J, i
E. O. E. PROOF ONLY
TRANSCRIPT OF INTERVIEW ON SUNDAY PROGRAM 2 JUNE 1985
JOURNALIST: Thanks very much for joining us this morning,
Prime Minister. Before we turn to tax, there has been a
lot of comment about the effect that the job of Prime Ninister
has had on you that you are looking older and tireder and
it wouldn't be the first time that it has happened to a world
leader. Have you found that the job of Prime Minister was
tougher than you thought it was going to be?
PM: No, not really, Robert. It has been very long hours,
but that has been as I expected. I think this year has been
a little bit tougher than one would normally have thoughth of
because in addition to the normal tasks of the Prime Mi. nister's
job we have had the Expenditure Rev4. w Committee w. hich led up
to the Ila,-Statement with that savi1it o-$ 1 billion and that
$ 1 billion wasn't lying around easily to be found. There was
a lot of work in that. And in addition to that we have had
the preparation of the tax white paoer, so I don't think there
will cver be a more horrendous six months than this last one.
JOURNALIST: Just on that tax paper. There were a couple of
Cabinet meetings that swallowed up Sunday night and went onto
early Monday morning. You can't go on like that can you?
PM: Well, and nor do we intend to. But, as 7 say, those two
things were there to be done. Wc had to get the May Statement
out because we were committed to the economic strategy of which
you are aware to bring down the deficit, to create the
conditions for growth for Australians ore jobs, sustainable
levels of inflation. And you just don't get those things by
sitting in your lounge chair at-the Loage and saying, I want them.
Yon have got to do them. And if you are going to do them it
is hard work. And then in addition to that, as I say, there
was the preparation of the tax paper. Now, I don't believe
there will be another six months in which you will have that
conjunction of heavy circumstances.
JOURNALIST: Prime Minister, over the last few weeks we have
had headlines like is he still up to the job a tired,
depressed PM loses his magic touch Prime Minister's backdowns
is it becoming too much for Hawke and a real beauty PM not
back on grog. I am just wondering why you think that
perception has suddenly developed and what you are going to do
about it.
Pi-: Wall. I think it has got something to do with the answer
I just gave to Robert that times have been hard. You just
couldn't work any longer hours and not just disintegrate.
Arnd one has been doing it. And when you get very very very
tired -I guess it is true of all of us that y~ ou operate
at less than your optimum. Now you just have to make a
judgement as to whether the job3 that you have got there and
that have to be done within a particular timeframe whether
you have got to do them. Now I made the judgement that
they had to be done. If you look at the tax exercise, Paul
Keating and myself, despite some nuances that appear to be
in the press, have worked hand in glove on that. And it has
been Paul and myself. In regard to the Expenditure Review
Committee, I just could not avoid being in that because it is
not just economic decisions, but it is political decisions as
well. Now, if yo-u are working those inordinately long holirs
because you know that something has got to be done, you
realise that you are going to be at som'ething less than your
best. Now it is a question of judgement. They had to be done.
They are behind me. And I want to assure you, Laurie, and all
your viewers that I feel great now and, as for that last
observation about the grog. It is now exactly five years
since I gave it up. I have not had a single drop in that five
year period. But you know, Laurie. You have had something of
the same experience. People are always sitting there wanting
to be half smart. They are the ones that finish up %. ith egg
on their face, not us, Laurie.
JOURNALIST: Isn't it the case though1 Mr Hawke) that those
headlines are occurring because people are wondering whether or
not, as Laurie said, you're up to the job. T-nd the man who had a
approval rating now has about a 50% approval rating~ Ilie man
that the Labor Party put in as their leader because they knew he
could win is now, according to the polls, quite beatable.
PM: Well I've not ever said George that those figures of over
were permanently sustainable. One enjoys them while they're there.
But I've made it quite clear to the people of Australia,
particularly during the last election campaign and since, that Australia
has entered into a period where a whole series of tough
decisions have to be taken. I think the record is quite clear now
that I and my Government are prepared to do the hard work which
involves taking the hard decisions and a lot of those don~' t make
you popular. And T would prefer to be 5Cefl as a. Prime Minister
leading a Government which is going to take the tough correct
decisions. And if that means in the process that you lose some
popularity points, so be it. The judgement will be made at the
end of the road where those decisions have helped to get Australia
into the position where we are going to continue as we are now
-performing better and far better than the average of the rest of
the world.
