The Next Ten Years: John Howard’s Federation Address

This is the text of Prime Minister John Howard’s Federation Address.

Howard set out “some of the goals which I believe Australia can achieve by 2010 if there are appropriate national policies in place”. He focussed on the economy, society, physical and intellectual infrastructure, and foreign and defence policies.

Text of John Howard’s Federation Address.

John HowardTwo years ago, I initiated this series of annual Federation Addresses to focus on the broad challenges confronting national policy making and to outline the priorities of the Federal Government in meeting them.

This third Federation Address is the first of a new decade, let alone a new century and a new millennium. For that reason, I thought it would be appropriate to adopt a slightly broader framework than in previous Federation Addresses.

Today I want to highlight some of the goals which I believe Australia can achieve by 2010 if there are appropriate national policies in place. A decade is a sensible time horizon in such a context. A lesser period can lose sight of important longer term possibilities and trends, while a longer perspective of twenty, thirty or even fifty years, becomes somewhat too dependent on subjective judgements and unknown variables.

In looking to Australia in the year 2010, I want to focus today in particular on the prospects for our economy, our society, our physical and intellectual infrastructure, and our foreign and defence policies.

Consolidating the Bases of Our Economic Strength

Our national economy is now stronger in its fundamentals and more competitive in its growth potential than it has been for decades.

We have strong and sustained economic growth, low interest rates, low inflation, declining Commonwealth debt, falling levels of unemployment and high rates of investment.

These are not outcomes that are inevitably destined to continue. They will only continue if responsible policymaking enables them to do so.

If we are to consolidate our current economic strength and realise our growth potential over the next decade, we will need an ongoing commitment to the policy priorities which have helped to deliver our current very favourable circumstances.

By the year 2010 I believe that Australia can achieve the goal of not only consolidating but also entrenching the bases of our current economic strength through a flexible, competitive and dynamic economic framework capable of maximising for all Australians the benefits of global economic change.

I believe that in the Australia of 2010 we can be maximising the advantages of the quantum shift in economic opportunity that will be generated by the pace of technological change, software revolutions, scientific innovation and the expanding frontiers of the knowledge economy.

I also believe that by the year 2010 we can consolidate our global leadership in mining and agriculture and further enhance our strength in manufacturing and value-added industries across the board.

We will only achieve these goals through a clear and deliberate pursuit of policy settings that raise investment levels, increase job growth and expand economic opportunities.

That means maintaining fiscal responsibility and sound financial management.

It means achieving clear, practical and sensible outcomes in microeconomic reform, particularly in reforming workplace relations to free enterprises of unnecessary and inflexible centralised controls…It means continuing the dramatic development of Australia as a great share-owning democracy.

It means advancing Australia’s strategy to become a world centre for financial services.

It means continuing to improve standards of literacy and numeracy in our schools, to modernise our education and training systems more generally, and to broaden our national skills base.

It means continuing a sensible, balanced approach between resource development and protection of Australia’s unique environment by asserting the national interest over narrow sectional interests on both sides.

Furthermore, and very importantly, the national economic goals to which I have referred will only be realised if there is comprehensive, generational improvement in the personal and business tax systems.

This modernisation is an indispensable element of modernising Australia’s economic infrastructure to enhance our competitiveness and prosperity in an increasingly globalised economy.

Our plan for a new tax system was the central issue of contention at the 1998 Federal election, and the Australian people clearly resolved the issue in favour of abandoning the old outdated system. An historic legislative reform package has been passed by the Federal Parliament with the support of the States and Territories…It is no surprise that the biggest single modernisation of the tax system since Federation will raise a number of transitional issues of a technical kind.

Individuals and businesses are entitled to assistance with that transition and clarity on those issues. As a government, we have allocated an unprecedented level of resources, expertise, planning and preparation to achieve that outcome, and we will continue to do so. In a few areas, an additional particular focus may be required and this will be provided. We will ensure that all appropriate information and assistance is available to individuals and businesses.

But we need to be clear that, over and above the understandable and quite appropriate concern for relevant information on particular aspects of the new tax system, there is a negative obstructionist agenda that is being pursued at the moment by the enemies of taxation reform and that this campaign will escalate over the months ahead.

It will seek to manufacture or exaggerate implementation aspects on a range of technical transitional issues; it will try to generate scares on particular cost increases; and, in doing these things, its general aim will be to try to create a climate of resentment, inertia and confusion.

This strategy is the last resort for the defenders of an existing tax system that is outdated, unfair, uncompetitive, inefficient and in the long term unsustainable.

It is a strategy that will not succeed.

