PRIME MINISTER INTERVIEWED BY PETER BOWERS. 19 AUGUST 1978~~~~
QUESTION: Prime Minister is this a fair summary of your
overriding Budget strategy: inflation is to be driven down
to the point where Australia, compared with its major trading
partners, such as the Britain and Europe, becomes
highly attractive for foreign investment which, with lower
domestic interest rates, will stimulate investment, creating
new industries, new Jobs, and lift Australia out of the recession?
PRIME MINISTER: That's certainly one of the objectives, but
it would be too much to say that is the sole objective,
because getting inflation down and getting interest rates
down would also be of very significant importance to all
domestic investments, to all domestic investors. We are
not necessarily looking at great large resource projects
alone, because as interest rates come down that will provide
a great stimulus to the home building industry. I have used
the figures before. The 2% reduction involves about $ 10 a
week for an average young couple borrowing an average loan
for their first home. And therefore a general reduction in
interest rates accompanying further falls in inflation is,
I think, the best possible thing that can provide, if you
like use the word'stimulus* for the whole Australian economy.
But the point you make, about making this country more
attractive for investors from overseas, is also a highly
relevant one. We are a resource rich country. The world
needs many of the resources that Australia has. To that
extent we are a lucky country. It is up to us to take
advantage of that, put ourselves in a position in which we
can much better withstand any difficulties in world trade
that might come, and certainly take advantage of any
opportunities that are open to us.
QUESTION: The problem with an investment led recovery,
if that is what it's to be in part, is that it takes time.
Meanwhile what is going to happen to unemployment? Do you
maintain, as you did during the election campaign, that
unemployment will continue to fall steadily?
PRIME MINISTER: I first want to say something about the
term " investment led recovery". I think " investment led",
" consumer led", these terms give a false picture of what
the Government is about. To have full recovery you have
got to get all the basic underlying factors in the economy
right, and then a number of things start to occur. It's
not just investment. In those circumstances consumers also
have more confidence. So it's a question of getting the main
elements, the relativities in the economy right, and then
your whole economy, your nation, starts to move forward.
Talking about " investment led" or " consumer led" is putting
too simple a view on it in a way that I think is not meant
to be, but in a way that can be misleading. Major resource
projects can, of course, take a considerable time to
implement, but I made the point that we are not just talking
about major resource projects when we are talking about
making this country more attractive for investment and
development. It doesn't take all that long, when it's within
/ 2
their financial grasp, for a couple to make up their mind
that they qo want to build or buy a home. And across a
wide spectrum of Australian industry things can start to
move, I think more rapidly, than your question indicated.
There is one other factor in the economy which I think is
highly relevant to our circumstances and which ought not to
be overlooked. I'd like to mention it here. For many
years rural industries have been depressed. You have had
occassions when sheep prices have been good, or cattle
prices good, but it might be ten or fifteen years you
might have to go back to the relatively early 1960' s to
find a time when seasons looked good, sheep and wool prices
were good, as they now are: beef prices have come out of
their trough and everyone is much more confident about the
medium and longer term future of that industry. With the
exception of those who have had too much rain, wheat prospects
are good, and the dairy industry itself is in a little less
gloomy position. So Australia's, a number of Australia's
major rural industries are all facing the future with a
degree of optimism that hasn't been around for a long whilep
and also they're facing the prospects of very good seasons.
Now I have always believed that the influence of rural industries
on our domestic economy has been underestimated. When the
rural sector is depressed it has been very difficult to
have a fully heo, 1+ 6 coom j in other respects. When the
rural industries start to move forward that has an impact on
country towns, it has an impact on manufacturing industry
and activity generally within Australia. And this again is
one of the reasons why I am looking to the future with a good
deal of optimism.
QUESTION: Prime Minister, in terms of social equity the higher
taxes on beer, cigarettes, spirits can be jsutified because
you don't have to smoke or drink. Even the tax surchar_ 5e is
fair in that it falls on people who at least have jobs. But
how do you justify the social equity of taxing the eight
categories of pensioners, including the blind and sufferers
of pulmonary tuberculosis? Are things so bad that you have to
squeeze five million dollars out of these unfortunate people?
