PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING
RADIO 2UE WITH ALLAN JONES
27 FEBRUARY 1992
E& OE PROOF CO: PY
AJ: He has reinvigourated his Party, that was obvious on
television, but he has thrown down the gauntlet to Dr
Hewson, and injected a feeling amongst Australians that
he must fight to preserve, that there is hope and
vision around, which we need to both generate and
exploit. Put simply he seems to be saying that
currently the private sector is unsure of itself and
therefore weak, so the Government will jump in and fill
up that void' with a massive capital works program.
They will change Australia's road and rail and ports,
and in this way he says, aid exports. He seems to be
saying that he knows that families are in trouble, so
he is going to give them money from April 2 to help
alleviate some of their problems. He seems to be
saying that tourism and the motor vehicle industry are
in strife, so he has provided tax relief for both of
them. He seems to be saying the same things about the
banks. And he seems to acknowledge, though not to the
extent that I would have liked, the crisis in
education. And he said the Commonwealth Government
will fund entirely a $ 720 million program in technical
and further education.
But most importantly he is saying to Australians, and
this is going to be the election issue, you can have
tax cuts but you won't have to pay for it with a 15 per
cent GST. By election time this is going to be a
powerful point as Mr Keating bids to hang onto the job
that Dr Hewson wants.
But some would say there are omissions, Australia is
more than an economic entity, if we are to become ' one
nation' as he called it last night, our 15-19 year olds
have got to be treated as a critical resource and
University structures may have to change. And if we
are to be one nation you've surely got to be able to
walk the streets and be free from being bashed up or
made victims to violence and drugs. The dissolution
within -our society isn't just a function of the
economic downturn, but a function of emotional,
psychological and attitudinal concern about where
Australia is heading. Are we asking then too much of a
Government to provide the answers to all of this? The
Prime Minister is with me, Prime Minister good morning.
PM: Good morning Allan.
AJ: Could I just take that last point first, that we are
not just an economic entity are we? What about the
psychological and attitudinal problem of families, in
relation to violence and drugs and those sorts of
things?
PM: The structure of our family relationships have changed
over the years, there is no doubt about that. One
can't explain the drugs phenomena well, but one thing
is certain, that is if people have gainful employment
it certainly helps their view of the world, it lets
them believe they are part of society, they don't feel
cheated or jilted by society. And I think that is why
it is important, particularly for young people, for
kids to give them an education and find them job
opportunities, and you mentioned TAFE, it is one of the
reasons, you see at the moment we have got now the very
high retention rate in Year 12, we have got about eight
children in ten completing Year 12, and while the
university places have increased enormously in the
not all kids can go to university and that's why
we want to bring TAFE, up at least to give them
technical and vocational training so they have got that
practical training to get a job.
AJ: But you have got a young son that might want to go to
university and you will say to him, work your backside
of f, and suddenly he doesn't make the numbers. Why
couldn't you say, well we will re-orient our spending
priorities of family and pay to send you, because we
think at 21 you might be university material? We still
can't do that yet in Australia can we?
PM: As a private show you mean? Well we have got the Bond
university, it's about our only private university, I
think, but Allan can I just say this, that since about
1987 the Government has created 120,000 university
places. And the average university campus is about
10,000, it is the equivalent of about 12 universities
and we are pretty well on track for the proportion,
what we believe to be the optimum proportion of' kids
coming into university from school by the year 2000, we
are on track for that. But we are not on track for
technical and further education.
AJ: Well let:' s come to that question, you projected last
night 80) 0,000 new jobs, 4 per cent growth rate and an
$ 8 billion Budget deficit. If there is a critisism
today of' those three figures, it may well that when
consumers and business attitudes change, so to do the
economic: models, lose their ability to predict. What
if somet~ hing comes a stray and one of those doesn't
come to pass, I mean your growth is going to pay for it
you say, but what if the growth rates don't reach those
levels?
