DRAFT SYNOPSIS FOR THE PRIME MINISTER'S

---

DRAFT

SYNOPSIS

INSTITUTE

FOR THE PRIME

Australian

economy

enviable

economy

What

has

at one

hand.

Some problems,

Propose

Why

No

the best

the world

the war?

short

material

unpredictable

world.

its classical

expression

to that background.

over

the

intentions experiencing

unemployment

Growing

-

and

realisation

that

and that problem

world

- both disci

sustained

over

political

needs

and international

freedom

in a complex

in adherence

based

Free markets

the most

discipline

budget

historically

national

line.

also proved

Financial

of the balanced

and about

cut.

of the wider

people's

but

is to-day

policies

of western

for its own sake; but have

the doctrine

despite

of financial

dimension

of meeting

economy

of free markets

framework

in relation

and fundamental,

prosperity

on development

recession;

time - the worst

since

about

the world

the world

only by resolute

of years.

economic

with

of all kinds,

are deep-seated

Economic

policies

is it that,

inflation

to talk about

of the present

gone wrong

be solved

within

at first

and the same

the worst

period

and hearing

Government's

decade?

causes

seeing

things.

of governments

will

TO THE AUSTRALIAN

Enjoying

and the roots

the British

past

SPEECH

OF DIRECTORS

Introduction.

many

MINISTER'S

the

we cherish

effective

way

and

- which

to the gold - the economic

received standard

and

counterpart

The

liberty

I mean

exist

by a framework

financial

stability.

Carried of post-war

years,

these

the overall

among

expectations

excessive government

spending

inflexible

non-market

sector

sector;

market

deficits

and monetary

inflationary

pressures.

of organised

labour

while

economies,

expansion

about

their

leading

to

Increased

of GDP meant

of economy

power

of all markets.

budget

to growing

and entrenchment

rigidity

of government

of

of

by growing

led inevitably

led to increasing

growth

at expense

financed

Increasing

for granted

taken

the electorate.

and being

proliferation

rigidity

their

as a proportion

flexible

became

over-ambitious

became

to shape

ability

progress

economic

effortless

fundamentals

Governments

and their

increasing

removing

while

away by seemingly

and forgotten.

market,

the freedoms

discipline.

financial

role

agents

economic

of past decades

to restrict

down:

to turn this upside

of individual

error

Fundamental

and

order

political

providing

thus

freedoms

and economic

political

sustained

has been

cannot

them.")

at all without

Our individual

that not

order;

but which

and virtue,

order

to

"The only

(Burke: with

connected

is a liberty

along with

exists

linked

two inextricably

provide.

only

that it is the duty of the State

order

social

of the wider

of labour

regulation

led to

• rates

exchange

brouglt dollar

finally

financing

But inflationary

States.

United

and vigorous

by a strong

pursued

policies

by non-inflationary

was assured

value

whose

on the dollar,

based

of fixed

by system

to some extent

maintained

discipline

financial

world

for a time an overall

Nevertheless

in

nothing

to an end, leaving

standard

war

of Vietnam

its place.

growth

As productivity

And - except

expectations.

not lower,

still higher,

to have

a dislocating

as well

as transfer oil shock

In first

others

wealth: fiscal

countries position

But world's

adjustment

quicker

to harden

inflation

before

were

occurred.

and were

oil price

if the arteries

this

first

economy

transfer

Noteworthy

we made

to the double

the shocks

this

Bound

countries. of

in their Those

the result.

right

oil shock.

the mistake

and better

accepted

to "accommodate"

policies,

is making

of world

from oil consuming

some countries

the second

1979 - in oil prices.

on functioning

of wealth

time nobody

been

in

that did not inflate to face

also hit by two massive

decade

effect

like UK tried

and monetary

short run -

unemployment.

- in 1973 and again

increases

outcome:

of inflationary

in the very

perhaps

over past

economy

by the quick

inevitable

- and the reinforcement

inflation

desperate

increasingly

The

demand.

faltered

performance

to cure the ailment

made

of monetary

fix of injections

World

were

attempts

still higher

of supply,

arteries

due to the hardened and doomed

and economic

in a stronger that this

time round. shock would

had not already And the worse

have

begun

the capacity

•

to adjust,

The

the higher

true nature

the current

others would

to

expansion.

