TRANSCRIPT OF THE PRIME MINISTER, THE MON P J REATING, PIP
PRESS CONFERENCE, CANBERRA
JULY 1992
EGOE PROOF ONLY
PM: A few of you have asked me for comments, as you know
I have just returned, you have asked me for comments
on the unemployment numbers yesterday and I thought
I would give you a few introductory remarks and then
take questions.
The first thing I will say is that the Government is
very disturbed by yesterday's numbers. While we
could see some employment growth there the number of
people joining the workforce meant that the outcome
was entirely unacceptable to us and I think we
understand entirely clearly what that means in human
terms. The pressure that this condition puts on
individuals and on families is profound and
therefore the Government's priority will be as it's
been, certainly since I became Prime Minister, and
that is restarting the economy, getting growth
coming through and getting employment growing more
strongly. The one thing we won't do in any of this is panic,
because there is no point In doing so, the
structures the Government have in place, I think,
mean that we will be having more of the One Nation
money coming through, which was announced in
February and remember we announced about $ 500
million of it to be spent in the last financial
year, the bulk of it to be spent in this financial
year, and I have got every expectation we will spend
every cent of it. And as well as that we have got
the natural stabilisers in the Budget working, with
a shift in the Budget balance from Y surplus of $ 8
billion to a deficit somewhat above $ 10 billion, a
substantial shift of $ 18 billion plus, whatever it
might be, which is of course cushioning the impact
of the recess ion. We have got the cocks fully open
on interest raiteis. So on the monetary front, on
fi; C-al 0Policy, on the One Nation spending coming
through, the next thing will be, as the Treasurer
said yesterday, that the Government is determined to
make the Budget an employment Budget, and we will be
spending money there but directly on the unemployed
rather than indirectly, for a fiscal boost to the
economy directly on the unempyq0. And that will
also include naturally whatever spending
consequences may emerge from the meeting on youth
unemployment and the measures and policies which
emerge from that gathering as well. Some of you
will recall, of course, that when I announced the
One Nation package I had said in the context of the
period I had spent in the backbench that the economy
was very weak and that I thought that it needed
stimulating, and I think that what yesterday and the
recent period reveals is that it was weaker then we
thought. But there was some general criticism of
One Nation on the basis that we provided a fiscal
stimulus for an economy which was already growing.
And that, therefore, I had inherited an economy
already on the up-swing and I had found myself
caught with the rhetoric of slower growth, and that
it was convenient therefore to pursue the One Nation
spending. It is now obvious that the One Nation
spending was entirely necessary and some of the
comment around at the time about how it was going to
blow fiscal policy, how the Government had given up
on responsible economic management, 811 of that can
now be seen for what it is, a misjudgement. Now the
fact is one Nation was necessary and will be coming
through for the economy at the right time. But I
think what all of this means is that the economy has
to start growing again, and we do believe it is
growing to grow in the 4 per cent area over the
course of the year. Now that being the case,
obviously employment is going to lag, and employment
has been lagging, and now additional people have
joined the workforce, the participation rate has
risen and therefore the unenpomntr rate has gone
up. So the growth comes t hrough slower, the
atructure is in place to bring it through, that is,
the general shift in the Budget balance, the
interest rate structure and the additional spending
of one Nation, and for those caught in unemployment,
now 8 substantial group of people, we will address
them directly in the Budget with Labour market
programs and with the programs which emerged from
the Youthj MetngSummi~ t and also with some industry
assist'ance measurer, and possibly some measures also
designed with a regional focus, where regional
unemployment is having an influence. So I think I
will leave my introductory remarks and invite
questions.
J: Prime Minister today John Haf y of the Trades
Hall Council in Victoria _ suggested one way to
overcome any fiscal difficulty would be to abandon
the promised tax cuts. George Campbell of the metal
Workers Union says that the Government should
seriously be looking at raising tIaxes in some areas.
Have you any sympathy with these causes?
PM: The tax cuts are not the issue for this year or this
year's Budget. I mean this year's Budget will be
about focussing first of all the spending of the One
Nation money, and then focussing any additional
support on those directly affected by unemployment.
