PRIME MINISTER
TRANSCRIPT OF TaX PRINZ MINISTER TRZ RON P J K= ATIM UP,
AND THI TRZASURWR, TIM RON JOHN DAKINS UP
JOINT PRESS CONFERENCZ, CANBNRPA FRIDAX, 12 JN 1992
z 6 0 z PROOF ONLY
PM: I would just like to make a few introductory remarks.
I might then invite the Treasurer to do the same.
The first thing I would like to say is that, as I
said this morning, our deliberations are now broken
into two parts. That is one part being non-financial
matters, the other being financial matters with
some of the carry over from the non-financial things
in the financial meeting, that happened today. But
you know that I have always said to you in contradistinction
the prevailing wisdom that Lhis has
always been a most efficient meeting. The fact that
we can allocate $ 17 billion of funds in the course of
an afternoon and resolve a lot of national issues
quickly, which are not capable of being resolved in
Ministerial Council meetings, even though they have
taken months, sometimes years, always made the one
day Premiers' Conference meeting a terribly efficient
meeting. Now the past popular conception of these
was that it was a sort of undignified scrabble for
money, where in fact we had made this a very
dignified process. The formal offer is now conveyed
to the Premiers a couple days before the meeting, but
that doesn't detract, it has only added to the
efficiency of the day and being able to resolve
issues and I think today we have had a good day. The
Commonwealth and the States and the public of
Australia have had a good day from this meeting and
it has been again a most efficient day where very few
countries would be able to get as many issues
resolved as we have. Firstly, we have resolved on
the Financial Assistance Grants disbursements to the
States over the course or 19z9r23. As you know we
have added to the pool by $ 150 million, now
$ 170 million, as we varied the offer in the course of
the day so that New South Wales and Victoria received
what they would have received per capita, even though
the rest of the States received what they did on the
basis of the Grants Commission relativities. You
understand the relativities. The pool is allocated
on the 1992/ 93 relativities. But the top-up of
$ 150 million, on those relativities, would have
detracted from New South wales and Victoria and that
distributioelarrangement comprehends the boom period
and stamp duties of a couple of years ago. So
today's Grants Commission formula is not adequately
reflecting the contemporary condition of the economy
and as come little modification of that, we let
Victoria and New South wales take their share on a
per capita basis and basically the Commonwealth added
million in the pool to do it. So we have that
agreed and that was going to be the most difficult
issue of the day, the distribution of the pool. The
second thing was we decided that we would try owdfa
effectively and genuinely do something about the
whole fiscal equalisation and distribution question
and in the course -o-f thedd icussiong, we raised the
issue as New South Wales and Victoria had raised
it, the smaller States resisted because the formulas
were working in their favour and we said that we
would have, as you see in our Press Statement, that
we needed to look at the sustainability or the
horizontal fiscal equalisation in the long term
that is looking at the principles and the
methodology, the principles underlying fiscal
equalisation and the methodology and the
Commonwealth, for our part, made the offer that les+.
the sma. ll States fear any such inquiry and their fear
in the past has thwarted any such inquiry, what we
would do is we would allow the introduction of a
Grants Commission benchmark relativity for 1993/ 94,
upon which they could judge whether any new
relativity would cost them money and if it did the
Commonwealth would meet the adjustment costs over a
three year period. In other words, to encourage the
smaller States to agree " to an inquiry into this
issue, we would carry some of the burden of any
subsequent adjustment. The result was a degree of
equanimity around this proposal to have this inquiry
by Treasuris and heads of Treasuris and to make the
information available to the Premiers'
Conference/ Loan Council before next year, was I think
by all me~ asures a breakthrough. The Treasurer and I
think we did pretty well and I think the States have
a sneaking suspicion they did too. Now the other
issue that we move to is the question or TAFE~ and as
you know there has been a reluctance on the part of
the States to do much about TAFE. For our part we
wanted to build, we think it is entirely important in
this country to build a national Technical and
Further Education system of substance and stature.
