Australia 2000

University of Western Australia, Perth - 22 January 1988

We are only twelve years away from the next century. What sort of nation will we be, what sort of nation do we want to be as we move through the year 2000?

Will we be faced by proposals for basic constitutional change and upheaval which could result in Australia becoming a republic?

Will we be a vigorous and relevant country, with a high world standard of living, participating actively within our own region, earning respect from our neighbours, or will we be an unhappy appendage on the south east of Asia, unwilling to accept the challenges of cohabitation with Asia?

Will we be despised as a resource wealthy, largely white people who would not accept the challenge of life, who wanted to jump off the world, who had had it so good for so long they could not understand what a competitive world was about?

Will we become just another nation that failed to realise its potential.

What are the issues we should address to achieve a strong, vibrant and thoughtful nation.

Let me address these questions in turn.

The first question really is fundamental. We should remember that Australia has reached its present state as a constitutional monarchy. Australia has provided a good home and a good life for millions of people from nearly every corner of the world. All Australians, irrespective of wealth or position, are equal before the law. While we have not always been well governed, excesses of government have at least been held in check, if not by the direct process of the parliament, at least by the process of elections.

When proposals for change in the constitution have been put to the people of Australia, they have been accepted, if they were in accord with the general aspirations of Australians. They have been roundly rejected when there has been an attempt to push Australians in directions foreign and alien to their nature.

One of the great attributes of our system of government is quite simply that it is responsible government. The Australian government must justify itself before the parliament. Ministers and Prime Ministers are open to question and challenge, they are responsible to parliament and, through parliament, to all Australians.

We should ask if any Australian is going to be better off, will any Australian family be advantaged by a change to a republic?

Some may say that many people have come from Asia, from Southern or Eastern Europe and have had no personal connection with the monarchy.

It should be emphasized that all these people came to Australia as a constitutional monarchy, knowing that this country, under its present form of government, would guarantee them political freedom and equality and economic opportunities which were not available in their own land.

So again, what is the advantage of any proposed change?

It is important for countries to maintain historical links unless they are positively harmful. Such links represent continuity and provide a sense of stability and of purpose. They provide a standard by which change can be judged. The monarchy is such a link.

If somebody wants to say: but look, we are entirely independent now, it is inappropriate that we should have a monarch sitting as head of state. Why is it inappropriate? Does anyone feel diminished by the status of the monarch? I don't believe Australians think in these terms. On the contrary the monarchy provides a standard, a sense of stability and a great deal of pleasure for many Australians.

It ought to be remembered that people who want dramatic change, as a first step propose destruction of past associations as a means of opening the door to a more radical future.

There are even more important questions, however. If we were to become a republic, if we were to have a president, what sort of president would he be? Would he be appointed, would he be elected, would he have constitutional powers, or none? Would he have executive powers that would detract from the government of the day as we know it, and from that element of parliamentary responsibility which I earlier mentioned?

I have heard a number of eminent Australians saying that they thought that we should adopt some part of the American system because they believe that is the republican system that works best.

With the greatest respect, such people know very little either of the workings of the Australian government or of the American system.

The serious consequences of Watergate, would be most unlikely to occur under the present constitutional system in Australia simply because the prime minister has to enter the parliament every day the parliament is sitting and be answerable to that parliament. Telling the truth is of the utmost importance. Misleading the parliament is cause for resignation. A president does not appear daily before congress and does not have to answer the most probing questions on his actions. Watergate would have been revealed much earlier under our system and at much less constitutional and social cost.

I happen to regard what President Reagan did concerning in Iran as much more damaging than whatever President Nixon did during the Watergate period. President Nixon's actions did not go to any element of domestic or international policy and did not affect America's relations with her allies. True he had not told the truth, it was a ghastly and terrible episode.

Concerning Iran, president Reagan was actively pursuing policies out of the White House, opposed by the state department opposed by the pentagon, contrary to the wishes of congress and contrary to the law of the land and, above all, in direct contradiction to the policies he was urging on all his major allies. It went to the heart of American government and to the heart of America's relations with major allies.

