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CEDA SPEECH SYDNEY

24TH JUNE 1996

“AUSTRALIA - ONE MORE CHANCE?”

S D M WALLIS

MANAGING DIRECTOR - AMCOR LIMITED

INTRODUCTION

•I am very pleased to have the opportunity to deliver CEDA’s Australia Today address in Sydney.

•Last year I was greatly honoured when CEDA awarded me an Honorary Fellowship. At the time of the award I readily agreed not to make a lengthy acceptance speech, but instead agreed to talk about this time on an escoteric subject of my own choosing.

•That commitment has caught up with me and here I am with the title “Australia - One More Chance?”.

•In opting for this title I had in mind to talk at some length as a retiring Chief Executive of one of Australia’s major companies on some of the major issues and institutions (government, unions, environmentalists and so on) which are very relevant to the direction and future progress of the nation - (I even might have had some words to say about banks and financial institutions).

•In other words I was prepared to indulge and let fly on some of my pet subjects and frustrations, given that my retirement was only a matter of days away, when I could pass gracefully into semi-oblivion and forget about all the shackles of responsibility which constrain one from speaking out too often and too openly when you are in a CEO role.

•All of this thought process was in my pre - Daughter of Campbell days, or should I say Pre-FSI (Financial System Inquiry) days.

•The FSI is clearly a very important task and one with a high profile. Hence I have slightly tailored my remarks to you today to avoid the possibility of too much distortion or misinterpretation in the context of my FSI role.

APPROACH

•Let me now spend a few moments outlining what I want to say to you today!

•Australia is a great place - of undoubted potential - but somehow we have failed to live up to the high expectations often placed on us.

•In economic terms we continue to fall off the pace - in the last 30 years our GDP per capita has increased by about 70% yet our position on the global standard of living ladder has fallen from No 7 to No 21, unemployment remains unacceptably high and overseas debt continues to rise.

•Whilst there is much to be pleased about in terms of increasing the competitiveness of the Australian economy, there is still a lot to do to bridge the ever-widening gap with competitive economies overseas.

•The common response to this talk about Australia’s relative economic performance is the assertion - “But Australia is a great place to live”. I have no doubt about this and would not want permanently to reside anywhere else - but there are some great life styles offshore in many countries whose economic performance exceeds ours and whose inhabitants don’t seem to be knocking on our door to take up residence.

•The key issue is however, whether Australia can continue down a path of re-vitalisation and re-invigoration, and realise the potential which has always existed but which has never been fully captured for the benefit of all Australians in both economic and social terms.

•My belief is that Australia has another chance at present to make some substantial steps forward as a nation. In economic terms, most of what has to be achieved has been documented and debated “ad nauseam”.

•Previous federal labour governments certainly headed down the reform path but were derailed by substantial pressure and interest groups, (including their own constituencies).

•Notwithstanding the legacy of “Fightback”, the new Howard Government, with a very strong mandate, is displaying the right intentions and is off to a good start - although the imperatives of a 3 year electoral cycle and a hostile senate presents some real challenges.

•The route to a more prosperous future for all Australians has also been laid out in the BCA’s - Australia 2010 Agenda which recommended a comprehensive suite of reforms to revitalise Australia’s economic performance and standards of living by the year 2010. Key targets are a higher rate of real GDP growth, lower foreign debt and declining unemployment. The BCA 2010 Agenda is a very well thought through set of reforms, but whose complexity has resulted in a less than desirable level of recognition and acceptance by governments, commentators and the community generally. We are working in the BCA to reinvigorate the 2010 Agenda once again.

•In the brief time available to me today let me touch upon some of the issues I know something about and endeavour to outline some of the ways forward. I will, towards the end of my remarks, make my first substantive public comments about the FSI Inquiry - the outcome of which can be an important plank in Australia’s ongoing progress.

NATIONAL IDENTITY / LONG TERM GOALS

•There is absolutely no doubt in the business scene that we can achieve a great deal with our workforces and various communities of interest by defining longer term goals and using them as an overriding guiding, motivating and unifying force.

•Maybe achievement of a more coherent Australian national identity is still some decades off, short of a national calamity or war. Nevertheless, we do have to decide what sort of a country we want to be.

•The realities of geography may in the end prevail and our best course of action, in my view, may be to assume a truly Asia Pacific identity with very substantial integration economically, socially and culturally with the regions to our North.

•Many of my generation have some reservations about this, but the more I travel the region and beyond the more I see the compelling logic. Certainly the next generation of Australians will have less reservations.

