J, A Lb
' PRIME MINISTER
QUESTIONS AND ANSWERS AFTER SPEECH AT NSW ECONOMIC SOCIETY
FINANCIAL FORECASTING DINNER
E. O. E. PROOF ONLY
QUESTION: Mr Prime Minister, you mentioned very early in your
speech that the Accord was not something that was open to the
Opposition should they become Government. Could you expand on
that, is that really because a Liberal Government would not deal
with the ACTU or because the ACTU would not co-operate with the
Liberal Government.
F14: No, it is because the Opposition have repudiated the concept
that underlies the Accord. They are entitled to do that but one
would have thought that they would have had the good sense to
learn from history. They apparently are labouring, or at least a
section of them, as they are not united vn this as they are not on
any'issue. But on this particular issue the general position is,
and one certainly put out in policy, that the concept of a
centralised system which is essential to the Accord would not be
the most appropriate wages system for Australia. They believe that
it would be appropriate to return to the disastrous sort of
scenario like the events of 1980 when the centralised system was
abondoned. Fortunately we are in the situation where we don't have
to be theoretical to test their policy. We just have to look back
at what happened in 1980 when the centralised system was abandoned
and we had the wages explosion. of course, it is the fact that if
you didn't have a system that operates under the Accord now you
would have wages booms going considerably beyond what has
happened/ will happen under the Accord. It just defies belief to
imagine that after two years of high growth and another one in
prospect, if you went for the system of allowing unions to
negotiate with employers, that you wouldn't get higher wages
outcomes. So they, the Opposition, and I don't think I am being
critical as they are entitled to be wrong. In a sense I suppose I
welcome it because the Australian people will clearly come to
understand the stupidity of their position. But they have,
according to their philosophy, adopted the view that it is much
better in this critically important area not to have a centralised
system where you have the opportunity of government negotiating
with unions and with employers and operating within the
commissioned systems to apply principles calculated to maximise
growth. They say it is better to allow the free market to operate.
Now in the present situation, you would have no chance whatsoever,
under their system, of dealing with the problem created by the
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depreciation. As I said in my address, the central responsibility
of the community now is to try and ensur, th~ it the advantages for
our international competitive position proviC'ed by the significant
depreciation should not be dissipated by ( inaudible) into
cost price spiral and if you were just leaving the market, of
course industrial power would be used, but employers would agree
to significant wage increases. You wouldn't have any chance of
meeting the central policy of getting there. We will under the
policy. So the answer to your question. It is not because of any
other reason than that the Opposition has repudiated the concept
and they haven't been secretive about it. They have had nothing
but contempt for the policy despite the outstanding successes that
have been associated with it. May they contin~ ue to be so
misguided. QUESTION: Mr Prime minister, could I ask a question about the
PSBR, you were kind enough to suggest, as the Treasurer did, that
the PSBR would be reduced by 1% in 1985-86. That figure of 1% is
most interesting of course, but the question that one might ask is
that as that figure in the context of the 1970' s and the early
1980' s is still historically high, what is the relevance therefore
for merely a 1% reduction if we are going to have a 5% increase in
the GDP? Could it be inferred that the reduction should be a lot
higher, a lot greater, than 1%.
PM: Well obviously and in the economic context you could hope
that the particular relevant factors could move more in a
particular-direction which you will perceive is their result. The
important thing, surely, is that we have been able, by our own
actions, to reduce our demands in this area. And importantly and
in a sense a more difficult task is being accomplished in getting
the States to agree to limiting their demands. Now it simply means
that as a result of that reduction in demand by ourselves and the
States, that in an expanding situation there will be less
competition in the private sector in capital markets. Now sure you
can eliminate that demand altogether or you can very very
substantially eliminate it. But in the process, of course, you
would be reducing the level of activity by the States and the
Commonwealth and you simply have to make a judgment of balance as
to how far in the situation, whereas a result of your opponents'
stimulatory policies, you have produced spectacularly successful
economic growth and you see the private sector now beginning to
expand. flow far do you withdraw that-degree of stimulus? I think
we are entitled as we go into our third year to be judged as
fairly good estimators of what the appropriate balance is. After
all we have got the runs -on the board. We have made the right
judgments as to what the right mix should. be. We have got better
results than just about anyone in the world. We believe that the
sort of mixture that we have got now will provide the appropriate
mix, if you like, of activity within the public sector and still
allow in this growth situation, the third year of substantial
growth, will allow the private sector to be accommodated in its
demands as it takes up more of the thrust of growth. We think we
have got it right.
QUESTION: Mr Prime Minister, how do you plan to stop the flow
through of tax increases included in tne cost of living into
wages PM: Tax increases?
QUESTION: Oil price increases, increases in transport costs due
to state government charges and so on.