The debate over tax reform often too easily focuses on one side of the equation by exclusively highlighting potential costs without taking account of more than offsetting benefits.

Tax reform is a vital national interest for Australia because it will reduce the overall tax burden for individuals and businesses, offer more incentives to save, work and invest, and provide a more realistic base to fund necessary government services to the community.

It is important to keep clearly in mind the great overall benefits for Australia of establishing a new, modern and competitive tax system. They include:

  • a $12 billion cut in personal income tax, the largest personal income tax cut in Australian history, which will mean that 80% of Australian taxpayers will have a marginal tax rate no higher than 30 cents in the dollar;
  • a substantial increase in pensions, benefits and family assistance;
  • major reductions in business costs, particularly for exporters;significant reductions in transport costs for rural and regional Australia;
  • abolition of a range of complex, outdated and distorting taxes, most notably the wholesale sales tax;
  • a more internationally competitive system of business tax, including a reduced company tax rate, a significantly lower capital gains tax rate and a range of incentives for small business;
  • and a more realistic basis for the future provision of important government services, such as schools, public hospitals, police and roads, by providing all the revenue from the GST to the States and Territories which are responsible for those services.

No agenda built on exploiting a few aspects of technical implementation will detract from the significant net benefits for the Australian economy and the Australian people which will result from tax reform.

The campaign of negativism on technicalities now being waged by the opponents of tax reform will be defeated by maintaining a clear focus on the national economic benefits of tax reform and by addressing specific issues of transitional adjustment in a clear, consultative and common sense way.

In doing so, we will not be entering unchartered waters. Most other countries around the world already have well-established implementation arrangements based on GST-type systems. They have overcome similar transitional issues and to suggest that Australia is somehow incapable of doing so is both demeaning and totally unrealistic.

Building a Stronger and Fairer Australian Society

The Government I lead does not pursue economic policies which will deliver higher sustainable growth as ends in themselves or as part of some rigid ideology. We are committed to them because they contribute to building a stronger, fairer and more prosperous Australian society.

The fact is that without a stable and fair society in which the avenues of opportunity and achievement are open for all Australians, our economic progress will be shallow and brittle. Equally, without an Australian economy that can generate growth, investment and jobs, the capacity to fund assistance programmes for those in need will be seriously diminished.

I look to an Australia in 2010 in which our unmatched reputation for achievement, for tolerance, for understanding and compassion, for independence of spirit and for ability to work together in adversity has been even further enhanced.

I look to an Australia in 2010 in which the current effective interaction between social and economic policy has been further strengthened.

The national economic objectives to which I have referred need to be achieved over the next decade in a manner consistent with what I called in last year’s Federation Address ‘the Australian way’ – that is, a way which reflects our unique national circumstances, upholds our tradition of ‘a fair go’ and supports the value we place on an effective social safety net.

Fulfilling our national economic potential in ‘an Australian way’ has special implications for those living in rural and regional Australia.

Clearly, there are those Australians in these areas who are not sharing in our current national prosperity to the same extent as many others.

The challenge we face is to ensure that as far as possible the great strengths of our national economic situation are shared across the country.

We are doing this in many aspects of our economic policies, including our tax plan which will significantly reduce transport costs in rural and regional Australia, as well as in our social policies, including our opening of up to 500 rural transaction centres. Other initiatives such as our Natural Heritage Trust, our Regional Telecommunications Infrastructure Fund and our initiatives in rural and regional health have sent a clear message that we will work to ensure that the concerns of people in rural and regional Australia are being directly addressed through specific initiatives.

But more needs to be done, and will be done. Later this year we will be responding to the outcomes of the Regional Australia Summit which we convened late last year and we look forward to achieving progress in some key areas.

One of the big challenges in keeping rural and regional communities together and in improving the equality of opportunity they enjoy compared to other Australians is to modernise our national economic and social infrastructure in those areas providing much needed jobs in the process – and I wish to return to that issue later in my remarks.

We will only achieve the national goal of a strong economy in a fair and decent society if there is a complementary approach to economic and social policymaking.

This approach needs to reflect a mix in public policy which combines what I have previously described as liberalisation in economic policy and a modern conservatism in social policy.

Economic liberalisation and modern social conservatism draw on a common set of values. Both recognise the role, and limits, of markets and government. Both uphold opportunity, incentive and responsibility over welfarism and dependence on government. And both emphasise the importance of liberating individual potential as well as recognising the reality of social obligation.

The best practical way of achieving progress towards the goal over the next decade of a strengthening Australian economy in a fairer Australian society is through a policies which avoid the extremes of long term welfare dependence on the one hand and laissez-faire indifference to the costs of being internationally competitive on the other – an approach in which policies promoting a competitive, market-based economy and a compassionate society are seen as mutually reinforcing.

