PRESS OFFICE TRANSCRIPT 16 AUGUST 1978
ABC COUNTRY HOUR COLIN MUNROE
Question: Last night's Budget has been variously described by Mr. Hamer
as severe, by Mr. Hayden as brutal, by Mr. Hawke as
horrendous. How do you see it?
Prime Minister:
I believe it is a responsible Budget and one that is very
necessary for Australia in 1978 and beyond. We've made
considerable progress in getting inflation down, in getting
stability into wages and the economic structure of this
country. But we all know that inflation is still too high.
Now as a result of this Budget, the Treasury forecastsafter
a rate of inflation of 5 percent, by next June or earlier.
You know that's not a politician's forecast, that the
Treasury forecast. That will put us below the OECD average,
all of the countries, it might only be Germany and Japan
with lower rates of inflation than that and for Australia's
exporters, getting inflation down, keeping it down, is of
enormous importance. I think Australia's farmers will never
forget the year 1974 or so, when farm costs went up 30% in
one year. Now we've stabilised farm costs. Outlook for
farmers of all kinds I think is better than its been for
many years. There is optimism in the bush of a kind I
haven't perceived I don't think I can remember it for
maybe ten or fifteen years and stability in costs is essential
to enable exporters to get the advantage of markets overseas
and of the better prices we are now seeing.
Question: Prime Minister, I take your point, but it has been suggested
that last night's introduction of quite severe indirect
taxes will have the effect of slowing the movement of the
economy. That it will improve much less quickly than you
would perhaps like.
Prime Minister:
I don't think that's so, because the health financing changes,
together with the reduced sales tax on motor cars, which a
lot of people are forgetting and that's a very substantial
benefit to any purchaser of a car; these two measures will
more than outweigh the CPI effects of the indirect taxes
and taking the Budget as a whole, the total effect on the
Consumer Price Index will be in the right direction. Whatever
the CPI would be in December, the impact of this Budget will
be to reduce it by about half a percent from what it
otherwise have been. So the movement downward in inflation
is reinforced by this particular Budget. / 2
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Prime Minister: ( continued)
Now, if the movement down in inflation is reinforced, I
think that brings us closer to the time when you can get
a more significant movement downwards in interest rates.
So far we have had very significant movements down in
finance company rates, in Government Bond rates. We
haven't seen the real result, we've had a half a percent
result in the home building area the permanent building
society but we haven't seen the result in bank overdraft
rates and I think that's what people are looking for.
Question: It would seem the Budget places greater reliance on the
Conciliation and Arbitration Commission to keep wages and
indirect taxes out of the CPI. Now what if wages and
salary earners go outside the Conciliation area?
Prime Minister:
Wage earners, salary earners, in Australia have got two
choices. They can take one of two choices: they can show
greater sense and moderation in their wage and salary
demands, and thus help this nation get more people back
into employment; or they can press for higher wages and
salaries, for themselves, for those in work, at the expense
of those out of work and if they do that I can guarantee
that unemployment will stay high. Against the kinds of
wage demands that we've seen, against the situation in which
wages went up under Labor by 50% over a two-year period,
there is nothing that can be done about unemployment unless
there is moderation in wage demands. I think one of the
great tragedies of the trade union movement is that the
leadership hasn't been prepared to argue for moderation;
argue for a restoration of the profitability of industry
whether its farming or other that's quite essential for
people to be employed.
Question: How much reliance are you placing on overseas investment
to get the Australian economy moving?