PM: Well it is a very conservative assumption. The year
after the ' 82-' 83 recession, we had growth running at 6
per cent over the course of the year. We have got to,
in this forecast, 4 3/ 4, but there are so many more
fundamentally good things around today than there were
in 1983-84, for instance the inflation rate at 1 1/ 2
per cent, not 10. The profit share will rebound
rapidly as soon as volume and manufacturing and
business picks up. We have got a competitive exchange
rate, which we didn't have in ' 83-184. I mean, there
are lots of things there, now which I think will
indicate to me that the economy will respond more
quickly than it did in ' 83-' 84, and therefore 4 3/ 4 is
a reasonably conservative consumption.
AJ: Could I just take two of those points, your arguing
strong points, and they are technically inflation and
interest rates. There are many who are listening to
you now who know that because you have now committed
yourself2 to keeping inflation low, that the value of
some of their assets, either in shares or real estate
or whatever, will be significantly eroded over what it
once was.
PM: Well not: really. You won't see the dash in real estate
prices ' Like we saw between say, 1986-87, but the time
before that was when 1979-80. So what happens is if
you look at real estate prices you have a flash in
prices and then nothing for six or seven years, another
flash up in prices. What you will see I think with low
inflation in Australia is a steady, generally inflation
related increase in prices. So I don't really think
people are going to find deflation as a problem.
AJ: May inf: lation place money in more productive
investments than the real estate industry has often
been responsible for?
PM: Well I -think what will happen is, low inflation, a
proper ' tax system as we now have, and particularly with
these very large depreciation rates for business which
I announced last night, and the banks having being
burnt with real estate, I think you will see banks
rationing our scarce national savings into the most
productive places in the economy, and that's business,
plant and equipment, the things that will actually
provide the jobs you mentioned earlier, and make people
wealthier. You can't draw wealth from sitting looking
at a building built in the 1960s increasing in price,
it is not doing anything for anybody, and in the end it
doesn't do anything for the country.
AJ: What about interest rates though? Many people
listening to you right now say, he has cut interest
rates, but in so doing that benefits the bloke in debt,
not the bloke like me who has actually saved, he has
actually cut my income in half.
PM: Well the interest rates were up for a purpose, and that
was to cut some of the crazy spending of the late
1980s, -they couldn't always stay up there obviously.
Lenders have not always had such rewards, but I think
what has happened Allan, we have brought interest rates
down at the same time inflation has come down rather
sharply so, there is a bigger impact there for lenders
than there was, but the real rate of interest, that's
the rate of interest above the inflation rate will
remain pretty constant. And the other thing is that
people who are living on fixed incomes, or who are
lending their money will find because of low prices,
they don't need the higher income to survive.
AJ: Can we say thought that we have enough incentive to
save given that spending was one of our problems and
that debt, is one of the issues facing us, is their
enough incentive to save?
PM: Well I think the big disincentive to save was inflation
because it simply ripped away at the value of some
monetary asset, but that has now changed, it is at very
low levels and I think, sort of inflation and the tax
system the reaction will actually now reasonably
encourage people to save, and it means that people are
not going to be desperate about running out to buy a
property because they think the price is going to go
sky rocketing tomorrow morning.
AJ: Dr Hewson would say a consumption tax is a disincentive
on spending and an opportunity for people to exercise
their own decisions about concessionary income.
PM: But they don't. But the fact is it's a discipline on
spending it will lift the price of products, but there
is not et commensurate return in the tax cuts, so
therefore people are going to be worse off, therefore
in my view they won't save. The savings device the
Government is supporting is occupational
superannuation, we have actually got in a way a
mandatory savings system developing now.
AJ: Now are you going, I know there was nothing said about
superannuation last night, I mean that given that debt
and savings are two of the biggest issues, I mean how
are we going to wind back a debt of about $ 135 billion
which has to be stopped before it can be wound back,
how are we going to do that?
PM: Well, two ways. The first thing is to put a suture on
it by making sure that our merchandise trade account
performs better and that that current account deficit
is lower. As we say in the papers we expect the debt
to stabilise about ' 94-' 95.
AJ: What will it be by then though?
PM: Well it will roughly in the region where it is, maybe a
bit morie. But the other thing about it is that it is
private debt, it is basically debt which is financed
upon projects and businesses able to service it, it is
not sovereign debt of the South Americans variety where
Governments borrowed the money without any basis for it
being serviced. This is borrowed by the private sector
of Australia, on plant and equipment, businesses,
projects etc. And the other thing can I say, we have
got $ 60 billion of private assets now off-shore. So
that $ 130 odd billion of gross debt would be only
had we n-. ot borrowed $ 60 billion to put $ 60 billion of
assets abroad. In other words we are counter-weighing.
