PM Transcripts

Transcripts from the Prime Ministers of Australia

Transcript 11064


Photo of Howard, John

Howard, John

Period of Service: 11/03/1996 to 03/12/2007

More information about Howard, John on The National Archive website.

Release Date: 18/02/1999

Release Type: Interview

Transcript ID: 11064



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.


It's a pleasure Danielle.


The Australian economy surprised many people with its strength last

year. How much longer can we expect that to continue?


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.


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?


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.


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?


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.


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?


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.


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?


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.


Given that if you can't get the GST through the Senate, would

you consider calling a fresh election?


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.


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?


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.


.......[inaudible] boost your revenue, will you use that to

make a deal with the Democrats on tax reform?


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



Your Government is promoting Australia as a global financial centre.

Will that process extend to offerings through tax concessions for

foreign insitutions?


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.


Anything else in line perhaps with holding or withdrawing or withholding

tax on [inaudible] bonds for example?


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.


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?


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.


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?


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.


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?


No. I think it's utterly irrelevant.




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.


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?


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



Prime Minister Howard, thank you very much for joining us today.


It was a great pleasure.


Transcript 11064