Deputy Prime Minister
Leader of the National Party
Minister for Trade

The Hon Tim Fischer MP

Auckland, 27 September 1996
Introduction

Philip Burdon, Kerry McDonald, Neil Scott, distinguished guests, and members of the Australia New Zealand Business Council.

Today I want to talk to you about the Australian Government's economic policies, and in particular their significance for New Zealand business

Given that Australia is your largest export market and a major destination for your offshore investment, the health and directions of the Australian economy are indeed of great significance for New Zealand.

Macroeconomic Policy

My Government has been in power for six months now and has recently delivered its first budget.

The budget is a major foundation stone for better economic management, but it is only the beginning of an economic strategy to deliver a sound and sustainable future for Australia.

Budgets are very complex animals, and as a rule don't make good lunchtime conversation. But let me distil what I think are the important messages from that budget for New Zealand business people dealing with, or in Australia.

A central pillar of the Government's economic strategy is to create a better climate in which business can prosper.

This strategy involves achieving a more responsible balance of macroeconomic policies. "Responsible" in this case, means putting our budget in underlying surplus in year three of our term of office.

If our announced cuts of between A$7-8 billion in this year's and next year's Budget are achieved, we will have reduced government outlays as a proportion of GDP by about 2 percentage points to just over 25 per cent.

"Fiscal consolidation" is the Treasury term of course, but I've always been one for calling a spade a spade.

And in this case there is no denying that the spade is "spending cuts".

And we have needed the spade to fill a budget black hole.

I am being frank about this, because as any Australian business people in the audience will tell you, we have cut spending on some industry and trade development programs which many firms saw as beneficial.

But we have to balance the interests of the future prosperity of all Australians against any short-term political pain associated with cutting particular programs that may have benefited some Australian firms.

We are committed to boosting Australia's savings, reducing our reliance on foreign investment and easing the current account problems that are constraining Australia's growth.

And of course it is absolutely vital for ALL businesses dealing in Australia that we raise our national savings and keep inflation low, so that we deliver a climate for low real interest rates and vibrant investment.

I have to say that the financial markets have agreed with this approach. Interest rates have already fallen since the budget and the Australian business community is responding positively.

So we've taken the spade and started to fill the deficit hole. We have laid the macroeconomic foundations of an economic strategy.

But, we're not proposing to cut back on government spending and just sit back and congratulate ourselves.

Microeconomic Reform

In order to build on the foundations, we are also committed to a revitalised approach to microeconomic reform.

This includes improving the efficiency of transport, the waterfront, communications and energy, reducing the regulatory burden for business, and establishing a more adaptable labour market.

Economic growth is projected to be robust over the medium term (three and a half per cent in 1996-97) and business investment is expected to grow strongly. But unemployment is likely to remain high (at eight and a half per cent in 1996-97).

So, freeing up the labour market will be an important building block in both fostering higher productivity and job creation.

On that score, many of you will be aware that the new Industrial Relations Bill is currently before the Australian Parliament. This will bring fair, sensible and evolutionary changes to our industrial relations system.

We have entrenched the principle that if men and women in the workplace want to negotiate directly with their employer, subject to some minimum guarantee safeguards, then they ought to have the right to do it.

The Government believes that if these reforms can be got through the Australian Parliament, then over time they will do much to reduce the unacceptably high levels of unemployment in Australia.

You will notice that I said "if" we could get these reforms through the Parliament. It is sometimes forgotten that New Zealand has not been blessed, as we undoubtedly are in Australia, by having a two-chambered national government, and six State and two Territory governments.

This makes for challenging and stimulating policy-making, but also explains why, on some issues, we in Australia cannot always move as fast as sometimes you in New Zealand would like. Perhaps our inability to move as fast also explains why we have not had to change our electoral system recently.

But to return to our plans for economic reform. The Government has recently received reports on the Productivity Commission's stocktake of microeconomic reform and from the National Commission of Audit. It has also called for sectoral reviews of business regulation as part of the regulatory reform agenda and a review of the financial sector (the Wallis inquiry).

These reviews will provide a basis for reinvigorating microeconomic reform in the next few years, accelerating the economy's growth potential and improving trade competitiveness.

Regulatory frameworks need to be responsive and flexible in the face of a changing international environment. If they aren't, they will simply hold the country back.

What we need to ensure is that we remain attuned to the need regularly to review and reform regulatory structures. Otherwise, they will become a drag on the efficiency and productivity of our industries.