Americans, wisely have not wanted to cause another catastrophe, another destroyed presidency so soon after Watergate. Thus President Reagan has escaped lightly.

No Prime Minister out of his private office in this country could try and organise independent and separate operations, either within or without Australia without the parliamentary system calling those actions into check. It is just not possible.

The Prime Minister, while he keeps the confidence of cabinet and of the parliament, can make sure that his policies are put into place. Such are the separation of powers in the United States, that the president cannot make sure that his policies are given effect. Partly as a consequence of that but as a consequence of that but also on the part of the White House and congress, the world is facing financial disasters greater than anything that has occurred since 1929.

In our case, if the government's budget-did not get through, as has been the case with President Reagan year after year, our government would fall. In our system the Prime Minister would have been changed, or there would have been an election.

The Prime Minister, signing a treaty with foreign powers, knows that it will be endorsed because he has his majority in the parliament. President Reagan is going to have to fight tooth and nail to get his intermediate range missile treaty with the Soviet Union through congress. He will be fighting members of his own party, furiously and strongly in relation to it. What a rebuff it would be, what a setback for world diplomacy, if that treaty is rejected.

This isn't an odd or strange occurrence in the United States. Woodrow Wilson had supported the League of Nations, and supported American membership. He was roundly rebuffed by Congress who would have none of it.

When people tell me that the presidential system has some advantages, let them examine the issues, let them enunciate the advantages. We must beware of shallow arguments and false notions.

Some suggest our system causes too many elections. Again, it is a question of priority. There is likely to be a proposal before us, I understand, leading to a fixed four-year term of parliament with an election not being capable of being held for the first three years, giving the Prime Minister discretion only in relation to the fourth year.

This is an unhappy attempt to blend some part of the American presidential system onto the Australian system of responsible government.

I have no problem with the simple extension of the term of the parliament under the current processes, although if the House of Representatives is to be extended to four years, I would want the senate reduced to four.

People glibly talk of three years as being insufficient, but they forget the senate, where the term is already six years. Under the present arrangements if there were a four year term for the representatives, senators would have eight years. I would suggest that is far, far too long. I am not sure that six years isn't too long for the senate. Any proposals to give the representatives four years and the senate eight, should be rejected out of hand. Anyone making that suggestion would, I believe, be entertaining a hidden agenda designed to bring the senate into disrepute. they might believe that if the senate has eight years that it would be easy to reduce its powers at a later point, something which basically I would be opposed to, even though some of its powers need changing quite significantly.

Putting a constitutional limit on the capacity to hold an election, or a limit on the parliament to force an election, diminishes the concept of responsible government significantly. It diminishes the power of the parliament over the executive and diminishes the capacity to re-establish a strong government after a period of weak government.

Let us assume that a government is just elected and the parliament is evenly divided. Under the constitutional proposal we are discussing, there could be no election for another three years. The upshot would be three years of hamstrung government, three years of weak government, three years of ineffectual government. There are circumstances where the only solution to a parliamentary situation is a new election. That should not be regarded as a disadvantage but as the most democratic moment of all in the history of a democracy.

The people proposing that we should become a republic need to demonstrate that individual Australians and Australian families will be better off. They would also have to start defining what kind of republic, they have in mind. If in the end it comes to giving somebody in the office of governor-general the title president, without any relationship to the crown, would it be worthwhile, all the fuss and division and loss of historical continuity.

People having proposals for change have, I suspect, far deeper and wider objectives than that. Australians would be to walk blindly along these paths.

We will have am unhappy future if it is to be spent arguing about forms of government, when there are so many positive and constructive things to do. Good people can govern Australia well within the present system. Inadequate people are clearly unable to govern Australia well, whatever the system.

Let me turn to the second question.

What kind of country will we be in only twelve year's time? How will we be regarded by Asia? What role will we be playing in the world beyond Australian shores?

Australia will be living in a world fiercely competitive in all commercial and trade markets. There have been significant changes as capital markets have been opened around the world, but trade markets are possibly more restrictive than ever.