Something that kids will want to go to and would be
proud to have a diploma from and where the training
profile or these institutions more adequately
reflects the labour market. That we don't have at
the moment. We do have some quality, in varying
degrees, in some of the TAFE areas in some of the
States, but we don't have that. Our proposal in one
3
Nation was for commuonwealth control of the funds, but
joint control of the policy. Now Mrs Kirrner put a
proposal this morning which is essentially that,
except that instead of it being administered by DEET,
the Department of Employment, Education and Training,
it would be administered by an authority, members
of which would be appointed by the Commonwealth.
Well let's say for the purpose of the discussion
which we then had that, and concluded, this proposal
the proposal of Mrs Kirner would be at least a
starting point proposal for a subsequent discussion
by the central agencies of the Commonwealth and the
States, with Kim Beazley and his Department to design
up a new system around an authority rather than a
department. Administering the TATE system in a
national structure, where the Commonwealth would be
accountable for the funding and for the appointment
of people to operate it and therefore the people
operating it to establish its policy, but the day to
day administration would largely still be the
bureaucracies which exist in the States. Gradually
that would shift over to the authority. Now we
started with the support of Victoria and then New
South Wales, Western Australia then came on board for
a consideration of this. I think beyond that South
Australia had indicated a willingness to look and
they wanted to keep the momentum going, go we are
going to start next week and try and roll it on under
the chairmanship of the Secretary of the Prime
Minister's Department, but under the * leadership of
Mr Beazley and we will try and push this thing
through so we can develop a model. it may rnot be the
model Mrs Kirner proposed today, but a model which
reflects the need to develop a national TATE system,
which has got joint Commonwealth and industry
participation. So on those issues, as you know, we
are concerned about youth unemployment and in about a
month from now I intend to hold a meeting on this
subject and we would like this thing, as a very
important part of it, if we can have it up and ready
to go by then, if possible. If we can get agreement.
So I regard that as a breakthrough and the fiscal
equalisation as a substantial breakthrough in terms
of getting agreement to a study which is real, not
just a study which has a States' opinion and a
Commnonwealth opinion or disagreed opinions and put
then, in a pigeon hole, but that one that is real,
that is going to make a difference and we have got
the distribution as well. Would you like to say
anything John.
T; Oh, except to say that I think the major bone of
contention when the States arrived here was ot the
extent of the Commonwealth offer in respect r
1992/ 93, but rather the distribution. That was
clearly an acrimonious issue during the last couple
of days and I think the fact that that has now been
resolved amicably I think is a tribute to the sense
4
of cooperation which existed throughout the meeting.
You will see also that the Loan Council agreed to a
program of borrowings by the States and by the
Commonwealth. Some other more minor matters were
dealt with by the Loan Council as well and I think
that, generally speaking, it was a result which left
everyone pretty well pleased.
J: Prime Minister, today the two biggest States upped
their taxes and clearly are hanging these rises
around your neck.
PM: No let me just say this. Whatever States do about
receipts can not be hung around our neck. We are all
responsible foz* A'udgets in this country. We have
given them in these Financial Assistance Grants more
of a go then they would have thought they would have
got. That is not just the maintenance of a real
terms guarantee on this year's funding, but
population growth added in $ 150 million, in fact,
$ 170 million. More than population growth. Now
given the fact that our budgets have deteriorated
much more rapidly than theirs because our receipts
have fallen away more sharply, in our circumstances
it is a concession on our part to be providing a pool
of this size in addition to a real terms guarantee.
T: The point is that all of the States got very close,
not only was the pool more than same real, except for
Victoria, New South Wales and the ACT, and in
relation to New South Wales and Victoria they were
only just short of same real., * 7en you combine the
other payments that they received along with the
general purpose payments. So whatever point the
States are making about the need for tax increases,
it can't be left at our doorstep because of the
changes we have made. To some extent New South Wales
and Victoria don't think they get enough of the funds
that come from the Commonwealth, but that is a
separate issue.
PM: Letl. me just run down these figures. The deflator we
are using here is 1.7 that is general revenue
paymients and other net payments, that is specific
purpose payments total Commonwealth payments to the
States and not through the States is for: New South
Wales 6.7, so it is 5 per cent real; Victoria 5.3,
which is 4.5 per cent real; Queensland 7.1, which is
per cent real. I mean they are all 4 and 5 per
cent real numbers. Because remember this, there is
$ 800 million of One Nation infrastructure spending in
Commonwealth payments to the States this year.
