PRIME MINISTER1
TRANSCRIPT OF THE PRIME MINISTER, THlE HON P J KEATING MP,
PRESS CONFERENCE, ADELAIDE, 4 FEBRUARY 1993
E& OE PR-OOF COPY
PM: I thought I'd start by saying a few things to you, and then you can fire away after
that. The point of the visit today is to cut through the ( inaudible). This State has
problems from which it is not going to extricate itself. We've had national
problems with the recession and post-recession period, and the recovery. But these
problems are more particular than the general problems. So what I've sought to do
is to bring the debate into the open. That is, because South Australians are going
to have to make a choice soon about the national government. T7hat choice is
going to materially affect them and I want them to realise that that choice is going
to affect them.
in truth, it's only the Federal Governmrrent that has the wherewithal to deal with
South Australia's particular problems. South Australians must bc scrutinising the
policies of the two parties and ask the question who will be prepared to provide the
resources to enable South Australia to work its way out of its problems. In other
words, ask the kcy question, which of the partics has a policy for South Australia,
which of the twvo is intcrested in it and which will provide the resources for the
resolution of South Australia's problems? This Govemtmcnct has always accepted
that South Australia necdcd special attention. It's not been in a position to pick up
a lot of the buoyancy of the ' 80s that camne to the Eastern States, or doesn't have the
base in wealth that, naturally, Western Australia has. So that's why, in the course
of the 19RNs, while the Treasury was arguing for per capita funding for States, I
stuck with fiscal equal isation. Fiscal equalisation. meant another $ 380 odd million
into South Australia. In other words, I always took the view that you had to lift the
smaller States up because just paying on a per capita basis meant that services in
this State, the economy of the State, and the strength of the State would he
diminished.
Over the same period, we made very clear that because we believed the State
needed special attention we argued that the submari -ne prograrn would be best set
up in South Australia, again to provide more balliest to its industrial structure over
a long period of time. The same with the multi-functio ' n polls, we've done what
we can to facilitate that. In my visit to Japan earlier in the year, the Minister for
international Trade and Industry told me that MMT is strongly behind the
development of the MFP in South Australia. And with that commitment and the
successful development of the MFP will come a lot more interest by Japan in the
State of South Australia.
T'he car industry, the Government has always taken the view that Australia needed
a car industry. When one asks the essential question, should Australia have a car
industry?, we've said yes. We've made clear that governments have to do things
that both maintain and build these industries. And that's why in cars, and in
componentry, we've always had South Australia particularly in mind because it's
such a large part of the Australian vehicle industry and components industry.
More recently, of course, is the One Nation Statement. I included in that the
Melbourne-Adelaide standard gauge railway, which is going to be built, and the
link to Port Adelaide, so that we tie South Australia more into the Eastern States'
economics through a rail linkage that should have been reality always had. There
can be no more basic thing than transportation and transportation services to
underpin any economy. I've taken the view that in terms of South Australia that
should be done.
Building Better Cities,. again we've got programs and funding across Adelaide and
the State. The road programs, the cooperative research centres where we focussed
particular funding on institutions and their collaboration with companies for
particular areas of rcscarch which we think are in South Australia's long term
interests. So let me just say this, Labor knows that South Australia needs federal policy, that
is in terms of industry, in terms of its industrial breadth, and fcderal hclp in terms
of its fiscal position.
I'll just say a couple of things about the Coalition. By contrast, Dr Hewson offers
the scorched earth policy. He wants zero tariffs he wants zero tariffs for cars, for
the motor industry. He wants t cut Commonwealth revenues to the States he
wants to cut $ 9 billion from outlays and make a very large cut in Commonwealth
revenues to the States. He has Prcmiers Mr Fahey and Mr Kennett breathing down
his neck on fiscal cqualisation they say that payments shouldn't be made in the
way they're being made to the smaller States. Thiat means that $ 385 million which
comes across under the equalisation pool is at risk. Of course this would come on
top of the ncarly.$ 300 million whigh the South Australian budget has got to find
now to service the State Bank debt.