JOURNA. LIST: But wouldn't it appear that Bob Hawke who looked like
an invincible charismatic leader is now back with the pack. He's
an ordinary politician who could get done?
PM: Well that's for people to make their judgement. 1-hat I'm
saying to you George is that I believe that by the time that we
get to the next election the Australian people will be making
their judgement on the issues that matter~ to them. Is this
economy performing better than the rest of the world? Are we
providing more jobs, at sustainable levels of inflation? Have we
rz: forniod the whole economic system. And at the same time, which
tends to be forgotteninsthere's this concentration on economic
management, are we gradually moving to do things in the area of
equity social welfare, education, which provide a better more
just society? We've been doing that. They tend to get forgotten.
In the area of social welfare we've done more for pensioners in
real terms than the previous Government ever looked like doing.
In the area of real need in social welfare you're single parents,
with kids, massive increases for them. Field of education there has bei
some talk about tertiary education-forgotLen. that for seven
years -the previous Government neglected tertiary education. Frr
the first time in seven years we've provided additional real
funds, real places iriall these areas-welfare housing. Now
we'll continue to do th~ ose things, look after the people most in
need, create a growing economy.
JOURNALIST: Prime minister, perceptions, images are also
importan~ t in politics.
PM: Of course they are.
JOURNALIST: And there's a perception abroad at the moment that
you're vacillating, that you're not a strong leader. Do you agree
that Paul Keating being quoted about how difficult it is to keep
you in the tax cart, that sort of thing has effected your image
adversely. PM: Well it may have, I don't know, but as far as
JOURNALIST: How do you feel about that?
PM: I feel quite relaxed about it because Paul Keating and Bob
H-awke know what the truth is. And the truth has been from the
beginning of this Government that we've worked closer together,
probably than any other prime minister and treasurer in the
history of this country. We have a close professional
relationship. We have an extraordinarly close personal
relationship. Our families have a close personal relationship.
A-md between two people of intelligence and integrity there are
going to be points at which you'll have some difference of
emphasis. One is not the clone of the other. But the
relationship between Paul and myself I believe has never been
better than it is now.
JOURNALIST: Prime Minister there is a difference in the
perception of yourself and Paul Keating, and I think it comes from
this, that Mr Keating has taken a stronger and tougher stand on
tax reform -has been more consistent on tax reform than you.
PM: Well I think the truth about the tax reform situation is this and
neither Paul nor myself have tried to put it differently. Paul,
as Treasurer, has had the ministerial responsibility for
developing a tax reform package, and that'i's his direct
responsibility. My responsibility as Prime Minister is to
oversight that work, as of other ministers if you like, and also
to take account of the total environment within which initiatives,
including tne tax reform package, have been undertaken. I have
never wavered, as Paul understands, from the beginning in believing
that if you are going to have, Robert, a comprehensive
reform, which gives to the mass of Australian people, a fairer,
simpler, more economically efficient system, then ideally you
need to go to the preferred package that we will be putting in our
white paper. Now I've had to look at that in the context of what
is achievable. And I've done that and I've come to the point of
not changing from what we said in the beginning. And you will
find in the white paper that the position that Paul Keating and
iryself have guided, if you like, through Cabinet, is there on the
understanding that the people of Australia, through the summit,
and elsewhere have to look at that package in exactly the terms
hat I've put in this debate from the last election. There has
been no wavering by Paul Keating, myself or the Government from
the approach of the election. Nine principles, including,
specifcally, the f'nal ninth principle, that whatever is done to
get ta: reform in this cointry, Robert, must be generally
acceptable to the Australian community.
JOURNALIST: So -are y saying that you've been in and out of
the tax cart
PM: No I'm not, I'm saying the opposite. I am saying that from
the beginning I believed that the ideal approach is the preferred
approach that will appear in the white paper and we are a-1i saying
Paul, myself, the Government are saying, there it is are
saying to the Summit and the people of Australia, that you've got
to look at that. You've got to see whether on your judgement,
with a package which will always include some losers, as well as
an overwhelming majority of qinners-look at the package as a whole.
