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SAVAGE:
Prime Minister Howard, welcome.
PRIME MINISTER:
Hello.
SAVAGE:
Any tips for other leaders on how to weather a financial crisis?
PRIME MINISTER:
Well, I can only speak from the Australian experience. We got our
domestic economic house in order. We cut a big budget deficit we inherited.
It was $10.5 billion three years ago. It's now in surplus. We
have allowed a sensible management, an open management of our exchange
rate. We have reformed our labour markets, although we still have
distance to go in that area. We've kept inflation down. And we've
got a strong competition policy. And, very importantly, we have won
the support of the Australian people but not yet the full Parliament
to reform our taxation system.
SAVAGE:
Well, talking about that taxation system, it is finding a lot of problems
getting through the Parliament. How are you planning to continue to
push that through?
PRIME MINISTER:
Well, the final vote will be taken in our Upper House, our Senate,
by the 30th of June. We had an election in which this was
the main issue and that was five months ago and the Australian people
returned my Government with a very comfortable majority. So we'll
be continuing to say to the Senate, listen to the verdict of the Australian
people. We need tax reform. The message I give repeatedly to the Australian
people and, indeed, to anybody else is that the reform process is
never finished. Countries that imagine they've got it made by
having maintained strong growth for a period of time are deluding
themselves. You must always keep finding new ways to further strengthen
your economy. And if you don't do that the gains of the past
will be dissipated through the laziness of the future.
SAVAGE:
Well, we'll come back to that in a little bit. I just want to
ask you about the economy's strength. A lot of the economy's
strength has been due to exporters' ability to buy new markets headed
by a lower Australian dollar. Now that the Aussie dollar has rebounded
from that all-time low it reached last year and is showing signs of
strength, does that mean Australian exporters are going to have trouble?
PRIME MINISTER:
Look, I don't respond to those sort of questions because whatever
I say might be misconstrued as some observation about where I think
the dollar is going. You either have a flexible exchange rate or you
don't. We have a flexible exchange rate. There's very strong
support to maintain a floating exchange rate in Australia and the
Reserve Bank has run exchange rate policy very well. And the Australian
dollar, like the Australian economy, has responded to changed circumstances.
The best thing we are doing for Australian exporters is to change
the tax system. Because if you have a broad-based, indirect tax replacing
rather discriminatory indirect taxes you take, in Australian terms,
about $4.5 billion a year off the cost of our exports and that is
a huge injection of support for Australian exporters.
SAVAGE:
You and your Cabinet are about to consider proposals to encourage
international financial institutions to choose Australia as their
base, in the Asia-Pacific region, other countries such as Singapore
and Hong Kong. So far no Australian leader's been able to offer
the incentive that people in financial industries seem to think are
necessary. How will your approach be different to trying to get these
incentives here in Australia?
PRIME MINISTER:
Well, we've already made a number of changes. And our tax plan
contains massive incentives for the building of Australia as a financial
system. And we're going to take, as part of the package, we're
going to take some taxes off banking and other financial transactions.
We're going to take taxation off share transfers. And we really
are going to make it far more attractive to trade securities and shares
and like instruments in Australia through taxation and other changes
than it is now. And when you add those to the fundamental strengths
of the Australian economy and the fact that cities like Sydney now
are, despite their size and cosmopolitan character, cheaper in many
respects than places like Hong Kong and Singapore, you've got
a very powerful cocktail making Australia most attractive as an international
financial centre.
SAVAGE:
Are you, in person, planning any trip offshore to actually sell this
message?
PRIME MINISTER:
Well, I have a number of travel plans that are being worked out at
the present time and obviously if they were to take me to Japan and
the United States, that would be very helpful. But just at the moment,
for obvious diplomatic and courtesy reasons, I can't really say
any more.
SAVAGE:
So any idea about possible timing if that was to take place?
PRIME MINISTER:
Not at this stage, it really is dependent upon a number of factors
and I really can't say any more at the present time. But obviously
prime ministerial visits are important but, in the end, people make
decisions based on how you perform. And if our economy continues to
perform well, if we continue to have low cost, low inflation, if we
can reform our tax system and we can get those reforms that the public
voted for through the Parliament then they will strike a very heavy
further blow in favour of Australia as a financial centre, particularly
in the Asian Pacific region.
SAVAGE:
And are those the sort of things that you will tell leaders of other
countries as an incentive, and businesses of other countries, as an
incentive to plant their bases in Australia?
PRIME MINISTER:
Absolutely, but I've been doing it on a very regular basis. And,
of course, leaders of other countries are advised as to how other
countries are performing but if it's reinforced at a head of
Government level that obviously helps.
SAVAGE:
You've said you want to reduce the company tax rate to 30% from
36%. How vital is business taxation reform for the wellbeing of Australian
companies and what will it mean for company profits?
