PRIME MINISTER
E 0 E PROOF ONLY
TRANSCRIPT OF INTERVIEW WITH JOHN LAWS 2GB -30 MAY 1986
JOHN LAWS: We talked earlier today at some length of the
government's political and economic problems
at the moment,* the pressure is on the government,
whether they see it as being a problem or
accept it as being a problem I don't know.
In a nutshell, it's got to get business investing
in new production to compete with imports
arnd to sell manufactured goods overseas, it's
got to cut a swath through the government's
spending. If I was a government, I'd see those things
as problems.
It's also got to try and persuade the unions
to accept even further reductions in the unit
costs of Labor, wage cuts in other words,
and it's also got to overcome a growing swell
of opinion to suggest that the government
is in some sort of political bother.
Now, like it or dislike it, that is an opinion
that exists, especially over the fringe benefits
tax, but also over,' what's perceived to be a
split in the ranks between the prime minister
and the treasurer..
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Divisions in the party Over Policy of course
will surface with some vigour in July at the
party's national conference and that will provide
I imaginie a little more political bother. maybe
it won't, but I suggest it would.
But now Paul K( eating has been out and about
trying to repair the apparent split between
himself and the prime minister by saying if
there was a misunderstanding, then they are
now understood, but then he seemed to tip
himself into hot water again, he couldn't resist
saying the real culprits were the prime minister's
minders. Without naming them, I suppose he meant
Peter Barren and Bob Hogg, former ALP state
secretary, and press secretary, Geoff Walsh.
The prime minister is on the line now, and
I assume he knows that we were going to broach
that subject.
I imagine when you were in China you were
pretty tired, must have been jet lagged apart
from anything else and having a busy time,
do you think in reference to the fellows who
do look after you when you're travelling and
elsewhere, do you think that they perhaps
got you a little too geed up in China through
a misunderstanding of what Paul Keating had
said both about the mini-summit and about
the statements he made to me?
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BOB . HAWKFE: They haven't got me, either then or at any
other tm, geed up. My only concern was
and properly to see that there wasn't undue
expectations engendered about what that meeting
of ACPI could do.
I said. and repeat to you, that I believe that
Ralph Willis and Paul Keating, the ministers
attending that meeting, did absolutely appropriately
in responding to the suggestion which arose
at the meeting that perhaps they should meet
again and have a somewhat wider discussion.
That was very sensible and proper In accordance
with government policy that they should have
responded in that way.
But then from that response, and one way
and another, there developed fairly quickly
a view that we were going to have another
summit or its equivalent and my concern-simply
was to hoe that down.
The meeting of ACPI, that extended new meeting,
wouldn't have had and will not have the capacity
to negotiate agreements or to formulate new
policies and I really wanted that to be underist6od.
LAWS: Is it true that these fellows that surround
you, I know they do the job well, I've always
found them pretty good frankly, but then.
again I'm not on the backbench, nor am I
a minister of your government, do they shield
you from those fellows, even from people as
high as Paul Keating?
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HAWKE: It's not a question of shielding. Let's have
this straight. clearP unequivocal, with regard
to my staff there Is no question about their
competence, integrity and loyalty, not just
to myself but to this government, and they
have done from the beginning of this government
an excellent job.
One of the things that Paul said yesterday
was correct when he was talking in this area,
and that is, as you well know, that this' is
a very hot house atmosphere, it's an unreal
atmosphere around this Parliament House.
You have the ministers' staffs, you have the
press and it's all very incestuous, it's an
unreal atmosphere and as Paul said, a lot of
pressures get engendered in that atmosphere.
If one wanted to, and gave him the exercise
of talki~ ng about the personal characteristics
of staffs, of the gallery and so on, you could
go on and have quite a saga.
What one has got to remember is that these
people on the staffs, not just on my staff
but of ministers, they are not in a position
where they can publicly defend themselves
and I'm going to do it for them as I would
expect Paul to of someone engaged in the luxury
of attacking his staff.
