ADDRESS TO THE

ICAA/ZURICH BUSINESS AWARDS

GRAND HYATT, MELBOURNE

TUESDAY, 14 SEPTEMBER 1999

Ladies and Gentleman, thank-you for the invitation to be here tonight and to be involved in your awards ceremony.

The Business Leader of the Year Award and the Chartered Accountants in Business Award are both prestigious awards.

The attributes of both winners have been amply outlined – and clearly they deserve the recognition of these awards.

In Greg’s case – recognition for building and creating a new and exciting enterprise.

In Dennis’s case, for turning around a major corporation, and putting it back on the path to success.

Whilst both Dennis and Greg are entitled to feel pleased with the recognition they are receiving tonight, can I please urge both them, for their own sake, for the sake of their shareholders, and for the sake of all of us here, not to rest on their laurels.

Whatever you do, don’t relax.

As I was preparing for tonight’s speech, I couldn’t help noticing that, while many previous winners of business awards have continued down the road of business success, this has not always been the case.

My innate sense of compassion prevents me from naming the precise business magazines which gave out the awards, or listing all of the previous winners.

Some went to jail, others faded away, and some are still overseas.

In terms of those still overseas, you may be thinking that I am referring to Christopher Skase. However, Christopher Skase never won an award for business leadership—- he was on the judging panel that awarded them!

With that in mind you can understand why I was just a little concerned to hear that Dennis Eck couldn’t be with us tonight – and would be receiving his award by video.

Coles-Myer shareholders will be relieved to hear that Dennis is not visiting Majorca– he is in New York on business and will be returning to Australia within the next week or so.

Whereas old awards can come back to haunt those who give them, I am equally aware that old speeches can come back to haunt Treasurers and Prime Ministers.

In the late 1980s before a live audience on The Midday Show the then Prime Minister, Mr Hawke described Mr Alan Bond as “one of the most outstanding exports from pommie land”. He said that he wanted to repudiate the idea that Labor was not a party which had close links with big business and also said it would be a condemnation of our society if we did not recognize the enormous contributions of the Alan Bonds and other great risk-takers of this country.

So if I am a little reserved in my words tonight it is only because I am aware that someone may drag this speech out in a decade’s time and quote it back at me.

I do, however, want to make some serious points.

And that is that our country paid dearly for the corporate failures of a decade ago.

There was a failure of business culture and ethics, and there was a failure of government policy.

Corporate irresponsibility mixed with a failed monetary policy, that included business overdraft rates of almost 21% and a policy induced recession, proved a shocking cocktail.

In the year to the March quarter 1991 there was a one per cent contraction in the Australian economy.

Corporate insolvency reached a record 9 ½ thousand in 1991-92 and the unemployment rate rose to 11 per cent in 1992.

A decade on we are still getting over that damage.

It took business years to clean up its books and management, and it has taken our government the last 3 years to clean up the federal budget.

Had we not done so when we faced the Asian economic crisis of 1997, we would not be talking about how we as a nation survived the meltdown, we would be talking about how we were going to get out of it.

There are parallels between business and government here. Both have had to reform, and both have had to make what are often unpopular decisions to secure a brighter future.

Had we not reformed our budget, reduced our debt, modernized our financial system and monetary policy arrangements, Australia would have been terribly exposed to the Asian economic crisis.

If we had not made the hard decisions 2 and 3 years ago, we would not be enjoying the benefits today.

Those benefits should not be taken for granted.

The Australian economy grew by 4.1 per cent in the year to the June quarter and has now been growing at an annual rate in excess of 4 per cent for eight quarters.

• Australia is now a low inflation economy, with inflation being below 2 per cent for 3 years and 1.1 per cent in the year to the June quarter 1996.
• Interest rates have been low and, importantly, stable. Since March 1996, official interest rates have fallen 2 – per cent and the standard variable mortgage interest rate is at its lowest level in around 30 years.

This is a remarkable economic achievement, particularly given the fact that over the past two years or so nearly every other country in our region has experienced a severe economic and financial crisis.

What has been the reason for Australia’s strong economic performance over recent years?