In the event

twolcountries diagnosis,

cycle

of the world

still

suffering

as their

leaders

Over past

decade

to cycle,

and so has world

while

now widely

was

persuaded

'locomotives'

to path little

clear

have

The notion

there

that

now totally

by

that

of growth helped

and

- but those

of that misguided

at this year's

economic

forces,

rigidities,

from

(especially

and return

in almost

supply

all major

those

on capital economies. trade-off

- have

microeconomic

stuck

to these

freedom.

market

- remove

wages,

of individual

encroachment suffering

least

- financial

labour

unwise

tax

initiative

of government

industrialising

basics

discipline,

and strengthen

sapping

newly

that must

financial

to rig relative

economies

- the viorous

recognition

side of economy

policies,

by inexorable

that

restore

attempts

security

and enterprise

recession

growth

and maintain

alike;

thus improving

Noteworthy

unemployment

increasing

restore

and fiscal

and social

has risen

is an inflation/unemployment

the world

to basics:

monetary

declined

inflation

discredited.

Throuelout return

or so world

productivity

(profitability)

Asia

the

the consequence

made

of which

at Ottawa.

among young),

market

symptom,

& Japan,

back

the world

problem,

of 1978 the two countries

Germany

and thus become

the rest

economic

obvious

summit

economies,

'reflate'

pull

summit

is the most

At the economic

the strongest

unemployment.

of the worldwide

recession

recognised. with

the resulting

activity.

in current countries

discipline

of and

•

Throughout

world,

too,

growing

emphasis

on monetary

targets

(as in Australia), reduction of budget deficits and (Germany, US, etc),/restoring market forces. Examples of

latter:

energy

to Managing • • •

pricing

Director

OECD ministerial not a machine: importance

of IMF

meeting,

both

throughout

June

attitudes

No escaping

protectionism get fiscal

to rest

with

on latter markets

course.

time,

rate

which

consequent

40 years.

leaders

world

has

but bound

term

already

spendinz. controls

Substantial

has

undue

in full measure

strategy: (Indeed

set its

Policies

declining

Government despite

rates.)

Curbs

in marginal

recession,

on

controls

income

monetary borrowing

reduced,

exchange

to

Set out, for

size of bureaucracy. Also

to

international

to take time.

to interest

Reduced

And need

avoiding

tendencies.

substantially

cUts

right,

suffered

financial

abolished.

policies.

recovery.

borrowing.

benefit

to eschew

destabilize

and inflationary trends,

just as each

in our own way.

that UK Government

UK economy

medium

terms

dividend

Need

balance

could

and retard

and government

Government

this the

But each also has

of world.

and interest

these

in real

at

crucial

and to their

discipline

and beggar-my-neighbour

from rigidities

growth

speech

But economy

in our own way,

financial

It is in this context

first

reference

and expectations:

that responsibility.

responsibility

reverse

Hence

themselves

of us has to do this

of us has to reimpose

economic

and pithy

1981, attached).

at work.

to the people

Possible

the world.

Each

financial

(his brief

it is people

of changing

challenge

reliance

and conservation.

Pay,

price,

- after

tax rates.

Denationalisation/privatisation.

Already

major

year;

wage

fewer

man-hours

realism

achievements.

settlements lost

on both

in British

in strikes;

many

But these

are long-term

about

essential

bring

increasing

short-term

has

remain

policies,

preconditions dividends our undoing

long run we are dead. (Simon)

effectively

difficulties

been

pointed

reduced;

new mood

of constructive

and much

in years

ahead.

in the past.

But as former

out, now Keynes

and inefficiencies at long last.

still

have

of economic

over past

substantially

tackled

which

side measures.

halved

of industry; overmanning

being

Of course

supply

Inflation

now greatly

sides

industry

Other

to be done.

already

success

brought

and which

Obsession Keynes

US Treasury

with

said in the Secretary

is dead and we are in

the long run.

Australian to our own

problems

(despite

similar

policies.)

similar

success

Lawson

7 September

draft 1981

show many

obvious

differences).

Similar

problems;

if carried

steadfastness.

Nigel

and policies

through

(Give examples

similar

with

similarities

remedies;

sensitivity

and

of

will

e

(

IAVN

•

I LIMi Treasury

Chambers,

Parliament

Street.

SW11) 3AG

/4,4 oti William Rickett Esq 10 Downing Street LONDON SW1

L._(1V2A61-41, RA. tOttlz 44.4 4-0 4 ,1

September

1

1981

RYUIR V4 .‘SQ Iltt\) PRIME

MINISTER'S

SPEECH

TO THE AUSTRALIAN

INSTITUTE

OF DIRECTORS

In your letter to Francis Richards of 20 August, copied to me, you conveyed the Prime Minister's request that the Financial Secretary should prepare a draft synopsis of a speech she is to deliver to the Institute of Directors lunch in Australia. You subsequently agreed to extend the deadline until today. I attach a draft synopsis which the Financial He hopes the Prime Minister finds it of use. to expand on his ideas and discuss them with that would be helpful. I am copying

this letter

to Francis

Richards

Secretary has written. He is of course happy her should she think

(FCO).

D L WILLETTS Private Secretary