As far as I'm concerned, these people can't
defend themselves, I will and I think that
the perhaps understandable concern that Paul
may have had about not the staff but a worry
about some version of attention from the real
issues, okay a muddy statement, there's to
be no more of that and there won't be.
LAWS: I understand the atmosphere a-nd that was
why I put it to you, that under the circumstances,
while you were in China, and I know you
want to leave the subject alone and I'm quite
happy to leave it alone too, but that's why
I put it to you, that being under some pressure
while away all sorts of things, like travelling
too much, language problems that you must
encounter, having to be forever on your political
toes, that they could have simply caught you
at a stage when perhaps you were overtired
and you may overreacted?
HAWKE: No, absolutely not. I hoped in the answer
I've already given you that the opposite is
the case, but as far as I'm concerned we were
about, not in any way, questioning the decision
of Paul and Ralph Willis, both of whom were
involved, They were perfectly right to respond and
have this meeting, but not necessarily out
of what Paul said or Ralph said and I've seen
the transcript of what was said, but the media
built up the idea that here was a new summit.
There was never going to be a new summit
and that was my concern; to see that that
was made clear.
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It has been made clear and the cabinet has
had a very, very good consideration of the
issues, a sub-committee of ministers under
my chairmanship looking at the issues which
will be discussed, not only at the ACPI meeting
next week, but in preparing an early statement
of the government's response to the current
economic situation.
It's all under control and according to the
proper proccesses. So what I was concerned
to establish, it has been established.
LAWS: I suppose that interest rates aria a key to
the slowdown in : the investment and economic
growth in Australia, what sort of plans have
you got in that direction, can we expect a'
fall in interest rates soon?
HAW KE: Well, let me make this clear, that as far as
interest rates are concerned we've always
said that monetary policy Is a key element
of our overall strategy and that strategy is
fine, as you know, to achieve sustained growth
without debilitating inflation and balance of
payments problems.
So in that sense we all want lower interest
rates, but we want them in a way which can
be permanently achievable and that's what
our policy is set now to achieve, permanently
lower interest rates as economic conditionls
permit.
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I simply note, as you are aware, that the
general interest rate trend over the past month
or so has been d ' istinctly downward and I'm
not going to risk the achievement of lower
rates by speculating in any detail on the outlook.
I simply say that the downward trend has
been consistent with our policies and our policies
are going to continue to take the appropriate
framework for having permanently lower interest
rates.
LAWS: You must have a lot of things on your mind,
I mean you came back and it certainly wasn't
all peace and quiet on your return, was it?
HAWKE: It wasn't too bad.
LAWS: It wasn't too good either, I wouldn't have
thought.
HAWKE: Let me say, I'm not being flippant about the
economic situation, it is one that requires
an adjustment, refinement of what we're doing,
but I was making the point not flippantly about.
the fact that there are difficulties, but that
I wasn't overweighed by them, that's all.
LAWS: That's what interests me. A lot of people
have been saying, I for one, that I think
that the government has got perhaps more
pressure on It at this time than It ever has
had since it's been in office, would you agree
with that?
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HIAWKE: I think that's right in this sense, that when
we came in it's very difficult to imagine any
government could have had more pressure
because, as you know, we were in the worst
recession for 50 years and we had the enormous
pressure of turning that around and taking
some hard decisions which were necessary
to get the economy going.
That was tough and hard, but now it's In
a different sort of situation and the paradox,
as I think you appreciate, is that in a sense
we're paying the price for our success.
We got the economy moving up so strongly
that the level of imports coming in with that
economic growth here were very high.
We would have been able to cope with that
if we hadn't been confronted with this just
unbelievably drastic deterioration in the terms
of trade, and as far as your listeners are rtconcerned
I don't want to use technical Jargon,'
but that simply means that the prices that
we were getting for our exports were diving
downwards while the prices of imports were
going up.
That simply meant, if I can give you the best
illustration of it which was supplied by the
statistician yesterday, that that's meant that
in the last 12 months a loss of 3% In our national
product as a result of that change in the terms
of trade.