Do you make the judgement at the end, that that package is most
likely to produce a fairer, simpler and more economically
efficient system. And I do not waver from my belief that that is
achievable. JOURNALIST: Do you believe that you are more aware of the
electoral consequences of the tax package than Paul Keating is?
PM: Well what I would say is this. As Prime Minister it is my
responsibility to look at the overall implications. It isPaul's
responsibility, which he has discharge,' magnificently, to go
ahead withthehighly complex technical Losk of oversightirig an
examination, which is the most comprehensive that's been
undertaken in the history of this country. He's oversighted that
task with dedication, and I believe enormous competence. Now
while he's engaged in that I have to support and sustain him, as I
believe I have in that andalso try and understand what sort of
problems there are in the application of the preferred option.
Let me just make one point. Its been quite glear from the very
beginning that if you move to a new system which has a broad based
consumption tax element into it then prima facie that can be
regressive. it can hurt people on lower incomes, and social
welfare beneficiaries. So we've had to look at the compensatory
mechanisms that you can put in and try and guarantee your
satisfaction that those people are going to be looked after. Now
I've had to make sure in my mind as the process goes on that that
can be achieved. I believe it can.
JOURNALIST: Mr Kawke, just to pull it together this
deceived difference irn approach to tax reform between yourself
and Ar KeE: t-ing. Is it in fact because of your consensus
ap-proach to try arid be all things to all people whereas
Paul Keating doesn't like steppinc on toes and upsetting some
members of the commnunity at least. And that is why he is
conceived as being tougher on this whole issue.
PM: No; that is very simplistic, George, and inaccurate,
and unfair to Paul Keating, I m2_ ght say. Because Paul wo. iuld not
be pressing the third option if there had not been an enormous
amount of work done by him and his officers to satisfy themselves
that the least privileged in the community would not be hurt.
He has had this matter very much in his mind. He is not a
steamroller man who san,,, this is something which is going to
be economically efficilent, therefore do it come what may. I am
simply trying to make the point that Paul and the Treasury
people have had the major carriage have necessarily had to
concentrate on the technicalities. I have had to have a
broader vision. And the thing that satisfies me so much at the
end cf the exercise is that we share the belief that what we
believe is the most economically efficient and equitable and
simpler system, is one which we believe the majority of the
community will come to see, not only satisfies those tests, but
has built into it the mechanisms which will look after those
in the community who need to be protected.
JOURNALISTr: So Paul Jaating is not pulling the tax cart and
dragging you the rest of the Government along with him?
PM: Well I have made that quite cltar in the previous answer.
JOURNALIST: Prime Minister, word has leaked out that you are
going to tax perks like company cars and cheap loans and travels
and all those things. Now how are you proposing to do that?
PM: Well I think it is preferable that the details that we
wait on the exposition until Paul releases the paper on
Tuesday. But let me say this ldicadly, Robert, which will be
useful. I think that you will see that there is a message
whereby these sorts of things may be ta: ed in the employer's
hand rather than the employee's, %.' icivñ will meet, I think,
a lot of the problems that people have in their mind about. this.
JOURNALIST: Even when the employer is a trade union or the
ACTU giving a car to a union official?
PM: You will see, I believe, that there are no exemptions in
tEhe sort of way you ar'e talking about.
JOURNALIST: But Prime Minister, if you tax the employer
charge him 45 cents in the dollar for perks I mean, surely
the employers w-, ill stop giving perks. The workers will be
affected anyway.
PM: No, I think that there will be a variety of reactions,
Laurie. There will be in some areas there may be that
reaction. In others, there will be some absorption by the
employers. I think you can't give a blanket ansl ; er, but what
you have' got to understand is this when you talk about this
area. It is an exploding area and you will find when you see
the white paper projections that it is exploding at such a
rate that if something is not done about it, then the ordinary
taxpayer will again have a greater burden imposed upon him and
her. I wonder whether I could just, setting the background to
this very briefly, give you a view a~ s an indication of just how
the last 30 years the burden of the tax syste-m has changed. If
you compare back to ' 54, ' 55 with ' 84, ' 85. You have got the
situation where the person on average earnings 30 years ago,
average rate 19 cents. It is now 46 cents. And the average
has gone fromu 10 to 25. Now that is an enormous increase in the
burden. You have got the situation where just over 2 million
2.1 million taxpayeis which is 39% of people in full time
employment are at the 46 cent rate. Now, 30 years ago 1%
were at that 46 cent iate. Now that is the sort of order of
change. You have got the position where the top tax rate
cents is now biting in at 1.6 times average earnings. Now,
years ago that was 18 times averae carnings. Translated in
price terms, $ 35,000 rnow is where the top tax rate bites in.
