JUN ' 85 18: 25 ** s/ n-14030037 PPGE. 01
PRIME MINISTER
E. O. E. PROOF ONLY
TRANSCRIPT OF PRESS CONFERENCE, ROCKHAMPTON, 25 JUNE 1985
JOURNALIST: Mr H-awke, how do you think it looks for the
Government going into the Summit with mr-re than half the
Mlinistry oppos'ed to the preferred option?
PM: I think it looks very good going.-int.-the Summit, not
just for the Government, but for the Australian community.
There has been very very widespread community debate and T
think that by the time we get into the Summit the opportunity
will be there for a detailed examination of the inadequacies
of the existing system and of the plusses and minuses of
various avenues for improving that existing system. Now
the Ministry will have every opportunity in the ' post summit
situation of expressing its views. And, I believe, the sort
of views that will emerge in that post summit situation are
not necessary the same as they are now. The more the
Government's package is being opposed and you discuss the
issue with people, Z think more are emerging as accepting of it.
JOURNALIST: What is the current state of play, Prime Minister,
Qwith the question of exemptions to the consumption tax? Are
we having exemptions or not?
PM. No, the current position is that the Government stated
in its preferred position that to grant exemptions creates a
number of difficulties, both in-administration, the possibility
of evasion, and in continuing lobby pressure for addition to
the range of exemptions. But having said, I mean I have to
say, as I have said continuously,-that. we are going into the
Summit with a-n open mind. we have, I think, manifestly
clicharged the obligatiopi upon us to go out and explain the
White Paper to explain what we see as the benefits of the prefer-2
option. That does not mean that we are not going to listen to
discussions and arguments for the possibilities of change. We wLido
that. And for that reanon, therefore, Peter, I can't at this
point be dogmatic about the question of the final shape of the
package. if I were dogmatic about that now, it would be making a
nonsense of the statements that I have been making that the
Summit is a real process. And it is.
JOURNALIST: Would you concede though that alterations to
the package now seem inevitable, given that there has been
so much opposition, both from business, the ACTU, and even
within ALP ranks? Just generally, not specifically.
PM: The opposition ' highlighted I mean I could
tell you from experiences I have had and that Paul Keating
has had as we~ e t around the country and explain~ the package
to pepple who have staed off with reservations or even
opposition. And then once you have had discussions with
them or talk with them, their view changes. Now, I think
it's too early tdosaythat it is inevitable there be change.
The obligation I have, and I take this opportunity here Qfks'gñ
i; TAhe_. The obligation I have got the people of Australia is
that we are open to change.
JOURNALIST: Does that include zonal charges or zonal
allowances for people living in country areas?
PM: Well, there is already, as you know, zonal allowances
and that jr l ikov" wc$ k 6j4, F discussion at the Summit
XC pople war."+ ) o cAeZd that aspect. It already exists.
Now, whether it is adequate and there need to be changes,
wey would like to hear from any people at the Summit who have
a p-ar+ ir concern about that aspect because there is no doubt
that it Mof, ) mt-tthis great country of ours the vast spread
geographical spread there are arguments strong arguments
for Mdv, They 44eA. a, G recognised. Whether they are
adequate enough or properly differentiated is a legitimate
matter to be raised.
JOURNALIST: At the weekend Mr Crean said that the ACTU
was still not satisfied with the distribution to the income
scale of the tax cuts, that he wanted more benefit for
lower income earners. Is there room for negotiation in that
area? PM: It's not a question of negotiation. UI -ot
at the Summit that people will discuss that if they reel that
the very substantial benefits. that are available for
distribution in the event of the imposition of a broad based
consumption tax. If they feel that that distribution is not
the most appropriate, then let them argue it. I would have
thought that the distribution that has been suggested in the
preferred option C isa reasonable one, but I'm certainly
open to hear argument as to why a different distribution
may be better. Now, ou 4IP oL negotiation, I would
want the matter to be discussed at the Summit, and I think
the At * r 0 & ud / 44" 6 a~ 4A 4' z~ j A~~~ c
JOURNALIST: Mr Hawke, do you expect or hope that the Summit
will produce a communique?