•In my view Australia needs to set its goals high in economic and social terms and as a truly unique country in the Asia Pacific region.

ECONOMIC PERFORMANCE

•There are many better qualified in matters ‘economic’ here today in the audience than the speaker.

•In my simple thinking, however, the game plan is all about competitiveness - in macro terms, in the processes of Government, in industry and at the individual business level. We need sustained export growth to offset the endemic deficits on the external account, and we need more domestic growth and savings and the appropriate blend of fiscal and monetary policies and reform processes by Governments (including State Governments).

•Certainly this audience does not need to be reminded about the inextricable linkage between economic performance and meeting the social and cultural aspirations of the community at large.

•To re-assure you about all this let me assert that there is a wave of competitive pressure swirling through Australian businesses. Increasingly, as a result of deregulation, tariff reduction, international benchmarking, global customers (and their buyers), more and more domestic business in Australia is being transacted at selling prices approaching equivalent pricing in the larger economies in Europe and North America.

•This is placing downward pressure on cost structures and is the cause of much of the complaints about contracting profit margins, which are appearing regularly in the financial press.

•However painful this transition process is, it augurs well for the future of many Australian industries in both trade exposed and non-trade exposed sectors.

•The important next steps however are to extend this process to those private and public sectors of the economy where reforms have lagged. This will be a key test for some of the new Howard Government reforms and more importantly for the customers of those same industries.

PROCESSES OF GOVERNMENT

•My original intention was to say a few words about the processes of Government in this Country.

•When I was elevated at a tender age to the Deputy CEO/CEO roles in Amcor, Gough Whitlam was Prime Minister, Sir Rupert Hamer - Premier of Victoria and Sir Robert Askin had just finished his term as Premier of NSW. Joh Bjelke Peterson was also just hitting his straps. So I have seen a few political luminaries come and go. In the intervening period we certainly have no less politicians and remain one of the most over-governed countries in the world.

•In the first 10 years or so of my term of office I went on countless trips to Canberra in the course of managing a moderately protected paper company who had its usual set of issues to resolve with the regulators and the bureaucrats.

•In the last 10 years I have been in Canberra on relatively infrequent occasions as we changed Amcor into one of the majors in the global packaging and paper industry.

•It seems to me it was one competitive disadvantage this country could have avoided by choosing either Sydney or Melbourne as the nation’s capital. Many, however, will disagree with me! However as I am about to rejoin the Canberra circuit I must in the interests of fairness, reserve any further judgement for the next 9 months or so.

•In the final analysis however we cannot lay the blame for Australia’s mediocre economic achievements at the feet of our politicians and their administrators - it rests on all our collective shoulders!

•As in most things in life the achievements of the political and governmental processes depend on people. Good politicians, and more importantly great leaders, can capture the minds of the electorate and deliver good outcomes.

MICRO REFORMS

•I have usually gone on record once or twice a year and criticised the slow pace of micro economic reform in Australia.

•In my case this has been driven by an acute ability to compare the cost performance of Amcor’s Australian businesses with those new manufacturing facilities we are involved with, particularly in Asia, North America and Europe (today Amcor has about $3.0 billion or 40% of its sales coming from 60 factories in the Northern Hemisphere).

•We have had to contend in our Australian businesses with capital costs and energy, raw materials, productivity, transport and wharfage outcomes, which have been substantially out of line with best practice overseas.

•The gap is narrowing but the goal posts keep moving. In the light of recent Australian experience in business, in State Governments, the Hilmer reforms etc, I am more optimistic these days about this matter, but unless we keep driving on, the hard won advantages may be lost. This issue is made more imperative given the propensity of the Australian dollar to escalate more for reasons of speculation than underlying economic fundamentals.

LABOUR MARKETS

•A few words on the state of labour markets/industrial relations in this Country.

•There is no doubt that further reforms are necessary in this country and the Howard Government needs every support to extend the reform processes to those sectors of the economy which have been prevaricating or incapable of undertaking change.

•However, the critical success factors concerning industrial relations are not, in the final analysis, about legislative reforms. They are about “capturing the hearts and minds” of the workforces that exist in all the individual enterprises around this country

•I speak to you as the past Chairman of the original B.C.A. Industrial Relations Committee which attempted, in the early 80’s, to place enterprise based industrial relations on the agenda in Australia in the face of cynicism and opposition from just about everywhere. My naivety regarding the task is evidenced by statements at the time that the process would take at least 10 years - I would now say, in retrospect, the timeframe is more like 20 years or longer.