So again I repeat, the change in the Budget balance
which is the better part of $ 20 billion, plus the.
low interest rates, plus the One Nation spending is
going to hit the economy at the right time in terms
of that response. Now if the economy grows as we
expect it will, I have got no reason to doubt it
won't, then we are living with the lag of
employment, unfortunately.
J: When are you expecting unemployment to start
moderating, Prime Minister?
Pm; I can't give you a quarter by quarter view on that,
but there is obviously going to be substantial
employment associated with growth of any order in
the sort of 4 per cent area. Now, where the
unemployment rate will then rest will depend upon
the participation rate, that is the number of people
out there looking for work.
J: Have we bottomed out yet?
Pm: in terms of employment?
J: Unemployment, yes.
PM: It depends on where participation goes. As the
Treasurer said yesterday, this is a statistically
uncertain measure, and the trend rate is the one to
look at. The trend rate is at 10.8 per cent. Now
the Government did forecast in the Budget 10.75 per
cent as the peak, the trend rate yesterday on the
numbers was 10.8 per cent. So it's very hard to
say. But what we saw with employment was employment
actually grew in the month by 26,000.
J: Mr Dawkins avoided saying the worst had passed
yesterday. Are you now prepared to say the worst
has passed?
PM: It's not a matter of being prepared to say that at
all. I'm not going to make a forecast about next
month's participation rate.
J: Mr Keating, would you say you'll spend directly on
the unemployed in the Budget, can you be more
specific about that. Is it dangerous not to spend
on productive things?
PM: When we did the One Nation package we found it
impossible to get more programs into place and spend
more money in the public sector. At the time there
were no more State programs that we could use or
Commonwealth programs. That is, no programs that at
the time the States said they could reasonably get
up in the required time frame. As well as that, we
thought that the balance in the One Nation spending
at about $ 2.3 billion was correct. So for the
programs that we had in place we thought that was
well and good. But what we were envisaging now,
rather than simply rely upon the employment effect,
either direct or indirect of that spending, what
we'll be seeking to do in the Budget is to support
those people who are actually affected. Support
them personally and directly. And I think that's
the qualitative difference in seeking any remedy for
the unemployed in that way, as distinct from adding
a bigger fiscal stimulus to the economy in general
or the public sector in particular.
J: When you say it's support personally do you mean
higher benefits, or do you mean short term make-work
schemes, or training?
PM: Labour market programs the design of which will be
revealed in due course.
J: With these disastrous unemployment rates are you
prepared to accept that your policies to date have
failed?
PM: Which policies do you mean?
J: Economic policies.
PM:. Do you mean the ones that have taken Australia from
an industrial museum to give it a future, or do you
mean the cyclical ones?
3: In fairness, Mr Keating, you've been Treasurer,
you're now Prime minister, you're facing
catastrophic unemployment figures. I'm asking you,
do you now accept that your policies have failed?
PM: No. What we are seeing here is a largely cyclical
response in the economy to the cycle of change. But
to make a judgement about the Government's policies
over the last nine years, the measure of failure
would be to have the same size labour market as
then. And the labour market is 1.5 million larger
than it was, or 22 or 23 per cent larger than it was
in 1983. Now what one desirably would like is to
come off the boom of the late ' 808, having been
through a period of adjustment on the current
account and inflation, without profound employment
effects. We've not been able to do that. But
again, what I say is that the structure of the
policy that we have in place is the best one for
pulling the economy out.
J: How much worse does it have to get before you're
prepared to accept that it's not just a cyclical
problem, that you've got a structural problem in
your policy, that you have failed?
PM: I'm not sure you understand what the word structural
means. Structural means that if you're trying to
compete with countries nearby with labour rates of
$ 7 a week, if you think that you don't need to
adjust yourself to those kind of structural changes,
I think you're mistaken. The fact of the matter is
that Australia has been through a very profound
structural change, but the largest part of the
unemployment we are experiencing now is cyclical.
And the quicker the economy starts growing again,
the better, and everything we've done on the macro
side and on Interest rates and on fiscal policy, I
believe, will pull it out more quickly than any
other prescription around.
J: Mr Keating, you're the Prime Minister now because
you believe you could fix this, and you've simply
failed to date. You've made it worse, not better.