3.
PM: I haventt got any feelings about that. I think it-.
a~. quite different situation to the Summit of April 1983
It would be less likel1y, I would think# that you would be
able to shape a communique which would have the unanimity
bar on 4 April 1983. 1 don't think you
would get the same unanimnity, but you may be able to get
some broad sort of statement about reform and directions
for reform, but I really haven't put my mind on that.
JOURNALIST: Would you need a communique which would meet
pninciple nine -' that is broad community support f or your
option? PM:. I don't think you need a communique to satisfy
principle'nine. it's just in the area of tax every
particular word can mean a lot to people who are there.
But we have established an agenda committee and this is a
matter that the agenda committee through the course of the
week of the Summit can look at, and if it emerges in a way
that a sensible communique can be shaped# then that is what
will happen.
JOURNALIST: Sir, what is your reaction to the visit of
30,000 farmers to Canberra next Monday. How much time
would you be giving to these visitors?
PM: Well, let me say these things. Firstly, I can understand
the concern that has been expressed by the members of the
f arming community right round Australia. This riot march
in Melbourne which of course was preceded by marches in
Adelaide and Perth. They are in a position where the*
net incomes of farmers are determined by two things prices that
basic. ally*. determined on overseas-* markets and rising cost
structure in this country. And I can understand their
concern. That is why to this point I have had many
meetings both with the executive and with the leadership of
the National Farmers Federation and why at this very stage
I am engaged with officers of my Department and other
relevant Departments in trying to see what can be done to assist
in the area of farm costs. So that's the first thing I say that
we are concerned with the issue. Secondly, I doubt that I will
be addressing the rally but what I had in mind is that I would
receive a deputation from the farmers' rally at some stage
uuring Monday if that's what they would like to do.
JOURNALIST: _ Is your Government willing to risk marginal
country seats with the introduction of a consumption tax?
PM: Well I have made it quite clear all the way along that
what this Government is about is making the decisions which
we believe are necessary to get this economy in proper shape.
And there is a very marked contrast between this Goverlnent and
our predecessors. I have said on a number of occasions that
they knew what had to be done in regard to deregulating the
financial system. They did the work but didn't have the
political courage to make the decisions. The same thing in
regard to the entry of foreign banks. The same thing in regard
to floating tne aoñ i. ar. * k71ey kxicsw w1aml-la Lo dcclc,~ i
because they were always looking over their shoulder and saying
* what might happen to us here. Who might fre upset there.
They put the interests of Australia second before their own
perceived self-political interests. Now that's not the way
we've operated. That's not the way. I intend to operate in
the future. The interests of Australia are far more important
to me than simply saying well what is it that I should do which
is going to maximise political advantage. Having said that
J believe that the people of Australia are increasingly making
their decision between my Government and the opposition who
are increasingly that is the Opposition being revealed
as hopelessly divided and without principle in this area. After
all who comes to the tax debate with creait. Mr Peacock and
the opposition who created and stimulated the tax avoidance
industry so that billions of dollars have been avoided by a
relatively privelioged few and that corresponding burden imposed
upon the mass of Australian. And no wonder, as I said in
Adelaide at the weekend, no wonder they refused the invitation
to come to the Summit because they couldn't come with clean
hands. So you ask about political judgement that will be made
by the elctorate. I am making the point that I believe that
increasingly the Australian electorate is making the judgement
that the Opposition are hopeless and not to be trusted in this
area, even those who may not agree with certain elements of
what this Government is proposing. ItB giving us full credit
for having the courage to face up and tackle this issue. I
believe that by the time the decisions are taken by this
Government then they will have a lot of time then to be capable
of explanation to the Australian people. By the time the next
election comes the whole tax issue will be a tremendous plus
to this Government and correspondingly a very big minus, as it
should be, for the Opposition parties.