PRIME MINISTER:
Well, company profits in Australia at the moment are very good, although
some companies in the resource and commodities area are not doing
as well because commodity prices are low. And even though the Australian
economy is very strong, I acknowledge that in the weakness of commodity
prices that is having an adverse affect on some of our more efficient
operators despite their best efforts. We have a review of business
taxation being conducted at the moment by John Ralph, a very prominent
and respected Australian businessman. And one of the options he's
laid out is that you could take the Australian company tax rate down
from 36% to 30% for everybody, but you would have to pay for that
by withdrawing concessions in the Taxation Act that benefit only a
section of the corporate community. And we've got to make a judgement
as we debate these issues, and it's out in the public for debate
now, we've got to make a judgement as to whether we want everybody
to have a company tax rate of 30% at the price of some people who
now have concessions like accelerated depreciation losing some or
all of those concessions. Now it's an interesting debate and
I've got an open mind. I want to hear the arguments. Obviously
we all like to have a like to have a low tax rate but we also want
to hear argument about the impact of that. So it's a debate that
has commenced and it will go on for some months.
SAVAGE:
Mr Ralph has also said the national economy is at a cross-road. It
can continue as a commodity based capital intensive economy
the old image of Australia as the world's quarry or it
can move to becoming a modern service based industry. Which way will
the Government steer the economy?
PRIME MINISTER:
Well it's never an ideal world. I mean we could always depend
quite heavily on commodities because we are efficient farmers and
we are efficient miners. And we are also quite efficient manufacturers
in many areas. But new opportunities are opening up and the goal of
good policy is to give everybody the maximum opportunity. And the
other goal of good policy is to have a flexibly run economy so that
when area goes down your instruments of policy are flexible enough
to allow other areas to go up unimpeded.
SAVAGE:
Your Government oversaw one of the most successful public share offers
when it sold a third of the State owned telecommunications company
Telstra. Still as we touched on before, there are problems in the
Parliament, you were unable to get that legislation through Parliament
to sell the rest of it. In the face of strong resistance from opposition
parties and the general public, do you believe the Australian Government
can achieve its plan to sell another 16% of Telstra to investors this
year?
PRIME MINISTER:
Well we're going to keep trying. We're hopeful that we can
get that legislation through. We now have 40% of the Australian public
owning shares. We're one of the great share owning democracies
in the world and people who bought shares in the one-third float of
the capital of Telstra have done very well. And we are encouraged
to keep trying. These things are on-going debates and what you have
to do in public life if you don't always succeed the first time
is to keep coming back. And I'm going to keep coming back on
the issue of privatisation because I believe in it. I believe that
we'll have a more efficient Telstra and we'll have a more
open and competitive telecommunications system in our country. We'll
be able to take on the world more effectively if we have a more open
system and that means full privatisation. And I know some people try
and whip up fear campaigns about it but I don't believe that
they have any substance and we remain very strongly committed in trying
to achieve these outcomes.
SAVAGE:
Well it brings us back to the question of the Upper House with the
balance of power in the Senate changing as a result of the October....election
last October. From July this year the minority Australian Democrats
will hold sway and they've made it clear that they don't
support many of the changes your Government has proposed such as tax
reform, the Telstra sale and labour reforms which you said are necessary
to reduce the unemployment rate. How will you avoid those deadlocks
in the new Senate?
PRIME MINISTER:
Well you've got to take each piece of legislation as it comes.
You don't lay down some blanket approach. You don't see
the Democrats getting the full balance of power until the 1st
of July this year. There's a bit of water to flow under the bridge
and there are a few votes to be taken before then. I'm optimistic
that when the vote is taken on the taxation legislation the minor
party and independents in the Senate will remember that we had an
election on the 3rd of October last year. The main issue
was our tax plan. We were open and honest and candid and forthright
with the Australian people and we would like them to listen, if not
to us, to the verdict of the Australian people.
SAVAGE:
So you're going to have a busy next few months?
PRIME MINISTER:
You're always busy if you are in the business of further strengthening
your economy and not resting on laurels. We've done well, we're
doing well. But no country can remain completely unaffected and we
have to keep making changes to strengthen the Australian economy so
that we can keep taking advantage of the strengths that we've
built up over the past few years.
SAVAGE:
On a different note here Prime Minister, Australian businesses are
expected to spend about A$10 billion to fix the problem with the so-called
millenium bug. How ready are Australian companies to deal with the
glitch?
PRIME MINISTER:
Well so far the general scene is very positive and we've put
a lot of resources in at a Government level, and we've passed
some good Samaritan legislation recently. So we're pretty strongly
of the view that a lot is being done but as always with these things
some countries and some sections of the community are complacent.