PM: I said i would commit myself to getting the economy
restarted and providing jobs growth. We are saying
in forecasts that the economy will grow through the
year, and employment is already growing. It's not
growing as much as we would like, but it's already
growing.
J; Do you believe in the next six months we'll see the
unemployment rate up about where it is or getting
worse? In other words, the forecast you've just
made now may be a long time coming, in fact it may
not even come before the next election Is due.
PM: There are two factors. If the growth comes through,
there will be an employment response. The magnitude
of the employment response will depend on two
things. Firstly, productivity how much
3roductivity there is there? That is, how much of
the growth will translate into productivity vis a
via jobs. And secondly, where will the
participation rate go? And it may be that in the
economy picking up, people will be encouraged to
rejoin the workforce so their participation rate may
rise. on the other hand, it may not. So I think
you'll have to wait till the Budget till we give
you, again, forecasts about employment and
unemployment.
J: Mr Keating, you said that the deficit will be
something over at $ 10 billion. lIfbow-iiuch more over
billion?
PM: Well we're not certain. As Mr Dawkins said to you
yesterday, there's been a fall away in the revenues
in part built upon the success we've had with
inflation. Lower inflation means ipso facto lower
revenues, and lower revenues mean that the Budget
balance shifts further into deficit in the short
term. The important thing is the structure that
sits underneath the Budget is a sound one, and I
contend the ' 80s provided for Australia a lot of
youthful work on fiscal policy which does leave us
in the position where now you can contemplate the
spending we have in One Nation, and what we may do
in the Budget and the impact of the natural
stabilisers, the natural decline in the Budget
balance, at the same time seeing it by the middle
come back into surplus.
J: On the labour market programs that you mentioned
earlier for the older unemployed, exactly what do
you have in mind make work schemes, red schemes
revisited?
PM: I think, Russell ( Barton), you'll have to wait till
we settle the design of those programs, of which
work is proceeding. But again, the Budget is not
that far away.
J: I'm just talking about the concept. Will it be
direct Government spending to higher unemployed
people, is that the Idea?
PM: It will be Government spending on labour-market
programs, We are contemplating at least two issues
here. That is, the youth unemployment issue which
I'll be directly addressing at that meeting on youth
unemployment, and the labour market more generally
in the Budget.
3: Mr Keating, despite the decree as to whether the
unemployment is cyclically caused or not, do you
accept that there comes a time when rising
unemployment becomes politically fatal to any
Government and aren't we at that point?
PM: The political fatality would rest in whether people
think an addition of 15 per centage points of the
consumption tax which would be an anti-employment
thing would be better. Whether they think tighter
monetary policies, higher interest rates, a cut in
fiscal policy, a 15 per cent consumption tax, a
massive addition to inflation and to interest rates
would be better. Now I contend it wouldn't better
and all that we would do is simply endanger the
recovery for a prolonged period of time. So
Australia had to come off the spending levels of the
late 1980s, the questions which are being put to me
today as directly as they are were being put to be
about the current account deficit two or three years
ago, and it was then all about imports and the
Government took remedial action to bring our demand
within our product growth. But in a recovery phase
the structure which is there, which the Government
has put into place, is the appropriate structure.
To go now to a massive impost upon spending through
8 consumption tax, a massive addition to inflation,
a massive addition to interest rates, a $ 10 billion
cut to fiscal policy is going to do what? It is
going to murder employment. The Coalition's
policies would murder employment.
J: With the increase in the deficit, does this mean
that the ' One Nation' tax cuts are still
deliverable?
PM: Yes, I think so. Fiscal_ poli~ gy in Australia in the
1980s became exceptionally strong and is standing us
in good stead now.
3: So the undertaking that the budget balance would be
restored in five years, is that still in tact?
PM: Yes, I think so.
J: Prime Minister, earlier you said that the Government
understands enti~ rely clearly what it means in human
terms, do you think it would be appropriate to offer
an act or at least an indication of contrition to
those nearly one million Australians who are
unemployed?
PM: What have you got in mind?
3: Well it's up to you, you are the Prime minister.