Table 1, if you look at that, 1992/ 93 the outside
line.
T: I was referring to the next table.
PM: Yes, John is referring to the Financial Assistance
Grants, but if you look at the total Of the payments
or even if you look at the Financial Assistance
Grants, they are all rising in real terms, but
remember that One Nation is largely spent on State
infrastructure spending which would have to be spent
by them anyway, at some point roads, rail, etc. So
there is $ 800 million going their way as a result of
One Nation, plus $ 170 million today on top ofareal
terms guarantee. There is nearly a billion dollars
of extra money. I mean they can't lay any problems
at our door.
J: So N4ew South Wales and Victoria have got no excuse
for raising these taxes in so far as today's meeting
is concerned?
PM: I don't think there is any doubt that their revenues
have declined in the recession, but that either means
that they cover it by cuts in Government spending or
debt.
j Mr Greiner estimates that the inflationary impact of
his taxes will be between 0.5 and 0.7 and Mrs Kirner
says she hasn't done these sums, but she thinks that
sounds about right. What do you thinkbtkie
inflationary impact of the two of the most densely
populated States putting up these taxes?
PM; I have got no idea. I have got absolutely no idea at
what they have in mind. But the point is in terms of
total Commonwealth payments, they are very strong and
in terms of their recurrent payments, I mean, here we
are we have got a large budget imbalance and we have
just added $ 170 million to it basically to ease their
budgetary position.
J: Did you urge Victoria and New South Wales at today's
meeting not to undertake these tax and charges
rises?
PM: We said so publicly, I think.
T: You would have seen what I said at the beginning of
the public session, arnd the offer document was
provided on the basis that there would be no undue
recourse to tax increases which had an adverse
inflationary consequence. Now I haven't seen the
details of what the two governments want to do, or
propose to do, I haven't obviously had an
opportunity to check the inflationary impact of them
and I don't know the basis on which they've made
those calculations, and what impact they would have
on the national CPI figure. So we'll have to
obviously have a look at that.
3: Did they make It clear to you, Treasurer, as they
walked out of the meeting that they were intending
on doing this because Mrs Kirner said that in fact
she and Mr Greiner conferred previously that they
had taken these steps?
T: They hadn't conferred to us, or not with me, and
what they said In relation to the chances of them
driven to tax increases was said In the public
session. So you know as much~ about that as I do.
3: Haven't you Seen what they've put out since?
T: No.
J: Do you think as well as cutting services that
cutting public service salaries might be an option
for the governments at thstmIt as done in the
1930s in the time of depression.
PM: we're not in a depression, though. I mean in a
depression, in the United States depression I can't
remember the numbers for Australia, but in the
United States GDP went down by 40 per cent. In the
United States in this recession it's gone down by 3
per cent, and over the course of the period probably
by a cumulative 3 to 4 per cent. I mean, these are
just not comparable periods, and that's not I don't
think a reasonable question, a reasonable solution
to problems. The wage share and GDP are still at
historically low levels.
3: Mr Dawkins, in your statement you say the states and
territories indicated they should not increase state
taxes and charges other then a lest resort, in the
last sentence of the last page. Before this had
actually come of f the photocopier both New South
Wales and victoria had announced their Increases.
At the very least this sounds like bad faith.
-7
7
T: Well, I think they may well have raised these
matters with a little more candour with us during
the course of the discussions if they were going to
announce them before they had even got home and had
an opportunity to properly assess the outcome of the
meeting. But obviously we're not responsible for
their actions.
3: Mr Dawkins, they say one thing to you in the meeting
and then in halt an hour do something else.
T: No, no, let me make it clear. in the context of
your allegation that there wasn bad faith, what they
said to us In relation to tax increases Is what they
said during the public session. Now Mr Greiner did
say during that session that in the context of the
current situation they would have to look at tax
increases.
3: out they obviously had a clear plan worked out
because they've got very precise figures here in
both their releases, and coordinated.
T: Well, what do you expect us to say? The fact Is
they didn't discuss It with us.
3: Well it's a question of faith, Isn't It? They sat
through the whole day and they had it in the shot
and ready to pull the trigger.
PM: They did say that they thought they would have to
increase charges. They didn't say by how much and
where.