Continuing United States budget deficits, have led to trade imbalances, which are causing severe stress in all financial capitals. The United States has become the major debtor country. As a result, the central bank of Japan , of Germany, of Britain and France have supported the United States dollar, by over a hundred billion U.S. dollars, in the last ten to eleven months. That central bank support has been very significant in recent days. the support might be worthwhile, if the necessary policy changes were being put in place in the United States . That is not happening. Therefore in the end, central bank support is likely to be ineffective, with the inevitable result that the U.S. dollar will continue to fall. One-hundred yen U.S. dollar is a real possibility.

In addition, the accumulation of third world corporate and individual debts has reached record levels placing further strain on the financial system. These stresses will not disappear quickly.

October market falls were greater than 1929, but unlike twenty-nine there has not been a rebound. We sometimes forget that it was not the crash of twenty-nine that did the damage and caused the depression of the thirties. It was the fact that there were successive falls, and the bottom was not reached until 1932, three years later, when the Down Jones Index had fallen from 380 to 40.

At best, the next few years are going to be difficult for middle ranking trading countries, especially Australia.

Australia has relied for her wealth on agricultural products and on the export of metals, and minerals. With some exceptions the international market for these commodities is going to remain tight. The European community and the United States subsidise their agriculture by over 120 billion United States dollars each year. World growth is unlikely to be high enough to maintain current prices for many metals and minerals. In these circumstances it is most unlikely that Australia will be able to maintain current living standards, based on traditional of agricultural products, metals and minerals.

It should be noted that our gross debt stands at over100 billion dollars and that is equal to 41% of G.D.P. By any standards we are significantly in debt and have built an obligation for our children which they will find a heavy one. The burden on each family now stands at $20,000.

The paramount objective of Australian policy should be to build our overseas income, to reduce our external debt, to enable Australia to pay her own way, and to contribute to the politics of the region in which we live.

What is happening about this now? We are told that a great deal of restructuring is occurring in Australian manufacturing industry. Net private business investment over the last five years, has in each case been a lower percentage of G.D.P. than it was in 80/81 or 81/82. What therefore is changing in Australian industry? Certainly some are taking advantage of the destruction of the Australian dollar, to move into export markets. But there is no general move across the broad spectrum of Australian industry to capitalise on these possibilities.

Why is industry not taking advantage of these opportunities? There are a number of reasons. Manufactures are fearful of future exchange rate movements, which might make export markets unprofitable; establishing overseas markets is very expensive especially when the tax system does not encourage it; the cost of new equipment is often inordinately high, since the devaluation of the dollar, further discouraging new investments; and wage demands can, as in the past, make exports unprofitable.

Against this back ground it is not surprising that many manufactures are still unwilling to export.

If we are to achieve the fundamental changes needed in Australia we must put in place an integrated set of policies involving taxation, financial and labour markets, the promotion of competition, trade policies, and scientific research and education. Let me take these in turn.

The present fashion, is to support a neutral tax system. Those who advocate such a course and these include the treasury, the labor party and the liberal party, so this comment is hardly a political one, believe that the taxation system should not support or encourage any particular activity. That should be determined, purely by the profitability of the undertaking. On the face of it, that sounds fine, but on closer analysis, such attitudes reveal themselves as abdication of policy direction, as abdication of ideas about the future of Australia.

We need more private and productive investment. It is not wrong to have an incentive to promote such investment. We introduced the forty percent investment allowance in 1976. It was remarkably successful.

We need much greater export income. It is not wrong for Australia to provide, as is done in Europe, a tax incentive for manufactured exports. I've never heard such nonsense as the suggestion that taxation policy should not be used to promote national objectives. I suspect current attitudes have grown in part out of opposition to tax encouragements for farmers which in the past had been put in place for three reasons.

One, because farmers contribute more than any other group to Australia 's export income. Two, because they pay much higher costs of production, as a result of protection. And thirdly, to enable farmers to withstand the vagaries of Australia 's droughts. The reasons were stated, the purposes were clear, and the advantages to Australia obvious.

Without taxation policy, being framed to support basic national objectives, we will not achieve our potential as a nation.