PM: Well let's come to that counter-weighing then, the
other counter-weighing is saving. We seem to have a
very significant pool of national savings that you're
building now through compulsory savings, which is
called superannuation. You made concessions last night
for busiLnesses under half a million to be 3 per cent by
July 1 and progressively increasing that to the end of
the decade. but Australians I suppose are saying, if
this is our only national savings is it right that it
should be invested in Texas oil wells and exporting
jobs overseas, why shouldn't there be a commitment, not
volunteering Government intervention here, but it is a
Malaysian scheme which has really regenerated business
by using those funds for the benefit of the
superannuant and for small business.
AJ: Well the savings come from three places, household
savings, corporate savings, that's the savings of
companies, and now superannuation. And we expect
superannuation to be running at about $ 6-800 billion by
the year7 2000, which is about 4 or 5 times our nationa.
debt. So that savings balance and superannuation is
critical. to Australia getting its sovereignty back
completely over that debt situation.
AJ: But you're not going to let the insurance companies and
banks manage that are you? They made a mess of the
other st~ uff.
PM: Well you have given them a decent old bagging there.
Well what is happening we are seeing a lot of
proliferation of funds management organisations now,
managing that superannuation dollar, but you ask about
money going off-shore, the tweak in the tax system we
have to keep the money invested in Australia is a thing
called dividend imputation. What is simply means is
that we don't pay a tax credit to super funds if they
pay tax to a foreign treasury, so if super funds want
to invest in Germany or Britain or the United States
and they pay tax to the German or British or American
Treasuries, we don't give the super fund back here a
tax credit. Therefore they balance very carefully,
their investment in Australia, where they get tax
credits and their investment out of Australia where
they don't. That will guarantee that not too much of
those superannuation savings are spent abroad.
AJ: Yes I just wonder whether it prevents the double
dipping though, I mean the purpose of your compulsory
saving is that those people won't be dependent upon
welfare in retirement. Can you be absolutely certain
we are not going to be paying twice?
PM: Well there will always be an interaction between, the
basic retirement element in the system is the age
pension, but there will be a more sympathetic sort of
interface between superannuation earnings and the age
pension. But the result will be that people will be
better off and the Government will be able to afford
the baby boom generation which will double the number
of retired aged people.
AJ: Just on that you are making compulsory a business payup.
I am sure you are aware that Governments around
this country have phenominal unfunded superannuation
liabilities. My information is that the figure is
about as high as $ 80 billion, in other words they
aren't paying as they go. That doesn't appear as part
of our national debt. But what are you going to do
about making sure that Government continue to pay-up
annually as indeed business must?
PM: Well the award superannuation, or cumulation schemes
where companies pay, some of the older superannuation
schemes which existed before then, what you say is
correct some of them are unfunded.
AJ: So the Government is the employer?
PM: The Government is the employer.
AJ: And when it is the employer it sort of uses that money
for something else, as an unfunded provision.
PM: Government does not normally fund the provision, but
again I don't think it is a problem for us.
7
JONESts Just as many of your critics would have you believe
that you're the person, that you're the reason that
Australia is in a mess and, therefore, as I've said
many times, perhaps you've been though we haven't
known it -President of the United State., Prime
minister of Britain, President of France and Prime
Minister of Japan, because they're all in a moss.
Equally given that you can't really be blamed for the
economy entirely because the world problem has
existed, how then can you say we can get out of it at
a time that General Motors are saying.. shedding
74,000 jobs, closing 21 plants, when Germany, Japan
and France are all in strife. How can you say: " Well,
I can quarantine Australia, what I've said last night
is to pitch-fork us on to a recovery.* But so far it's
been elusive for them?
