The Economic Outlook and Australia's Trade Agenda

Address by the Deputy Prime Minister Leader of the National Party Minister for Trade The Hon Tim Fischer MP to the Minter Ellison Executive Briefing

Adelaide, 29 April 1999

(Check Against Delivery)

Introduction

Thank you; ladies and gentlemen.

I am always glad to share views and experiences with Australian companies, particularly those from a State as dynamically engaged with our trade effort as South Australia.

When one thinks of South Australia and exports, the magnificent performances of the wine and automotive industries immediately spring to mind.

Wine is one of the great export success stories of the 1990's with exports forecast to rise over a billion dollars by the end of this year. This compares to only $114 million at the beginning of the decade. And we are making strong inroads into new key markets such as Japan, where exports have been growing at a staggering 135 per cent over the last year, despite the ongoing recession in that country.

Our auto exports have been similarly impressive, though there is no denying that the regional economic crisis has had an impact on exports over the last year or so. But mirroring the Government's strong trade diversification strategies, there has been impressive growth in markets such as the Middle East - especially the United Arab Emirates which is now the largest export destination for Australian-made cars - and New Zealand where there has been a near to thirty per cent increase in exports.

Global Economic Developments

Almost two years after the onset of the Asian economic crisis, what can we say about the outlook for the global economy?

World growth this year is predicted by the IMF to be only around 2.3 per cent - the same as 1998 but well below the trend growth in past years. In its latest World Economic Outlook report, released last week, the IMF now considers the balance of risk to be even - with uncertainties both on the upside and on the downside. This is a considerable change from last December, when the IMF saw the balance of risks decidedly on the downside.

On the positive side we have the continuing strength of the US economy, with strong domestic demand, continued employment growth and low inflation. On the other hand, many analysts expect that European growth will moderate this year. And it doesn't look as if the Japanese economy will come out of the doldrums any time soon - indeed, the major structural reforms needed in Japan for sustainable recovery are likely to have a contractionary effect in the short-term.

This rather mixed global picture is mirrored in our own region. Despite signs of bottoming-out in some economies and a significant improvement in market sentiment, a broad-based recovery in the region as a whole will still take some time. Korea appears to have been making the best progress and Thailand may also be bottoming out, even though we are likely to see only minimal growth in 1999. Indonesia remains a concern, but has also seen more encouraging financial figures in recent months.

China's economy is also under pressure, as indicated by the rise in both unemployment and non-performing loans, and the collapse of a number of the International Trust and Investment Corporations. Premier Zhu Rongji in his March report to the National People's Congress indicated the need for continued close attention to China's economic problems. I hope to get a better idea of the situation in China during a visit I will be making there in May.

Australia's performance

The performance of the Australian economy in the face of our region's worst financial crisis for half a century has been magnificent.

The overall outlook for our economy remains good. We've got one of the highest growth rates in the developed world, low inflation and low interest rates, a Budget that's in very healthy surplus, unemployment at an eight year low and days lost to industrial disputes at an eight decade low.

This is a great set of economic figures. But they did not just fall into the Government's lap. They are the result of our firm commitment to economic reform and our unwavering determination to make the Australian economy more productive, more competitive and more responsive to global change. Tax reform is an integral part of this, of course.

Australia's export strategy

On the trade front, we can not afford to be complacent. Export volumes are forecast to grow at a slower rate (1.5 per cent) in 1998-99 than in 1997-98 (3.8 per cent), and well below the longer-term trend. This makes for difficult trading times, but the Government is meeting this challenge head-on.

Our strategies to help Australian exporters in these tough times are set out in the Trade Outcomes and Objectives Statement 1999 which I tabled in Parliament in February, and which I commend to you all.

Our efforts on market diversification have already shown good results, with exports to markets outside East Asia growing by more than 20 per cent last year.

Our trade efforts are pitched at three levels - the multilaterally through the World Trade Organisation (WTO), regionally through APEC and bilaterally at the country-to-country level.

The WTO is a key focus for the Government in 1999. In cooperation with like-minded countries, we are already pushing strongly to build momentum for a new round of trade negotiations - the so-called Millennium Round - in the lead up to the WTO Ministerial Meeting in Seattle in November.

Australia, as a significant trading nation and with our diverse export interests, must lead the debate on the new round, and the Government wants to ensure that all Australians can contribute to our WTO efforts. We've already sought public submissions on Australian priorities for a new WTO round, and I would encourage you all to give this some serious thought. Details on how to make your voice heard are available on the Department of Foreign Affairs and Trade web page (www.dfat.gov.au).

A particular feature of our trade work since we came to office in 1996 has been an increased stress on bilateral country-to-country negotiations. We have achieved great results through such measures as the establishment of the Market Development Task Force, and an increase in our global resources in places as diverse as Buenos Aires, Pretoria, Brussels, Lima, Bucharest and Abu Dhabi.

The Government has legislated to extend the life of the Export Market Development Grants Scheme for a further two years - a simplified EMDG scheme that targets the needs of emerging exporters. The Export Finance and Insurance Corporation has been moved into the trade portfolio, which will allow us to improve and fine-tune our trade finance architecture. And we will continue with our domestic reforms to take the red-tape out of doing business in Australia.

Conclusion

There is no denying that these are difficult times internationally. I do, however, have great confidence in the ability of Australian exporters, including those of you here in South Australia, to make the most of these difficult times. There are opportunities out there, as many in the wine and auto industries would be able to attest to. That is why I implore you to maintain a strong export focus as a vital ingredient to Australia's overall strong economic performance.

Thank you for the opportunity to touch base and I would be pleased to take any questions you may have.