Just as our economic policies over the next decade need to maximise for Australia the advantages to be gained from globalisation, so too our social policies need to manage areas of dislocation flowing from the processes of globalisation, provide a modern social safety net, and address a range of other issues affecting individuals and families such as services in regional and rural Australia and drug abuse.

Meeting the social policy challenges of the next decade will entail further strengthening a social coalition built on a partnership of individuals, families, business, government, and welfare and charitable organisations – each contributing their unique resources and expertise – to tackle disadvantage at its source, rather than equating the compassion of a society with the size of a distant bureaucracy.

Significantly, those most critical of this concept of a social coalition have based their opposition on the claim that it will lead to a reduction in the Government’s involvement. This is wrong. A social coalition to attack social problems does not entail government reducing its commitment. But it does recognise the limits of government and the effective contribution which others can make.

In fact, annual Commonwealth spending on health, education and welfare is currently almost $85 billion, a substantial real increase since we came into office.

The idea of a social coalition is already driving a range of new social policies under my Government. For example, the Youth Homeless Task Force, chaired by Captain David Eldridge of the Salvation Army, represented a watershed in the way youth homelessness is tackled in Australia. Another excellent example is the Job Network, a partnership between non-government employment service providers and government, which is outperforming the old Commonwealth Employment Service by 50%.

Over the decade to 2010, I look to an Australia in which the choices available to families in terms of education, health, family care and work opportunities continue to be broadened and in which the costs of raising families continue to be recognised by government.

Social policies will also need to take increasingly into account the rapidly evolving nature of family circumstances – in particular, the changing financial relationships between family members and the expanding role of women in our society more generally.

We will need more deregulated arrangements to reflect the changing nature of work in the era of information technology, the shift to smaller, decentralised units of operation, and the differing ways in which families will want to combine work and family responsibilities.

The information technology revolution has made it easier for many parents to combine their work and family responsibilities.

Increasingly, many parents are forging more flexible arrangements with their employers so that they can work from home and provide care for their children at the same time.

I predict that this process will accelerate rapidly over the decade ahead.

But people’s preferences in this regard will not be fully met until we have a workplace relations system that fully accommodates and encourages such arrangements.

That is why an explicit object of our Workplace Relations Act relates to work and family responsibilities and why further improvements to industrial relations laws in the decade ahead must keep in clear focus the modern pressures on family life.

Realising the full benefits of new information technology will be constrained without suitably flexible workplace relations.

The US Federal Reserve Chairman, Dr Alan Greenspan, recently pointed out that an important factor in the slower application of innovation and new technologies by Japan and Europe relative to the United States is “the relatively inflexible and, hence, more costly labour markets of these economies”.

My Government remains strongly committed to promoting the better balancing of work and family responsibilities which is encouraged by new technologies. Part of our role is to encourage more businesses to identify this balancing as an important issue and to provide more flexible arrangements.

Beyond that which has already been done, I will be asking the Minister for Employment, Workplace Relations and Small Business, Mr Reith, to identify remaining obstacles in federal and state arrangements for employers who wish to develop work arrangements that are more family friendly.

Furthermore, to return to an old theme of mine, State Governments should look more sympathetically and creatively at more sensible school hours that better reflect modern family realities, needs and work patterns.

One of the greatest challenges to social policy over the next decade will relate to the ageing of our population as the post-war baby boomer generation begins to reach 65.

This development will be combined with ongoing increases in life expectancy brought about by advances in medical science and health care.

By 2010, the proportion of our population aged over 65 will be appreciably higher than a present and it will continue to grow over the succeeding decades. This age group will have high expectations of quality health, community and recreational services.

An important challenge for government is to ensure that Australia is well prepared for this important development. One area where we need to be better prepared is providing choice and opportunity for older people themselves who wish to remain in active engagement with the paid and volunteer workforce.

More effective social policy over the next decade will mean further expanding the current emphasis on achieving a more productive balance between the alleviation of poverty and incentives to avoid poverty, between living with social problems and attacking the causes of them at their source.

It will also entail further developing the principle of mutual obligation: the principle that those who benefit from government support have an obligation to give something back to the community in return.

This is the principle underpinning the very successful Work for the Dole programme, and I believe that over the next decade the principle can be applied more widely in a positive and constructive way.

The principle of mutual obligation underpins the work of the Government’s Reference Group on Welfare Reform, chaired by Patrick McClure of Mission Australia, which will be reporting over the next few months.

