Al
PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING MP,
FINANCIAL REVIEW LUNCHEON, QUESTIONS AND ANSWERS, SYDNEY,
12 MARCH 1992
E OE PROOF COPY
Q: role of Australia in the Asia-Pacific?
A: I think our future is in the Asia-Pacific state.
Already 70 odd per cent of our export goes to the APEC
area and ab6ut 67-68 per cent from memory, of our
imports come from there. We are all really largely
integrated with the region, but, of course, more will
happen. It's the fastest growing part of the world and
we are now well set up to participate in that growth.
Whereas because of our reliance upon border protection,
tariffs, quotas, and the fact that we had a largely
uncompetitive financial system back in the ' 50s and
the trades in goods and services passed Australia
by. Now we have removed exchange controls, broken the
tariff wall down and now where national savings will be
funding productive things. Our exports this year, for
the first time in our history, our manufacturing
exports are larger than our rural exports. We're now
set up with a low inflation rate and with flexibility
now coming into the labour market on an enterprise
basis, we're really set up to participate in this
growth which formerly we were not. So, we've got to
the point for our exports again in the Asia-Pacific:
area, the great bulk of our imports come from there,
obviously we are now better positioned to take our part
of that trade and to share in that growth than we ever
were. That's why I think it is important that we continue to
improve our competitiveness, and we break down all
these areas of inefficiency. These are the first order
issues. The first order issue are continuing the
change in the micro-economy that we formerly were doing
and successfully in the macro-economy, that is ports,
wharves, railways, airlines, power generation,
training, enterprise bargaining these are the things,
not whether we tax our Kelloggs or our income. It is
an tenth order issue. The first order issues are
those, and if we concentrate on the first order issue
that One Nation concentrates on improving the capacity
of containers through our ports and onto our rail
system, on our roads, training our kids and
underwritting a tax break to capital, to investment.
These are the things which will set us up more
adequately to participate in that growth which is where
our future must be.
But agaiLn we have got to be confident about our future,
confident about Australia and look as though we are
confident. I think that is terribly important to the
chemistr7y Of the region, that at least they think we
know who we are and what we are and what we ' re after.
Q: Mr KeatiLng, my question is about inflation. One Nation
predicts inflation at 3.75 per. Will this blow out due
to enterprise bargaining in wages and higher growth
rates than predicted?
A: No, because it is no accident now that for 9 successive
years we brought wages, the average weekly earnings
forecast:, which was put together by the Government with
the ACTU under the Accord, we brought it in under
target. We brought it in because of that
understanding. I said in my speech that the ACTU as a
constituency was at least as interested in lower
inflation as any constituency in the country. The
truth is it'has been much more interested in low
inflation than any constituency in the country.
Because interest is between it being prepared to..
cut demands'back where most other sectors haven't. And
it is because it understands how pernicious inflation
is to the low paid, to the retired, to people trying to
buy a house and carry large price increases in
propertiLes, but most importantly retarding investment
and with it employment. It's been about knocking
inflation down and the fact that on the large booms as
we've seen in the post-war years, 1988-89, when
employers were offering wage increases of 12-15 per
cent. B~ ut the year AWE number came out at 6 1/ 4 shows
just how entirely committed in the face of that
enormous demand for labour the ACTU has been.
Now we are not focussing on average weekly earnings.
Because we have got inflation down, the thing t~ o do now
is keep it down and we are now focussing on major
trading partner average inflation and imputing in that
a wage number which is consistent with that, that is to
which the ACTU is committed. But if you take the view
that we can't open the labour market up, that we've got
to remai n with the Arbitration Commission for all
adjustments in relation to the economy, then I think
what you'll end up with is a colony of losers out on
The economy just won't be as competitive as it
ought to be, it won't be as clever in managing itself
and remember this, we are not the New Zealand Labor
Party, there is no blunder and stumble here into
deregulation. We've actually broken the craft system
up. The craft system of industrial organisation meant
that if someone on the metals construction award on a
Sydney ' building site paid an increase, that went
through the whole of the metal industry in Australia.