PM1 Well1, we missed the post war trade in goods and
services. I meanf what happened to us was that we
istayed with commodities f or 40 years too long. Now
we're out there,' picking up our share of tourism, our
ishare of manufactures the things we should have been
doing. While it may be true that the rest of the
world is growing slowly and, indeed, right now so are
wfe, and they will pick up as we will. The fact of the
matter isf we will get a bigger share of that trad in
goods and services and, particularly in our region
which is the f astest growing in the world. I mean,
they're growing at in the countries around us
where most of our trade is. I mean, we're not -trading
most of our trade with the United States or Germany or
Britain or France. We're trading it in the ASEAN/ Asia
Pacific area.
JONESt You've got a bit belted over the head for making that
observation when the Queen was here. oc you have afty
comment about that? You seen to be saying that we
belong in the Asian region, and I'm not sure the Queen
objected as much as some of your critics, but what
essentially were you saying?
PM: Well, I'm saying that 80% of our exports and I think,
just off the top of my head, I think it's about 83% of
our exports go to the Asia Pacific area and 70% of our
kmports come from there. in other words, we're now a
country trading with the Asia Pacific area. We're not
a country trading with the European community or in a
way of great substance with North America. we're
trading with that part of the world but that does
include North America. So, I'm simply making the
point that we're lucky to be in the fastest growing
part of the world. And that's why Australia can grow
a
as little faster and that's why, I believe, we can do
that and at the same time still run a healthy
merchandised trade account.
JONES: Well,, yesterday there were some good figures out on
tikilled job vacancies. Now, do we have a capacity to
fill those vacancies as they arrive or do we have to
rely on migration. I mean, someone rang this morning
and said: " Well, what is your view about migration?"
If growth is something you're predicting, does this
mean growth in migration number., where from and what
sort of people?
PM: Well, Alan, T think Australia.. migration generally
has been good for the Australian economy, good for the
Australian nation. That's the general policy.
Governments have always reserved the right to raise or
lower the quotas, as the intake, as economic
conditions have dictated. we peaked at about 2.40,000
migrants a couple of years ago. This year we're down
to 111,000 and I think when our review comes in in
April we'll be going lower. But the most important
thing' is, Australia can grow faster and particularly
with a larger population.
JONES I Yeas, sure. Well, now, employers sometimnes say when
they rcing heres " Why its it that the Government pays an
unemployment benefit to a child or young person that
its out of a job and gives us such limited incentives
to employ them?" I suppose what they're saying is why
would you pay the unemployment benefit to an employer
and use that as a subsidy f or taking on an apprentice
or: giving a kid a job?
PM:. Exactly, and that's what we've done last night with
Jobstart.
JONES: Dcoes it go that far?
PMe Yeah, it does. Because we pay it to employers, we got
another 44,000, another 44,000 young people likely to
pick up a Job under Jobstart and well,, young, young
and old, we've increased funding to create additional
job opportunities for up to 44,400 through wage
subsidies to employers and to apprentices.
JONES% But, see, the same thing applies to apprentices,
doesn't it. I mean, if a kid wants to sort of do Arts
or Pharmacy or Architecture, he gets automatically
paid for by the Government via his entry to
university. But if you're an appentice, you've got to
fin~ d a willing employer to start with. And the
balance seems to be stacked ahead of the kind of skill
that we need.
PM: That's true. So, what we've done here, we've got
funding in to assist the retention of indentured
aipprentice.. That is, apprentices at risk, people who
have already been indentured but might be put off in a
recession. We've got funding there to keep them
cn..( inaudible).. assistance to training groups
schemes and reallocations of entry level training
programmes. We're also trying to generally support
that pre-vocational
JONES&. But the principal of what I'm saying you understand,
don't you?
PM: Oh, absolutely.
JONESS If you want to do architecture, that's going to be
funded for by the taxpayer. if you want to be a
construction apprentice or an electrician, you've got
to find a willing employer.
PM: Exactly. And we've also got Jobtrain and Jobstart and
these other labour market assistance progrannas which
are about job skills. For instance, we've got another
million on Jobskills which will provide 6 months
of employment and training to young people. But in
terms' of apprenticeships we've got this programme
there to keep people at risk and, also, provide a
further 10,000 pre-vocational training places from
July, 1992.