3: Didn't you expect themi to at least give you a copy
of the press release before you came in here?
PM: It would have been a reasonable courtesy, I think,
yes. But again, can I just say, It's all about
level. The fact is very rarely have we seen any one
year where the states have not increased charges.
So we're not going to hold our breath and gasp at
that. But it's about level, about how large it is.
3: Prime minister, you say that it's been a good
outcome, Nick Greiner says he's angry, Joan Kirner
says she's disappointed, and the two major states
have raised taxes.
PM: Well we expect you to have at least the standard
level of journalist guile to understand when someone
is angry or not angry, moderately pleased or quite
pleased. And I think~ a modicum of scribe's guile
would lead you to the conclusion that they were
quite pleased with the outcome.
8
3: You say that it Is an achievement today that the
states have agreed not to bring on any undue tax
increases. This financial year the tax Increases
for New South Wales and Victoria will be $ 370
million, in a full financial year it will be half a
billion. Is that due or undue?
PM: We'll have a look at the numbers. But again, I
can't give you off the top of my head effects about
inflationary Impacts.
T: It they've decided to raise taxes before they left
Canberra they must have had also decided that
publicly, at least, they'd be unhappy regardless of
what happened today, in order to justify such a
decision.
PM: They certainly left the meeting quite happy. Let's
say that. Between the meeting and here I'm not sure
what happened. But they left the meeting quite
happy, they all thought there was a bon homie of
national achievements and everything alse.
J: But forgetting their happiness or unhappiness we
still have two statements that are quite at odds
one the offer document and second, the two Premiers'
announcement*.
PM: What things are at odds?
J: On the one hand the offer document Is saying that
they'd not raise taxes and charges. On the other
hand they had done just that and haven't told you.
T: Leave aside the fact that they haven't told us,
which is I think a defect, but they did not promise
not to put up taxes, nor did we seek such an
undertaking. We said that they should assume, I
think the words of the offer document were that they
should eschew any undue increases, and the words of
my statement say that they should only do it as a
lost resort. I am a little surprised that they got
to the last resort between the Cabinet Room and up
here.
PM1: And they probably think that in the low inflationary
culture provided by this Government that whatever
increases they slipped through would subsumed in the
culture somewhere.
3: Would you agree with that, Prime Minister?
PM; I don't know that that was what motivated them.
3: Would you agree that the low Inflation we have at
the moment will subsume these increases, or might?
PM: I don't know, one has to see. But we' ve been doing
better on Inflation than I think most people would
have expected.
J: Mr Dawkins, Is the 1.7 deflator you've used Is
that essentially your inflation forecast or 1992-93?
It It Is then that's quite an Impressive figure.
T: No, it's the March to March figure just passed.
J; So you can say that roughly It equates to 2 except
that ? 7
T: From March to March, it's the CPI figure though,
it's not the non-formi deflator or other. The basis
of the deflator that's used for the purposes of
these grants, the same rule undertaken that was
given a couple of years ago, was based on the
prospective increase on the CP1 March to March.
PM: We used to use the non-farm GDP deflator but when
commodity prices were coming down it was, they
though, unduly lower, and therefore they wanted the
CPi. So they've now got the CPI and the CPI is the
measure we use.
3: In your overview of the economy, Mr Dawkins, you
only refer to Australia doing better than the 3 per
cent OECD average. And also I'd like to ask, why is
It that you haven't kept up with the precedent set
by your predecessor Mr Keating and release the JEFO
forecasts?
PM; No, no.
J: it was a precedent.
PM: Not much of a one.
T: it was a precedent, but it was a precedent not worth
following, I think. And the fact is that we had the
federal estimates In the One Nation statement. I
mean we don't go about making these renewed
forecasts month by month. The JEFG process, as far
as I know, hasn't finished. And even If It has I
wouldn't release the figures anyway. We will be
releasing those estimates in the context of the
Budget because they'll probably move around now and
then anyway. And we don't make month by month
forecasts on growth in the year ahead. We will
provide you with, you seem to the one who is most
anxious about these things, will provide you with
our latest forecasts of growth in the context of the
Budget in the normal way.
TE:
PM: That was only a purple pen to sign the books of f at
the time.
3; Mr Dawkins, today you were saying that you were
concerned about the uneven economic performance
between the states and between some of the regions.
