PRIME MINISTER:
Today's National Accounts figures are very pleasing indeed. Not only has there been very strong growth for the quarter, but this is quality growth because it comes off very strong business investment and that augurs well for very sound corporate balance sheets. It also augurs very well for the maintenance of very strong jobs growth and therefore the maintenance of the low unemployment we are now enjoying - at or around the figure that we've had in recent months. If you look at the composition of the growth, and the Acting Treasurer has put out a statement and the Treasurer will be saying something about it also in Indonesia, if you look at the composition of the growth you find the very strong business investment, you find that nominal GDP rose by 2.9 per cent in the quarter and there was a 5.8 per cent boost to the terms of trade and that is the best terms of trade lift since 1988. Now obviously that is coming off the back of the resources growth and the fact that it's a great time to be in resources and we have a number of Australian companies that are well and truly into resources at this time. Importantly, the accounts also reveal that real wages rose by 0.5 per cent in the June quarter and real wages have now risen by 14.9 per cent since 1996.
So overall these are very good figures for the Australian economy. They show that the growth in the year concluded on the 30th of June 2005; at 2.3, was above the Budget estimate. And they are, obviously, are positive in terms of the strength and accuracy of the Budget forecast for future growth. So overall, a very strong picture across the board of a strong economy. But no room for complacency and the very strength of these numbers, and although they are for only one quarter, they are nonetheless, because they cover a quarter, they're more relevant than monthly figures and a better guide than monthly figures. Importantly they underscore yet again the necessity for this Government to continue the reform task. And the fact that we have such strong growth is a reason for pressing ahead with workplace relations reform.
It's a reason for hoping that we have a window of opportunity over the next six to 12 months in working with the States to secure some other reforms that involve Commonwealth/State cooperation. I think that window of opportunity is available because we are just under a year from the last federal election and I think the opportunities, and given the moods of some of the State Premiers, I think the opportunities in some of those areas are more significant. So this is in a sense a good platform, the very strength of the economy is a good platform and a good opportunity for further reform and we are very focused on that.
Could I, just before taking your questions, make a comment about the Telstra debate? And that is to say that everything that's happened in the last 48 hours is powerful evidence in support of the Government's case for selling its share in Telstra. What's happened in the last 48 hours is to demonstrate the incredible conflict of interest in which the Government now finds itself. There's been a lot of talk about the meeting on the 11th of August. When the Chairman and Managing Director of Telstra came to see me and my senior colleagues on the 11th of August, we saw them in three capacities. We saw them as the principal shareholder; we saw them as the potential provider of money, and they certainly wanted money from the Government when they came to see us, and we also saw them as the regulator.
Now that is an impossible conflict of interest and it's a conflict of interest that's been highlighted by what's occurred and the debate that's gone on over the last few days. And so far from what's occurred over the last few days ... diminishing and weakening the case for the Government to go ahead with the full sale of Telstra - it has in fact reinforced the case. And that is certainly the very strong message that I would give to those who have been critical and no doubt though you'll have some questions to ask about that.
But certainly a good day for the Australian economy, a quality, strong, soundly based, broadly based growth figure and very welcome news for Australians and can I again thank the people who've contributed most to the growth of the Australian economy over the last nine and a half years and that's the workers of Australia, the men and women of Australia who've worked so hard and productively and also the businessmen and women and the risk takers and the enormous contribution made by business investment to these figures is a mark of their contribution to our current strong economic conditions.
JOURNALIST:
Will you sell at any price...with regards to Telstra?
PRIME MINISTER:
Will we sell at any price? Certainly not. Peter Costello put it very well when he said we are not a distress seller. What should happen is that the parliament should approve the package that's been brought forward by the Minister and then the timing and the nature of the sale will obviously be dictated by commercial considerations and that is our duty and that is our obligation to the Australian public.
JOURNALIST:
Prime Minister, wouldn't you want this conflict of interest to end as soon as possible?
PRIME MINISTER:
As soon as possible, having regard to the obligations that we currently have albeit in a conflicted situation. And one of those obligations is to get the best value for the taxpayers of Australia. And see that's one of our obligations. You are right to say that the sooner we end it the better, but we shouldn't end it at the expense of the Australian taxpayer.
JOURNALIST:
(inaudible)
PRIME MINISTER:
Well I have been critical of certain statements and particular behaviour by some. I continue to have confidence in the Board. The Board has chosen Mr Trujillo and I am perfectly happy to the extent that we need to work together, and bear in mind on a day to day basis. Because the company operates under the Corporations Act, we don't have to work on a day to day basis. But the Board has chosen him; the Board has responsibilities in relation to him. But can I just say again that my criticism has been in relation to comments and conduct which has not promoted the interests of the company. I'm not asking anybody to tell lies about the company. That's absurd. I never said that. But I think it's the obligation of senior management not to make comments that are not positive for the interests of the company. And that's what I said in Parliament yesterday.