JOURNALIST: Mr Hawke, what sort of support do you need from
the Trade Union movement for your tax package. Both you and
Mr Keating have madeiit clear that you can't proceed unless
the ACTU agree to discounting before the court. But what will
you do if a couple of major unions stand out and oppose the
consumption tax. Will you proceed even though that means damage
to the Prices and Incomes Accord.
PM: I am not going to answer that question in its hypothetical
formn but its a question the substance of which of course deserves
to be answered. We have made.. it clear, Paul, as you know, that
if the preferred option were-to proceed with a substantial
broadly based consumption tax being imposed then you could not
have a situation where unions and their members having been
more than compensated for the price increase associated with
the broadly based consumption tax more than comnpensated by a
reduction in direct tax, then sought to double dip. Now, I am
strongly c( onf irmed in the strength of the Government's position
if you like by the unqualified statements that have been made
by the leadership of the ACTU, that they understand that in a
position where there was compensation via the direct tax route
there couldn't be legitimately a seeking of compensation by
way of wage increases as well. Now the leadership of the ACTU
have made it quite clear. So the logical. thing to -say is this.
Well, where the leadership of the ACTU from the beginning of
1983 has given its support to the Accord, then you ask yourself~
the question, will they be able to give the same leadership in
the situation you are talking about. Now I have no reason to
bo14or 4-h~ t hairinu aivpn th. lcadershiD and delivered before
that they wouldn't be able to do it again.
JOURNALIST: Prime Minister, the National Farmers' Federation
says you have given them an undertaking to seriously consider
exemptions to fuel Does that mean you will also
consider exemptions on the same basis for industries like the
aviation and road transport industries.
PM: Well lets get this position straight. It is true that
the National Farmers' Federation put up a case to me generally
about the cost of inputs and within that general framework
they addressed themselves particularly to the question of fuel.
And I undertook that I would consider the detailed submissions
that they wanted to put to us there at the Su~ mmit and the
National Farmners' Federation representing as they do the
farming community of this country, they are entitled to be heard
and I certainly will take account of what they've got to say.
Now there are no further implications to be drawn from that.
I will listen and the Treasurer and Government will listen
closely to what the people have to say about the economic
implications of any of the proposed tax changes and in the
end we will make the decisions which we believe are most likely
to guarantee equity and economic efficiency. And I repeat
the farmers are entitled to put their case because, as distinct
from a lot of other significant sectors of the Australian
community who are able to determine to some extent themselves
the prices they will receive for their products on the domestic
market, farmers are overwhelmingly at the whim of international
market mechanisms.. And the additional element in their concern
which I fully understand is that that international market
mechanism within which their prices are fixed is not one where
relative economic efficiency is the determinant. They have
been successively hurt by the distortions of the international
market mechanism which have been affected by the activities
and practices of the European community. And where they see
themselves as amongst the most efficient farmers in the world
which they are and having their markets decimated as they
have been by the inefficient practices condoned by European
governments, then they are naturally disturbed. They are
entitled to be. And it is for that reason that I pay particulEattention
to what they've got to say.
JOURNALIST: Mxr Hawke, is one representative at the Summit
then sufficient for the farmers voice. Apparantly there is
only one farmer
P14: You want to catch up. There are many more than one.
There are three now from the National Farmers Federation.
I contacted Mr M~ cLachlan and asked him whether he would like
to have more than the one, and would three do. And he said,
yes, that would be fine. So, there are three comingJ from
the. National Farmers Federation. Of course in addition to
that, 14r Michael Davidson, cx head of the National Farmers
Federation, will also be present in his capacity as a mcmber
of EPAC.
JOURNALIST: Prime Minister, can you Just give us an
instance where a group have changed their attitude publicl 1
on the tax proposals, after having spoken to you and
Mr K( eating.
P14-A group?
JOURNALIST: Or anybody?
PM-. Yes I can. On Sunday past I was in Adelaide and
at a meeting of about 500 people at a luncheon. And I
was speaking to them after I had addressed them. And
literally scores of people said to me, well, I was a bit
worried about that, but I see what you are about now. We
support it. And I have had that thing happen a lot to me
in personal diocussions and group discussions. And
certainly Mr Keating has had precisely that experience.