•We have, however, come a long way! Notwithstanding the deficiencies of the present system, there is no limit to what you can achieve in Australia today at the enterprise level if the task is tackled appropriately.

•The key “buzz” words are training, quality accreditation, information sharing, continuous improvement, self-managed teams, empowerment and gain sharing. I could talk at length about this process and how “informed” companies and businesses (large and small) are effecting “sea changes” at the workplace level.

•In this context the centralised trade union movement in this country has a real challenge ahead - either to frustrate the evolution and realisation of the consequential benefits of enterprise based relations by unnecessary intrusion and seeking to impose inappropriate broad based wage settlements, or to find new roles for the centralised functions which bring benefits to the union membership at large.

ENVIRONMENTAL MATTERS

•After I vacated the chair of the BCA’s Industrial Relations Committee I was prevailed upon to become the inaugural Chairman of the Environmental Committee.

•That experience, combined with my other continuing role as Chief Executive of a large forestry, pulp, paper and packaging company, has given me a unique insight into some of the more “popularist” environmental issues - native forests utilization, plantation establishment, organo chlorines in pulping, re-cycling, packaging, disposables and so on.

•Let me go on and make a brave assertion - in almost all cases the popular perceptions re these hot environmental issues is almost the diametric opposite of the conclusion of any soundly based analysis of the issues.

•The whole of the forest products industry harvests about 0.3% of the native forests of Australia in any one year - all of which and more is re-established. From this small (and justifiable) involvement we see the extremes of the environmental movement emerge.

•Australia has led the world in paper recycling yet there is a point even in paper recycling where, apart from the cost issues, too much recycling will be an environmental negative.

•The use of returnable plastic crates to replace recyclable cardboard corrugated containers at twice the cost is being forced on industry in some countries - notwithstanding that reputable scientific investigation cannot identify any environmental advantage.

•Equally reusable nappies have no environmental advantage over the disposable variety when all the energy, waste, detergent and disposal issues are accounted for - fortunately the mothers of Australia are coming to realise this fact and the fact that the modern disposable diaper does a better job for baby.

•Yet, these popular perceptions combined with environmental activism and the readiness of politicians to become involved, is forcing industry to respond in ways which needlessly add to cost structures and reduced competitiveness.

•All this is not to say that there are not many macro and micro environmental issues to be addressed by industry and the community. No one who enjoys the benefits of modern society is without blame in some form or another.

•Time does not permit me to articulate my arguments today any further on a case by case basis, but we do need in Australia to introduce more rationale debate and discipline into environmental issues, particularly at the formative years in the education process.

•I don’t sense this is likely in the short term, given the fervour and passion commonly displayed in the environmental area - but concentrating on the important and relevant environmental issues in Australia can be a very important building block for the future.

FINANCIAL SYSTEM INQUIRY

•Can I now make some remarks about the recently announced Inquiry into Australia’s Financial System.

•I would like at the outset to acknowledge the value and influence of the analytical work on financial deregulation which has been commissioned by CEDA, as part of CEDA’s support for public discussion of a long-term economic strategy for Australia.

•This Inquiry has been given very major questions about the financial system to consider - what lessons are to be learnt from the effects of deregulation, what are the implications of rapid technological change and globalisation, how best to modernise the regulatory framework and how to ensure that our financial system and its regulatory framework will remain internationally competitive.

•These terms of reference give us a great deal of scope. Although there are some “excluded areas”, such as taxation and retirement incomes policy, I do not think the Government intends that the Inquiry is to be blinkered. Rather, the intention seems to be that this Inquiry should be based on comprehensive analysis, but be focused so as to complement other processes of policy advice.

•Fortunately I find myself at the head of an outstanding group of Inquiry members, Linda Nicholls, Bill Beerworth, Jeff Carmichael and Ian Harper have a remarkable depth of expertise about the financial system, and a wide variety of directly relevant experience. Each of them is, I know, approaching our task with a lively, independent mind - and also with the strictest objectivity. None of us is representing sectional or institutional interests - and some of us have stepped down from positions with financial institutions or regulatory bodies in order to avoid any possible conflicts of interest in our Inquiry task. The secretariat, headed by Greg Smith, is also coming together well and the committee is very pleased by the calibre of the people who have joined the secretariat so far.

•It is also pleasing to see that there seems to be quite general support from the financial industry and the interested public for having such an Inquiry, and for the objectives indicated in our terms of reference. This is an encouraging beginning for our task. But of course I am not underestimating the difficulty of forming recommendations which will find general support from those who now wish us well.