PM: Well I think you have got to talk about the present situation
in two categories. I have ma~ e it quite clear that those increases
in the CPI which have been associated with the depreciation will
be taken into account. I have made it quite clear that we have put
to the ACTU that these matters have to be taken into account. We
have put all the options on the table, and I have given the
undertaking and the Treasurer has given the undertaking, that we
will see that in one way or another, or with a combination of
measures, the Australian community will not lose the advantages of
our very competitive position flowing from the depreciation. Now
if your talking about other elements of the price index which flow
from charges, and the increases in charges made by state
governments, on their own independently of the depreciation
effects which I have dealt. Well the answer is that you attempt in
your overall economic policies to ensure that the increases t!-.-nt
are made by state governments will be as minimal as possible asa
res-ult of the decisions you take in conjunction with the States in
terms of revenue sharing. We believe that in 83-84-85 we have had
a singularly successful relationship with the States an6 that we
have been Properly generous in the sharing of funds in a way which
haven't imposed undue pressures upon them to raise their charges.
So that is a way in which Commonwealth Government, Federal
Government, can act. You can't stop some charges from going up. To
the extent then that they were reflected in the price index is
appropriate but that shouldn't wages. We have a particular
issue, a particular problem now as a result of depreciation and we
will deal with that.
QUESTION: There is a lot of discussion today on the question of
targeting put the view that targeting implies discipline on
government.-I take the quite contrary view, I think that in many
ways it is a cop out for the government to select a target that
doesn't necessarily achieve the ends-that we as economists would
like to set as targets. I think the absence of a target goes from
the government to communi. cate much more regularly and much more
carefully with the market extension and make much freer
information on what it's doing to our economic........ I would just
like to hear your views on the issue of monetary targeting.
PM: I addressed myself to it to some extent in my address as you
will appreciate. And I simply want to say this that as to
why we believed it was appropriate to abandon the singular targets
as we did. The changes that have been introduced by us into the
markets following deregulation have produced results, distortions
which have made it, we believe, futile to adhera to that single
target. And in my address I analyse all the features of this. I
take your point that it is appropriate for the Gov'ernment to try
and make as much information available as possible. It is seeking
to do this. At this stage we are certainly not disposed to assume
the use of the M3-and set targets-for them for that purpose
because all the evidence has indicated that it would be quite
inappropriate to do so. It would produce, we believe, quite
inappropriate economic outcomes. We are open to persuasion, if you
like, as to what is the best way of hearing our knowledge with the
market, but we do not dispose to reverse our decision. We will not
be reversing that decision. We will try as far as we can to direct
ourselves through the Reserve Bank, make as mucn information
available to the market as possibly can be done. We will not be
perverting economic policy by adherence to some aggregate which is
no longer appropriate to that task. If in fact........ there can be
specific suggestions put to us, myself and the Treasurer, as to
how we can achieve the objective that you talk about. We are open
to suggestion.
QUESTION: Prime Minister, as you are aware, as far as the outside
world is concerned, the Australian economy is basically a two
product economy, that is rural and mining. As you are aware the
worldwide rural and mining industries are in decline. The outlook
for the longer term for both sectors isn't particularly brilliant.
In the short term we have a reprieve through the devaluation whi. ch
you have outlined and in the short term things are going to be
maintained but surely the long term answer is not going to be the
continuing devaluation of the Aussie dollar to offset the decline
in our exports. I was just wondering sir, if you might be able to
share with us tonight, any thoughts you might have about future
policy initiatives which might help the Australian economy
diversify away from its highly dependent status on rural and
mining and what sort of economic policy initiatives may be
considered in the future.
PM: I had addressed myself to that issue to some extent in the
address. i pointed out that we have addressed ourselves to the
question of industry policy. We are not depending on rhetoric. We
made the point as to what we have done, for instance in the steel
industry. It was very interesting to see, I think it was in
today's Melb'ourne Age Terry Brand's article where just what has
happened within the steel industry in terms of its international
competitiveness as a result of the combination of depreciation and
not just depreciation but the significant increase in productivity
that has been associated with the steel industry plan that we
brought in. So not only there but in the automobile industry we
have reached the stage now where one major producer is talking
about exports of Australian vehicles to the United States. That is
a significant improvement in that area of industry. And in the
whole approach to industry policy our assumption has been that
Australian industry hasn't been prepared to restructure itself. We
are seeking to assist industry and trade unions and governments to
work together to achieve those objectives. And we are not merely
going to particular sectors of industry in the way that I have
just talked about, but I have established a committee of Ministers
which is concerned with Australia's long term economic growth
opportunities under the Chairmanship of Senator Button, the
Minister for-Industry, Technolo ' gy and Commerce, and they will be
reporting to~ the Cabinet on the range of policies which are
necessary to achieve those objectives. All that we are doing in
the area of industry training and retraining is calculated to try
and produce a range of skills in the labour force to include
training and education and retraining and re-education which will
ensure that we do not suffer from absence of skills. We need to
have not merely the training and mobility in the labour force to
ensure that it will be able to service those industries which were
able to develop and which will be able to, as I have said before I
enmesh the Australian economy with this region. I think in terms
of what we are prepared to do, in direct terms of industry policy
of what we are prepared to do in the area of tax to develop
research. And you know the initiative we have taken there. And in
terms of training of our work force and retraining of our work
force, we have made it clear that we are dedicated to enabling a
restructuring of Australian industry to give the maximum
opportunity of taking advantage of the fact that we are a part of
the most dynamic region of the world. Our trade policies are
calculated to achieve this. I believe that I am able to say now,
just over two and a half years in office, that our relations with
the region in qCneral and with China in particular are better than
they have ever been before. So the combination of our general
mac'ro-economic policies, our trade policies, our training
policies, our education policies are all calculated to try and
develop in Australia an industrial structure which will take to
some extent account of the realities to which you refer. We can't
think of an area of relevant economic policy in which we haven't
directed attention and already produced policies or intending to
produce policies calculated to achieve those results.
