Japanese capital with no citizens of that particular country present. And it was just one of those simple but regular reminders that one receives that the world has indeed changed forever and any notion that that changed world can be turned back, any notion that somehow or other we can shrink away into a corner and ignore

the globalised environment in which we exist is completely ill founded.

Our challenge is not to avoid or resist globalisation. Our challenge is to master it, to manage it, to harness and garner its benefits, and where appropriate assist people who are too harshly affected by it. And that remains one of the great and enduring challenges of all governments of industrialised countries as we enter the early years of the 21st Century.

Tonight I do of course wish to say a few things about the economic journey of the last few years and also the prospects for the Australian economy. I am pleased to say with some fervour and emphasis that the Australian economy is well and truly back on a very strong growth path. We did have a bad December quarter, we did have some transitional effects from the introduction of the new taxation system. But all of the indicators now point to gathering strength within the Australian economy, such that many predict that next calender year the Australian economy will grow faster than any other in the industrialised world.

That growth is characterised by a very strong trade performance aided by a number of factors: certainly by a super competitive exchange rate; a return to far better conditions in many parts of rural Australia - long overdue given the many difficult years through which our primary producers have passed; the contribution of the new taxation system, to which I’ll return in a moment, to Australia’s export performance likewise should not be discounted. A tax system that removes all embedded indirect taxes into our exports of goods and services can only be beneficial to our overall trade performance.

We’ve also over the last five-and-a-half years enjoyed very strong productivity growth and that is a tribute to a number of things not least the cooperative culture which exists between most employers and most employees within Australia. And out of that higher productivity I’m very happy to say that I can speak of five-and-a-half years in which the real incomes of average Australian workers have increased and when added to the benefits of personal tax reductions under the new tax system, and the significantly, indeed dramatically lower housing interest rates which have been a characteristic of the last few years, present a situation where it can be argued with some force that the real living standards of millions of Australian workers have been enhanced.

I welcomed Mr Acting President your reference to the increasing importance being placed in the political debate within Australia to issues related to science and innovation and technology. Backing Australia’s Ability, which was the product of several years of dialogue between senior ministers in the Government, and I particularly thank Senator Minchin, Dr Kemp and Senator Alston, the three who are principally responsible for that work, for the enormous effort and diligence that they committed to producing that policy.

I also want to thank industry for its very valuable contribution and not least the Australian Industry Group that worked very closely with the Government and was particularly helpful after the launch of the policy in helping to refine the 175% premium R&D tax incentive. The way in which that policy was put together, the way in which in a very open and transparent fashion there were exchanges between the Government and various industry bodies and scientific groups within the Australian community was I think something of a model for the way in which policy of that kind should be made.

There is little doubt that this nation did need more investment in innovation and there is little doubt that the success of that policy and matters related to it will be very important to the long term economic future of this country.

As you are aware the most significant economic reform to which this Government has been responsible during its second term was the introduction of the new taxation system. I believe that history will judge the Government as having done the right thing for the long term economic strength of Australia in persevering with the introduction of a new taxation system. I do not pretend for a moment that there have not been some transitional difficulties. And I want to thank businesses, particularly small business, for the patience and understanding and the commitment they have made in the process of the introduction of the new taxation system.

But there are very important benefits and much of what your Acting President had to say tonight and much of what is beginning to enter a lot of the political debate at the present time surrounds the undeniable demographic trend within the Australian community and that is of an aging population. And there are many ways in which governments must respond to that and many of the observations made by your Acting President are very relevant and are observations which I support.

But one of the important ways in which a government can respond to an aging population is to provide a revenue base which will grow commensurate with the development of the economy as the demographics change. And the weakness of the indirect tax system that we threw out a year ago was that it was a declining revenue base. It was posited entirely on goods and then in many respects a limited area of goods and totally ignored the burgeoning service sector. And the maintenance of that system was utterly antagonistic to what was needed as the economy and the demographic composition of the Australian population over the years changed. And one of the strongest single arguments that can be advanced in support of the introduction of a broadly based indirect tax - the goods and services tax - is that it will provide a far sounder revenue base from which to fund the increasing demand for services to support the aging of the Australian population. And with the dedication of all the proceeds of the goods and services tax to the Australian states also responding long years after the need to one of the weaknesses of the financial arrangements within the Australian federation, that is a very important characteristic.

I can’t of course let a reference to the introduction of the new tax system go by without referring to the fact that the company tax rate has fallen from 36% to 30%, and that for individuals in certain entities the capital gains tax has been effectively halved.

I also want to take the opportunity of thanking the AIG in the context of corporate tax reform. I have not forgotten that this group came out very strongly in favour of the fundamental changes that were ultimately embraced by the government in that area, not withstanding the fact that some of your membership in terms of their own specific company situations might not necessarily have been advantaged. And it was an example may I say of an industry group putting the national interest very much in front of individual sectional interests.