What implication does that have for your policy?
Will you be looking at more specifically targeting
assistance to particular areas that seem to be
suffering while states such as WA seem to be doing
mnuch better?
T: I made the point this morning that there are these
very great regional differences and state by state
differences which, exist not only In respect of
unemployment figures where you've got in some states
jobs still being lost and in other states job growth
being quite clearly in evidence. Now what I've said
is that I think the objective of policy on the part
of both the states and ourselves should be directed
towards those areas where the job market is still
deteriorating. And I don't Intend to say anything
more about that now, just to reiterate that point.
3: Mr Keating, Mr Greiner said that at one point during
today's proceedings you described the current system
of fiscal equalisation as unsustainable. 1s that a
proper reflection of your views?
PM: No, I said it will not be sustainable while at least
the two large states believe that the system Is
patently unfair to them and the principles
underlying it, and the methodology which accompanies
it Is no longer appropriate or a reflection of
contemporary conditions. Now there were years that.
the Fraser Government just didn't accept Grants
Commission recommendations, just ignored them. The
Grants Commission and its recommendations are
relevant only to the extent that a Loan Council
Premiers Conference wants to adopt them. If we
don't the Loan Council is irrelevant to these
processes. Therefore, if you have the two large
states in there not continuing to be part of the
compact, a wise manager of the system says there is
something wrong here, So let's go through and see.
whether the principles are right and whether the
methodology is right. And that's what we sought,
but every time we've sought to do that the smaller
states the beneficiaries of the current
methodology, always object. So as a way, if you
like, of greasing the tracks for a real evaluation
of this thing, we said we'd carry some of the
adjustment burden in the event that there was a
marked shift away from the relativities of 1993-94
from the Grants Commission.
J: Mr Keating, have you any doubt that a fair end
proper review of the methodology would result in an
advantage to New South Wales and Victoria?
PM: To the extent that there is structural change In the
economy and that the structure of the states like
QVuiecetnosrliaan d iiss chcahnagnignign. g anIdn tteher mss trouf cttuhre e roefl ative
decline of manufacturing then there may be some
change, but to the extent there is we will help In
the process of adjustment.
3: Is there any way of making the methodology more
understandable. I mean I'm sure you've looked at
the algebra in the Grants Commission updates they
are incomprehensible.
PM: The thing Is I think the most Important thing is
that whatever they say should be a contemporary
reflection of circumstances. Whereas now what we're
getting is a retrospective reflection of
circumstances. I think that's the problem. Whether
you can simplify It Obviously if it is more
transparent the better, more understandable, more
transparent the better. Whether we can get there I
don't know.
3: Mr Keating, has it taken the gloss your day at all,
that you've come In here and been told about halt a
billion dollars of extra taxes in two states?
PM: No, in the sense that we thought they were going to
lift taxes and charges, we've said to them be
restrained, be sensible about It. But I think from
our point of view the longer run issue is, can we
out of this establish a better basis for fiscal
relationships in the Commonwealth of Australia? And
the answer to that will probably be an unambiguous
yes. And have we made progress today in the
establishment, on a long term basis, of a national
technical and further education system? And I think
we can say yes. I mean we will know soon. These
are things which were never attempted in the last
forty years.
3: Prime Minister, Mr Greiner has come out with a
statement saying " Mr Keating kicks his own state and
then announces changes". what effect to you think
this will have, the electoral impact, the rising of
tobacco and beer prices?
PM: I don't know what he said, today or when?
J: Yes, today.
PM: I think he's probably written that before the
meeting. You gee the meeting has gone better than
they expected and I think they've got to live with
those remarks, not me. Mr Greiner could not
complain that the Treasurer and I have facilitated
an inquiry Into fiscal equalisation which stands at
least to clarify the New South Wales position, where
New South Wales has claimed now for some time now
that the methodology runs against them. That's an
unambiguous benefit for New South Wales. I don't
think Mr Greiner could say that when the smallest
states were not prepared to see New South Wales and
Victoria get the benefit of per capita funding out
of the pool today, the Treasurer and I agreed to top
up the pool for New South Wales and Victoria. I
don't think It's sustainable that anything I've done
has been other than doing things which are sensible
to keep the federation moving, and also happens to
be coincidentally beneficial to New South Wales.
