1. Sep. 92 13: 42 No. 003 P. 01/ 06
PRIME MINMISTER
TRANSCRIPT OF INTERVIEW WITH PETER KENN4EDY ON ABC RADIO 12
SEPTEM4BER 1992
E AND OE 1PROOr ONLY
KENNEDY,, Prime ' lnister, you needed yesterday's current
account deficit of sl. 4 billion for July like a hole' in the
head. unow much pressure is there for an interest rates hike?
FX: Commentators can't have it both ways Peter.
They can't say that the economy isn't growing and yet then
point to the growth in imports. If imports are growing as
fast as this it means the economy, demand in the economy is
stronger than anybody thinks, If the economy is responding
and sucking in imports there is a lot more going on out there
than the partial data has indicated, or alternatively this is
just an aberrant month,
KENNEDY: But alternatively it means that perhaps we
don't have the productive capacity at home to meet this
increased demand, either way there is a pressure on interest
rates. PM$ One of the features of the exchange rate of
late has been the fall in the terms of trade. That is the
value of our produce, the prices we are getting for minerals
and agricultural products are now very low. But export
earnings -are still rocketing along which means our volumese are
doing enormously well. That is not withstanding the fact that
export prices have come down our earnings are still up because
of volume, the amount of stuff we are selling is enormous. So
I think that explains some of the markets apprehension but the
current account has improved enormously in the last, it's been
halved in the last few years to around 3 odd percent of GDP
and we can't let one month's number set the scene.
KENNEDYs so you are Confident that interest rates
certainly can be held for the time being?
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2.
PM1 There was a rumour around last week the
government tightened monetary policy, It hadn't, Lt hadn't.
XENNEDYt So no move in interest rates in the foreseeable
future? PM: That's a matter for the Treasurer, the Reserve
bank but from me, no.
K. ENNEMY You said the figures indicate that probably
there Is a lot more going on in the economy than has been
showing up in the figures.
PM: We have these sort of people, commentators so
called in Australia. They are either crying in their beer or
they are laughing, there is no sort of you are not getting
that sort of middle comment. We had some of the Sydney
commentators like Max Walsh today saying the ring of
confidence is going, we put to big a stimulus into the
economy, that is the fiscal budget changes are too great. Now
they are about just under three quarters of a percent of GDP.
Last week Japan has just announced a new f iscal policy of a
stimulus of -1.5 -percent of GDP and the whole world is hoping
that the Japanese stimulus pays of f for North America and for
Europe. That is that the Japanese economy will tug everyone
else along. Now the fact is the government has done the right
thing I it has got interest rates where it can induce a recovery,
it's got spending in the One Nation and the Budget which will
bring a recovery on, and that is as it should be.
They have been carefully judged; the stimulus is about the
right amount and~ if we didn't have commentators who think they
have got to be extravagant to be noticedobut basically making
comment in the national interest rather than against the
national Interest, then I think they would think that the
settings the government have in place at the moment are just
right for the economy.
KENNEDY: Nevertheless in the past you have described
Australians as import junkies haven't you. Are we still
import junkies?
PM': In the late 60s we were importing more than we
were exporting but at the moment we have bee6-n exporting our
heads of f. The shift to exports has been just a phenomena,
phenomenal, a phenomenal thing.
KENNEDY: if we can move onto another matter Prime
Minister. You yesterday, speaking at an international
industrial relations conference served notice that the
government would introduce an industrial relations charter to
I guess draw attention to the differences between the
government policy on Industrial relations and the opposition's
policy. What sort of things would you expect to see in the
charter?
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P14: Like f or instance protecting the conditions of
employmient under awards. What Dr Hewson wants to do is go
back to the 19th Century' so that I think an individual person
gets called into the office by the employer and he says to the
person this is what we are going to pay you now, no holiday
leave, you won't be getting this and you won't be getting
that, your rates are going to change and the person says weill
hang on I am not going to cop that I will deal with the union,
no no we don't deal with the unions, there is no more union&*,
you are not part of the award system, you are on your own.