In 1954 terms that would need to be $ 400,000 now to have the
same thing. So those are the sorts of things that have happened.
JOURNALIST: By definition, Pri~ iie Minister, to prevent that,
you have got to raise a lot of money.
PM: Yes.
JOURNALIST: Now, is the only way to raise that money through
a broad based consumption tax?
PM: Well, let me put it this way, Robert. You can do
something about broadening the direct tax base. But you have to
say two things about that. Firstl. y, there is a limit under the
operation of the law and the mechanics of the tax office as to
what you could get. To be sure-that you c~ ould really get into
all the areas of avoidance and evasion you would have to have
such a massive army of people in the tax office that it would be
the sort of system that wouldn't be tenable. So there are limits
tc what you can get from the direct tax broadening base. And
therefore, if ther-are those limits which mean you can only get
$ 1 billion, $ 1 billion, there, you are talking about tax relief
in personal taxes which are significantly less than what you
were able to give in the last Budget. If you are going to get
substantial amounts you have to look elsewhere.
JOURNALIST: And the place where you can get that money really
the only place where you can get that money is through sonte
large indirect tax. You are not going to get it out of capital
gains. You are not going to
PM: No, capital gains may I just quickly refer to capital
gains, Robert. There has been a lot of loose reporting of
capital gains. It has been put as a massive heavy impost
because you are talking about the tax operating at the
marginal rate. But what is not understood and hasn't been
put clearly is that it is not tax on nominal gains. it
is a tax on real as offset the losses and prospective gains
and at the time of realisation.
JOURNALIST: But it also covers things you inherit, doesn't it,
and gifts?
PM: Well let me I don't want to go into all the details.
The thing that it doesn't cover and w.. hich has got to be made
clear, is the personal home. That is excluded. And it is a
relatively minor impost going back -I mean, I want to pursue
your point, Robert, and this is the important point, as to
amounts. You will see in the white paper that the amount which
is derivable from a capital yjams tax is very very small. it
has its importance, and I hope that the community, including
my friends in the rural. community and I am entitled to say
my friends, because I recognise that the rural commnunity
is terribly importctnt. It provideF: 40061 of our export income.
And we arc not about hurting them. Wve are not. What they have
got to understand is that without a capital gains tax this
community is not going to have all the instruments available
to it to stop the tax avoidance andI evasion which is imposing
increasing burdens on the mass of the people. So comirng
back to your point, unless there is a source of income in the
consumption area, then the mass of Australians the ordinary
taxpayers are not going to be able to. get the substarntial
cuts in personal direct taxes to which they are entitled.
Because you can't have a situation, I believe, where your
ordinary taxpayers are just getting into the situation of paying
half their incomes in taxes. There will be another quarter of
a million people......
JOURNALIST: Mr Hawke ort the question of capital gains, still, its
always been envisaged as a tax that would only affect a wealthy
minority, bu*. there ara suggestions being made that your approach
coulJ mean that all sorts of people across the board could be hit,
that it isn't going to be restricted to just the wealthy few.
PM: Well I think that the debate which will emerge after Tuesday,
will satisfy people, George, that it is a proprosal, and that's
all we are at this stage with the draft white paper, a proposal.
It is a proposal which will be seen to be fair. Let me make it
clear, the last thing in the world that this Government, which
more than any other Government, has shown its commitment to
st: imulating economi~ c growth and expansion of job opportunities.