PM: We all get these sort of questions and I have said
over and over again that the Government understands
the damage caused by unemployment, it's disturbed by
it, feels it very poignantly, has done all the
macro-economic, broad economic things it can
possibly do to set the system up for growth again,
and in the meantime try and look after those who are
directly disadvantaged. That doesn't mean cutting
their unemployment benefits after nine months, it
doesn't mean producing an underclass of people who
are off unemployment benefits after nine months, or
employed people who are working at employment rates
near the dole. This has never happened in
Australia.
J: Does it mean saying sorry?
PM; Look Dennis ( Grant) don't try silly drama with me.
I've made my position on this clear for years.
J: Do you accept responsibility for the 953,000 people
out of work?
PM: I take responsibility on behalf of the Government
yes. But remember this about the private sector of
Australia, I don't take responsibility for the
massive crude spending of the late 19809 and I take
responsibility also for getting our imports under
control and getting our inflation rate back into the
best order in the world and these were all joint
responsibilities on a responsible Government.
J: Mr Keating, do you accept that whatever may happen
to the exact employment figures, we face the
probably permanent situation of a large body of
probably permanently unemployment people who will
end up being a sort of underolassed, making the
traditional notions of fairness and equity really
disappear?
PM: I think the answer to that is in the negative. I
don't think we need a large or will see a large body
of permanently unemployed people, I don't think we
should accept it, I don't think that structural
unemployment means that at all because I think a lot
of it is cyclical and the Australian way has always
been to pull everybody along, give them a job, to
give them a place in society, to look after them
when they are down, when they're unemployed or their
sick and that's what this society must do. it
shouldn't chop them off after nine months, it
shouldn't turn our young people into an economic
subclass. It should pull Australians along, give
them their proceeds of the growth, give them their
share of the growth. The traditional way Australia
has divied out the share of the growth is through
employment, and that's why in the 1980s the
Government committed itself absolutely to employment
as indeed it's doing now, but it's waiting for the
response in the economy.
J: But after each of the cycles over the last twenty
years we have been left with a larger body of
permanent long-term unemployed.
PM: That's right, but it's not at 10 per cent levels.
it's at something much below that, probably less
than half that. At the peak of the cycle in the
1980s we had unemployment under four per cent in
some capitals.
3: Yes, but it's still a lot higher than it was twenty
years before that.
PM: True, but again twenty years before that We didn't
have the countries of the Asia-Pacific making
manufactures and other things In competition with
us. Australia, like many industrial societies is
going through a change and a technological change.
We didn't have jobs being displaced by computers and
it simply means that one has to commit oneself to
more growth. If technological Change means there's
more Output with smaller employment, the answer is
to have more output. That's what we tried to do
through the 1980s, that's what we're trying to do
now.
J: Would you comment please on the much higher growth
-in yA-m work than in full-time work and what do
you see as the implications of that both in economic
terms and short term and longer term?
PM: It's been a feature of the whole of the 1980s a
shift to part-time work, and although the work force
grew in aggregate there was a shift in the
competition between part-time and full-time
employment. Partly this is in consequence for the
higher participation rate by women in the workforce,
It may also be a consequence of the change to a more
service-oriented economy, or also a consequence to
the change to an economy which is now living with
higher technology and technological capacity. So I
don't think one can be profound about the change.
J; Can you see it skewing the statistics as we've been
used to knowing them?
PM; Maybe, but I think if the economy does growth
sufficiently strongly, if we've got low inflation in
place and Australia's well resourced with a
technological able workforce, it can grow strongly
particularly in the 1990s and it will pull up a lot
of employment both full and part time.
J: Mr Keating, Mr Dawkins said yesterday that
Australians who do have jobs are quite well of f now
because of the drop in interest rates. Do you think
that in the light of that and in the light of
yesterday's figures that we should delay the
national wage case that's coming up?
PM: He made the point for those in employment and
particularly those who have mortgages, their
positions improved quite sharply as mortgage rates
have come down to quite low levels. This may not
have come by way of disposable income because some
people have chosen to repay their mortgage faster,
I'm not sure banks have actually offered, I think
only the Commonwealth Bank has offered to reduce
repayments, I'm not sure the other three have.
Perhaps they should if people want that weekly
relief rather than paying a mortgage off more
quickly. Where we go on wages will be a matter for
judgement, but obviously the labour market will
condition our thinking about it and that's something
to think about. But again, generally economies with
no wages growth are economies with no demand growth.
ENDS