Prime Minister:
I think reliance is probably the wrong way of looking at
it. Could I put it this way? If we get the basic underlying
taxes in the Australian economy right, inflation down,
interest rates down, stability in Australia, reasonable
industrial relations, then that's good for investment from
Australians in Australia, internal investment, and that will
occur under those circumstances. Because we are a resource
rich country, we will also attract more than our fair share
of investment from overseas under these circumstances, because
you know with inflation under the world average, this is
going to be good for exporters and it will be good for
investment and both of that is good for jobs. / 13
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Question: 16 cents a gallon on petrol, let alone any other costs
that may be incurred in diesel and in that area. It's
been said by various primary producer organisations this
morning that the effect will be traumatic and its also
been pointed out that perhaps the Treasurer has ignored
that fuel is an essential and not a luxury in rural
Australia. Prime Minister:
It is an essential and its certainly not a luxury in
rural Australia. But at the same time, I am a farmer myself
and I don't do much work, I don't do any work on the far,
but I do look at the balance sheet at the end of each year.
So I do know exactly what part fuel goes to make up costs
of running a property.
Question: 16 cents a gallon, sir, is going to knock around your
balance sheet.
Prime Minister:
It will put up the cost of fuel, but I know the proportion
of the total costs fuel is, and it maybe is not as high as
is sometimes stated. But, it's significant, but against
that you've got to look at the benefits that are coming to
the rural community from much lower inflation and as exporters
they benefit from that as they well know, enormously.
Getting interest rates down will much much more compensate
for any additional the rural community as a whole much
much more than compensate for any increases in petrol taxes.
Question:
You talk about help. to primary producers. It has also
been said this morning that is little help to primary
producers in the Budget and that great reliance has been
placed on the weather in fact.
Prime Minister:
I don't think so, no. The weather is important, and one of
the good things about primary industries at the moment is
that most of Australia is looking forward to better seasons
than we have had for a very long while. But, we've done a
number of things; better access to markets overseas, for
beef, especially in Japan and the United States which is
utterly critical to a large part of rural Australia and
in addition to that with the real prospects of a return to
better incomes, the benefits of tax averaging which is much
much better than anything there before; the benefits of
the income equalisation deposit scheme will start to be of
real benefit to farmers. I think that the income equalisation
deposits have had $ 60 million to $ 70 million invested in them
/ 4
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Prime Minister: ( continued)
over the time, but with the return to better incomes,
I would expect those deposits to grow greatly.
Question: On the point of IED's and tied in with the Primary
Industry's Bank, there * as no spelling out last night
of interest rate for the Primary Industry Bank and there
has been extreme criticism this morning that TED's should
be used to fund that Bank. It's virtually farmers lending
money to themselves.
Prime Minister:
You mean farmers don't want the TED's used?
Question: That's the message I get.
Prime Minister:
I have had it put the other way around, that farmer
organisations did want TED's used inthe Primary Industry
Bank and that's the view that had been put I think when
farm organisations were discussing these matters in the
Cabinet room with us. So, if they are now saying they
don't want the TED's used, I think that's... . you know it's
not going to restrict any person' s right to withdraw their
IED's under the circumstances and I would have thought it
was a pretty natural development.
Question: Isn't it a fact though, that the Primary Producers would
be lending money to themselves. They put money into the
IED's, they get a certain interest rate, a small one, and
then they borrow back from the Primary Industry Bank
well it's been measured at 11%, what is the interest rate?
Prime Minister:
The interest rate is I think around about that sort of
order. But it's the term of the loan which is going to be
the great advantage in the Primary Industry Bank and if you
look at the finance that is available for farmers, its
the terms of repayment that is the most important factor in
the burden on a particular farmer. Now the interest rates
have got to be related to some extent to the general level
of interest rates and as we get interest rates down overall,
obviously the interest rates on Primary Industry Bank loans
would come down as would other bank loans come down. But
I can't understand the argument that TED's have a small
interest rate paid on them and the money is being lent back
at a higher rate of interest. There is a very considerable
tax advantage in TED's which farmers well know and that's
the very precise reason why the interest rate is small.
Prime Minister: ( continued)
The advantage would be inequitable in relation to other
people in Australia if it was getting a commercial rate
of interest in view of the tax advantage.
Question: If I could leave the question of the IED's and the
Primary Industry Bank there and ask-. you whatever happened
to decentralisation?