One of the lessons I would draw is that policy matters, policy counts – good economic policy brings its rewards.

The strong performance of the Australian economy is the result of good policy, policy which has involved:

• Putting the Budget into surplus;
• Pursuing a medium term objective for fiscal policy;
• Locking in accountability and transparency in fiscal policy through the Charter of Budget Honesty;
• Reinforcing the independence of the Reserve Bank and establishing the framework for the maintenance of low and stable interest rates;
• Increasing competitive disciplines through on-going competition policy reforms and privatisation;
• Moving to reduce the burden of Commonwealth public debt;
• Accelerating the move to enterprise bargaining and improving labour market programmes;
• Introducing a world class system of prudential supervision of the financial system which ensures a stable, efficient and competitive financial system;
• Progressing a major reform of business law in the context of the Corporate Law Economic Reform Program so as to establish a more favourable climate for both investors and business; and
• Introducing landmark reform of the taxation system.

In business you know that change and reform are difficult and are rarely greeted with applause. There is always a constituency pressuring for delay. But you also know only too well the consequences if you do not reform, change and adapt.

You also know that in business it is important to attempt to anticipate events and ensure that the enterprise is in good shape so as to seize the opportunities that may become available or to survive the rough times that may eventuate— but the reality is that we never know what is around the corner.

We never know what new challenge will confront us.

I did not know mid-way through 1997 that Asia would sink into its deepest economic crisis in memory.

But when it did I was glad we had done the work to put our economic house in order.

The lesson of the last Asian economic crisis and of our current economic circumstances is that reform and change are not dangerous – it is delaying them that is dangerous.

At the moment the focus is on events in East Timor. Australia is playing a leadership role in responding to the dreadful situation. We are responding to our moral and regional responsibilities. We will face considerable challenges and strains.

But it is a reminder of the uncertain and volatile world in which we live.

The events in East Timor may seem a distance from business awards and discussion of economic policy, but they should remind us of the importance of making our economy and economic institutions sound so that as a respected and strong neighbour we can fulfil our regional responsibilities.

Our reform agenda to date has secured our current economic fundamentals, which have created an environment in which business can prosper and grow. A sound economy with strong growth and low inflation is the best assistance any government can give business.

And our reform agenda is continuing.

Soon, the Government will release the long-awaited Ralph Committee Report.

As with our approach to the Wallis Report into the Financial System, we have had a highly consultative approach to this important area of policy. We have listened to business, we have consulted, and we have been responsive.

Almost a year ago we gave the Review some principles and broad guidelines to explore—but then we threw it over to business to come up with what it believed was necessary to improve our business tax system.

The Ralph Committee consisted of three leading businessmen – in addition to John Ralph there was Bob Joss and Ric Allert. In the context of preparing their report they received 370 submissions, conducted 42 focus groups meetings, held 16 public seminars, gave 51 presentations and met with 151 organisations and individuals. They listened to what business had to say and road tested their reform proposals, to the business community.

I doubt whether there has ever been as much focussed consultation on business tax issues as has taken place over the past twelve months. And I believe this consultation makes for better policy outcomes. Business has greatly appreciated and welcomed the opportunity to be consulted in such an open and transparent manner. It has built a great deal of confidence and trust.

The Government will shortly announce its initial response to the Ralph Review, and I will soon be saying a great deal about business tax. At this stage, however, in addition to noting the highly consultative nature of the Review process, I would also emphasize that it must be remembered that business tax reform is part of a broader package of tax reform measures.

It is important to assess business tax against the background of the overall benefits from the reform package.

Like the previous reforms and changes, it will be necessary for all participants to have regard for the national interest and the future national economic outcomes for our country.

In business you cannot look at things in isolation – you need to look at the overall operation of the enterprise. The same goes for economic policy. In particular, it would be inappropriate to look at particular components of business tax reform in isolation of the overall package.

To conclude, I congratulate the winners of tonight’s awards. I applaud the success of the businesses here – the Government welcomes it, encourages it and will do everything possible to establish the environment in which business can succeed.

Thank-you very much.