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Now, the problems are new for us, therefore
we've got to adjust policies in a way -which
means that we ge ! t that external problem down
and try and keep activity going in this country
in a way which is going to keep employment
going. We'll do that with the co-operation
of the people of this country.
LAWS: Okay, but if you've got to get things moving
in Australia, and we understand that that
simply does have to happen, then it seems
to me contradictory that you are offending,
and I think that's the best word, the business
community with the fringe benefits tax that
is about to come in.
HAWKE: Well, you talk about offending the business
community, let's get some facts straight about
the fringe benefits tax.
We're not altogether dills when it comes to
research and it wouldn't surprise you therefore:
that we've been undertaking some research
on this question of fringe benefits.
LAWS: I'm not saying that they're correct in being
offended.
HAWkE: No, but it's not just correct, you talk about
some people being offended, it is true that
some are, but all the indications of the research
are that the fringe benefits tax continues,
which Is not surprising. to have very, very
strong majority support.
That is simply a reflection of that fact that
it is a relatively small proportion of the
workforce which gets the benefit of these
fringe benefits.
I mean when you cut all the hyperbole and
talk and special pleading out, the fact of life
in Australia has been that the top 10% basically
of wage and salary earners, have had their
differentials against their ordinary salaried
wages colleagues, pushed outwards by that
basically having these non wage benefits,
Which they're non taxed and has given them
greater benefit.
LAWS: Yes, but isn't that fundamentally-the business
community?
HAWKE: I beg your pardon?
LAWS: Isn't that fundamentally, that top 10% that
you're referring to, the business community?
HAWKE: It's executives and so on not simply executives,
I noted it comes down the scale somewhat,
but if you want to say that business community
is the executive to the business community,
I just have a different view.
They are an important part of the business
community. People who work, wage and salary
earners are part of the business community,
without their input there'd be no business.
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LAWS: Yes, but it's the wage and salary earners
that also can be affected by the fringe benefits
tax.
HAWKE: Just let me give you some figures. The best
way of putting it is the highest paid 11%
have about three. to seven times the chance
of receiving any particular fringe benefit as
the 74% of wage and salary earners paid at
or below average weekly earnings.
I'm simply saying that overwhelmingly the
fringe benefits have been concentrated in
those upper income levels.
I'm not worrying about that in any sort of
class thing, you know I don't go on with that,
I'm simply saying, however, if you're talking
about reaction and concern the simple point
is that the great majority of people are in
favour of the fringe benefits tax because the
great majority are in a position of seeing that
a relatively Emal proportion have been given
benefits which haven't been taxed and Which
give them an advantage over and beyond what's
available to the great majority of people,
it's fair in this society that that. sort of
advantage should be moved. If people are
to be rewarded for higher skills, higher
importance, let that be clearly indentified
in salary terms u Ipon which those people then
make their contribution to the welfare of' this
community.
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LAWS: That's right, You're not getting any argument
from me on the basis of the fringe benefits
tax because I think it's been an unbelievable
rort and I agree: with everything you say,
but the point that I'm making to you,-two
points I'd like to make to you we're getting
all sorts of calls of anguish from hundredd
of small businesspeople who are confused about
it to start with, but more importantly a lot
of people that are angry that they consider
it to be, and listen to the words I'm using,
an imposition on the business community at
a time when you're trying to persuade them
to perform better anyway.
HAWKE: Let's get this busini ss of the imposition on
the business commUnIty right, and the best
way I guess of doing It is to just look at what's
happened under my government and compare
it with what was happening to the business
community in the period before that.
Just let's look at the profit share. Under
Mr Fraser, if I can call them the Fraser years
and let's talk about the Hawke years, and
I'm not trying to be immodest, that's the easy
way of identifying it.
Under the Fraser years the average profit
share, in the national income, was 13.9%.
Under my government, the average has been
15.3%.
When we came to office it had got down under
the other mob to 11.7%, we've pushed the
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profit share up arnd we've done that because
it had got too low, it had to go up.
We had the understanding not only of the
business community, but of the trade unions.