That's now been broken into much more discrete
elements, and by going at it on an enterprise basis if
a union wanted to claim and use its industrial muscle
to claim an-increase which destroys the business, it
takes responsibility for it. Where formerly this was
happening with the Arbitration Commission, who had no
great relationship with either the business or the
union. Now a union can sit down with the company and glet it
managed better. And you've got the metals industry for7
its unions groups talking about advanced manufacturing
technology.' They now go and say what's your long-term
corporate plan, what's your long-term investment plan,
and how can we help the business grow. That's the sort
of mindset of maturity, not the confrontation. The New
Zealand trade union movement never spoke to the Labor
Government in all the years it was in office, and the
Government didn't speak to it, there was no accord.
They had a sort of cold turkey system that Dr Hewson
will give you, you go and have a punch up over wages
and the national interest invariably loses out. That's
why when David Lange or Roger Douglas come here to
listen politely but take no notice of them at all. I
mean good intentions, but good intentions were never
enough.
Q: Why are you waiting to give tax cuts for two years.
Are you holding a carrot for the election?
A: To not do it would definitely see the tax burden
That is, even with low inflation, the effect of low
inflation on the tax which will see the real tax
burden And this Government has been pursuing a
policy of handing back fiscal drag from the system and
more. So the reason we are not doing it this year is
because we think fiscal policy can't afford it and at
this point the build up is simply not there to return
but over the next couple of years there will be a build
up in the revenue, particularly as growth picks up and
as more: time goes by, with inflation even at low
levels, to have an impact on the tax scales.
And by that stage, as the, if you like the hump of the
deficit: starts to decline as the economy comes back, as
revenues pick up and unemployment benefits and the
other things start to diminish and the deficit starts
to come back towards surplus, that's the point then
that we! can make these tax cuts. All of Labor's tax
cuts, every single one there's been many of them
since 1.983 have all been honoured, every one of them
has beEtn honoured. It won't be a repeat of the John
Howard, John Hewson and Malcom Fraser show in 1977,
remember that campaign they had, ring up and find out
how much your tax cuts were. Well 3 months later they
took it back, they legislated them away. There won't
be any of that. And they'll be there as they've always
been. 1: think they will create a very good climate in
the labour market. People will think they are getting
a fair go out of the tax system by creating employment
and it will provide a certain per cent rate of tax for
people between $ 20,000 and $ 40,000. People on medium
incomes where the incentive is to work and do more at
per cent rather than 38 in the dollar. But I hasten.
to add 30 per cent, the same as Dr Hewson's but without
a consumption tax, without 15 per cent.
That's t~ he point and I don't know how you are going
with your businesses at the moment but what's going to
happen to you is that in the nostalgia area as you give
your Sundays away filling in, as you'll be a tax
collection point on the GST, you'll give your Sundays
to remitting money to the tax office, you will be
nostalgic you will be nostalgic for a Labor
Government if it were to ever come to pass
Q: Will an international increase in interest rates affect
One Nation forecasts?
A: We've based it on what we think is a, in part, the
trading environment over the forecast period. And the
trading environment we are tied up to mostly is the
Asia-Pacific environment which I think is growing at
per cent in forecast to 92-3 and 4.5 the following
year. E1 don't see that sort of change, I don't see now
the prospect of that changing with some shift in
interest rates. It needs to be borne in mind that
we've sItill'got a tighter monetary regime applied now
than ever applied from the 82-3 recession. In 1982-3
interest rates came down by about 12 per cent and
same in this recession. By then we had inflation
running at 10 and now we've got inflation statistically
running at 1.5 or a trend to 3. So there is a 7
percentage points difference with inflation and yet the
fall in rates has been the same, ie therefore this
regime has been as it remains, much tighter than 1982-
83.
Q: curr-ent account deficit/ foreign debt?
A: It says in the text that systems stabilisation, the
Treasury says that. This has been consistent with a
slight drift up in the ratio of net external debt to
GDP. And the ratio of debt to equity financing have a
return -towards levels which existed prior to the
excessive leveraging of the late 1980s. Net external
debt to GDP ratio could stabilise or decline slowly.
In other words we shouldn't take as the comparable
period, the high leveraging phase of the ' 80s, but
something more sensible when that balance between debt
and equity is more of a guide to how the economy will
be in the ' 90s. So any 2-3 percentage points the
current account forecasts, will forecast by other
people looking at the performance of the ' 80s. Now
that has changed markedly, I can't remember the numbers
exactly but ' I think we went from about 90 per cent debt
in 89-90) to 90 per cent equity in 1990-91. One has to
assume, I think, more sensible behaviour in financing
levels assume that this is consistent with the
stabilisation of debt and GDP or a slow decline.