But you have got to also take this point into account.
If you talk about a group l. ike the ACTU it is natural
enough with the constituencies they have got, and being
part of an overall movemnent that they are going to, I think,
keep their options somewhat open. I believe that by the
time we get into the Summit and the immediate post Summit
situation, some of those individuals who have been expressing
a view with an eye to their own immediate constituency,
may well have a different view in the light of the detailed
analysis that will be able to be undertaken. at the Summit.
The other point I make is that the ACTU and welfare groups
in the -period leading up to the Summit are having a lot
of work done in analysis of the work that we as a Government
have done both well not both but in regard to matters
like this. The assumptions that.. are made about expenditure
patterns, the assum~ ptions that are made about savings
ratios and so on, the assumptions that are made, therefore,
about compensation levels that are necessary to cover the
price increases that would be associated with the
introduction of a broad based consumption tax. Now the
more work that they do on analysing the assumptions that
have been involved in our work,. then the more the possibility
is that they will be satisfied as to the general adequacy
and accuracy of what has been done. You have got to
understand this I apologize to some extent for the length
of this answer, but I think it is necessary and relevantthat
there isn't an argument against an indirect tax as such.
It is the argument that an indirect tax of itself can have
a regressive effect. It can impose an unduly harsh burden
absolutely and relatively upon low income people. Now, the
more the work is done to show that the compensatory rncchanisms
are adequate to overcome that regressive effect, so that
neither in absolute nor in relative terms are the needy
disadvantaged, the more likely it is, I think, that you got
acceptance of that approach.
JOURNALIST; Mr Hawke, over the course of the last couple
of weeks both yourself and the Treasurer, Mr Keating, have
put a lot of your personal prestige squarely on the line r
supporting option C. Do you agree that the assessment
made by a number of people in the business and financial
community that the Governint can only retrent from a
consumption tax at the cost oS-destroying the authority and
credibility of both yourself and of Mr Keating?
PM: No, of course I don't. The authority and the
credibility of-Mr Keating and myself and the Government
generally is on the firmest possible foundations. That
is the achievement of having turned this economy round
from the disaster into which it was plunged by seven years
of conservative government into a position of record
economic growth. The record creation of jobs the
halving of inflation the tackling of the fundament issues
of our exchange rate of Commonwealth/ State financial
relationships de-regulation of the financial markets
all of those things together constitute an extraordinarily
impressive record of economic achievement unmatched by any
previous Prime Minister and Treasurer, I would suggest in a
comparable period. And that is the basis upon which we will
be judged. Now, in regard to the tax process. Let me remind
you of what it has been. In the election campaign I said
that we would make tax reform a central part of this
Govenrment's second term of office. I just didn't leave
it at that. I said we would follow a very specific
process and I outlined the nine principles that would be
applied. in doing that I then said that we as a government
would go ahead and do the hard yakka the hard work of
analysing the existing tax system and exploring avenues for
reform. We have done that. we have done it in a way which
has never before been tackled in this country. We then
said we would take the product of that work after its
analysis in the White Paper throughout the community.
We would then take it to a national Tax Summit so that the
community, including the business community, could examine
that work. We said that wie were not seeking to impose,
but we were seeking to do as much work as we possibly could,
both in analysis of existing inadequacies and the opening
up of possible avenues of reform. We remain of the view at
this stage on all the evidence available to us that the
preferrrcd option that we have suggested is the best way of
going. If, out of the process of the Summit, and
immediately following the Summit, there emerges some more
general view that there is a preferred way to go, that will
not be inconsistent with the whole process that the
Treasurer and I have indicated would be followed from the
time of the election campaign.
JOURNALIST: Are you Baying you won't back away from the
12h% consumption tax?
PM: I suggest you read the transcript of what I have just
said. The answer to that question is contained in what I
have just said.
JOURNALIST: Mr Hawke, what are the odds then of getting the
Option C up?