Now that is the sort of world he wantsp that is 90 years of
industrial achievement to go out the door and what, forAn
economy where the wage here, the total cost of wages is now at
sort of 1960s levels, and where the profits here and the
economy is quite high are now going to skyrocket as any volume
comes through with business the companies are very stripped
down. The flip side of the unemployment is that companies are
very stripped down and many are now quite profitable and once
there is a bit of volume come& or, that will go straig1~ t to
profits because their overheads are covered.
KENNEDYe But that is a pretty extreme view isn't it, and
if the Opposition is going to adopt a policy similar to' Now
Zealand the sounds coming out of New Zealand seem to be quite
favourable now.
PM8 We have now twice as many people covered by
enterprise agreements under this government's wages policy as
there are in New Zealand covered under these enterprise
contracts, twice as many people in Australia. We are now
presiding over a revolution in industrial relations where we
are seeing General Motors, Toyota, Ford, enormous increases in
productivity as a result of agreements with working people and
their unions which is giving them now higher paid but lower
cost for the company. I mean it's working as sweetly as it
has ever worked..( he whole of the 80s evolutionary change is
coming good. What Dr Hewson would propose would wreck the lot.
You pit employer against employeas you take them out of the
award systemthey have no protect ion at law for holiday pay,
sick leave, rates of pay, it's basically law of the jungle.-get
what you can, 1tt won't do Australia any good and it won't
protect that low inflation rate which has given us those low
Interest raLea.
KENNEDY: One of the big criticisms of the Australian
industrial relations scene has been that it's been far too
rigid and while you are freeing up the financial market for
instance in the mid 80s
PMS That was in the mid 80s though Petert Now, as a
result of this deal we did with three weeks ago or in the
course of itoing, three quarters of all wage adjustments this
year won't come from the centralised wage fixing system) it
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4. PM: ( cont'd) will come from enterprise bargaining. It's a
revolution but it is not one which is disruptiveit's been an
evolutionary change. That's the value, I mean one where
everyone has agreed, not an acrimonious vicious change.
KENNEDY: You are saying then that you are succeeding in
freeing up the industrial relations system without an
upheaval? PM8 obviously we are why do you think Mr Prescott
from BHiP and Nasser from Ford and all these other people are
coming out extolling the virtues of enterprise bargaining and
productivity change, they are really saying to Dr Hewson your
thing is too rough we don't want to go back to the 19th
Century we want to change it the way we have been changing it
and you have got to fit in with the rest of Australian
society. I mean at the moment Dr Hewson is the odd man out
everybody is out of step but him. The big business community
BHP, Toyota, Ford, they are all out of step with him the trade
unions are out of step, the welfare industry is out of step
everybody is out of step but him.
KENNEDYs Nevertheless in the industrial area there in
still a lot of criticism especially from small business about
some of those award conditions that have been piled on over
the years. Things like holiday penalty rates
PM1 Yes I know but Peter the wage share in GDP,
that is the cost of wages and the total economy is at 1960s
level, say noQ more put your glasses down, that is with
everything in, that is with everything bar the kitchen sink
thrown in. That is the point but Peter you were going to ask
me, I am running out of time, you were going to ask me about
these, you mentioned in your introduction these secret taxes
the Opposition have.
KENNEDY: Yes
PM1 I'll say some things about that,
KENNEDYs It's reported that the Opposition OST it's been
recommended that it should tax things like wheelchairs,
artificial limbs and local government rates. Now Mr Reith was
backing of f on that on AM but I am just wondering where that
leaves the Opposition?