In fact, let me find the very words that I used because I thought I put it well, if I may say so. That: "I'm aware of what happened. I think it is the obligation of senior executives of Telstra to talk up the company's interests and not talk them down." Company's interests. I'm not saying they should run around telling lies about the share price, I'm not asking that at all. But surely as a matter of just ordinary commonsense, if you just stop and pause, if you're a senior executive of a company, the idea that you don't talk up the company's interests is not something that I accept.
But look, I've made my position clear. I don't retreat from it in any way. And can I also say that again; all of this just illustrates, I mean, why should the Prime Minister of a country, why should the Treasurer, why should the Minister for Communications be in a situation where they have to answer questions like this? I mean I'm not complaining. I don't mind answering questions. But it just highlights the absurdity of the current arrangement. And given the nature of Telstra and the sort of business that Telstra's in, it is inevitable no matter what arrangement you have, that if the Government is the majority shareholder, the Prime Minister and the Treasurer and the Minister are going to get involved in being asked to comment about all manner of things. And it's not really, in a sense, something that we're competent to do. The responsibilities of Government and the responsibilities that Ministers have in a Government in our system are often far divorced from the responsibilities that corporate chieftains have. And that's why as a matter of philosophy; I've never favoured Governments owning enterprises.
JOURNALIST:
(inaudible) more favourable way?
PRIME MINISTER:
I'm sorry Geof?
JOURNALIST:
Are you suggesting to Telstra executives they should spin unfavourable views?
PRIME MINISTER:
No I'm not. I'm not exhorting anybody to tell lies. I'm just saying that if you're a senior executive in the company you shouldn't talk down the interests of the company. And I think 99% of Australians would agree with me. It's just a matter of commonsense. It's not something you derive from corporate law, or even from the common law. It's just a matter of commonsense.
JOURNALIST:
Didn't you have a moral responsibility in relation to at least two of your three roles to reveal the nature of the information about just how badly the company was travelling?
PRIME MINISTER:
Well Mr Seccombe, I've been advised that the law, namely the Telstra Corporations Act...
JOURNALIST:
...moral responsibility....(inaudible)
PRIME MINISTER:
No well hang on, I'll come to morality in a minute. I've been advised that under the relevant shareholder provisions of the Telstra Corporations Act restrictions are placed on what the Government can do with the information it receives. And we are in fact restricted by that very Act from passing on information given to us as a shareholder to what are called non-associated people. And the non-associated people are basically your Ministers, our employees and relevant public servants. So before we get into morality the fact is, and if you actually stop to think about it, it makes sense doesn't it. We, because we are the Government, we're also a shareholder. We find ourselves in a situation where Telstra thinks we should have information which is not information that they think they might give to other people. But that's a matter for them. And what I'm telling you is that the law, according to my advice, placed a restriction on us from making this information available to anybody other than the people I've mentioned. So before we get into morality, according to my advice, it would have been unlawful for us to have made this information available. And if you stop and think about it for a moment, that makes sense. This was apparently in the Telstra Corporation Act of 1991 and the Minister for Transport and Communications in 1991 was the Leader of the Opposition.
JOURNALIST:
(inaudible)
PRIME MINISTER:
Look the question of what Telstra does is a matter for it acting on advice. There is an ASIC investigation. I don't want to be heard to be saying anything about what Telstra should or should not have done in relation to that information, that would not be proper because there is an ASIC investigation but I am being accused by the Opposition and by some in the media of having acted wrongly in not making this information available. What I am telling you is that my advice is that it would have been against the law to have done so. Now that's what I am told and that is the advice that I have from the Department of Finance and that advice, I am told, has been confirmed by my own Department.
So before we, you know, go down further down that track, that is the position and the more I think about it and I suggest the more you think about it, it makes sense and doesn't it again highlight the point I am making that we have this ridiculous conflict of interest and here you all are saying you should have made that information available because you are the government. Yes, we are the government, but we are also the shareholder and it's just an absurd conflict of interest and it's in the public interest that that conflict of interest be ended; but in a way that is not unfair to the Australian taxpayer because part of our obligation in this conflicted situation is of course to the Australian taxpayer.
JOURNALIST:
[inaudible]
PRIME MINISTER:
Sorry?
JOURNALIST:
The conflict of interest [inaudible] resolve that under the new model, in a sense you said you've got the Minister runs an independent regulator making rulings on a lot of operational issues on Telstra and the government's been trying to work out how it maintains some sort of interest [inaudible] over the Board and also are you confident that you will have enough resolve or as a latent shareholder if you move the governments' share...