The last thing in the world that this Government is going to do is
to contemplate the bringing in of a tax reform with an element
which is going to have adverse impact upon econiomic growth. We
simply wouldn't do it. Our whole record shows that. And we're
not about trying to impose burdens upon people which shouldn't be
imposed. But if the community wants a tax system which is gcing
to be fair, and mean that you have, as a community, every
instrument available to you to stop hillicnis of dollars being
avoided and evaded in tax, then its sensible to have it. And
particularly, if I may make this point finally in regard to
capital gains tax. You do have to ask yourself a question, as
Australians. Wqhy is it that virtually every other country in the
western world has such a form of tax, iLn part to stop avoidance
and evasion. W~ hy shouldn't Australia have it.
JOURNALIST: Priimc M. 1inister can we look at the politics of the
consumption tax.
PM: Sure.
JOURNALIST: It seems to me from talk back radio and from opinion
polls that its quite clear the public doe'sn't want this. They
dread it. The Unions obviously don't want it. How can you sell
it. Aren't you taking a heck of a risk, and is it worth it?
PM: Yes we are taking a risk. But I just want to make this
point, if I could, by preface to going to answer the question
particularly. What this country has needed despecately for years
now is a government ahich is prepared to Aface up to what has to be
done to get this economy in proper shape. We have across us in
the Parliament a group of people ; Tho in government did the
analysis of what needed to be done. Floating the dollar they
did the work and then they wouldn't jump the hurdles. Sorry too
hard, might be problems. Deregulating the financial market did
the work, Yes that must be happening. Came to the hurdles
said no, difficulties, p. roblerns, wouldn't do it, and so on.
JOURNALIST: But if you do this and then lose the election,
they're the ones who benefit.
PM: Well let me say this. I'm not in politics and never have
been in public life just to be their ric'e a popularity wave and
do what you think is going to popul. ar. What needs to be done
is to have a Government in this country w~ hicb is prep'arel to face
up to the great challenges facing this country. We're coming to
the end of this twentieth century. We cannot any longer afford to
go on, take soft options and say she'll be Light mate. The world
is not going to say to Australia, she'll be right. Now if you
don't have your tax system which is an intrinsically important
part of seeing that your economy runs efficiently. If you just
say, sorry too hard we won't do it, then perhaps it might be
easier politically for us. But let me remind you of this. When
in the last election I said we were going to approach the question
of tax reform I put up the nine principles. I guess you don't
want me to run through them. I can if you want me to. But the
final principle was this. That if tax reform is going to work
then it must have broad community support, so the job we've got at
the Tax Summit, and leading up to the Tax Summit is to try to get
prejudices and narrow interests, as far as possible off thie table,
and ask all Australians to look at the package as a whole. Now we
want to do the job of selling that to the people. If
overwhelmingly they say they don't want it, then under the ninle
principles, so be it. it will be a tragedy for Australia if we
baulk at tax reform because it might hurt me here, it might hurt
you there. Now for God's sake let's, as Australians, say what
does Australia as a whole, what do our children nieed in the next
generation. Do they want a tax system which has just beern slin
slop, mish mashed together over thirty~ years, with no point or
purpose, and which is inefficient.
JOURNALIST:. Well you used the word earlier, hurdles, ahout the
Liberals going up to the hurdle on deregulation and not jurlping
the hurdle. The hurdle on consumption tax it seems to me is the
ACTU. If you can't get them to agree to it, then it won't happen.
Now if it doesn't happen, that's the first part of the question,
the second part of that, if it doesn't ha p~ en can you, and
particularly Paul-Keating, draw back from consumption tax with any
credibility left at all?
PM: Well let me remind you of the seventh principle. I mean I'm
going to have to read them all cut in a minute. But the seventh
principle put to the people of Australia was that if there be a
proposal to move to a broad based consuImption tax, then you are
going to have to have the support of the Trade Union movement,
because what woul~ d be totally cdis~ strous and not acceptablie. And
that's why I put it to the people in the election campaign, is
that to have a consumption tax which had the immediate effect of
lifting prices, and thc~ n having the Trade Union movement saying
having got an enormous cut in direct taxes wanting to double di;;
anid saying we want our wages adjusted to that as well. Now so I
said to the people, ui~ ess there is an acceptance of this and no
discounting, then it can't be done. Now I believe that, part of
the work that Paul Keating has done so well, is to talk with the
Trade Union miovement, as v. ell as with business, and say here are
the advantages. Now I know that the ACTU is going into the Tax
Summit with an open mind. They've kept their options open.