So I put the question can South Australians trust Dr Hewson to withstand the
pressures of Premiers Fahey and Kennett in seeking to renegotiate the fiscal
equalisation policy and thc formulas which attach to it? What I would contend to
you is that that sort of policy would push South Australia under.
Perhaps could conclude on this point. Dr H-ewson has no concept of regions. He
doesn't understand that) for instance, caus and components are important to So uth
Australia. H-I doesn't undcrstand sugar is important to Queensland. It's basically
an ideological approach which says if you tax your clothes and your haircuts and
your water bills and your power bills, then that's all than needs to be done, you
don't need to think about regions as regions, you don't need to do things for
regions, you don't need to comprehend regional economies and their needs. Well
the Government does, and that's why it has only been the federal Labor
Government in the ' 80s and early ' 90s which has looked at South Australia
particularly and set up the programs and policies have already mentioned to you.
But now that the problems of the State Bank hangs over the South Australian
budget, given the fact that the revenue base of the State is limited, think there's
about $ 600 odd thousand tax payers only to carry this burden, then we believe that
this matter ought to be brought into national focus, that the shadow debate should
stop, the South Australian Government by itself left to itself left to its own
resources is not in a position to stabilise the dcbt, and therefore I'm willing to, after
a federal election, help and deal with fiscal problem and stabilisation of South
Australia's debt cooperatively with thc govcrnment of Premier Arnold.
So I think I'll leave my remarks at that and invite questions.
J: ( inaudible).
PM-No, no, how do you contend that? Thie fact of the matter is you've got a debt of
$ 3.15 billion, which is already now being carried from the State budget into the
bank. That's going to cost South Australians on an ongoing basis about $ 300
million a year. What's going to happen, left unattended South Australia is going to
get itself into a debt trap. It just won't be able to meet the interest on the interest. I
don't think this has been said quite as obviously as this, and that's the point of me
saying it.
J: How much arc you prepared to offer?
PM: It's not a matter of that, it's a matter to negotiate. I've told you that I've already
spoken to the Premicr about the question of the tax compensation which flows
from the State Bank becoming a federal tax paying institution, thcrcforc diverting
the receipts from the Treasury's budgct to the budget of the Commonwealth. In
that case, what has to be done is that the Commonwealth will negotiate wvith South
Australia as to the valuc of those stream of payments. The stream of tax paymcnts
which were formerly going to the South Australian budget will now go to
Commonwealth budget. They can be capitalised into a capital sumn, and that
capital sum can meet some of the debt obligation, as indeed can the proceeds of
the sale of the franchise of the bank meet those debt obligations.
J: But that's not special treatment, that's no more than the State Bank of Victoria or
the GIO received.
PM: For a start the bank has to be sold, that's what we're saying. Two, that we will then
negotiate. It'ns a matter of negotiation. What we see as the value of that stream of
payments, what the tax position of the bank is, what the value of that stream is
worth. Then on top of that is, beyond that the residual debt that has to be serviced.
South Australia will need Commonwealth assistance, just as this Governent
provided Commonwealth assistance to the Northern Territory, and as we
negotiated Commonwealth assistance for the State of Tasmania for similar reasons.
But the reasons are not as large or as acute as the problems here.
J; The debtors have pointed out it's around $ 3 billion. If the bank makes the sort of
profits it would bc expected to, it would be around $ 100 million a year which
would indicate you could expect a profit stream of around ( inaudible) a year.
Given those profits over 5 years, what are you offering, $( inaudible)?