Now, that's what we've done, we have as a
deliberate result of our policies pushed the
profit share up to historically high levels, and
we have done that in a situation corresponidingly.
where the rate of wage increase has been
significantly lower.
You probably haven't heard this figure before,
but I think you would. agree, in terms of a
lot of the nonsense that goes on in this special'
pleading, that these figures are important.
The average under the Fraser years for
movements in earnings, the average was 11.4%,
that's what male average weekly earnings grew
on average in the Fraser years.
Under us, down to These are the' facts,
we've pushed profitability up" ' the movement
in earnings has been lesser, the level of
industrial dispute is at historically low levels.
Now, sure you're going to have some people
ringing up and doing their special pleading,
but what you are concerned about, as a
responsible commentator concerned with aggregates,
what really is happening, those are the figures
which are important.
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LAWS: But back to the point--
HAWKE: I haven't gone away from the point, John.
LAWS: Yes, you have.
HAWKE: No,. I haven't, mate.
LAWS: They consider that an imposition has been
placed upon. them, they being the business
community, at a time when you're trying to
persuade them to perform better.
Now, you are adding costs to the business
community, aren't you?
HAWKE: Some of these, of course, of course there
are some costs, but remember this, that it's
not just one thing, the whole tax thing is
a package.
I remind you that as part of this package
the top rate, the top rate of tax is going
to come down from 60% to 49%, t he same people
who have been getting these fringe benefits
that are going to pay some tax upon it, they're
ringing up and complaininig about that.
At the same time, are they saying to you thank
you to Mr Hawke and thank you to Mr Keating
for moving now to bring the situation where
by next'year my top tax rate will be brought
down from 604t in the dollar to 49*? Are they
saying that?
15
LAWS: No, they're not, but--
HAWKE: They're not being very rounded, are they?
LAWS: No, I certainly agree with all of that, but
you're saying that they're not saying thank
you for this, but why should they say thank
you to you when you say they will pay the
tax, not the person receiving the benefit?
You're making the business community pay
the tax, not the ' people who are receiving
the benefit.
BAWKE: Let me say this, I understand that point,
but we're doing i t as part of a whole package.
The judgment of the government was that
it was appropriate. within the whole package
to do it that way, it certainly would be a
much stronger argument for these people if
all that this government had done was to impose
a fringe benefits tax and push it on to the
employer. Of course what will happen is that as a result
of what we're doing, in imposing the tax this
way, is that companies will do what they ought
to do, and that is in regard to their employees
who deserve a higher differential saly, arid
of course that is the nature of business, that
some people deserve higher salaries.* then
that will be Identified by way of salary and
so remunerated at the higher level will out
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of his remunerati Ion pay his share to the common
revenue out of that tax, he -will still have
a higher remuneration, but he won't have
a great hunk of it being in a form out of which
he pays no benefit to the community.
Why should you have a situation where the
lower paid salaried and wages earners have
the whole of their remuneration in terms that
mean that out of -the total of it they pay tax,
whereas for the higher remunerated people
you've had a very large and increasing'part
of their remuneration out of which they paid
no tax?
LAWS: That's all axiomatic and makes miles of sense.
HAWKE: Thank you.
LAWS: But it doesn't alter the fact that you are adding
costs to the business community.
HAWKE: Of course there is in this aspect an added
cost, but I point out to you that in terms
of what's happened to real unit labour costs
under this government, that's looking at the
totality, it's no good just picking up one thing..
Real unit labour costs under this government
have been returned to the historically low
levels of the end of the 19601s, that's when
you look at the aggregate of the decisions
of this government.
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The international. competitive position of Australian
business is back to the level of the late
1960' s as a result of the combination of the
decisions. It's like you, as a farmer, if you're makcing
a judgment about your total picture of your
outlook decision~, you don't just look at one
element and say, that's what's determined
il, you look at the aggregate of factors which
are determining your output situation.