If I may very briefly turn to a large section of your Acting President’s address and that is the very unfortunate and very difficult industrial dispute which is affecting the automotive industry in Australia at the present time. Can I say in general terms that we are in fact enjoying a period of almost record freedom from industrial disputes within Australia and one of the things of which I am especially proud as Prime Minister of a government that is some times unfairly been criticised as being antagonistic to the interests of working people is the fact that over the last five-and-a-half years the financial position of working men and women of Australia has been greatly enhanced by the fact that we’ve had so few days lost from industrial disputes. And might I also tangently say that another thing of which I’m especially proud is that over that same period of time we have seen a quite stunning rise in the number of

apprenticeships and traineeships. That level having languished at between 120,000 and 150,000 for a period of some years until 1996 has now more than doubled so that we have in excess of 305,000 Australians in apprenticeships at the present time

But generally the industrial scene has been one of rising productivity, of rising employment, of rising real incomes, and of almost a record freedom from days lost from industrial disputes. That of course makes the dispute now underway all the more regrettable and all the harder to defend in any sense. I don’t think it needs me to repeat the obvious that anything that casts doubt on the stability and continuity and the sense of common purpose of the Australian motor vehicle industry, the manufacturing motor vehicle industry at the present time is counterproductive in the globalised environment in which we all live and of which I discussed with officers of Mitsubishi corporation in Tokyo last week.

I hope that the workers at Tristar and the union of which they are associated see the wisdom of listening to what the umpire has had to say. We have designed a new industrial relations system which has made a powerful contribution to higher levels of productivity and has made a powerful contribution to the enhancement of the real incomes of the working men and women of Australia. And part of that new construct is a role for the industrial relations commission which is different from its role under the old system that we replaced with the new system. But where it has a role we respect that role and we support that role and we ask others to respect and support that role because where there is a role for the industrial umpire then the verdict of that umpire should be adhered to.

I am aware of the very legitimate concern within the Australian community and amongst employees whether they belong to unions or not about the payment of entitlements when companies go into receivership or liquidation. Let me make it very clear that workers are entitled to receive their entitlements and there has been much debate about the most effective way to respond. I share the views of Mr James regarding the unsuitability of the Manusafe proposal. It is possessed of all of the flaws that he outlined. It is not appropriate for the circumstances of protecting worker entitlements.

I do not believe as a matter of principle that response to the failure of a very limited number of companies that the financial burden of that should be passed on other companies that are doing the right thing. That has always struck me as being particularly unjust and unreasonable. And any scheme that interferes with the necessary cash flow of firms, particularly small businesses, is a scheme to be avoided. But there is nonetheless a responsibility on the part of the general community through its governments to provide a safety net where entitlements are at risk. And I believe that subject to a very important proviso, and that is the states joining and sharing their responsibilities as governments which have in fact been responsible, quite properly, for the laws that have given rise to many of the entitlements in the first place subject to them entering that scheme, then I believe the proposals that the Government adopted last year represent a fair and proper basis for providing a safety net scheme for workers unfortunate enough to be employed by companies that get into difficulty.

To date there has been a negative response from the states. But I am pleased to announce to you tonight that earlier this evening the Premier of South Australia indicated to me that his government would join the federal government’s scheme with effect from tomorrow. I would ask the premiers of the other states of Australia to follow the lead of South Australia. I will be in communication with all of them. It is not an unreasonable request. There are state responsibilities, there are state laws involved, there are state awards involved, and I think it does in the words of your Acting President represent a proper basis for responding to the very

legitimate concern within the Australian community and the justice of the cause of people whose entitlements are denied to them. But the way in which to deal with an issue such as this is not through strike action which can only hurt the families of those on strike and can only hurt the workers and the families of the workers who through no desire of their own are consequently stood down or potentially thrown out of work.

Ladies and gentlemen, can I finally say that I very much welcome the forward looking character of the address made by your Acting President. This country is in my view heading in the right direction. We have come a long way in the last 20 years in terms of economic reform and economic change. In his kind introduction Mr James mentioned my long association with your predecessor organisation, particularly the Metal Trades Industry Association. And thinking back over that period of 20 years I can recollect as to how the Australian economic debate has changed.

I think we have learnt a lot about our own country, we have learnt a lot about adjusting to a very different world. We’ve embraced five major areas of reform of which taxation reform has been the last and certainly in many ways the most challenging. But what has come out of that in my experience has been men and women in business in Australia always having a capacity to think in a futuristic way and always having a capacity to think of the national interest as well as personal and sectional interest. We are forever part of the globalised environment in which we all now exist. We have as governments the responsibilities I outlined, and you as leaders of business and leaders of the union movement and others have your responsibilities in relation to responding to those challenges.

We are an aging population like all other industrialised nations and that carries with it the challenges identified in your Acting President’s address. We have some precious assets few other countries have. We have an essentially classless society, we still have a deep egalitarian streak, we still have a very profound sense of justice and fair play, and we are a remarkably cohesive country. Few nations on Earth can boast a social experiment of Australia’s post war migration program, and few countries on Earth can boast the success of that program and the contributions it’s made to the building of a modern, outward looking, sophisticated liberal democracy.

Ladies and gentlemen may I thank you all again for the contribution that you have made through AIG to the development of important policies in partnership with my Government. I thank those members of my Government present here tonight for their role in responding to those policy challenges. We have been a reformist government and in the process we have probably offended some, we have presided over some transitional difficulties in certain areas. But in the end the role and responsibility of government in the kind of economic environment in which we live is to change and to adapt and to provide leadership in the process of change and adaptation. I believe that we have done that, and looking back over the last three years I can reflect that the Australian economy is strong and robust, it is increasingly respected around the world. The Australian business community has played a very major role in bringing that about and I thank you most warmly for your contribution.


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