PRIME MINISTER: I think you need to look at this in the total
context of what has happened to the taxation of pensions and
income supplements in recent years. There has been a general
move to the taxation of all income support payments, for most
of them anyway, in the Social Welfare area. Some of those
categories that you mentioned are already taxed if the person
is over pensionable age, but not taxed if a person is under
pensionable age. There seems to be a degree of inconsistency
in that. It's worth noting that the tax will not fall on those
most in need those only dependant upon the pension but will
only affect those with additional income. The whole move to
tax income supplements, I think, needs to be looked at as part
of a concerted effort to make sure that support payments coming
from the Commonwealth, from taxpayers, are concentrated on those
most in need. It is very easy to have generalised payments that
go to everyone. But if you do that the payments, if they are
to be kept within our capacity to pay, tend to be much smaller / 3
than would be necessary to meet the real needs of those who
have nothing but the pension payment.
QUESTION: The scrapping of Medibank Standard will mean an
additional cost of more than $ 300 million to the Budget
in a full year, and consequently runs against the tightfisted
thrust of the Budget. If the deficit is so important,
why scrap Medibank Standard this year?
PRIME MINISTER: There are two reasons for this. The Medibank
arrangments existing up to the time of the Budget were
certainly complicated, and I think that complication was one
of the factors which have concerned many people over the last
year or two. We believe that the proposed arrangements are
better, simpler, more effective. A standard service will be
provided by the Commonwealth to everyone that maintains
a universal health cover. Going back to our commitment before
the election of 1975, the commitment we made then was to
maintain Medibank certainly, but Medibank to me to the
Government is universal health cover for all Australians.
There is no sanctity in a particular method in providing
that, because obviously with escalating health costs one
has to change as circumstances change and meet whatever
develops. The universality of health cover is of course
the factor that distinguishes what's been available in recent
times and what we will be continuing to provide.\. 4th the
pre-1972 health care, which was not universal, it depended
upon voluntary insurance. So, I make the point universality
of cover is maintained. We'think it is simpler# The Commonwealth
will be providing basic services, especially hospital cover,
and then it is up to individuals to decide whether they
want to insure for intermediate and private ward treatment
where they can get the doctors of their choice, or whdther
they want to insure for the gap in relation to ordinary medical
services. But there are other reasons why we made the change.
I think you've got to say the principle one was the nature
of the service itself and I am delighted to see that most
commentators I've seen since the Budget seem to have been
saying that the changes are a significant improvement.
But let me come to the other reasonst If Medibank with the
leyy had been maintained, we would have had to increase the
levy, we would have had to increase the ceiling. The way
Medibank fell out for very small monetary return had very
very significant Consumer Price Index effects. We didn't
want to make changes that were going to put, in the
Government's view, a completely false jump into the Consumer
Price Indexbecause so much of our efforts and initiatives
have been directed to getting infaltion down, and in that we
have been successful. The forecasts for the future indicate
greater success. The effect of Medibank, as it was, on
the Consumer Price Index, was something that the statistician
determined beyond control of Government, but it was a
supporting factor in our decision.
QUESTION: So you have done a sort of cost of living tradeoff,
have you? You have scrapped Medibank Standard which will
reduce the C. P. I. by a couple of percentage points, which
in effect will offset any rise that will occur from the higher
excises on beer, cigarettes and spirits and the higher cost
of petrol.
PRIME MINISTER: Wel, there is one other element that you didn't
mention in the question the reduction in sales tax on cars also
has a significant impact on the Consumer Price Index in a
favourable direction, I think of about h percent. So the
Medibank decisions, the reduction of sales tax on cars from 27%
to 15%, more than offsets the effect of excise increases on
beer, cigarettes and tobacco. On our estimates, the overall
favourable impact on the Consumer Price. Index on this Budget
should be about h percent. In other words the Consumer Price
Increase impact in December should be 1 percent less than it
would otherwise be.