The message we are giving out is that nobody can be complacent. It's
one of those issues where you get a variety of expert opinion although
the strong balance seems to be very much in favour of the need which
we support for people both in the public and the private sectors of
the economy to take all the precautions they can.
SAVAGE:
Your Communications Minister Richard Alston says he's invited
you to spend New Year's Eve 1999 with him flying in the cockpit
of a plane. Will you?
PRIME MINISTER:
Well I've received many invitations on New Year's Eve but
if Richard deems that necessary well I'll give it serious consideration.
SAVAGE:
Prime Minister, just a few quick issues overseas. Late last week pro-Indonesian
East Timorese armed militia leaders threatened to kill Australian
diplomats or journalist in East Timor because of the Government's
policy on East Timor. How great a concern is this threat?
PRIME MINISTER:
Well the situation in East Timor is obviously a quite fluid and unstable.
Our position is very clear. We want the voice of the East Timorese
people to be listened to. We would prefer that in the short term at
least there be autonomy within the Indonesian State because if there's
too rapid a transition to full independence then what could be left
behind could be very unstable and pragmatic and can lead to potential
not only bloodshed but economic breakdown. Australia is prepared to
play her part and play it fully irrespective of the outcome. But we
want others to share the responsibility including the Europeans and
the Americans and of course Indonesia who has after all exercised
sovereignity over East Timor for 24 years and have that exercise of
sovereignty recognised by the world including Australia. Indonesia
has the responsibilities as well. We remain naturally concerned about
the safety of our own people and that will be uppermost in our minds,
and that of the Government's.
SAVAGE:
Has Indonesia, as far as you're concerned, indicated that it
is going to take up that responsibility as far as East Timor's
future goes?
PRIME MINISTER:
The talks we've had with Indonesia within the last week or so
have been very constructive and my Foreign Minister, Alexander Downer,
who's done a quite outstanding job particularly over the last
week in relation to East Timor, has had very good discussions with
the Indonesian Foreign Minister. He has also been in Lisbon, he went
through London on the way home and he got back to Australia this morning.
And what we are trying to do on a broad-based diplomatic front is
to impress upon the whole world the importance of everybody making
a contribution. Obviously some have a greater responsibility than
others Portugal as a former metropolitan power, Indonesia as
the country with autonomy at present and Australia as a near neighbour
and longstanding friend of both Indonesia and the people of East Timor.
SAVAGE:
Well, [inaudible] to rock various parts of the rest of Indonesia ahead
of elections this year. Does that instability affect Australia as
a close neighbour?
PRIME MINISTER:
Well, it doesn't directly affect us. We are concerned, we remain
very committed to a close relationship between our country and Indonesia.
We were able to help Indonesia economically and politically last year.
President Habibie and his Government face a very, very difficult situation.
It's a very large country, it's been devastated by the Asian
economic downturn and one can understand the unrest that is occurring
and on top of that there's a very strong drive to a more open,
democratic society and there are elections in June. And we see those
as an opportunity for renewal in Indonesia and the involvement of
more of the Indonesian people in shaping that country's future.
SAVAGE:
One final question Prime Minister. Australia is moving towards becoming
a republic, losing Queen Elizabeth II and England as its head of State,
there's going to be a public vote on this issue this November,
which way do you think it's going to go?
PRIME MINISTER:
I don't know. I think it's too early to make a judgement.
There are a lot of people who think the republican system of government
would be better, there are many others who believe that the present
system has served Australia remarkably well, that Australia for all
practical purposes has been an independent country for 70 to 100 years.
I don't think anybody has any doubt that there's a distinctive
Australian identity. That's been self-evident for a very long
time indeed. I don't know how the referendum will go and there
are some who argue that if we are to become a republic then we should
have a completely different system of government. And all of those
are going to be thrown into the mix and it will be very interesting
to see the outcome. And within the Government parties there's
a free or open vote, there's no firm Government line. Different
members of the Government have different views and I am allowing a
free or open vote.
SAVAGE:
With all those different aspects thrown into mix is it going to be
quite complicated for people to give a straight yes or no whether........
PRIME MINISTER:
I don't think it's complicated at all. I think the Australian
people are perfectly capable of making up their own minds one way
or another. If they vote yes, well we will change on the 1st
of January in the year 2001 which is the Centenary of our Federation.
If we vote no we won't change. Either way, Australia will go
on regardless. We are a free, open, independent, distinctive society
which is composed of people from all around the world. And we have
our own character and our own values and our own traditions and they
will endure unimpaired, untouched, irrespective of the outcome of
the referendum. I don't think it's really going to make
an enormous difference either way.
SAVAGE:
Right. Mr Howard, thank you very much for your time.
[ends]