Prime Minister:
The best decentralisation in one sense is profitable
Australian industries; profitable Australian rural industries,
because this means much more to Australian country towns
than anything else. But we did establish last year a
Decentralisation Board and more funds are being provided
to that to encourage enterprises in decentralised centres.
Quite obviously, in this Budget, there are no massive
funds to be put into that particular Board but there is an
increase, it is gearing up, it is starting to make funds
available and its work will be proceeding.
Question: Telecom: Virtually running their own business, does this
mean that the Government has given away any idea of reducing
telephone and communication charges to country people in
Au s t r alia.
Prime Minister:
No. I think you will note that the off-peak charges were
reduced a short while ago and that is a help. In the country
areas a good deal of business can be done out of hours.
Agents business and this sort of thing and that's the way
its gone for a long period. The Government remains of course
very much involved in policy but I think it needs to be
remembered that while Telecom technically makes a profit.
their capital requirements are so large they still have to
borrow very considerable funds for their total capital program.
Question:
More of your time if I may. You moved in the Budget a possible
reintroduction of the beef export levy, but it will be
held over for a while. Is there a chance there will be a
mini-Budget with that sort of thing introduced in it?
Prime Minister:
I don't think I would regard that as a mini-Budget. What
we are concerned about is the profitability of the beef
industry and while the prospects look very much better now
than they did twelve months ago or even six months ago, and
everyone knows the reason for this, with the industry running
along normally and profitably its fair enough for some
of these things to be recouped from the industries concerned. 6
6-
Prime Minister:
When the industry had been hit, we thought well it should
be a charge on the Government, but we didn't want to put
a charge on, at this point, because it is earlier in the
stage of recovery of the beef industry. We wanted to
make quite sure that the recovery trends were confirmed
before moving in that kind of direction.
Question: If the strengths of your Budget, as you see it, don't
take effect, you've mooted that there could be a reduction
in the Public Service and in fact unemployment could
increase. This must-concern you.
Prime Minister:
Of course unemployment concerns us. But everyone in
Australia has got to understand what causes unemployment,
and Governments can do something about it but Governments
at the same time need the cooperation of other people in
relation to unemployment. If leaders of the trade union
movement are to continue to press for wages running ahead
higher than the Consumer Price Index, the prospects for
getting unemployment down are very much diminished. In
spite of all the arguments we've put to the Arbitration
Commission over the last two years, in the twelve months
to June, average wages increased more than the Consumer
Price Index. Now that doesn't indicate any restraint at
all on the part of the leaders of the trade union movement.
And again, its worth noting that this is something of
very real concern to exporters, farmers, manufacturers,
producers everywhere because its the productive life of the
country which enables the jobs to be provided.
Question:
What do you think you will be able to say when you sit here
next year in August, to the people of rural Australiaat the
end of this 1978-79 Budget year?
Prime Minister:
I think we will be able to say to you, this much does depend
upon forces quite outside my control; you've had a good season,
all the omens are for a good season so lets take that as
read. At the opening of the wool sales the prices were edging up,
so the prospects for wool and for sheep prices remaining good
are very very high. The cattle market is firm and I believe
it will get even better throughout the course of the next
12 months. I know some people haven't been able to sow their
wheat because it has been too wet, but for those that do, the
crops should be good and the price will-be good. So I believe
we will be able to look back and say we've got inflation down
further, significantly further, we are now well belowe the OECD
average. There are only one or two significant countries with
a lower rate of inflation than Australia. We are becoming more
competitive. Our markets overseas are consolidating. You've
had a good year and I'll look forward to the future with a
great degree of confidence.
Question: And does that air of confidence carry through to the
community as a whole.
Prime Minister:
I believe so and I hope so. And out in rural Australia
I really believe this confidence is already abroad. I
don't know how much you've been out and about over the
last two to three months but there's a tremendous different
atmosphere from six months ago or twelve months ago.
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