PRIME MVINISTER
E 0 E Proof only
TRANSCRIPT OF INTERVIEW WITH MIKE CARLTO0N -2GB -24/ 1/ 86
MIKE CARiLTON:
PRIME MINISTER HAWKE:
CARLTON: Just when you think the economy is off anid
runnIng smoothly in top gear along comes
another spanner in the works.
This time it's oil. There is In the world today
too much oil about there's s. glut of the stuff
and overseas the price of oil is dropping like a
stone. That can be a mixed blessing for Australiat.
It may reduce our Inflation rate that'r goodbut
it may also coat the government hundreds
of millions of dollars In lost revenue& maybe
maldng for a tight budget this year.
There are other straws in the wind for the
economy too come very good. some not so.
For a look at them#, on the, line from Canberra
this morning# the Prime Minister.
Good morning.
Good morning. Mike.
Thanks for your time.
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PRIME MINISTER HAWKE: Pleasur'e.
CARLTON: PRIME MINISTER H-AWKE:
CARLTON: PRIME MINISTER H* AWKE:
CARLTON: Can you see the price of petrol dropping
soon? Well. the next adjustment Is to be made on the
list March, Mike, and on the way in which
international price has been moving that's
what would be required.
You rightly say that that's a good thing in
Itself. We have to look at the revenue
implications. The relevant statistics roughly
are, Mike, that the price of oil per barrel
has to faU by about $ R-10 and be maintained
at that, which is the sort of drop that's
happened, as you know.
That could cost us up to about $ 1.6 billion
in revenue and if you lose that revenue and
you want to provide and the people want
the same level of services. well then you've
got the difficulty that that creates.
So we'll be looking at the situation In time
for that March Adjustment.
But you're absolutely spot-on In your analysis.
It's a mixture of good news and bad news.
But you do believe the price will come down?
I think so, to some extent, yes.
Can YOU put a figure on it, roughly?
rn' UHP U62 732923 No. 40,& 1: 2P0
PRIME -MINISTER HAWKE:
CARILTON:
PRIME MINISTER J1AWXl(.;
CARLTON~:
PRIME MINISTER HAWXEt I can't at this stage for two reasons. We
don't know what will have happened to oil
prices by the time we come to make the
adjustment for the 1st March, and al80 as
you appreciate, the Australian dollar to
a combination of two things. The price
which is made up of 80% of-. the spot price
and 20% of the official price which to $ 28
US a bar'rel, and what happens to the exchange
rote. So it would be misleading to say at this
stage, Mike, what the drop would be.
On the plus side. the good side, that I guess
would be good news for farmers particularly.
also for small business. anyone who I guess
freights goods about.
Yes, sure.
And the Inflation rate -could you see it
easing that off?
Obviously if you have the bort of drop In
petrol prices that have been talked about
that would go with that which Is of the order
of 6 cents, somnething like 8 cents a litre.
at that figure I mentioned before, that can
mean about a half a per cent in the CPI.
So yes. that can be quite significant If we' re
In a position to be able to do that sort of
thing. 1 24,01,86 10: 02 P. 03
1 24,01.86 10: 02 P. 04
rml rKt. o Uti-ubZ ( 62923 No. On the down
a bilion plus
a very# very
it?
PRIME MINISTER~ HAWKE:
CARLTON;
PRIME MINISTER HAWI( E:
CARLTON:
PRIME~ MINISTER HAWKECARL-
TON:
PRIME MINISTER HAWKE: side if you wind up losing
dollars in revenue that meant;
tight budget this year, doesn't
It does mean a tight budget and we're
approaching a tight budgetary situation
anyway, because we've got the commitments
that you know of In regard to the deficit
and the levels of government expenditures.
so yes, it means a tough budget and we're
going to have to make, as we have In the
previous three years, the right mix of
decisions which Is going to maximise growth
at sustainable levels of Inflation.
Can you still keep to the trilogy though?
Yes.
Without a doubt?
We'll keep to the trilogy.
It's going to make It very hard to deliver
on those tax cuts though. Isn't it? You're
going to have to count every cent.
Well, this io the nature of economics though.
Mike. I repeat, you were on the ball in
your first comments that In this complex
world in which we live there's hardly
any significant economic variable which Is
simply good or bad, It has its pluses and
Its minuses and the success of this government
has been in this three years In adjusting the
CARLTrON:
PM PRESS OFF 062 732923 No. 1 24,01.86 10: 03
range of economic poicy variables to
changer, In economic circumstances in
which keeps the economy going, and
we're going to be able to continue to
CARLtON:
PRIME MINISTER HAWKE:
CARLTON:
PRIME MINiSTER HAWKE:
CARLTON: meet those
a way
I think
do that.'
Is it too ' early to put any sort of figure on a
budget deficit next time around?
Yes.
AU right. I thought it might be. Again or%
the brighter side, the Australian dollar Is
rising again now. It closed at about 71.4 cents
US New York. Do you expect that trend to
continue? Again, just let me make this first point, Mik~ e.
You say, " on the gobxI side". Yes, there are
obviously good features of that.-You were
talking about the farmers before. The farmers
will say It's not pood news.
As that rises that means a lowering in the
Austratlian dollar result they get, so on balance
we think that it's pood that the dollar is coming
up to what we think is about getting towards
its right level.
