E. O. E. PROOF ONLY
INTERVIEW ON ELEVEN AM 8 NOVEMBER 1985
JOURNALI1ST: Giood morning Mr Hawke, thanks for being with us again. Well,
the economic indicators continue to point to a basically sound economy. -Yet
our dollar does seem to be having troubles. What has gone wrong?
PM: Well, the basic area of concern is in the current
account and it was known tljat we would have troubles with
the current account for a while even when the devaluation
occurred. It takes some time for the competitive benefit
we get from devaluation to work itself through with a
reduction in imports and an increase in exports, but we
are confident that that will take place. And you rightly
say, Ken, the fundamentals are good. They are reflected in
the fact which I think will give great comfort to all your
viewers yesterday's employment figures. it is the first
time for three years that unemployment rate is down below
8% That is very good news. We are very confident
that while we will have to wear slightly higher interest
rates for a while, while we are having the trouble with
the dollar, it will come good.
BEGG: Does that mean that intervention of some kind is out.
You talk about the possibility of higher interest rates. Is
that a response to the dollar?
PM: Monetary policy has firmed somewhat. That is quite
clear. And in-' the result of that firming of-monetary polic j
there has been this increase in interest rates, but we are
not talking about dramatic intervention because we are
confident in the correctness of the basic fundamentals of our
economy.
BEGG: Are you saying that interest rates are going to rise
further, Prime Minister?
PM: You know very well that it is not proper for the Prime
Minister or the Treasurer to speculate in this immediate term
about what is going to happen to interest rates, because
that speculation or observation of itself by either the
Treasurer or myself, can have its effect on the market. We
are not going to do that.
BEGG: The Opposition Leader yesterday said you basically had
two options. You could either go to the ACTU and say the
productivity deal is off, or you could allow interest rates
to go up.'
PM: Well I would have thought, Ken, that if Australians
were looking for one source they would not go to for economic
advice, it would be the current Leader of the Opposition who
was the architect of the worst recession in this country for
t) O years. Interest rates soared. Unemployment soared.
Inflation soared. We don't want, or need, Mr Howard's advice.
He has had his go. He has made a bigger mess of it than any
Treasurer in the nistory of this country. We have turned
around this country. We have saved it from the shambles of
Howard. We don't need to turn to him for advice. And we won't.
BEGG: So basically the economic strategy stays as is?
PM: It would be madness to depart from an economic strategy
which has produced Australia as the fastest growing economy in
the world, which has empployment growing at a significantly
faster rate than the rest of the world and within containable
levels of inflation. Now, it is the case, as we have said,
that we have certain difficulties at the moment on the current
account and the balance of payments area, and that has produced
this run, the pressure on the dollar. But we are confident,
as I say, that with the calm approach that we are taking, this
will turn around, and that by the end of this year the current
account relationship to the GDP will be acceptable and will
continue to improve.
BEGG: So you don't at times perhaps wonder or even possibly
suspect the motives of the money market?
PM: No, I'm not a conspiracy theorist. I rather say this
that I think they have their time horizons far too shortened,
that they tend too readily to react to one particular bit of
information or one particular event. I mean, I think they
over-reacted to the 3.8% increase in wages. And this is, I
think, a silly thing to do because in fact it is quite clear,
and the business community have told us that they now accept
the fact that the non-discounting in September and the 2%
discounting early next year, they accept will produce basically
the same sort of result in inflation terms as if you had done
some in September and done some next year. Now, I think the
market should have understood that.
BEGG: From time to time we have heard over the last year,
and indeed before, that as a nation we are living beyond our
means. Is that what has happened?
PM: We have, over a period of time, because we have borrowed
very substantially. You can't keep on doing that. You have
got to look at the elements of that borrowing, as far as the
Commonwealth itself is concerned. And if you look at its
external debt, our external debt as a government is more than
covered by our reserves. The great proportion of the debt is
as a result of private borrowing by enterprises in Australia.
Now that has been made on what they consider to be good and
rational economic grounds to invest in en ' terprises which are
going to produce returns into the future. And I believe that
will occur. But you can't indefinitely go on borrowing at the
sort of level that we did. And of course part of the overall
economic stragegy that we have adopted is to reduce the call of
government upon markets. We have reduced the deficit very
significantly and in co-operation with the States, we have
reduced the total public sector borrowing requirement very
substantially. So this will reduce the call by governments
upon foreign markets and over a period of time should lead to
a relative reduction in the pressures in the capital markets
and therefore an easing of interest rates. But we are
cxperinc. n3 this p~ i-prcssuire at thec-momcn~ t for the reasons
that I have given.
BEGG: So we are in for a tough time as far as interest rates,
for a while?
PM: Well, for a while we have to live with high interest
rates. But I believe that when you are making a judgement
about economic policy you have got to look at the totality
of it. And I believe that the Australian people are proud
of the fact, and they should be proud it is not just a
question of government they are proud of the fact that as
a community we have worked together employers, the trade
union movement, and government, to very substantially reduce
the level of unemployment. When we came to office we inherited
a figure that was going up to about 10.3% unemployment. We
have got it down to 7.8% now. And we reduced inflation very
substantially. The result is that the young people of
Australia are looking at better job prospects now than they
have for a very considerable period of time.
BEGG: As you say, Prime Minister, unemployment is coming down,
but you still do have a fairly high level of youth unemployment.
Looking ahead, what do you target what do you see as a
possible? PM: Well, I am looking, as I have said before, to towards the
end of this decade a situation where as a result of our
initiatives in education and employment and in training that
we will have substantially eliminated unemployment in the level
of 16 and 17 year olds and have brought it down very
substantially at the next level of teenagers.
BEGG: Does that mean in the old sense full employment, or
is that an impossible dream?
PM: Well, when we talked about full employment in the past
we talked about it traditionally in terms simply of looking at
jobs as such. I think we have got to understand that we live
in a rapidly changing world. The impact of technology is
upon us. So what we have got to do is have a range of programs
which means that we have more of our young people staying in
the education system longer. We need a more varied range of
training programs which we are bringing in. So that what you
will have is the young people of Australia occupied in either
education or training or employment or a combination of these
things. I. believe we can . get towards a position where,. as I
say, in those age groups that I have talked about, we will get
very close to having them fully occupied,-as they should be.
I3EGG: Prime Minister, 1 unfortunately we have run out of time.
OUr thanks again, and as this is our last program, all the
best for the year.
PM: Ken, can I say thank you to you, and as this is the last
program, congratulations to the station for a great year.
And may I take this early opportunity of wishing all your
viewers a good Christmas and a happy new year.