QUESTION: Are. you. saying that although Medibank Standard has
been scrappedyou have replaced it with a universal subsidy
scheme and there is free standard ward hospital service, so
therefore you have not broken your unqualified undertaking
given in the 1975 election campaign that Medibank would be
maintained?
PRI22 IiINIS LER: I have said that categorically. But I have to explain
what is meant by Medibank: universal health cover showing special
concern for the poor people in our community, the disadvantaged
people in our community. That is the distinguishing feature
between all the variations of health service since 1972 and what
was there before 1972. One can look at it another way:
It's certainly not possible to say with any degree of sense
that Medibank is the health services commission or the
public servants administering the service. It's the nature
the service avollable to the people of Australia that is
involved in this, and universal health care remains.
QUESTION: So this is Medibank Mark III, Fraser version. How
lon-gbefore Medibank Mark IV, Fraser version?
PRIME MINISTER: Well there you do one of the things which I
always object to to a certain extent. In a Medibank Mark III,
if you want to call it that I have no objection to that, but
then you say " Fraser version."
QUESTION: Is it a Fraser Government version perhaps?
PRIME MINISTER: That would be more accurate, but the decisions
of government are decisions of government. I have forgotten
which journal it was, but I noted on one occasion that a
Minister made an announcement which was a very proper one
I wasn't associated in any way with the announcement-but the
headlines said, if my recollection is correct, " Fraser says".
I think there is too much personalisation, it's a horrible
word, of politics.
QUESTION: If we don't call it the Fraser Government, what
should we call it?
PRIME MINISTER: Fraser Government is all right, but you said
-Fraser version'
QUESTION: Incidentally, what is to happen to more than a
thousand Medibank staff whose jobs are to become redundant
because you have already placed a new ceiling on the public
service to reduce it by a further 1500 by next June
PRIME MINISTER: Obviously there are problems of employment,
in the staff ceilings decisions of recent times the
Public Service Board, I think, has been quite skilful in
redeploying people. our policy is to achieve our ceilings
without retrenchments through wastage and resignations.
QUESTION: You have made an overriding commitment to tax
reduction, in fact I think it would be fair to say you've
made it the lynchpin of your political philosophy. The
tax surcharge claws back much of the tax cuts that you
introduced only on February 1, and therefore must be a
bitter blow to you.
PRIME MINISTER: It was disappointing to have to do it, but
I'd like to make two points. We introduced tax indexation
to make governments honest. Without tax indexation, through
inflation, government gets a larger share of revenue year
after year after year. We wanted a situation in which if
governments needed more revenue they would have to legislate
for it, justify it, just as we are doing with that tax
surcharge. I believe that our policy is working, and I'd
sooner have to do that, and state it publicly and openly,,
than by doing it by the hidden processes of inflation. The
other point I would like to make, two other points If it
wasn't for the estimates that went awry at the time of the
last Budget, the tax base would have been higher and it
wouldn't have been necessary.) 6ut two things underestimation
of PAYE tax refunds and over estimation of non-PAYE tax collectionsthese
two things led to a shortfall of $ 700 million of the
approaching $ 1000 million shortfall in revenue in the course
of the last year. It lowered the tax base, and without that
I don't believe this surcharge would have been necessary;
But the other point,. the final point, is that if you took
the scales that were operating,-the Hayden scales, and if
they'd been operating unchanged through to this year and
operating this year, in this year alone taxpayers would be
paying $ 3 billion more than they will be even with the
surcharge. So that emphasises, in quite categoric terms,
that there has been an enormous advantage to individual
Australians, all taxpayers, as a result of our tax reforms.
That's further evidenced by the fact that over the last two
years, including this year, and including the surcharge, the
growth of tax revenues from income tax will be growing less
quickly than incomes. In many years, leading up to the last
two, tax receipts from income have grown more rapidly than
income itself.
QUESTION: Do you reaffirm your unqualified undertaking that
so-called " full indexation" will be fully restored after this
f inancial year?