Those who argue for a neutral tax system are in any case not consistent. The liberal party at least, wants a tax system that encourages families, as indeed it should. That's not neutral as between individuals. Another attitude has grown in recent years, namely that the market can solve the problem, whatever it is, and governments should keep their sticky fingers out of the market. This is a reversion to seventeenth century ideas.

All modern societies have accepted that markets alone will not solve all problems. The simple reason is that markets left to themselves are not free, and are not fair, that is»simply because the players on each side of the market are not equal. One side of the market or the other tends to be dominated, by one or a small number of very large and powerful players. Government rules have been regarded as necessary to protect the public interest.

In the last century and in the early part of this century, rules were necessary to protect labor from the unreasonable actions of capitalists whose only thought was profit. Now the pendulum has swung and labor is more powerful than capital. There is a need for mechanisms that will achieve a balance.

There are many who talk about deregulation of the labor market. If that is merely saying that one must be able to achieve flexible terms and conditions of employment, according to the needs of particular industries, well then that's fine. But that does not necessarily mean deregulation? It might ironically mean more regulation.

There has been a great deal of talk about deregulation. Deregulation is commonly regarded as ‘a good' that should be pursued regardless. I accept that in many areas there are too many regulations, but to suggest that all regulations are wrong is stupid. We need as few regulations as possible, but the ones we do have should be wise and advance the public interest. The deregulators seem to have taken the argument so far, that they any rational role for government. We have not at any time had constructive national debate on this issue.

Civilised societies have long accepted that trade practice legislation is needed to prevent monopoly and to maintain competition. Such circumstances, maximise the individuals power as a consumer. We unfortunately, have the weakest trade practice legislation in the western world. It is dependant upon a principal of ‘dominance' in the market, as opposed to the principal of a ‘reduction in competition'. Legislation in the United States and Britain comes into force at around thirty per cent of the market, ours is ineffective under sixty per cent of the market.

In all of these areas there is a role for government. Politicians must stop saying, the market alone can solve it or Australia will suffer even more. We've seen significant consequences of free running markets in the financial system in the last four to five years. Such markets used to be regarded as service industries for those who produced real wealth, in the farms, in the mines and the factories of Australia. Now the financial transaction is an end in itself. The financial instrument is an end in itself. As a result a few people have become wealthy beyond wildest expectations, but at the expense of productive Australia. We are no longer the egalitarian society which we once were, which we used to proclaim with pride.

Another aspect involves the value of the Australian currency. Defending, the value of the Australian currency was not merely a matter of honour. It was regarded as important for fundamental economic reasons. The value of the currency is fundamental for the well being of every Australian. It measures the value of every persons assets in world terms. The present political thinking seems to have turned into an art form, the gaining of praise for the destruction of the value of the dollar. But if we are to live in world markets, if our overall capital system is to be opened up as it has, you cannot judge the wealth of Australians simply by the number of Australian dollars they earn, or the number of Australian dollars they receive for selling their homes. Overall the international buying power of all Australians has been reduced by forty percent.

It is not markets alone that have driven the Australian dollar down, it is also the polices associated with Australia . Certainly there are external factors: low world growth, difficult markets for minerals and agriculture. Australia has lived with such circumstances many times. Circumstances of the last five years in that regard are not new.

Let me take one simple aspect. Most Australians are unaware that for its own commonwealth purposes, commonwealth expenditure is now thirty-percent greater in real terms than when the government came into office. In addition, the world overseas is highly skeptical of labour relations in this country. They are still worried about a wages blowout. People overseas are aware that standard hours worked here are thirty percent less Japan and twenty percent less than the United States. Such matters affect the value of the dollar

We are going to face an unhappy trading world in the years ahead, GATT has failed. It is ill-equipped to deal with problems of agriculture, of commodities of newly industrializing countries. While the GATT negotiations cannot be ignored, it would be unwise to rest our hopes upon them. GATT negotiations always start out in a great round of optimism but end in relative despair as virtually nothing is achieved of consequence. We ought to do one of two things. we should seek a trade association with Japan or failing that seek to ride in on the free trade agreement between the United States and Canada to achieve the same kind of free trade relationship with North America.