The review processes that I've mentioned are aimed at ensuring that the regulatory framework for business remains contemporary.

Trade Policy

To build the frameworks further, let me add that we are serious about strengthening Australia's trading position.

We see our trade policy playing a critical role. It complements and reinforces the reform process, by securing the best possible trade and investment conditions and opportunities for Australia-based firms and industries.

For my Government, trade policy begins at home, by fostering more productive and competitive firms. On that foundation, trade policy then extends off-shore, pursuing multilateral and regional actions, as well as a more aggressive approach to bilateral trade policy.

This more aggressive approach has already delivered us a banking licence in China, a fruit market access agreement with the Philippines, access for fresh milk products to Hong Kong and access for kangaroo meat to the French market.

For 1996/97, we expect exports to continue growing strongly at 8 per cent, although we also expect strong import growth.

We expect the current account deficit to fall slightly as a share of GDP, to 4 per cent.

Well, I've talked about our spade, starting to fill the hole, laying foundations and building some frameworks, and you might well ask, "Well what are they building over there, and is New Zealand interested?"

Australia and New Zealand: Better Business Opportunities

At the end of the day, the Government is driving sustained economic growth, attracting investment, creating jobs, generating increased exports, and fostering higher incomes and living standards.

And for New Zealand business that means we are building a better place for you to do business, a better place to invest profitably and safely, and a growing and more affluent market for your exports. Just this week, the Australian Treasurer and the New Zealand Minister of Finance exchanged letters confirming that both Governments intend that investment across the Tasman should be subject to minimum constraint, both now and in the future.

We are also building a source of more cost-effective and better quality goods and services for you to import; we are building a better source of investment funds; and we are making Australia a better potential partner for collaboration in the global market place.

That's the good news. But New Zealand exporters should also be warned. What we are also building are Australian firms that are better competitors for international markets that both countries aspire to win.

So on that challenging note I invite you to take a new look at Australia. After all, it's always worth keeping an eye on what the neighbours are building. And it's definitely worth thinking about what you might build together.

I do not wish to repeat what Philip and I told the Conference a short while ago about our discussions this morning. But I would like to state for the record my firm conviction that this has already been one of the most significant years for progress in CER since the Coalition Government in Australia brought the Agreement to signature stage in 1983.

And there is no doubt that, with goodwill and hard work on both sides of the Tasman, this success will continue.

CER is a core component of Australia's relations with New Zealand, and those relations are of primary importance to Australia.

Someone asked me earlier today if I thought the forthcoming New Zealand election would bring any changes to the relationship. I said that I was confident it would not bring any fundamental change. Because I am certain that all of the NZ political parties recognise, or will soon come to recognise, the very great importance to both countries of the relationship, including the benefits it has brought to both sides.

The Australian Government will be looking forward to working with the next Government of New Zealand.

One familiar political face will be missing from Parliament after 12 October - not, I hasten to add, because of any political transgressions. That's my friend and colleague Philip Burdon.

As Minister for Trade Negotiations since 1990, Philip has been a valued friend of Australia, as well as a formidable defender and promoter of New Zealand's interests. I think I can speak for previous Australian Ministers for Trade when I say that the friendship, integrity, knowledge and expertise that Philip brought to this portfolio will be greatly missed.

I know that Philip holds strong and very positive personal views on the broad Australia New Zealand relationship, and particularly the economic relationship. On behalf of my predecessors and myself I would like to thank him for his personal contribution to the success of CER, as well as to many other regional and multilateral trade initiatives, including in APEC, the Cairns Group and the WTO.

I understand that Philip's negotiating and organisational talents will not be lost completely to New Zealand diplomacy, as he has recently taken over as Chairman of your Asia 2000 Foundation. I wish him well in that endeavour.

I would also expect that we will see him at future ANZBC Conferences, and I hope that then, if he thinks of asking a difficult question, he remembers that a Trade Minister's lot is not always an easy one.

Conclusion

Finally, I wish to thank Kerry and Neil for the invitation to address you today. It has been a pleasure to be here at the Conference, and indeed in Auckland - home of the America's Cup!

I understand the Conference has been a successful one, and I hope when next year's Conference is held in Australia, that I will get an opportunity to spend some more time with you all.

CER was always envisaged as a collaboration between government and business, and it's been a pretty successful one. That spirit of collaboration is going to be even more important and challenging as CER's links with AFTA and MERCOSUR grow and strengthen. It is a challenge I hope we can meet together.

Thank you.