T: What the Premier of New South Wales said in the open
session, and it's the only time he said It, was that
we should have doubled our offer from $ 150 to $ 300
million. Had we doubled our offer he would only
have got an additional $ 50 million at the most as a
result of doubling the offer. So to the extent that
he is trying to fit us with the responsibility for
his own tax increases, all he ever asked us and I
might say he didn't repeat the request, and he made
it perfectly clear that he didn't expect to get It.
So I mean, heavens above, you've been around here
for enough Premiers Conferences to know that what
they try and do is have an unhappy outcome so that
they can justify tax Increases. I mean It wouldn't
be the first time Wlally ( Brown) that this has been
tried. And some of them are nice enough to get home
first before they announce it, but they've obviously
decided a new little trick to announce it here
before they leave.
PM: Can I just say that Premier Greiner said in his
opening remarks that these arrangements are the best
arrangements we've had for the five years he'd been
coming, a lot better than they have historically
been. And I don't think he came with any real
expectation of walking away with a fair dinkum
inquiry Into fiscal equalisation or walking away
with anything better then the of fer document. But
he did on both accounts.
J: Just on the labour market, Mr Keating in your
comments you mentioned that the growth in the
unemployment was yet to impact on the job market,
end your comments, Mr Dawkins, you said that the
growth in output was more likely to be transformed
in higher productivity rather than higher job
growth. That's quite a bleak assessment, does that
suggest we are going to have the sorts of
unemployment rates of 10.5 per cent for a lot longer
than is implied by the present forecasts?
T: No, it's only making the obvious point that there is
a trade off between productivity growth and
employment growth and as a result of the fact that
the economy has been through a restructuring, the
fact that there is a fair bit of unutilised capacity
out there, Is only making the point that we're
likely to see In the first instance as the economy
picks up, as demand increases, that that demand will
be satisfied in the first instance by an Increase in
output without a commensurate increase In jobs. But
as the economy picks up more rapidly and during the
Course of the next twelve months we will see job
growth. I'm not saying there will be no job growth,
I'm not saying that we're stuck with these levels of
unemployment* I was making an historical comparison
between this period in the cycle and say a similar
period in the cycle nine years ago, when you saw a
much more rapid growth in the economy than we are
now anticipating, and also a very much more rapid
growth in employment growth.
So I was only saying that it's rather different this
time than it was last time.
J: Under that scenario does It mean that it's going to
be much harder to drag down the unemployment rate
from say 10.6 where it is now to even
T: The ether point to bear In mind, that to the extent
that the economy becomes Increasingly export
orientated and this Is a point that I've been making
Increasingly, the labour market Is only dependent on
what happens within the domestic economy, but it
depends on us getting a larger share of the world
economy as well. if you've watched, as I'm sure you
have because you are a diligent chap, if you've
watched what's happened in terms of manufacturing
exports you've seen that there's been an inexorable
increase in manufacturing exports over the last ten
years, an increase which we think will increase and
we will do whatever we can to ensure that it does
increase. And when I'm saying is that I'm
emphasising the importance of policy which directs
itself towards those particular areas of the economy
and in ways which can Improve job growth, that's one
of the things which I'm talking about.
PM: And of course as the economy picks up and more
confidence comes in people might hire more people.
That Is, that as the recovery cornes through the
employment is not lineal but sinusoidal, parabolic.
J: Mr Keating, this morning you mentioned a training
wage being Introduced, I'm wondering how you see
that wage actually working.
PM: That's all for another press conference.
14
J: Mr Keating, the Issue of APEC, Washington has made
It pretty clear that the idea of a summit is
premature.
PM; I don't think that that's right because the terms of
the letters from President Bush to me have been most
supportive of the proposal. But the US and
Australia are basically on the one wave length an
this, but the letter which the President sent to me
was most supportive of It. Whether anyone's miffed
in the State Department, I don't know, but certainly
the administration I think they would regard It as a
good advance. But they see difficulty in doing it
themselves or doing it alone.
J: So when do you think the first Summit might be?
PM: That's not for me to say. it's never been a matter
of urgency, never. We've never put a time table on
it, I've said that often.
ends