P1; We had the Opposition and we had the media
running around a week ago saying the government had secret
taxes which of course was a total furphy. These were things
we mentioned ourselves in the Budget that we might do but what
we have here is that Mr Cole, Sir William Cole is the chairman
of a board of management looking at the GST and Dr Howson
wrote to him on 9 March saying under your leadership the
office will act independently to consult with the Australian
community on all administrative and technical features and he
TEL: 1. Sep. 92 13: 4 No. 00
PM i ( cont'd) went on to Identify in the same letter,
Identifying the health and education goods and services that
will be zero rated. In other words those things in health and
education and services that will attract no tax. Now this
committee Is going to recommend that they tax because they
can't run the UST with all these exemptions that they tax
wheelchairs, artificial limbs, 15% on school boarding fees,
on local government rates and now we have got very
dishonestly Mr Reith this morning trying to run away from It
and say that's not our policy and he said the Cole committee
was given a brief to look at the broader policy issues but
that certainly was not one of them.
in fact it was explicitly one of them in Dr Howson's remit to
this committee. You see the fact is the GST is a monster the
Cole Committee has had now three hundred submissions from
business and private community groups about it. People hate
the thing and they have got this welling up in this GST office
they have set up and now when they want to make the
recommendations to Dr Hewuon and Mr Reith they say we don't
want to know about it, we don't want to know about all these
technical problems which are going to tax things like school
boarding and local government rates and wheelchairs and
artificial limbs and the rest.
This is going to be the most monstrous tax impost ever mounted
on the Australian people and they are trying to do it in
secret and worse than that when some of it leaks they try and
deny it even though they have set this committee up to do it.
KENNEDY: What tax do those items attract at the moment?
PM1 School boarding fees zero, local government
rates zero, and the same with the others. The fact is this tax
is,. oIee, people have got to understand this Peter: the total
income " tax raises $ 49 billion in this Budget it raises forty
nine thousand million, the GST raises $ 30 billion it's over
half of the total income tax of Australia. It's not just
it's 15% on all goods and services but it equals, it's revenue
equals over halt of the income tax because the average rate of
income tax is * only about 23.5% if you put all the high
salaries and the low salaries together they only come about
about 23.5%. You stick in a 15% tax on everything, food,
clothing, shelter, goods like we were just talking about
school fees, local government rates, it hurts, Lt's a
monstrous impost And of course It will add 6/ 7 percentage
points to inflation it will tip us back to a l0t inf lation,
it will put interest rates up by 6/ 7% because there is no way
the financial markets are going to lend at less than the
inflation rate and we will go back into a recession and stay
in there for what, an idealogical obsession on the part of Dr
Hewson to straighten all the low Lnccae people up and make
them pay their way as he puts it.
I LL
6
KENEDY But isn't all the Opposition doing really
compiling a list so that we know before the next election
which items will be subject to GST and which items will be
exempt? PM: Yes but this committee is saying what will be
subject will be school boarding fees, local government rates
so if people are paying $ 3001400 a year on their rates they
will pay a further 15%, they will pay another $ 50 or on
artificial limbo and yet when the harsh reality of the
management of the OST is coming out. See as a matter of fact
in a newsheet in Canberra called Inside Canberra which is a
privately circulated thing the editor had this to say a week
ago that Messrs Hewson and Reith have decided on stalling
tactics, now the GST coordination office looms as a huge
emnbarrassment* It has received some 300 submissions, some 300
companies or organisations were dissatisfied, worried,
confused about Fightbacc, most about the GST and as well as
that they say Dr Hewson does not intend to spell out what he
intends to do about road user charges.
See at the moment he wants to abolish the tax on petrol and
excise but that is the way we pay for road user charges and
big trucks breaking up roads. If they travel more they pay
more, if you take the tax off who is going to pay for the
roads? He is going to try and slide past that issue too so
what Inside Canberra was telling us was that Sir William
Cole's GST committee set up as an independent unit under Dr
Hewson's GST policy Is basically sitting mum on 300
submissions of people whingeing, complaining and reasonably
about the GST.
I( ENNEDYs I gather Prime Minister we are going to hear a
lot more about that before too much longer
PM: your ears will be burning with it Peter, your
ears will literally be burning with it. These characters have
got so many hidden taxes ready for you it's just not funny.
ENDS I. Z) ep.' JZ 10; 4Z NO. uu,) r. uo/ uo