Q: In regar~ d to the Monarchy and your comments about
Australia, if Australia becomes a republic what form
will it take, will Bill Hayden be president for
examplel
A: Well just remember what I said. The remark which was
objected to by our conservative friends, forelock
tugging mates, was that I said in the presence of the
Queen, I was congratulating her on her 40 years as the
Monarch and to make the point that in the 40 so much
had changed. In 40 years, I said to her, Britain had
joined t~ he European Community and Australia's largely
devoted itself to the Asia-Pacific, we were necessarily
more independent of Britain than Europe, but that she
was panl: of that change. She was part of that
independence by taking the royal style and title of
Queen of Australia in 1973 a thoroughly unexceptional
remark. But our friends in the Opposition had to jump
all over it. Dr Hewson said I didn't have enough
respect for the Queen of Britain outrage, he'd like
to slip right back to the torpor of the 1950s. As I
said he would be our first candidate for an exhibit in
the constitutional museum down there at the old
Parliament House. Like I said in Parliament, we are
going to put him in there with the Morphy Richards
toaster and the qualcast mower and all the other bits
and pieces that we all remember affectionately and
well. That's what I was saying. I was just saying that
Australia isn't necessarily more independent and needs
to be clear about itself, needs to be confident about
itself. It's very bad for these people who wish to
lead us in the ' 90s, but who harp back and want to be
part of the 150s. What I'm saying is they are not the
people -to lead us. The people to lead us are people
confident about Australia, confident Australians,
people that, know that we are good enough to make our
way in * the world and know that we are entitled to and
have indeed' an identity of their own. if one o~ f our
national leaders in the 1990s thinks that we shouldn't
have an identity of our own but we should in some way
not even be referring to changes in constitutio~ nal
arrangements with Great Britain, then I say well thank
you but we don't need you.
That was one of my remarks, I was not talking about a
republic or what sort of republic we ought to have or
what constitutional arrangements should be. That's
something for the public debate to comprehend as time
goes by..
Q: When can we expect announcements on the simplification
of superannuation and the clarification of pension
rules?
A: Well when the Government has adequately considered the
area. it's a complex area and when you take any system
like superannuation, which is again, part of the torpor
of the " 50s and ' 60s, it was a gift from Mr Howard and
Mr Hewson when we had only a very small proportion of
workforce accessing the superannuation concession. And
when werve opened it up more generally the workforce
and then more sensibly taxed superannuation earnings,
to do that and not disrupt the expectations of
Australians who are near retirement, at retirement,
some proximity of retirement, has meant that
necessar7ily we've had grand provisions what have
you, to protect them. This is a matter of
inconvenience I know to the industry, but there is more
than industry inconvenienced in all this. There is
reasonable expectation by those who believe they've
grown up in'the system which gave them certain
entitlements. And it's not easy therefore to change
superannuation, arrangements for tax computation
without having due regard for those things.
We've tr7ied to do that. We've tried to make the system
more simple but at the same time make it fair. There
is probably areas where simplification can occur but
they have to be proposals which we can adopt
confidentlyand that will take examination and..
we've done more than any government in history.
Q: Can you explain what assistance there is to small and
medium business in the One Nation Statement and what
does it do for women?
A: I'll deal with the second part of the question first.
The thing that I've had most in mind for women in this
country since I've been a Minister was jobs,
participation, choice, opportunity and of those
million jobs we created between 1983 and 1992, 60 per
cent of those went to women. In terms of my own direct
responsiLbility beyond employment, a number of
significant things which the Government did for women
in the ' 80s'and that is opening up child care
opportunities for women to go to work if they choose,
which diLdn't exist formerly. The child support agency
where women are supported by their husbands or former
husbands, as the case may be, in support of their
children, in supplementary payments for low paid women,
in medicare which is an obvious support for women
because women mostly have the burden of worrying about
children and regardless of their circumstances are
covered for health protection. I mean it is just one
thing after the other, equal opportunity legislation,
affirmative action legislation and we're continuing
that tradition and of course access to superannuation.
