TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING, MP
7.30 REPORT WITH PAUL LYNEHAM, CANBERRA
26 FEBRUARY 1.992
E& OE PROOF COPY
PL: Well Prime Minister aren't you being too modest, you
talk of $ 2.3 billion but when you look at the revenue
forgone and everything over the full four years it is
$ 16.6, surely?
PM: It is a cyclical kick to the economy, a stimulus the
economy, which then basically is spent over $ 2.3
billion over this financial year and next financial
year and then tails off, and as the economy picks up as
receipts grow, as employment grows, as business grows,
as profits grows, as unemployment benefits recipients
come off the Budget, as the Budget strengthens we pay
tax cuts. And it is a four year program at the end of
it we have the Budget back into surplus. We have tax
cuts at 30 per cent without Dr Hewson's 15 per cent
consumption tax. We have one of the biggest national
infrastructure programs in our history, rebuilding the
rail system.
PL: Which a few years ago, you were telling us all that we
had to realise we were a poor country we couldn't
afford all these flash infrastructure projects.
PM: In the ' 80s when private investment was running very,
very strongly, the thing to do was to pull the public
sector back, which we did, we produced these large
Budget surpluses. But because we did all that hard
work, we did what the Americans didn't do for instance,
that is pull the big deficit into surplus in the good
times. Now with a recession we are able to open them
out to provide some of the stimulus that we need, and
yet not leave it to lay there in the Budget, to see it
wash out and see the Budget come back to surplus.
PL: Well let's separate this discussion a bit in terms of
the short term kick-start things and the longer term
things. I mean your most immediate thing is that $ 317
million to families. Why did you decide a one-off gift
like that?
PM: Well, because the infrastructure programs of rail,
ports, roads, will start from now, but they will only
build up really this year. So for most of this year we
won't get a stimulus unless we can find a way of
injecting one quickly into the economy. And the best
way to inject it, is into people who can use it
families including of course the unemployed, but all
families, and there is particularly a long going
program there for low income families. But that
stimulus will lift the activity and spending, profile
the economy before and during the time when we build
the rai. and road programs up.
PL: Is it a form of Paul Keating saying I am sorry for the
recession?
PM: No, it i~ s a sensible thing to do. But it is spending
it on the right people. I mean, if it had of been Dr
Hewson hie would have thrown it to the top end tax
payers, who would have thrown it to the big companies.
We have given it to the people who can use it
families, tax payers with children.
PL: Alright, and the family car about $ 800 cheaper as of
tomorrow?
PM: Yes, I -think we have been producing the same number of
cars this year as we were twenty years ago. We have
got a car fleet, which on average is 17 years old.
PL: Yours isn't too new is it, your old Mercedes?
PM: Well I am part of the same syndrome. So this is to
encourage people to buy new cars, to give a fill-up to
our biggest manufacturing industry and a change. Make
travel safer, make the environment cleaner with lead
free cars, and to kick that again, another sector of
commerce along.
PL: What do you think it is going to do to car sales? You
must have some ideas what it is going to do?
PM: Well obviously, it is a substantial saving, and it is
permanent. It is a permanent change to the car
industry.
PL: Is it going to produce sales though? Can you be sure
of that?
PM: I am pretty sure. When the car industry executives put
advice to us about a change in tax rates, that was
their certain belief.
PL: Industry assistance and development, that's fairly
modest isn't it? I mean $ 31 million this year, $ 125
million next year.
PM: The biggest industry assistance is the revolution to
depreciation rates for business. We are changing the
depreciation schedules so that a twenty year asset, can
now be written off in seven and a half years, or a
forty year asset in fifteen years.
PL: Which encourages me as a factory owner or company
director to go out now and buy that new lathe?
PM: Well, you will have the benefit of greater cash flows
earlier because of the faster write-off, and it is the
major change in the Statement for business. But of
course as you say there are many others. I mean, we
are going to produce by a tax change, private provision
of public infrastructure. We are producing equity
development funds for small and medium business that
can't get equity, they can get debt, but they can't get:
equity, they can't get it on the stock market and they
can't get it anywhere else. We have got a quite novel
concessionary change in the tax system for that, and
also for big projects. So, this is a partnership
proposition. Government and business, moving forward
cooperatively, discursively, cooperatively to produce a
recovery and change Australia.
PL: And we end up in ' 92-' 93 with an $ 8 billion deficit, in
' 95-' 96 we are suddenly $ 2 billion in surplus. How do
you perform this?
PM: Because as the economy grows, the receipts are very
sensitive to pick up in growth profits and employment.
If GDP kicks so do Budget receipts. And we expect GDP
to change from zero, that's growth in the economy, to
change from zero this year to 4 3/ 4 next year, and to
on-go. So we are running at that sort of rate through
the early ' 90s. Those estimates are put together by
the Treasury, the Reserve Bank.
PL: The team that brought us the Budget estimates for the
last five years.
PM: Well look in the 1990s we had huge growth, it was all
forecast. The Budget is very sensitive to growth. If
you get the growth, the revenue that's why this is
a responsible package, it is a cyclical, it is a cycle
to stimulate the economy, which then drops away and the
Budget comes back into surplus.
PL: But I mean we look at these forecasts you have got in
here going up to ' 95-' 96, I mean surely they are so a
wish and a prayer by then that we should take them with
an enormous grain of salt?
PM: Well did you take Dr Hewson's with a grain of salt,
which were not done by the Treasury, or the Reserve
Bank, or the Department of Finance? I mean the fact is
it is possible to give a reasonable indication of
activity levels that far out.
PL: I wish they had been that good in the last few years,
Mr KeatLng.
PM: Well they were good in the main on growth, but the boom
of course of ' 88-' 89 was simply too great.
PL: And wages and inflation? What's the ingredients here?
PM: Well as the Party which broke the back of inflation
from 10 per cent for nearly twenty years, to now 1 1/ 2
per cent, we're not going to be letting that particular
genie out of the bottle again. So unlike the Liberal
Party, unlike the confrontation of Fightback, unlike
the accountancy of the GST switch, we are not going to
try to abolish trade unions, we're sitting down and we
have a commitment from the trade unions that they won't
claim, that their wage claims will be consistent with
keeping our inflation rate and our trading partners
average.
PL: You got that commitment a few days ago, did you?
PM: I did. And we had it through the
PL: Is this you on the phone to Bill Kelty?
PM: No, this is a meeting with the Wages Committee, with
the whole 40 of them. As it always was, and that's why
we have got a 1 1/ 2 per cent inflation rate. It is
worth remembering, Paul, out of the last recession when
Mr Howard was Treasurer and Dr Hewson was his adviser,
inflation rate was 10 per cent on the way out. On the
way out this time it is 1 1/ 2 per cent. The reason for
that is the Accord and the trade unions and we will do
it again. But this time part of that sympathetic
environment is tax cuts for low to middle income tax
payers, that 30 per cent tax rate, as I say without
taxing the food you put in your mouth, or the shirt you
put on your back, or your dry cleaning or anything
else.
PM: You reckon this will win you two elections on the trot?
PL: Well what this will do, this is a policy where we have
sat back: and said what's best for Australia? Dr Hewson
has sat back and said how can I be different to Labor?
I will have a consumption tax. That's not what we have
done, we have sat back and said what's best for
Australia? How can we induce a recovery? How can we
look after the Budget? How can we invest in the long
term? How can we re-modernise the railroad, the roads,
the ports, the airlines, how can we do all these
things, and give Australia a long term productive
focus? That's what this is about.
PL: Prime Minister thanks very much. I know you have got a
lot of other commitments so we will let you go now.
PM: Thank you Paul.
ENDS