PM: Come on. I'm not running a book, Greg. You pcople have
got more time to engage in those esoteric pursui:* ts.
JOURNALIST: Mr Hawke, given the fact that the package
is very finely balanced in internal construction
PM: That's a nice way of putting it. Thanks, Paul.
JOURNALIST-the fiscal dividend, the actual extra
dollars that we get in our pockets at the end of this
being about $ 1 billion, is a relatively small number
compared with the big numbers that are involved the
14.3 from the intake of the consumption tax and scoon
if those big numbers do get thrown out at all, then that
little number at the bottom, which is what we are left with,
could be thrown out a lot, could it not?
PM. well of course you are displaying some knowledge,-but
not a complete knowledge of this finely tuned mechanism
that you talk about. Fiscal dividend the phrase fiscal
dividend refers to that amount of revenue which would be
'. forthcoming as a result of tax avoiders and evaders having
to pay the 12 W consumption tax. Of course that is not the
total amount which is available additionally for distribution.
YOu have the fact that in the part A option A which is
common to all the broadening of the direct base you have
there also a very significant additional source of revenue.
So, you take the two together, you are then starting to
look at the areas wihere you can calculate what the basis
of benefit to people in by wag-of reduction of the direct
taxes. It is not just the fiscal dividend. Fiscal dividend
is one part. Now, you are right in saying* '. that you only
get that fiscal dividend that element of it which may be
in the order of $ 1 b1 lion you only get that by way of
the broad based consumption tax. And indeed that is one of
the very strong reasons that we put in favour of preferred
option C. because we regard it as offensive if you like, thiat
people in this community would be left in a position where
they still would pay no tax into the revenue. And there would
still be a number of people in that category if you didn't
nave a broad based consumption tax, because it is clear, as tb
paper points out, that you would have to have such a massive
army of people in the tax avoidance and evasion area of the
Tax Office if you were going to have any possibility of
ensuring that everyone paid their tax. So its only through
the existence of a broad based consumption tax that you can g(
that fiscal dividend and that's something that I think the
people of Australia should be reluctant to miss getting, prov.
and always provided, that they can be satisfied that the
compensatory mechanism that's put in place is going to cover
the otherwise regressive features of a broad based consunptio.
tax. 13ut if the people of Australia do say that thcy don't
want a broad based consumption tax, then they are ensuring
that there will be a very significant loss of revenue availab
to them and ' available to Governmnent to reduce the direct tax
further.
JOURNALIST: Mr. Hawke, much of the credibility of the tax
package dep~ nds on the assumption
the inflationary impact of it, there has been some qu~ estioning
from the ACTU and indeed within the Ministry in the last few
days of Treasury figures, have you had any further
diacussions about them and are you completely satisfied they
are correct.
PH: I have'nt at this stage had any further discussions abou~ t
them, Michelle. But I have had nothing brought--to miy
attention from those around me to suggest that those analyses
to which you refer are inadequate. But let me say this to you,
that by the time I get back to Canberra, which will be
Thursday afternoon, I will be going through the whole range of
assumptions and analyses before I go into the Summit with my
own advisers and with the people from Treasury, so that in the
light of all the work that has been done elsewhere, of which
they will be aware, so that I can be in a position to make,
by the time I go into the Summit, make the judgement
about-the adequacies of all the critical assumptions and
assessments.
JOURNALIST: Prime Minister, last week you challenged the
business community to tell you where you could cut
Government spending further, since then some of them said
they would be happy to do that provided you gave them the
relevant economic information on which to base the review.
Would you be prepared to give them that information.
PM; Well, I find it a little bit surprisi ng for them to
suggest that with the whole range of information thats
available to them that they can't give details about areas
in which they would suggest expenditure cuts can be made.
Let me make this point, however. This Talx Summit is not
about expenditure levels and it indeed is somewhat amazing
that the business community should be attempting to put
some pressure upon this Government in regard to -the exercise
of discipline in these areas. Because this Government has
shown more discipline about its levels of expenditure and
has imposed more constraints upon itself now than any other
Government has in the past, and I simply say that we will be
in that way bringing down the level of the defici-' both in
absolute terms and very substantially as a proportion of GDP.