Before we came along there was no preserved benefits
and women who entered the workforce, left the workforce
to have children and came back and had no preservation
of benefits. They were effectively chopped out of
superannuation. These are quite milestone reforms. I notice the
Opposition talking about pay rates for women, Dr Hewson
said he will oppose national wage cases. A lot of
women are in the low paid sector of the economy
process workers, shop assistants who rely upon national
wage adjustments for maintenance of their incomes which
they say they are opposed to. So, as usual, it will be
Labor who provides, again, for Australian women.
C c> tj T'g E= N U
In relation to small business, we've got a number of
changes in there which I think are important. The
first thing is growth. That's the most important
thing small business lives off the growth in the
econtomy. And we've got growth through the year
forecast at 4 3/ 4 per cent. The second thing is,
there has been claims by the small business
community about the mobility of capital between
businesses. We've now decreased sharply,
dramatically, the concession for good will, the
taxation of good will under the capital gains tax,
exempting up to 50 per cent of the value of good
will. up to the value of a business of $ 2 million,
which should help, at least some people rolling from
one business to another. We've also changed the
rate at which smaller business meets the
superannuation guarrantee levy. We've also changea
the timing of the taxation payments for small
business. So, there is a fair bit there for small
business. Let me say that I am not advocating any
environmental vandalism or scorching the earth, but
what absolutely escapes me this time is that we
desparately need to create jobs, we desperately need
to create foreign revenue, but we persist with the
policy Which allows some projects which have got
potential to create lots of jobs and earn lots of
money for this country to just sit on the back
shelves.-And it looks to me as if you are just
pandering to a small political minority group as we
persist with the uranium policy, which makes this
country a laughing stock, where we are allowed to
mine this mine but not allowed to take uranium from
that mine. I don't understand why we do that, why
we don't use all of our resources and why we don't
stand up. to this vocal minority and get on with it.
PM: I don't think that a vocal minority is holding major
projects back. The only uranium mine which has ever
been an issue in Australia is Pan-Continental in the
East Alligator River's flood plain. And, for
exactly the same reason that the former Coalition
Government did not agree to this development is the
same reason why this Government concerned with the
prospects of mining uranium, building a retaining
damn In the middle of a flood plain. And it's a real&
live issue, in terms of the environment. But that
is not a new issue, it's not something that has
risen in the last few years, it's something which
has been there in the last 15 to 20 years. Now,
Roxby Downs is larger than three or four
conventional mines put together. So there's no
prohibition to the actual export of uranium, it's
only about the development problems of particular
mining sites. And the only one that I know that is
a problem is basically Jabaluka and pan-Continental.
And that's because of the flood plain problems, it's
right in the middle of the flood plain. If you had
seen the escarpment and the flood plain, you know
what the problem was. The latest, largest project
to be, if you like begun, in terms of quantification
and preserves is the monster out in Western
Australia in the Pilbara And whiJthere were some
objections to that this last week, it is now
proceeding. And one of the reasons we put this
per cent development allowance in is to say to
people who are running companies, that are not
certain about their timing or whether they should
enter the market and are sitting on the side lines
Wait ing and looking at particular commodities and
market opportunities, and then sort of blaming the
Government, to say look there is a 10 per cent
investment allowance in there, so if you
procrastinate now you have got to really want to
procrastinate, because if you do you will lose the
per cent. In other words, it is a carrot: sitting
out there, and if they don't take it they will lose
it. It is time limited. So if you are here now,
getting up and saying we are being held back, you
know either they really are, because if they're not
they aresimply going to do their company a
disservice by losing a very important component in
their cash flows in their early years. So that's
why it's there. it's basically there to support the
ones who have got bigger projects together which are
which go through all these various states and
what have you, and get environmental assessments and
the rest. It's to support them and to at the same
time encourage them. Now, in the One Nation
Statement we have announced a one enviornmental
process, intergovernmental agreement, environmental
assessment which will now take place between the
Commonwealth and the States in one process, which is
a very great change. And also, the coordination and
acceleration of projects which will now be conducted
under the agis of the Prime Minister's Department,
supported by my Parliamentary colleague,
Laurie Brereton, to try to hurry and bring the
projects-through these approval processes. So don't
believe that minorities are holding up major
projects. The one major project that has been a
problem for years is basically the pulp mill in
Tasmania. Now, the pulp mill in Tasmania was not
held up because of wood or forest resource issues.