PM: I don't know, that's to be negotiated. Obviously it's not a back of the envelope
occasion, it's a matter of sitting down and working out what that income stream is
worth. did that with the State Bank of Victoria, and premier Kirner and I
successfully arranged the State Bank's sale which plugged a very big hole in the
debt of Victoria, and has now seen that bank incorporated solidly into the
Commonwealth Bank of Australia, making the Commonwealth Bank an even
stronger institution than it was, and of course most particularly protecting the
depositors in Victoria. That negotiation took place and a similar one will take
place here. In fact we've already had discussions about it.
I: Mr Keating, why is it impossible to work out the details before the election?
PM: The details on the bank?
J: Yes.
PM: The details on the bank..
1: And your proposition?
PM: That's only on one thing, that is on the income stream. But then the franchise has
got to be cleaned up, the debt skinned out of it, and sold. Nobody is going to buy a
bank with a whole lot of contingent liabilities. The franchise has got to be sold
clean.
J: ( inaudible)
PM: There would have to be a due diligence done obviously, as there was with the State
Blank of Victoria.
1: The Bank is clean now..
PM: That depends on the view of the buyer. Buyers have Oarticular views about
cleanliness, and they're called due diligence. And they'll do a due diligence to
make sure that when the franchise is offered that they can successfully manage it
and confidently buy it. When that happens, then the income stream can be one of
the key issues.
J: How quickly do you expect to sell the Bank?
PM: I think the Government of South Australia should be moving to put the Bank in a
position for sale, and to develop a sales process.
3: Looking at the GIO's sale, that took a couple of years.
PM: We did the State Bank of Victoria in a much shorter time than that. And it was
quite a complex situation because..
J: It won't be a shotgun wedding, will it, with the Commonwealth Bank?
PM: [ t all depends on what a particular bank's market share is in South Australia and
whether there would be trade practices problems putting togethcr what is already a
large market share, combined with an even bigger market share.
J: Who would buy the bank, Prime Minister?
PM: The market has -shown that busincss can expand their stock for acquisitions, and
obviously there are a number of both domestic and foreign banks who may well be
interested in it.
1: Would you prefer a foreign buyer?
PM: No.
J: ( inaudible)
PM: That's always been a comimercial matter, whether it's been commercially viable.
Every study we've had, no-one has ever stepped forward to do it.
J. Are you saying you'd allow the sale of the State Bank of South Australia
( inaudible) foreign ( inaudible)?
PM: I wouldn't, no. But it may be that the large domestic banks here This will be the
last great franchise to be sold in Australia. The big State Bank of New South
Wales was incorporated into the Commonwcalth Bank in 1931. The
Commonwealth Bank of Australia was largely a national bank flying on one wing,
that was on New South Wales. It got the pigeon pair together when it picked up
the State Bank of Victoria. There are no other such franchises left, except the Stae
Bank of South Australia. Thiere's the R and I Bank, but it's a much smaller
institution, in Western Australia. The only other large one is the State Bank of
South Australia.
J: Mr Keating, are you cons idcri ng suuing Dr Hewson over his allegations that you
made policy decisions for personal gain?
PM: Dr Hewson made an intemperate remark yesterday, it's in the same class as the
intemperate remark he made about Bob Carr saying he was suspect because he
didn't have any children and didn't drive a motor car, the same intemperate
remarks he made about renters saying you could always tell a renter in the street by
the way they look after their house. I put it in that category. Dr Hcwson would be
wise to think Mcore he speaks.
J: You're not considering suing him?
Pm: rye got no more to say about that.
J: On fiscal equalisation, in the last three thc years the fiscal equalisation payments
have been reduced, have they not, to South Australia, it's been a feature of the local
budget, are you saying this will stop that downward trend?
PM: No, I'm saying that there's a pool of nearly $ 2 billion which is distributed to the
smaller States under fiscal equalisation. I'm saying that as an express issue in
policy I believe that fiscal equalisation should be maintained. That is, that the
smaller States should be supported, that they can't providc the services left to their
own devices and their own finances.