-We'll have virtually by the time we get into this Dudget, we
have halved the deficit as a proportion of GDP frcm that which
we inherited, and this hasn't happened by accident, its
happened because we've been prepared to exercioe discipline p>
ourselves in these areas. Now, outside of the structure of
the Tax Summit, if the business community want to go to the
details then we are more than happy to do it. They've got
enough information upon which they can do it.
JOURNALIST: Mr Hawke, are you happy with the commrents that
Mr Howe made on Sunday given that lie attended all the Cabinct
discussions, he obviously doesn't agree with you that the
compensation provisions are adequate.
JA.~
PM: Yes, I've got no unhappiness about that. I spoke with
Brian on the Friday, he was over in Perth. We had a very
amicable discussion and I pointed out that I knew he had some
questions that he still neeeded to be satisfied about and I
certainly did'nt regard, nor did he, regard his observations
as an attack~ upon the Government and I must say I valued the
contribution that Brian Howe has made in the discussions in
the Cabinet on this matter arnd I am sure he will continue
to make very useful contributions in the discussions that
we'll have to have after the Summit in coming to our final
conclusionls. JOURNALIST: Mr Hawke.. in the latest opinion polls the State
Labor Opposition has dropped I think Mr Warburton
blamed. that on the Queensland electricity dispute and the
ongoing occurrences there. I was wondering, given the attempt
to involve the Federal Government in that, whether you
accepted any of the repercussions that is the 7% drop.
PM:-No. I don't accept any particular responsibility.
( 1 What goes to make up the decisions in the minds of people
in any particular State is a combination of factors. I would
have thought, if you want to talk about the current position
in the State of Queensland, and not only current hut what
it is going to be like in the montha ahead, that its a fair
bet that the Government position is going to worsen because
its becoming increasingly clear to the people of Queensland
I think as more evidence comes out, that its the worst
managed, worst run economy of all the States in Australia in
a time where unemployments is declining in the rest of
Australia, its increasing here. Actual jobs have been lost.
Its got the worst unemployment and employment record by a
very long way. Its price movement has been well above the
national average. Its sales of registrations of new motor
vehicles is way below the national average and in dwelling
commencements, a very important sector of economic activity,
it is pitiful and pathetically below what is happening
in the rest of Australia. This evidence is becoming clearer
and-clearer. And as that evidence of the economic incompetence
of the Queensland Government continues to come through, I belicvc
, that the position of the Government will deteriorate and the
position of the Opposition will improve. As will, of course.,
the influence of the evidence aboub industrial disputes,
also work in the same way. In the rest of Australia we are
moving to historically low levels of industrial disputation,
because the rest of Australia is getting the benefit of our
consensus approach in this area. So the rest of Australia is
benefitting from it. Which is the State where you've got
industrial disputation getting worse and worse, not just in
relation to theSEQEfl dispute, the State of Queensland. The
Premier has had the opportunity here in this State of using
his methods of saying to the people of Queensland this is how
you can got industrial relationships working. And he's done
infinitely worse than any State in Australia, infinitly Worsc
againat the whole of the national average. I just happen to
believe that as these things become more and more appairent
Bo will the people of Queenisland make their judlgemerit. h\ s c
will also., may I say, against his outright misreprosentations
f-hat's a nice way,. a polite way of putting it. I won't use
the more direct way of saying it. His outright
m~ ocpC5Ct~ t1OlBatnout now QuaN f~ M1riae a xith the'
Commonwealth Government.
What he is attempting to do is t6 blame everyone else for
his own incompetency. First it is the unions he blames
them for his own economic incompetence. Then it is the
Commonwealth Government it is their fault. But
increasingly the people of Queensland will come to the
inescapably true conclusion that the reason why Queensland
on every relevant statistic is doing worse than the rest
of Australia is because they have the worst economic
management.