It was held up because the company said they could
meet the organo-chloride emmission targets of the
Goverament, but they wouldn't be required to meet
them. And that's why it didn't proceed three or
four years ago. And part of that was because of
Naranda, the Canadian company, who wouldn't be
required to do things in Australia who might then be
required to be done in Canada. So, just a little
bit of guile helps here, sorting out what is true,
what : Ls fact and what is fiction. There's no doubt
there is environmental differences in this country
a legitimate one, but again I believe they can be
balanced of f in a sensible balance for development
in Australia, and that there shouldn't be a
preoccupation or a view that major projects can't
start in this country. I just don't think that
that's true.
0: Actually, Mr Hunter is being a little coy since he
has ' two questions and I'll save him the trouble by
asking it. Is the Prime Mininister of Australia
being trounced in cricket, yachting and boxing.
Does this reflect on the new leadership as the
previous incumbent has had no such problem?
PM: I'll lot that go to the keeper. We might have
spurr~ ed the English team on, I'll take some
respansiblity there.
0: Prime Minister, you've already referred to the
aviation policy in the One Nation Statement. Can I
take it a little further and ask your predictions
for ' the likely outcome of the 1992 round of the CER,
and secondly if you could give us guidance on your
thoughts for the longer term direction for both
countries; under a CER-type agreement.
PM: Well I think it is important that Australia and New
Zealand are more integrated as economies, and
particularly in things like aviation where there's a
group of people who are closer to Sydney than indeed
to Perth is, and where it makes sense to run an
airline system in Australasia. And a lot of the CER
arrangements be concessioned by Australia to New
Zealand, letting a country with a smaller market
acces; s to a larger market. And that mostly costs
us. I've never minded the cost because I think it
matters politically and strategically in the long
run to keep New Zealand as a country which is
economically strong and able to have access to
larger markets. But I think it is important to get
the airline agreement into place and we've got some,
now absurd, blanket claims like Air New Zealand who
want 50 per cent of the on-carriage rights out of
Australia to Air New Zealand, which is of course
absolute nonsense, absolute nonsense. I don't mind
helpi. ng the New Zealand aviation industry, but if
they think help means scraping more of our plate
onto theirs in absurd arrangements, then they are
cracking jokes. So, we'll be in a good negotiation,
a meaningful, sensible one, but we're not about to
be pillaged in the interests of bon homi-e and the
fellowship of man in the South Pacific.
Q: Prime, Minister, just on one aspect of your One
Natio~ n Statement, do you think that the electricity
grid will overcome State rivalries that currently
exist, and are you hopeful that there will be more
competition in the industry.?
PM. Are you from the industry?
0: Yes.
PM: Well, one of the problems is, one of the great
comparative advantages Australia has is that it can
produce cheap electrical energy. We have a
colosseum all the way down the East Coast of
Australia and therefore it is one of our
comparatives strengths. It in nevertheless true
that we are not able to fund cheaper power in the
important industries who rely on it because of the
control of the State Electricity Commission in
particular states. The sensible thing is to set up
an interstate grid company which is owned by the
Commonwealth of the States which will be the
distributbr of power and the electricity commission
will be the generators of power and that they will
then tender a price to supply power to the grid, or
that if a company wishes to use power, in the use of
that power, they can get a tender from Miraring or
Loyang or somewhere else and then that power station
funds the grid and we can get competitive power
prices to businesses around the country. That's the
point of the grid corporation and which I think will
be a very healthy thing for business and
competitiveness and for consumers in the Eastern
Coast of Australia, Queensland, New South Wales,
Viocria and South Australia. Now the opportunities
which. I think will manifest there and it is
important to bring them home and that is another
important change. But can I just say, these are all
the changes which Australia really does need. I
mean, putting a national grid corporation together,
or buildl~ ng a railway highway from Brisbane to
Pertra, or tying the ports to that railway highway,
or extending the road highway system, are all things
that can only be done really by Governments. And
they can'. t be done by taking money away from Budget
in th~ ese respects, which is what the opposition
wishes t6 do. It is not going to happen by simply
taxing your Weet-Bix or your clothes or your shoes.
