E&OE................................................................................................
JOURNALIST:
It's being called the miracle economy of the world financial
crisis. Australia was seen as a likely frontline victim of Asia's
financial crisis because of its heavy dependence on commodities and
exports to Asia. But instead Australia has emerged as one of the fastest
growing economies in the industrialised world. So how did they do
it? Leading analysts such as US economist Paul Krugman say Australia
has succeeded because of sound macro-economic policies. Those include
the refusal of the reserve bank to raise interest rates during a speculative
attack on the Australian dollar last year. A healthy and open financial
system free of the bad debts and distortions which undid many Asian
economies also underpinned Australia's performance. And finally
the conservative Coalition Government knows its own success in returning
the budget to surplus as fireproofing Australia from the global turndown.
The Coalition under Prime Minister John Howard was re-elected for
a second term last October promising further reform. But the Prime
Minister's victory came at a cost. His Lower House majority was
slashed and from July this year he faces a hostile Senate dominated
by left leaning parties. That leaves his Government just five months
to see a controversial tax and privatisation proposal before Parliament,
and later this year Prime Minister Howard will put a referendum to
the nation proposing that Australia break its remaining constitutional
ties to Britain and become a republic. Joining us know from Canberra
to discuss what promises to be another challenging year for Australia
and his Government is the Prime Minister John Howard. Mr Howard, thank
you very much for joining us today.
PRIME MINISTER:
It's a pleasure Danielle.
JOURNALIST:
The Australian economy surprised many people with its strength last
year. How much longer can we expect that to continue?
PRIME MINISTER:
Well our growth outlook is still very strong. We are being told that
it will be over the year ahead at least 3.25%, and I'm pretty
optimistic that at least that is going to be achieved. We aren't
complacent but we have got the fundamentals as strong as they have
been for 25 to 30 years. We've got the budget in healthy surplus;
we have low inflation; we have low interest rates; we have made a
lot of reforms to our labour market; and we had a strong privatisation
program; and we're in the midst of an historic tax reform. So
if all of that comes together we have laid the foundations for continued
strength and growth.
JOURNALIST:
You mentioned inflation. Your inflation target in fact has been below
central bank's, the inflation rate in rather has been below the
central bank's target for nearly two years. Doesn't that
suggest that maybe there's room to grow the economy faster?
PRIME MINISTER:
Well, I think what it means is that the growth we have at the moment
is very manageable and that's tremendously important. The best
situation is to have high but manageable growth and that is what Australia
has achieved over the last 12 months. And we need to keep it like
that because steadiness in the management of an economy is the thing
that more than anything else produces confidence and stability. And
we certainly have that, we certainly have a mood of optimism and strength,
the like of which we haven't seen for probably 20 or 30 years.
JOURNALIST:
Your own budget is back in surplus but the Australian economy is still
running a current account deficit of more than five per cent of GDP.
How much of a concern is that on Australia's growth potential?
PRIME MINISTER:
Well, an economy like Australia is always going to need to draw from
time to time on its external situation because of the structure of
the economy. The real question is whether the other elements of economic
policy combined with the current account deficit to make all of it
together a constraint. And when you have a budget surplus, low inflation,
low interest rates, high growth against the current account deficit
then it is very manageable, it can be handled. And on top of that
our debt servicing ratio to GDP now is significantly lower to what
it was a few years ago. So whilst you must always watch the current
account deficit, when you look at all the other fundamentals they
are so strong and in equilibrium that on its own that current account
will not act as a constraint.
JOURNALIST:
I'd like to move onto the issue of reform. You won praise from
the financial markets for your reforms in the first term. How do you
plan on picking up the pace in your second term?
PRIME MINISTER:
Well, first of all we make certain that we do all we can to get our
tax reform through. Because if we can reform the tax system in a way
we want to we will make Australia even more attractive as a regional
or world financial centre. Part of the tax reform package includes
the removal of taxes on certain financial transactions and that will
add to a number of other steps that we have taken to make Australia
very attractive as a financial centre. And, of course, the other thing
that has stuck to Australia very much is that we have a very transparently
regulated banking system. We have a sound, coherent, easily understood
and well enforced legal code as far as corporate behaviour is concerned.
And all of those things make Australia an attractive place in which
to do business.
JOURNALIST:
The Goods and Services Tax legislation is key to that tax package.
How confident are you that you can get that through the Senate unchanged?
PRIME MINISTER:
Well, I am optimistic about it. We don't in our own right have
the numbers in the Senate. We haven't had that since the day
we were elected in 1996. But we did put it on the table before the
last election. We did tell the people what we were going to do. We
didn't hide it and therefore we are entitled to keep saying to
the minor parties in the Senate, listen to the people. Democracy in
the end is really about a party presenting its programme, and if it
wins, having that programme implemented. So I remain optimistic and
we'll continue to push very strongly the simple proposition that
the Australian people voted for what we want to pass into law.
JOURNALIST:
Given that if you can't get the GST through the Senate, would
you consider calling a fresh election?