JOURNALIST: Mr Hawke you've got a unique relationship with the
Trade Union movement. Most of those guys are mates of yours. Is
Bob Hawke going to be the Bob Hawke of old and convince the ACTU
to accept a thing like a consumption tax.
PM: Bob Hawke is going to be standing shoulder to shoulder with
Paul Keating seeking to persuade the ACTU, persuade business,
persuade the rural community, that what each section, including
the Trade Union mQvement has got to do, and we've reached the
point as Australians where this is what has got to be done. We've
got to stop thinking about a particular self interest, a
particular concern. We've got to say what is it that's going to
be best for Australia as a whole. Now I think I have the
capacity. Certainly, whatever capacities I've got, I'll be trying
to use those to make my fellow Australian men and women say that
you can't have a continuation of a tax system which is
haemorrhaginq, imposing burdens on those least able to bear them,
economically inefficient. Now I'll try and persuade the Trade
Unions. I'll try and persuade social welfa. re people. I'll try
and persuade the business community. I hope we'll be successful,
because if Australia rcfuses to face up to this issue we'll slop
through, Oakes, Negus, Hawke and Haupt. We'll slop through. Our
children will pay an enormous price if through our self indulgence
and self interest we refuse to remedy this system.
JO'JRNALTSC: Prime Minister, just one last que; tion. We're
running out of time. We read in today's press that the Australian
Rugby authorities intend to approach the Australian Crickot Board
for a joint submission to try and change your Government's mind on
sporting contacts with South Africa. Have they got any chance of
succeeding? PM: No. But let me say this. If people want to make submissions
to us they can. We'll receive Lhein. I don't want to be emotional
about this issue, but just let me make this point Robert. We are
members of the Commonwealth of Nations. And I think that's
something that we should be proud of. That Commonwealth of
Nations, the Gleneagles Agreement, has said that it is an
obscenity to witness what is happening in South Africa, where the
overwhelming majority of people, simply because they were born
black, are to be treated as second rate, third rate, fourth rate
citizens. And they have said, the Commonwealth conservative
politicians, the most conservative, the most liberal, back and
white have said together. There is one area in which we as a
Commonwealth caii do something, not to give international prestige
and standing to that eegime. And its through refusing to have
competitive sporting contests. Now that seems to me to be a
reasonable thing. I do want to make this point because it seems
to me to be absolutely fundamental. I am not asking. This
Government is not asking. Mr Fraser and his Government were not
12.
asking people to embrace their particular politica'l phil T1hy or
ideologies. We're just asking people to understand one t,
that no human being in this world can control, deterin'ne ti,
colour they are born. And if you want to think of the grco,
obscenity in the world I think it is this, that a kid that i irn
without control over their colour is going to be subjected to
di. scrimination because of difference of colour, then we've got: tt
say we will not do anything we possibly can to sustain and helfr
regime which continues to condemn kids because they wore born
black.
JOURNALIST: Well you've been accused of hypocrisy in not having
the same attitude, or of taking the same measures on trade, and I
know your answer to that, which is the trade we can't effect. it
has to be done with an international agreement. Now we're about
to go on the Security Council of the United Nations. Are we going
to try and lead the way to getting a world trade embargo on South
Africa. PM: Certainly Robert. I believe that we should, and will take a
lead there. I can come to this with I think impeccable
credentials. For ten years I represented tu. e Australian workinq
mnen and women at the International Labor Organisation. And when
they had their emotional gatherings there saying we're going to
have trade embargoes, I said that's beaut. I said what you've got
to do is go back to your Government and make sure that your
emotional voicp hare is backed by Government decision so that such
sanctions can w-, ork. Now we will with others take a lead in that.
JOURNALIST: We'll initiate something in the UN. Is that ahat
you're saving.
PM: Well I believe that with others we will. Certainly we will
tFake a lead, but what I'm saying to the actual mechanics of it.
There'll be others associated with us I w'ould think.
JOURNALIST: Prime Minister we must leave it there, thanks for
joining us.