I mea~ n it will not matter if you tax your clothes,
your shoes or your Weet-Bix, it will have no impact
on the curves and gradience of the Sydney-Melbourne
railway lines, or the rida-heights, or whether one
has to follow a route from the Port of Melbourne
or the East Swanson dock to the railway yards.
Whether a truck can only take one container not two
becauLse it cannot go onto the railway line, because
it is: n't r I mean these are all physical
pract~ ical things that need to be done to make the
count~ ry efficient where it matters most. Moving
goods and around and being able to trade. Dr Hewson
calls that irresponsible. He calls that spending
irresponsible, he knows that no private company is
ever going to Invest in the railway system in terms
Of the permanent wave, he knows that. He knows that
without Government action we will not get a better
electricity distribution system. He knows without
Government spending we will not invest in our
children in technical and further education, and we
can't have now as Labor has, 7 out of 10 children
compl. eting secondary school, but not enought uptake
in the TAFE system, to take them up and train them.
But we can't have a clever country without a trained
workforce in this area. He knows all these things,
and y; et we are given only the ideology of the OST as
the solution to Australia's problems. In other
words, we are supposed to say, well look, we've now
reformed-the macro-economy largely, we are now
producing competitively, we've now got our inflation
rate down, now is the time to crm. ck all these other
areas, ports, wharfs, rail, road, training. All of
these things. But we will not do that, what we will
do is we will go and tax expenditure but not income
and that will solve the whole problems. That will
solve the whole thing. But of course it is
nonsense. It is a tenth order matter, and
regardless of what everybody things about taxing
expenditure, nobody is going to accept that someone
on $ 20,000 who spends all of their income, that is
in material whether you tax their income or
expenditure because it is one of the same, they
spend the lot and mostly more, they do save, whereas
some-thing on $ 150 or $ 200,00 who is spending half
their income and saving the rest, not only is not
taxed fully on that income, but as well as that,
receives a very big tax break. Nobody is going to
wear that, nobody is going to wear that. And so not
only is it going to be, is it a focus on things
which are not material to improving Australia's
competitiveness, but it will actually be divisive.
And as we add 4 percentage or 5 percentage points to
the price system, and inflation rate doubles, more
than doubles and goes back towards double digits
again, Dr Hewson will require the workforce
undercompensated to take a real reduction in income
by a dis ' count to wages which will preserve the low
inflation rate, which of course they won't, they
will just go and recover it in the market. And
there wil be a lot of buzz in the news then
about inflation. A lot of buzz about inflation
rising. And what will he do then to repair it, lift
the interest and slow the economy down, so you will
end up with structural high level and structural
unemployment, lower levels of economic activity and
that is supposed to be a solution. The fact is you
can't run Australia without an agreed basis of
income determination. Whether you call it Accord,
or conpeftation with the Government and the unions,
or a partnership with business, a partnership with
the unions, you can't run this country without some
agreed basis of income determination. And to throw
a sort of hand grenade at the system with the
doub: ling of the inflation rate throught GST when we
have the unions now prepared to make our enterprise
efficient, committed to low inflation, wanting to
train our children and prepared to come to into,
agree with enterprise agreements on things like
railways, ports, power generation and the rest, and
say oh no, we don't need that, we can have the
luxury of not worrying about those things which have
bedeviled us for half a century and will go for Dr
Hewson's CST. And then when the system is inflamed,
with higher inflation and lower growth, and the
whole micro-economic change stalls, people might
then say, well that was a mistake. It is a mistake
because, it is a mistake for this reason, Dr Hewson
had exactly the same opportunity as I had when I
became Prime minister, and that was to sit back and
say well, what needs to happen to Australia next,
what is the logical thing to be doing now? He sat
back and said, not what should happen for Australia,
or what is logical, he said, how can I be different?
What can I do that marks me out to be different?
And he said, I got it, it's a consumption tax. So
then he has put this consumption tax and wrapped
around it other policies on the basis that its
camo: Elauged and hidden and disguised for all to say,
oh that's clever Dr Hewson, that is terrific,
terrific little result. He is going to double the
inflation rate, blow the wage system out of the
water, derail micro-economic reform, just what we
need, just what we need. But he had such a dream
ride for 3 or 4 months, that he actually believes
that the policy brought down actually has some
qualiLty to it. I hope that I have punctured that
dreata.
ENDS