PRIME MINISTER:
A latent shareholder?
JOURNALIST:
If you move the government's shareholding of Telstra across to the Future Fund that will be an almost more difficult position for you won't it, the fact that you influence Telstra while you do that remains...
PRIME MINISTER:
I understand your point Laura, I understand your point. Well clearly it's not something that is going to change immediately, totally overnight, but once our shareholding falls below 50% and the further it falls below 50% the more the process will gather pace, the conflict of interest will begin to diminish. As far as the Future Fund is concerned, we haven't made final Cabinet decisions about the mandate but let me predict without much fear of contradiction that we are going to have a situation where the Board of the Future Fund will operate very independently and you may remember that in the Budget we made it clear that there was an effective tightening of fiscal policy involved in the decision we'd taken thus far on the Future Fund and that was that we were going to re-invest in the corpus of the Future Fund. The dividends from the investment of the Future Fund and whilst that would be part of the overall Commonwealth account and would add to the value of the Commonwealth assets, it would not, those dividends would not appear on the Budget bottom line. Now I go into that detail to make the point that the Future Fund would be operating with a very significant degree of independence. We obviously haven't defined completely its mandate but I think you will find that the way the Future Fund is likely to be structured it's not going to frustrate our goal of trying to reduce that conflict of interest or those conflicts of interest.
JOURNALIST:
Mr Howard...
PRIME MINISTER:
Can we go to the left for a minute?
JOURNALIST:
Prime Minister what do you say to the mum and dad investors who have potentially lost thousands of dollars in the last couple of days?
PRIME MINISTER:
Well I am not an investment advisor and I am not going to give specific advice about particular movements, I am really not going to try and do that. I would repeat what I said on a radio programme this morning and that is in the longer term it's a very strong company, clearly it will face, and it is already facing increased competition, that is a good thing because higher, greater competition normally produces better outcomes for the customers and the Australian public but as to individual movements and the precise reasons for them, I am not going to get into that. I don't think I am qualified to do that and I don't think it's appropriate to do that.
JOURNALIST:
Do you feel for them though?
PRIME MINISTER:
I beg your pardon?
JOURNALIST:
Do you feel for them though?
PRIME MINISTER:
Well I feel for anybody who suffers any financial loss. But if you own a share and its price often fluctuates, then I don't think anybody who has any understanding of the share market assumes that what goes down might never go up.
JOURNALIST:
(inaudible) and how did it strike you (inaudible)?
PRIME MINISTER:
Well look I would have to check a whole lot of records before giving an iron clad answer on that. I mean there may have been some piece of paper that crossed my desk that doesn't immediately come to mind - I'm wary of giving these iron clad answers without checking every conceivable email and piece of paper I've seen. I do remember the reference in the presentation by Telstra. You asked me... I won't comment because I'm wary of the ASIC situation with Telstra in a specific way, except to make this observation that it is not completely uncommon for companies to pay dividends out of retained earnings. It is not completely uncommon and that point has been made by quite a number of market analysts over the past few hours.
JOURNALIST:
In your discussions with Mr. McGauchie lately, have you canvassed the option of dismissing Mr Trujillo?
PRIME MINISTER:
Look I have had a discussion with Mr McGauchie. I gave a broad outline of the gist of that discussion and I do not intend to go into the detail of it.
JOURNALIST:
Did you get undertakings that he would talk to his...
PRIME MINISTER:
I do not intend to go into the detail of it Paul.
JOURNALIST:
Should the Board have reined in the executives' comments before....?
PRIME MINISTER:
Look I have made a statement about the conversation I had with McGauchie. I have indicated the areas of my dissatisfaction. They do not represent generic dissatisfaction with Telstra. I am perfectly happy, as are my colleagues to work with the Managing Director chosen by the Board. And beyond that I do not intend to go into detail. But I certainly do not resile in any way from what I said in parliament yesterday and I regard the attempt by some to suggest that this really means that I want them to lie about the share value and everything is quite absurd. I mean they've just taken it beyond a simple statement of commonsense principle. Of course chief executives and directors have got to tell the truth, but they've also... fully consistent with that, they also have to look to the interests of the company and there's no fundamental conflict between those two things.
JOURNALIST:
Mr. Howard is Mr Trujillo a good bloke?
PRIME MINISTER:
Yes of course he's a good bloke.
JOURNALIST:
Was his appointment the right one?