I also believe that our society will be strengthened over the next decade if there is greater corporate and individual philanthropy. This is another dimension of the principle of mutual obligation: this time emphasising that those who have done well in our society, and who have benefited from its opportunities and stability, should assist those in need.

An important dimension of building a stronger Australian society in the period ahead relates to the success of the national reconciliation process among indigenous and non-indigenous Australians.

On election night in October 1998 following the Government’s return to office, I reaffirmed the strong commitment and priority which we would give to the goal of achieving lasting national reconciliation. In a very genuine and sincere sense, I renew that commitment and priority today.

Meeting the challenge of reconciliation is an often slow and sometimes difficult process. Real progress is being made but can take significant time.

Patience, perseverance and goodwill on all sides will be needed.

So too will a sense of realism about what can be achieved over a given period of time.

Too often on public policy issues, artificial time deadlines imposed on sensitive processes can have quite counter-productive effects.

My Government remains strongly of the view that the cornerstone of the reconciliation process will continue to be practical and effective measures which address the legacy of profound economic and social disadvantage which many indigenous Australians continue to experience.

I am immensely proud of the specific focus which the Government has given to practical projects targeted at reducing indigenous disadvantage in health care, housing, education and employment, and more broadly at enhancing economic independence and more genuine equality of opportunity.

This focus on practical programmes directed at areas of greatest indigenous disadvantage will continue and will be a key to lasting reconciliation.

My hope for the period ahead is that all parties in the national reconciliation process will build constructively and incrementally on what has been achieved in the recent past; that we will focus on what unites us all as Australians rather than what divides us; that we will respect and appreciate our differences and not make demands on each other which cannot be realised; and that together we will build a future in which we can all share fairly.

Renewing Our National Infrastructure

By 2010 I would like to see an Australia that has successfully renewed its economic and social infrastructure in a way which meets the competitive challenge of new technologies and global markets and which also strengthens Australian society in the process. And I wish to address a few remarks today to meeting that challenge.

Over the course of the next decade Australia faces the prospect of a conjunction of favourable economic circumstances which have not applied for generations.

Because of the prudent financial management of recent years, there is the prospect of significant Budget surpluses over the course of the decade.

There is also the prospect over the coming decade of the nation being free of net Commonwealth debt. This debt-free situation will be facilitated by the Government’s commitment to the goal of the full sale of Telstra subject to consumer safeguards, particularly for Australians in rural and regional areas, other legislative requirements which we have put in place, and the independent benchmarking study of Telstra’s performance to which we are committed.

In addition to facilitating debt relief, the full sale of Telstra also has the potential over time to strengthen even further the nation’s fiscal situation.

I should note in this context that, subject to the legislative and other guarantees to which I have referred, the case for the eventual full sale of Telstra is being strengthened by events.

The dynamics of change within the international telecommunications industry are making increasingly inappropriate a government/non-government ownership structure for a major telecommunications company which is split on a 50.1/49.9% basis.

The more things change in the dynamic way they are in this sector of the economy, the less appropriate current ownership arrangements will be.

The tide in this sector of the economy is clearly in favour of technology convergence, partnerships, international joint ventures and economies of scale.

For Telstra as a modern communications company, the pressures will be to enter into such convergence, partnerships, joint ventures and economies of scale, or risk increasing uncompetitiveness in the global communications market place.

For the Government, as a majority owner of Telstra, such a prospect could increasingly create significant difficulties, conflicts of interest and unnecessary commercial involvements.

Over coming years, current ownership arrangements will increasingly constrain Telstra’s capacity to achieve its full potential in an area of economic activity that is at the cutting edge of global competition and technological change.

In these circumstances, and given the range of challenges which the country will face, the benefits of locking in tens of billions of dollars of public money to a telecommunications carrier which is 49.9% privately owned are becoming increasingly inferior to the benefits of re-directing those funds into another form of public investment, the retirement of net Commonwealth Government debt, which can facilitate some additional responsible expenditure in other appropriate areas such as our physical and intellectual infrastructure.

Over the period ahead, we need to develop a clear view of priorities for a situation of significant Budget surpluses free of net Commonwealth debt.

In such debt-free circumstances, I believe it would be responsible and appropriate to allocate part of future surpluses towards acceleration of the process of the renewal of important aspects of our national physical and intellectual infrastructure.

It is an entirely appropriate role for government to be involved in the allocation of public resources for infrastructure renewal of this kind. This is part of a limited but appropriately strategic role for government which the Coalition I lead has always supported.

The fact is that there are aspects of our intellectual and physical infrastructure where it is simply not possible or appropriate for the private sector to take a lead role and where governments must provide leadership and resources.