QUESTION: Mr Prime Minister, I was very interested to hear your
statement in your address that you plan to make an announcement
regarding youth unemployment. I have two teenage children who
often ask me the same sort of questions that the three teenagers
asked you last week on " Pressure Point" program. I find again and
again that I have the same problem as you had on that program and
that is the'distinct lack of knowledge of the facts on the part of
our teenagers and that a lot of thei-r statements are based on an
underlying attitude that we don't seem to care. I think it came
* through. You had to correct them a number of times on that program
, and I find myself in the same position again and again. Can we
expect on your announcement some real initiatives that show our
unemployed youths that we ' the employed' do care?
PM: Yes, I can give you an unqualified purpose to that. I
obviously don't want to, nor am I in a position to, disclose all
the details. But let me very briefly go to the elements which I
believe are important. In think firstly it is important to get
across to them that we, not merely as a Government but as a
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community, do care. There is no doubt that there is a feeling out
there among a lot of our young peo? le th~ at w-e don't. And just to
produce statistics to show that it's somewhat better now than it
was two years ago is rnot enough because the problem is of very
considerable dimensions. So the. sorts of things that we are
wanting to do are these. You will appreciate that the Kirby Report
shook a whole range of labour market programs, gave technical
colleges the concept of traineeships. Now as I have announced
before we will be picking it up in very substantial numbers. I
won't go into detail now but let me make the point that the
purpose of the traineeship concept is to recognise that in the
past students coming out of school had the opportunity of going
through the apprenticeship stream and that provided positions for
33,000 and we pick up in 82-83 with numbers of up to about 45,000.
So it's that sort of numbers who would have the apprenticeship
route available to them. Then you have the tertiary education at
the universities or in the TAFE institutions. But a hell of a lot
of our kids have been where they haven't got a job at all, where
they have gone into the market and really gone into dead end type
of jobs where they have no sort of training at all which will open
up the possibility of devel~ oping a talent which undoubtedly so
many of them have. Now the concept of the traineeship is to
provide a situation where it will go into jobs which won't be dead
end. They will get training on-the-job and then there will be that
pull at the end that they will get a broader training of the Job
in development institutions. The TAFE will be one but not only
TAFE. So that they will have the opportunity to dev'ilop their
exp'erience on and off the job in a way which will open up to them
more meaningful and satisfying jobs in the future. Now that will
be an important part of what we are doing. Secondly, of course, we
want to keep up the momentum which is developing in the last
couple of years to an increased retention rate of our young people
in the education system. one of the great tragedies that we
inherited was a very low retention rate in the latter years of
secondary school. By international standards this was dismally low
down at the beginning of the 80' s to about 35%. Now that has moved
up to abo'. It 46% and we are wanting to continue the policies which
we are introducing which will keep that increase in the retention
rate going. Now the next point, it is no good just keeping our
young people in the education system. We have got to make the
education system as relevant as we can for their needs as
individuals'and for the needs of the economy. That is why we have
appointed the Karmel Committee, the quality of education review
committee. And we have asked of and received an excellent report
from Karmel as to how the very substantial funds that are going
into primary and secondary education should be developed in a way
which is going to make the quality of education relevant for young
people themselves and for Australian industry. So in co-operation
with the States, we are working in that area to give the young
people of Australia a greater chance and opportunity to stay in
the education system and to be in an education system which is
relevant. Now another strand of what we will be doing is to try
and get a greater degree of rationality into our youth income
support arrangements. A greater degree of rationality between the
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secondary education allowances, the TEAS allowances and the
unemployment benefits. So while looking after' the necessary human.
requirements of those who are still unemployed but you a.-e going
to have to get greater incentive for kids to remain in education
through appropriate relationships between the range of youth
income support. Now that is not' an exhaustive statement of the
things that we are about, but I do believe that it will mean the
most important thing that has been done in addressing this problem
since the time when the disappearance of full employment started
to create this disaster for young people and I believe that with
the appropriate length of co-operation from the young people
themselves, from the education institutions, the employers, the
trade union movement we can at last start to do something about
eradicating this blight upon our society.
QUESTION: ( inaudible)
PM: I will just answer this question very very briefly. Firstly
as an ex-member of the Board of the Reserve Bank We are
examining a range of options on what useful information about the
standard policy can be communicated to the markets. We are looking
at that. I pointed out in answer to a question yourself the
difficulties of why we won't revert to the previous
practice. I take note of what you have said. I will discuss it
with the Treasurer and in our discussion that we are currently
engaged upon as to the range of options that are available......