PRIME MINISTER: That's as the legislation is, and there is
certainly no proposal to alter it.
QUESTION: Do you give an unqualified undertaking that this
1 surcharge will not be extended beyond June 30, 1979?
PRIME MINISTER: I can't make judgements about the way in
wqhich the figures will fall out for the next Budget. I
believe we'll be in a significanlty improving position.
For example next year, because rural incomes will be better
this year, tax from rural areas will obviously be up;
I would expect tax from companies to be up because of a better
situation for companies this year, and that effects revenue
next year as you would know I think we will be in a better
revenue position next year. obviously it would be irresponsible
to make judgements about the next Budget. Let me only say that
the legislation we are going to introduce about the surcharge
will expire at the end of this financial year, and whatever
revenue we need to collect next year will have to be justified
against the facts.
QUESTION: You refer to last year's aggregate estimates of
expenditure and revenue going awry. Presumably....
PRIME MINISTER: Not of expenditure, expenditure was pretty
much on line. It was some estimates of revenue collections
that led to the major discrepancy.
QUESTION: O. K. Presumably the same officals who prepared
last year's estimates prepared this year's. How can we be
any more confident that this year's figures won't go awry,
and that next year you'll be in just as much trouble and
have to extend the surcharge?
PRIME MINISTER: I believe that the officials would have
worked over the figures with even more meticulous care and
concern than they do on every occasion. They wouldn't
want the same mistake again. The Government certainly wouldn't.
* Mistake' is too harsh a word the same error in estimatior
again and the Government certainly would not. But I've given
you the reasons, John Howard has given the reasons in more
detail as to why there was a shortfall in revenue. I think
a number ci those circumstances were particular in relation
to the last year. Again let me point to rural incomes and
company incomes through the course of this year I believe
next year we should be in a better position.
QUESTION: Perhaps the Prime Minister worked over some officials
to make sure they paid more attention to their aggregate
figures this year?
PRIME MINISTER: This was in the area of the Treasury's
responsibility, and I think you are underestimating the
degree of consciousness of the public servants involved in
this particular matter. They would want their estimates to
be accurate. They have a pride in their work, they are devoted
servants of Australia. I'm quite certain last year and this
year they will be doing the best they can. 7
QUESTION: Prime Minister, Mr Howard has said that public
servants would be sacked if the Conciliation and Arbitration
Commission granted large wage increases. Can you define in
more precise terms what-the Government means by large
wage increases, in terms and expressed as a percentage of a
C. P. I. increase?
PRIME MINISTER: I don't think that I can be that precise, and
I don't think I should be, except it ought to be noted that
average weekly earnings rose in the last financial year more
than the Consumer Price Index, which doesn't indicate much
wage restraint. You all know the extent to which wages have
risen, right out of line with productivity, in the period of
Labor administraiton. That causes much of our present problem.
We would have to make judgements at the time of any wage
decisions to see if we believed they were consistent and
appropriate. If you believe wage decisions placed too great
a strain on our own budget, what we have said is that we will
again re,' iiw our programs to what programs should be reduced
or eliminated., so that we respond in a way in which private
enterprise businesses have to respond. If wages go up too
much, and they can't afford to pay everyone, they have to do
something about it. I believe that to have a view that it
doesn't matter how much Commonwealth public servants are paid
or. how much State public servants are paid, there is an
inexhaustible supply of money to meet an escalating wage bill-
I believe that is a very false view. It is a view that says
that it doesn't matter how much money the government spends
But it does matter. What governments spend they have to take
from people like you and all the other taxpayers of Australia.
We are seeking to drive home the point that the level of
money wages is very much related to job opportunities. Trade
Union leaders have an option of continuing to press for higher
wages for those in work at the expense of those out of work,
or they have another option of showing more concern for those
out of work and assisting our general policies of getting
inflation down, which will be greatly helped by some moderation
on the wages front.
QUESTION: You don't think wages, to a-certain extent, have
already taken off because of the Utah settlement involving an
increase of $ 95 a week?