Now, similarly, if you're looking at the
Australian business situation, and you as an
intelligent man know this, you wouldn't simply
say here is one decision by the government
which has added a cost, you would say the
fair thing is to look at the totality of the picture,
has the business community been put into
a higher position of probfitability than ever
before as a result of the aggregate of decisions
of the government?
Has it bee pu ai the position where its
international competitive-position is the best
it's been for 15 y ears?
Do you have the lowest level of industrial
disputation for 18 years?
If you look at all those things, within that
context, that you take into account one decision
about fringe benefits.
is
LAWS: Assuming that You agree, and I think you
do agree,. that you are adding to the costs
of the business community in a way at a time
that you're trying to persuade them to perform
better, how are you going to encourage investment?
HAWKE; We will encourage investment I believe as a
result of the range of policies that we have
brought in.
I think that we will also be seeing a position
within a relatively short time where there i
will be a positive response from the business
community to the announcement of a range
of new initiatives that we'll be taking because
we understand that in the climate that I've
been referring to about the change in the
terms of trade, we've got to not simply rely
on our agriculture and our minerals, they
will always remain important but we can't just
sit back in a situation where the prices for
those commodities are going through the floor.
We've got to lift the operations of our
manufacturing and service sectors and we
will be adding to the existing range of incentives
that exist with our wages policies, with other
already existing investment policies, we will
be having an overall approach which I think
you will find will add to the impetus that should
exist. Let me say this, I don't want to be critical
of Australian, business because that's not
productive, but there's not enough of our
19
Australian business entrepeneurs who realise
that they have it within their capacity to get
up anid go.
One of the most satisfying features of this
overseas visit I've just had, there were two.
I went way out into the west of China, the
Chengdu, which is way out there in the middle
of China, well out to the west, and I went
there and witnessed the opening, or the*
preparation for opening, of a new factory
there which was the result of Australian
enterprise this was in the computer software
area. There, right out in the middle of China,
Austral] ian enterprise, going into operation
there using Australian know' how, they've
brought some 20 or so Chinese operatives
out to Australia, trained them out here, and
then gone back into the China with them and
with Australian people and -' e're going, from
there, not only supplying -3arket in China.
but other export markets.
Then a couple of days later, down in Chengdu
in the Sichuan province in southern Chinii,,
and there I opened a textile mill.
Here was a young Australian entrepeneur,
I won't name him, but a great young bloke,
a Sydney fellow, here he was bringing Wool
up to China and there they were, producing
the yarn and the material, textile material.
Now, that's get up and go initiative and you
just felt bloody proud to be an Australian
and see Australians doing that.
And that was done out of the Australian
environment with all the circumstances of:
Australia.
The point of what I'm saying is If initiative
and entrepeneurialship is utilised, if people
do understand that we can match the world
if we get up and go, then that's the sort
of thing that's got to happen.
That's going to require enterprise by management,
it's going to require co-operation by
unions and it's going to require initiatives
by government.
If we all as Australians understand that we
can take on the world in a whole range of
areas, then there are no limits.
LAWS: I know you've got to go because we've just
had a call from one of your fellows saying
that you're supposed to be somewhere opening
something, so I'd better be quick.
Have you got any sweetness in mind for the
business community?
HAWKE: Look, I think it's not appropriate that give
any sort of indication. Let me say this. I' 11
be announcing in the not too distant future
a range of decisions and approaches by the
21
government which-are appropriate to meeting
the circumstances of this time.
I want to conclude on this note, and it is
straight and direct and totally sincere.
When we came to office at the beginning of
1983 1 remind you, and you've been good enough
to talk-' about it yourself, that was the worst
recession for 50 years.
I simply said to the people of Austrblia, look,
we as Australians are good enough with
leadership to get out of this awful whole and
get going again we did.
No, I'm saying again now in the middle of
1986, just over three years later, the world
has dealt us a bad hand at the moment with
the terms of trade, okay, we dbn't like it
but we've got enough guts, determination,
capacity between us all together to get out
of this we will again.
LAWS: How long will it take?
HAWKE: Not very long, I think.
LAWS: Prime Minister Bob Hawke.
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