A trade association with Japan could be based on basic common principles. It would not be exclusive between us. The basic rule would be that no member would increase any form of protection against any other member. No member would accept dumped produce from any outside source. Why is it that advanced countries accept that dumping is an evil practice when manufactures are involved, but is meritorious in relation to agriculture. I believe that Japan would accept such a principal. That would send a significant message to the United States and Europe, a third principal would involve working steadily to reduce other forms of protection to an agreed minimum. That would pose significant pain for Japan in agriculture and pain for us in manufacturing.

I would be in support of as many countries in Asia as possible joining such an association. I would not mind countries from other parts of the world joining. Trade associations do not have to be limited by geographic boundaries they need be limited only by those willing to accept the rules.

If we are to compete as a nation we need to devote much more of our resources to scientific research. We are competitive in agriculture and in mining, because of basic natural advantages. Farmers have been helped by a very considerable agricultural scientific community in this country. Now it seems government policy is to reduce the input in these areas, to devote more of government funds to research that might directly help the manufacturing industry.

Two things ought to be noted. Farmers already contribute to research significantly more of their income than do most manufacturing industries. They do this through government and industry-supported levies across the range of their products. Now governments are reducing their support for agriculture, sending greater sums on manufacturing industry, on the grounds that agriculture is strong and does not need it, and manufacturing must be encouraged. I have no problem encouraging manufacturing, but believe manufacturers should do more on their account. It seems foolish to take support from strong sectors of the economy to prop up the weaker.

The overriding argument, however, is that there is absolutely no case for reducing agriculture-related research, especially at a time when new and important problems of land degradation are starting to emerge. The government is also moving more research effort into increasing funds for applied research at the expense of fundamental research. This can be done for a year or two but in the longer term a heavy price will be paid. Maintenance of adequate fundamental research is ultimately essential for effective applied research.

However, greater scientific effort overall is needed by Australia. We come well down in the world list.

If we are to be the vigorous nation which I am sure most Australians would want, we need to accept certain other realities. There has been a great argument about education. The government is seeking to make education more relevant to the economic needs of Australia. That continues a process which governments have pursued for decades.

The introduction of advanced colleges of education was an attempt to do just that. The government's efforts, to make education more relevant to Australia's economic, social and productive needs should be strongly supported. But that is not the only issue.

Compared to Germany, Japan or United States, Australia is an under-educated nation. We have less people completing secondary school, and less people gaining degrees. For example: about sixty of Australians complete secondary schooling, in Japan the figure is ninety-four percent, Germany is eighty-nine percent, in the United States it is eighty-seven percent. Only eight percent of the Australian labor force has qualified to a first degree, in the United States it is nineteen percent, in Canada and Japan it is thirteen percent.

We are not going to be able to compete in the 21st century with an inadequately educated people. This involves enormous changes to education, to schools, colleges and universities. However effectively we organise the resources currently made available to education, they will not be sufficient for the numbers that need to be educated if Australia is to compete. That is the central, basic fact why fees ought to be re-established in universities, not to penalise poor families, there would presumably be an adequate system of scholarships and allowances as there were before the abolition of fees.

More non-government education should be encouraged if only because it would reduce the heavy financial burden on government.

Unless we adopt an integrated set of policies regarding taxation, financial aspects and labor relations, promotion of competition, trade, scientific research and education, which would be understood and supported by most Australians, our future in the twenty-first century might significantly be diminished.

It ought to be noted that changes of the kind, in this paper, are needed if Australia is to be strong and respected. The changes will be needed if Australia is to have adequate defence. They will be needed if we are to play constructive and respected role in south-east Asia and the pacific, and in the commonwealth. Other countries will judge us by what we make of our own opportunities and by the quality of our actions. Sometime ago the far-eastern economic review had a front piece which showed Australia and New Zealand upside down on a map of Asia and the Pacific. The headline title was ‘the countries that want to jump off the world'. Many Asian countries already have half an adverse view of the way we fail to take advantage of our opportunities. It is up to all of us to turn that around and to make sure that as we move through the year 2000 their current view is not confirmed. These issues ought to be central to the political debate in Australia.