PRIME MINISTER: I think that was a most unfortunate settlement,
and contrary to what has been said let me just record the
Government neither Tony Street or myself were aware of the
final terms of the settlement when it was made. When I heard
about it, it was already over an accomplished fact. But I
believe that the great body of Australian working men and women
know that wage increases that run too high and too far take
the job away from their workmates.
QUESTION: You said it was that it was unfortunate, Prime
Minister. Surely it's late criticism for you to call that
irresponsible. / 8
PRIME MINISTER: I think I used stronger words at the time.
Let me also say though adminilstrative arrangements have been
put in frame to try and make sure that the government is
kept even more closely informed of the developments in major
industrial disputes that have got significant wage implications.
QUESTION: Prime Minister, can I put this question to you in.
a Budgetary context, because I believe it does have . Budgetary
implications far beyond the immediate and political implications:
If a Prime Minister is under continual attack, it must affect
political stability, and if it continues for long it must affect
the country's standing even overseas and even on money marketsso
that it can have a serious effect on our international
credit rating. Has not the stage been reached when it becomes
a national duty, beyond any personal political consideration,
to put a stop to the present furore over the Withers Affair,
as a national duty?
PRIME MINISTER: I believe that what you said about political
stability and economic stability in Australia is very accurate.
We all know what happened in the Labor years. It was madness
of economic policy, but at the same time political instability
and foolishness and other matters raising money in odd
corners, all sorts of different things which did so much to
destroy Australia's reputation overseas, so much to destroy
the confidence of investors in Australia and overseas which
takes some time to regain. Anyone who is aware of what is
happening in the financial arenas of Australia knows full well
that confidence is returning, has returned, to a very marked
degree. They know full well that the policies of this
government, the policies of my government, have led to a marked
turn-around in confidence in Australia, in New York, in London
and financial circles. When you get people overseas investing
in Commonwealth Bonds that's a pretty good sign,. and that has
been happening a bit this year, probably for the first time in
many years. Confidence in Australia, confidence in economic
policies, and confidence in political stability are of enormous
consequence and enormous concern. Political instability could
do a great deal to undermine what I believe is a Budget
ideally suited to Australia's circumstances, and the kind of
reaction I'm getting out of the public which is not really
adequately reflected in the media up to this point is evidence
of that. Take yesterday for example, at the Lactos Factory.
Going around the opening there were people there -farmers, and
there were others working in the factory, who were saying it
is a good Budget, and glad to see that somebody has had the
courage and the determination to introduce the kind of Budget
that is necessary for the economic recovery of Australia.
That's not to say they agree with every last detail of the
Budget but the broad thrust, its purpose, its objective,
its policies. At the Liberal Party State Council Dinner last
night I can say that I have never been to a Liberal Party meeting
after a Budget when so many people have come up to me with a
sense of rel and making the point that the Budget is the
right one Australia. They knew it was tough, they knew
it was difficult, but I believe that people outside are very
glad indeed to know that we did what we were elected to do
and introduced a Budget that is desirable and necessary for / 9
Australia. You asked about political stability, you asked about
attacks on myself. I agree with you that if that continued it would
become damaging. I say it in no sense than stating anything
other than the fact, in terms of what happens in
countries overseas whether one likes it or not, and because of
the personalisation of politics which the media, I think, does
so much to promote. The reputation of this country and its
economic policies overseas is Malcolm Fraser's reputation overseas
in terms of the policies that we have persued, . in terms of the
kind of determination which has won this country respect,
which is moving us into the ranks of the stronger economies of
the world. All of that is, I believe, a fairly categoric
answer to every significant part of your question. Let me also
say that the thrust of allegations in relation to Eric Robinson
was a thrust that pressure had been brought to bear upon him, a
thrust that there had been a suggestion that he should say that
his memory was defective and that something might not have
been soid in the way in which he put things down in evidence
before the Royal Commission. No such suggestions have ever
been made to Eric Robinson, and I regard the answers that have
been given in the Parliament as answering categorically the
thrust and the substance of whatever the implications are.
PETER BOWERS: Prime Minister, thank you.