JONES: Just -on jobs: you saw in the Tasmanian election a
diminution in the environmental vote, the green vote,
by about 25%. This surely means that the public want
jobs before I mean they want the environment as well
but ' some sort of balance. I noticed that you seem
to be resistant to Coronation Hill. Why is that when
Gareth Evans said it was just a piece of clapped-out
buffalo country and Bob Hawke found a spirit up there.
I thought that you might have come in and said: " Look,
this is nonsense, really." We gave a commitme~ nt to
BliP, when yoU Were Treasurer, why not sort of got on
with it and create some jobs and export income?
PM: Well, it's a small mine. It's in the East Alligator's
RiLver region. Look, that's the whole.. there's so
much made of Coronation Hill. The concern of
Coronation Hill, when you got to the bottom line, it
wits in the Kakadu National Park area, catchmfent area.
That was the big concern. It was a very small deposit
this small mine. Now we, as a Government, sort ofp
you know, argued ourselves ragged over it and, finally
decided to say And I think there's not point in
c,. ontinuing that sort of debate for us. Therem's no
point for the country, no point for us. it's better
1to say ' that's it, a decision's been made, the
Aboriginal commuunity has again written to us saying
' please don't change your mind'. So, as far as I'm
concerned, until the Aboriginal cozmuunity up there
i: ake a decision themselves and they took expressly the
opposite decision to say that they didn't want this
area mined. And I think that's the end of it, I'd
r: ather get on.. see, Alan, it's not stopping the bid
projects being built. Look at Marandoo which is a
large iron ore deposit. I mean, a real minep not a
thimble-full of minerals. A real mine. We've let it
go0.
JONES: Just a quick one, before you go and we've got to
take a newsbreak: you've given the banks, behind
closed doors, a bit of plain speaking about what you
expect from.. they were very significant inhibitors to
continuing business recovery, if you could put it that
way. we've had several callers here to say ' I've
heard Mr Keating say this many times but I can tell
you, it's not happening out there. We're not getting
the money at the kind of price he thinks we're getting
i~ t at'. Now, you've given very significant
concessions to the banks in the Statement last night
about bad lending and bad debts. How can you be sure
that small business are actually getting what you
think they're entitled to get?
PM: Well, we've got.. the Treasurer had the banks in, said
to them we want them to be sensible in their lending
policies, we want them to be more ambitious than
they've been they've got too frightened, too
careful, too backward and we have put a very
significant concession in there so they can partially
wrrite off debts. So they don't have to send a
business to the wall.
JONES: But they'vd got what they wanted from you now..
PM: They can partially write them off and what ure want
them -to do is go back to lending to people, to those
who need support.
JONES2 And if they don't, will you withdraw, wi. ll you
withdraw this thing which you've given them last
n~ ight?
PM: Oh, I don't think we can withdraw it. But what we'll
do is, we'll keep the pressure on them. But we've got
a co=' tment from them that they'll do it. That
they'll be easier with their lending. I think what's
happening to them, Alan, is their books are running
off too quickly. Their books are getting too small
too quickly. I think they've overdone it themselves
and they now realise they have.
JONES: And then got frightened, do you think that?
Pm: I think so. I think they know that the business they
had in the Eighties, which might have been a bit
hairy.. hairum scarum at the edges, is now actually
contracting and they are concerned about the pace
they're running off.
JONES: There was a show you just cancelled a very quick one
about Paul Keating and how tough he is. I moan, out
there they actually think there's a whole heap of
money being wasted. Taxpayers money. And we saw this
project the other day, $ 200,000 to funld a
revolutionary booklet. And Brian Howe withdrew it,
and you had something to say about that sex diary, and
so on. How tough is Paul Keating? He must see these
anomalies out there: a waste of taxpayers' money on a
range of fronts. Are you going to kick, continue to
kick a few heads?
PH: Well, in the Eighties we cut this place back by
$ 313,000 million a year. And that's why in this
package, that's why this package is affordable. I
mean, when the times were good, we cut those big
deficits back to a surplus. And now that times are
dif ficult, this is the time to actually spend some
money., So don't let John Hewson or anyone else
says" This is not the time to give the economy a bit of
the spend." it is.
JONES: Good to talk to you. Thank you for your time.
PH: Thank you, Alan.
JONES: Prime Minister Keating.
ends