It is also true that in some areas of infrastructure renewal, government leadership can facilitate or generate supportive involvement by the private sector.

I emphasise here that our renewal of national infrastructure is ongoing and expanding. It is not dependent on any sale of Telstra. But what a situation in which the Commonwealth is free of net debt will facilitate is responsible additional public investment from future surpluses in important aspects of our national infrastructure.

Advancing Australia’s Interests in the World

Finally, and briefly, I wish to refer to some important perspectives for our foreign and defence policies over the period ahead.

Australia has been able to play a co-operative and influential role in our region due to our resilience and our strengths, including those which derive from the unique intersection we occupy as a country next to Asia, with a strong European heritage and close links with the United States. This regional role contributes to our prosperity and security. It underpins our ‘Asia first’ rather than ‘Asia only’ focus in foreign policy.

Along with other regional countries, we have sensibly taken the view that we do not need to be cultural and political mirror images of each other to work closely and effectively together.

The economic crisis in Asia was an enormous challenge for many countries in the region. The strength of the Australian economy and the soundness of our regulatory systems meant that we could weather the crisis and assist others.

Economic recovery in Asia is now underway strengthening the prospects for stability in many of our important partners. But the region cannot afford to be complacent through a premature declaration of victory. Much remains to be done over the coming years to ensure that the recovery is sustainable and that practical and realistic policies are implemented which reflect the lessons of the recent past.

I am confident that over the course of the next few years these goals can be achieved in a way that will strengthen regional stability and expand Australia’s linkages. We will work with our partners in the region, particularly through APEC, to get the fundamentals of good economic governance and sound regulation in place. These will underpin further regional investment and growth.

We will also push hard, within the region and beyond it, for a new round of global trade liberalisation negotiations in the World Trade Organisation to open markets for Australian exporters.

A prosperous and secure region over the next decade will continue to require constructive and sensitive engagement on the part of all the major powers.

Active United States engagement will remain the cornerstone of regional security, and in its turn will be important in providing the region with a strategic framework in which to pursue its common economic goals.

China, with an expanding economy and increasing global engagement, will have a special capacity to further develop stable, collaborative and mutually productive relationships with regional countries.

We also look forward to the successful completion of Japan’s economic refurbishment and recovery, allowing Japan again to utilise its significant diplomatic and economic assets to the region’s wider benefit.

Indonesia’s full participation in the incipient economic recovery will be important for Australia and for the region.

Our aim is to work closely with a united, democratic and economically successful Indonesia – an Indonesia that is able to meet and overcome the challenges of sectarian violence, and embark on a strong path of growth and development.

In co-operation with the Indonesian Government, we will assist in ways which each of us sees as useful and appropriate. We aim to deepen and expand this critically important bilateral relationship, built on a foundation of mutual interest and mutual respect.

East Timor was a regional problem and it was right that the region took the lead in solving it. Australia was willing and able to play a leading role in developing and facilitating a solution. A modern effective defence force was required to do this, and our contingent in East Timor met the challenge it faced with great distinction.

Australia will need to ensure that we have a viable defence force to meet the challenges of the next decade and beyond. To this end, the Government is committed to providing additional funding over time to achieve this goal.

As with all Government programmes, expenditure on defence must be appropriate to the nation’s needs and efficiently delivered. Accordingly, over the course of the year ahead, we will be undertaking a major review which will significantly determine the future shape of the Australia’s defence forces.

Our decisions will be guided by a careful review of the regional strategic environment and the requirement that Australia receives the most effective return from our expenditure on defence.

The development of a Defence White Paper and an extensive public consultation process will focus on providing for responsible and efficient investment in the future defence of Australia in a way which has the support of the broad Australian community.

Conclusion:

My focus today has been on some key national goals for the next decade. They are all achievable for Australia. But they are not inevitable.

Whether we achieve them or not will depend significantly on the choices in national policymaking that we make.

I believe very strongly that they will be achieved if we make the policy choices I have outlined today.

But a different set of policy choices would deliver a very different outcome for Australia.

If sound fiscal management were compromised, if the inefficiencies and inequities of a failed tax system were preserved, if workplace relations were returned to centralised controls, if microeconomic reforms were reversed, if we fail responsibly to meet the challenge of infrastructure renewal, and if the balance in social policy reversed in favour of dependence over incentives to personal responsibility, then the outcomes for Australia will be very different.

We are currently headed down a path that will continue to strengthen our economy and our society over the years ahead. I am confident that, with the good sense they always show, Australians will not turn back but will maximise the opportunities now within our reach.

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