PRIME MINISTER:
Well I was not involved in it. I'm not in a position to make.... Look the people you should speak to about that are obviously the Board. Clearly he had very good qualifications but we were advised, I was advised of the selection process, I was told that they had it down to a small number and then they made a choice. Now I didn't seek to interfere in that choice. I have a view about the appointment of directors because that's something that's within the warrant of the Government. But the appointment of the Managing Director is the responsibility of the Board, they kept me informed, they kept my senior colleagues informed, but it's their decision and not mine.
JOURNALIST:
The Battle of Australia commemoration today...what's your view of Dr. Peter Stanley's comments that the Japanese plan to invade Australia during World War 11 was a myth?
PRIME MINISTER:
A myth? I think the balance of historical evidence is against that and I think the balance of experience of people is against it and I find it very hard to accept that the consequence of an Australian defeat at Milne Bay and the consequence of the absence of American support, the battle of the Coral Sea could have resulted in anything other than sooner or later, a wholesale invasion of the Australian mainland given the way in which the Japanese Imperial Army had proceeded almost unimpeded, until Milne Bay. I think it's inconceivable that they wouldn't have gone on to invade Australia.
And bear in mind for that a period of 20 months we had what 100 air raids from the 19th of February 1942 when Darwin was bombed, we had 100 air raids from Exmouth right across to Townsville, we had the midget submarines in Sydney Harbour. I don't claim to be an expert. I've read a little bit about it, but I think it's a fairly insubstantial hypothesis, let me put it that way.
JOURNALIST:
Prime Minister, given the strength of the economy and your previous position to cut the top tax rate, is it now more likely than not ahead of next year's Budget will include some broad tax reform and particularly a change to the top tax rate?
PRIME MINISTER:
I'm not going to speculate about next year's Budget.
JOURNALIST:
(inaudible)...raise alarm bells on interest rates?
PRIME MINISTER:
Look, the management of monetary policy on a month to month basis is a matter for the Reserve Bank. In the nine and a half years that we have been in Government the Reserve Bank has managed monetary policy very well and I have every confidence in the continued good management of monetary policy by the Reserve Bank and by the Governor. Last question.
JOURNALIST:
NSW Premier Iemma is calling for an investigation into petrol prices. Do you think maybe you should call on the other states to follow the example of Queensland and use their GST revenue in the way of ameliorating or bringing down the price of petrol?
PRIME MINISTER:
Can I just say that, can I just quote what somebody said about petrol prices to sort of get this thing in context: "Australia's record petrol prices have one cause and one cause alone - high world oil prices." And the same person said: "There are no magic solutions to high petrol prices. It might seem clever to pretend there are, but the Australian people are smarter than that." Now they were the words of the Member for Rankin, Dr Craig Emerson, writing one of his increasingly frequent economic...
JOURNALIST:
(inaudible)
PRIME MINISTER:
Yes there are a whole lot of other things that are different in the State of Queensland than there are in other states. I don't enter into that debate except to say that while ever we have State Governments in this country, and I'm sure we will continue to have a federal system, then State Governments are going to make different decisions on those issues. This is very difficult and I understand the pain that Australian motorists are feeling. The only, I suppose consoling factor, is that it's occurring at a time when people's disposable incomes are higher because of the strength of the economy - the recent tax cuts, the high real wages and the low unemployment. So therefore that helps to ease the pain.
But there's no simple gimmick on this, and the Premier of New South Wales can call for investigations. I mean he knows, as Dr Emerson knows, that that is just political posturing. He knows, as Dr Emerson knows, and Mr Beazley knows, that this is a product of the high world oil prices. It fell a bit overnight, but it could go back again in the near future and it's aggravated by Katrina, the impact of the hurricane and we hope that will abate fairly soon.
But we have to keep a sense of perspective about this. We... a one cent reduction in the excise would cost $380 million and bear in mind, bear this in mind, that the excise is volumetric; it's not an ad valorem tax. It's volumetric and therefore we as a Federal Government have not got any extra revenue from the increase in the price of petrol. The States potentially might have a GST gain but that's not certain because you have this substitution effect - they've got to spend more on petrol which carries the GST, they might spend less on things that also carry the GST and there could be a levelling out.
So I'm not saying that the States are automatically massively enriched as a result of this, although they could be a little better off. But it is a very difficult situation. Could I say that if the changes we made (in what was it, March or April of 2001) had not been implemented, we would now be paying 6.5 cents a litre more for petrol than what we are now paying because it's the combination of the excise reduction of 1.5 cents a litre and also the abolition of the automatic indexation of excise.
But don't imagine for a moment that I am insensitive to, or unaware of, the extra costs that people are incurring, but this is something beyond the control of this Government. It is a result of the high price of oil; the reasons which I think are manifest and painfully aware to the Australian public.
Thank you.
[ends]