PRIME MINISTER:
Oh look, we have just had an election on it. Let us see what happens.
We have a number of months to go before the 30th of June
and there is always a bit of shadowboxing in the sort of circumstances
that are operating at present.
JOURNALIST:
Westpac bank has forecast that your budget surplus this year could
exceed your $3 billion forecast by as much $5 billion. How likely
is that?
PRIME MINISTER:
Oh, I am not going to start speculating about the surplus. There will
be a surplus but just exactly what it is I am not going to speculate
about. I'll leave that to the non-official economic commentators.
I don't want to take away their opportunities to predict but
I am not going to get pulled into that speculation. But the accounts
of Australia are in a very sound state.
JOURNALIST:
.......[inaudible] boost your revenue, will you use that to
make a deal with the Democrats on tax reform?
PRIME MINISTER:
Oh look, I am not going to get into that sort of speculation. We have
a very fair package and we think the package as presented ought to
be voted for by the Parliament because the Australian people endorsed
it.
JOURNALIST:
Your Government is promoting Australia as a global financial centre.
Will that process extend to offerings through tax concessions for
foreign insitutions?
PRIME MINISTER:
Well, we have already offered a major tax reform in the tax package
and that is the removal of the bank accounts debits tax and the removal
of the financial institutions duty and they will....and the removal
of stamp duty at a State government level on share transactions. Now,
those three reforms together represent a major move towards making
Australia as a very attractive world financial centre.
JOURNALIST:
Anything else in line perhaps with holding or withdrawing or withholding
tax on [inaudible] bonds for example?
PRIME MINISTER:
We have made some other changes a couple of years ago but I think
what we're now offering represents a very attractive package
and all we've got to do is get it through our Parliament. And
I hope those in the community of Australia and elsewhere who see Australia
as a world financial centre of the future, well, express that view
to those who might be tempted to vote against our package.
JOURNALIST:
If we can move on to the Australian dollar, the Australian dollar
was a victim of hedge funds speculation last year, or a target at
least. Does that suggest to you that we need further curbs on speculation
or on speculators?
PRIME MINISTER:
Well, I don't talk, of course, about the day-to-day variations
in the Australian dollar. I do make the observation that the management
of our exchange rate position by the Reserve Bank of Australia has
been very professional and very sensible and I have enormous confidence
in our monetary authorities. As far as international financial reform
is concerned, we support essentially the open-market approach. There
is obviously some room for what I might call fine-tuning at the edges
to deal with certain behaviour and they were the subject of a report
from government and private financial people who I got together after
the last election. And I've sent that report to President Clinton,
to the Prime Minister of Japan, the Prime Minister of the United Kingdom
and to many other world leaders and the feedback I've had so
far has been very positive. But, fundamentally, there continues to
be a role for the IMF and there continues to be, of course, a great
emphasis on the strength of domestic financial policies.
JOURNALIST:
Australia's fortunes are of course very much tied to those of
Japan. What do you feel is the best policy course for Japan to be
pursuing in order to follow a return to growth?
PRIME MINISTER:
Clearly the Japanese Government needs to continue to address some
of the longer term difficulties of Japan's banking system. We
think that, respectfully, that that was one of the difficulties that
has been around for a number of years and, perhaps, if had been addressed
a little earlier then some of the problems now being experienced in
Japan would not have arisen. Japan, of course, has experienced very
sluggish or no growth for some time and the need is to continue to
press ahead with financial sector reforms because in the end unless
you have a completely, or as near as completely, transparent financial
system you are going to have problems down the track.
JOURNALIST:
Returning to your own programme for this year. Australia will vote
on becoming a republic yet you remain a committed monarchist. Isn't
there an economic argument for Australia cutting its ties with Britain?
PRIME MINISTER:
No. I think it's utterly irrelevant.
JOURNALIST:
Why?
PRIME MINISTER:
Well, because in the end you don't buy or sell to a particular
country according to what is in your flag, you buy and sell according
to economic opportunity, you buy and sell according to economic performance.
And I've never heard an argument suggesting that a republican
push in a government delivers a lower budget deficit or a more competitive
external account. I think if you look around the world the success
and the failures, economically, bear no relationship to systems of
government. They bear a lot of relationships to economic policy and
the openness of society. Australia is one of the most open, democratic,
free societies in the world and that will be the case whether we maintain
our present system under which we are free and open and free and democratic
or whether we change to a republican system of government. It is utterly
irrelevant to the economic future of Australia.
JOURNALIST:
You've also pledged in you second term to recognise the wrongs
done to Australia's indigenous people. What concrete measures
will you take to do that?
PRIME MINISTER:
Well, what I have committed myself to do is to try to achieve what
we call in Australia a process of reconciliation. And that principally
involves reducing the disadvantage that the indigenous people have
in areas relating to health and education and housing and employment
opportunities. The best reconciliation is that which removes contemporary
disadvantage.
JOURNALIST:
Prime Minister Howard, thank you very much for joining us today.
PRIME MINISTER:
It was a great pleasure.
[ends]