Which would b~ e about what?
W~ ell. you ask six economists you'll probably
get six~ different answers. But T guess the
range of opinion, Mike, Is of the order of
12 to 75 * onto.
' PRIME MINISTER HAWKE:
1 24,01.86 10: 04 P. 06
i-n ri'ib UFFI Ub2 ? 32923 No.
CARLTON:
PRIME MINISTER HAWKEl:
CARLTON: -a-
I think that would be the sort of order that
the Majority of economists would say is perhaps
the appropriate level.
In other words they're saying that when it
went down to the 65 and 68 there'd been an
over adjustment.
But you'll get different answers, as I say. to
just precisely what it should be.
But you're right, in balance It's a good thing
but I can't give you an answer as to how much
that will keep going. I think the answer I've
just given you about the general range of
opinion probably Is relevant to your question.
But the signs are better than they were, say.
even a month ago?
Yes, but -you'll remember that I've expressed
confidence about what would happen because
I have said consistently, as you'll recall, that
the basic elements of Australia's economic
policy have been found.
I've kept saying that during the latter part
of last year. I said because the economy was
basically sound, doing better than most other
western ecvonomies, I thought these other things
would come Into place and that's whatte
happening. The next, I suppose, variable if you like here
we go again -is the exchange rate. Sorry, not
' 4, UuI, 6 iU: Ub P. 07 I-I J
-7-
PRIME MINISTER HAWKE:
CARLTON: PRIME MINISTER HAWKE:
CARLTON: exchange rate interest rates. Can you see
those maybe easing off in due course?
Well, I must be careful in answering this,
as you know, because a prime minister's
statement or a treasurer's statement about
their expectations In regard to Interest rates
can of themselves have impacts you don't
want to be trying to push markets.
But let me say this, Mike I think it's the
fair answer that with the increasing strength
of the Australian dollar this was an essential
element of the change In the pressures here
and Internationrdly on interest rates.
So the condition for a downward movement
in interest rates has emerged.
That may help get the farmers off your back
again. Let me just quickly say this about the
farmers. I don't have any feeling of upset
about the expressions of concern by farmers
because many of them are going through a
very tough time. basically because of the
corruption of international markets by the
Europeans and now to some extent by our
friends, the Americans.
Just on another related topic, do you regret
the shemozzle over the fertilizer business.
the West Australian thing?
124,01,86 10: 06 P. 08
PRIME MINISTER HIAWKE: No-Let me Make it quite clear, there's
no ahemozzle except in the minds of what
passes for an Opposition in this country.
The position Is quite clear. At the beginning
of this year the Cabinet processes weren't
In operation and we weren't going to meet
until the 20th January.
I was approached by the Premier of Western
Australia who had an election on and I've
made no secret about the fact thatt within an
election context he came, he said, " Look, we've
got a problem -as a result of the imposition of
that anti dumping duty".
Cabinet was not going to be meeting till the
so I got the two relevant ministers
together and said, " There is a problem here,
it's wider than Western Australia. We can
deal with the whole problem when we get to
Cabinet but we've got a real problem now in
regards to Western Australia. Something ought
to be done".
We agreed to take a course of action there
at the request of the West Australian Premier
and on the clear understanding that the full
Issue would be looked at by the Cabinet at the
firet opportunity.
CARLTON: But it was a wrong decision. wasn't it?
PRIME MINISTER HAWKE: It was not a wrong decision, Indeed it's quite
clear that what was being done was to give
I. 7
CARLTON: PRIME MINISTIER HAWKE~: effect to anti dumping legislation which had
been in there under our predecessors and
which they'd administered In exactly the same
way. You can't have a system whereby this country
does not have protection against having goods
dumped hero at Uncompetitive prices. You would
destroy Australian Industry.
So the decision wag not wrong. but what we had
to do and would have done when the Cabinet
met was to see what next step in action had to
be taen M~ ike, to protect farmers particularly
in this situation.
So the steps were entirely logical to deal with
the problem that was put to us In regard to
Western Australia. at the first full Cabinet
meeting to deal with the situation as a whole.
That's what's been done and the decisions
have been right.
Laot question if I may, Prime Minister, and
this is pretty general. I guess. but It is
Australia Day coming up this weekend, a new
year along with it.
is it going~ to be a & ood one? Do you feel a
good year coming on in your bones, if you
like? I feel a good year coming up. Milke. and
basically for the reasons I put to you before.
PM.. PRESS OFF 062 732923 No. 1 24,01,86 10: 07
t don't want to repeat them at length, but I
say that the fundamentals of economic policy
are sound. We are well ahead of our job
creation programme, more than a half a million
new jobs and the surge in employment is
increasing. We give our commitment to the people of Australia
on this Australia Day weekend that we'll keep
sound economic policy in place so that we can
create more and more jobs for Australians.
CARLTON:-PRIME MINISTERI HAWKE:
CARLTON: Prime Minister, thanks very much.
Thank you, Mike.
Bob Hawke there on the line. I said there
from Canberra. He wasn't, he was from
Tasmania. A small slip of the tongue there.
On balance a healthy economic outlook.* but
some fine tuning to be done and a tight
budget coming up. There'll be not a cent
to play with for the Treasurer Paul K~ eating
and the Finance Minister, Peter Walsh.
But it could be a bell of a lot worse.
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