J: Will that pool get larger or will South Australia's share get
PM: The Grants Commission makes recommendations each year about the revenue
effort of the States and it equalises. It makes recommendations on the
equalisation, to sec what the relevant disadvantage is. The Grants Commission has
done that year in. year out, and the Government mkes a decision about it every
year. The issue in principle is the pool. Fiscal equalisation is an interventionist
policy. One has got to cut across per capita paymcnts, that's equal payments per
head across all the Australian States, and say in an interventionist way we believe
there will be express payment streams coming to these States for these reasons.
What I was contending to you was the philosophic basis on which Dr I-ewson
works is non-interentic a per capita. Thiat's a big risk for South Australia,
particularly a big risk when he's got Fahey and Kennett breathing down his neck
about it. So, if South Australians ask themselves the question could they trust Dr
Hewson to keep the payments off with the two large States on his back, both
Coalition States?, well I'll leave the answer to you.
J; Why can't you quantify the sort of offer, why Can't you put some sort of figure on
it?
PM: Because it's not a matter of simple figures in response to a simple question. This is
Dot simple, it's complicated. And it's complex by virtue of the state of the State's
budget, the paucity of its revenue base, the weakness of its revenue base, the
problems of the State Bank, and being able to pull together a debt profile which
doesn't see the budget of South Australia caught in a debt trap.
J: Knowing all of that, can't you give us somne indication of how high you're prepared
to go?
PM: It's a ridiculous question, you're asking a simple onc number question. That's the
sort of question you'd expect from page 30 of a tabloid.
J: A ball park figure would be reasonable.
Pm: rm saying that we will sit down with the Governnmcnt of South Australia looking
at all thcse issues the sale of the Bank, the value of the tax stream, the
compensation, and what further Commonwealth assistance is ncessary to provide
a profile to South Australia's budget arnd debt position.
1: ( inaudible)
PM: I don't think anyone else has come and told you that your budget in the long term
isn't viable. Has anyone? I know you're super news sleuths, but has anyone tole
you that? And if they haven't, it might be worthwhile you taking the issue
seriously.
3: We have been taken seriously which is why we've been slashing public service
numbhers and Lonrd knows what else in this town for the last two years. ( inaudible)
the cutbacks in the federal budget. Are you not prepared to put any figure at all.?
PM: Of course I'm not, hut I'm making it very clear that I don't believe that 1k,; South
Australian budget is capable of dealing with its debt position, and that the
Commonwealth Government is saying it will asist, it will provide federal
assistance. That's the issue in principle.
J: if you decidcd not to sell the Bank will there still bc federal assistance?-
8
PM: I think the Bank should be sold and I think the Premier's view is that it should be
sold, too.
1: And that's the only condition on which ( inaudible)?
PM: The State has got to make its own efforts to deal with its debt problem.
J. Prime Minister, on Leo McLeay, do you believe he should stand downi?
PM: Let's just deal with this issue of substance.
1: T1hen can we talk about whether you are concerned about what Mr Hawke has
said?
PM: I'm not going to answer those questions, forget about those things.
J: Do you agree with former Prime Minister Hawke that you'd lose the election if it
was held today?
PM: You people have a responsibility for reporting the news that's kcy to the future and
well-being of the community of South Australia. I'm a Commonwealth Prime
Minister and I've come here to talk to you about it. I'm not interested in picking up
Mr Hawke's interview of last night.
J: As a national broadcaster, Mr Keating, we have an obligation to service other parts
of Australia, and they're the questions we've been told to ask by our Canberra
bureaux.
PM: Just tell them politely that the Prime Minister refused to give you an answer on
that. OK?
J: OK, looking at pay TV then, the former Prime Minister says your pay TV policy is
strange.
PM: Before we go through all these things, have you got any more questions about
South Australia?
J: On fiscal equalisation, how can you undertake to make the pool larger when you're
running such a large deficit now?
PM: It's not a matter of making the pool larger. The Grants Commission decides how
much is required to equalise the payments.
J: Will we hc getting some paymcnts that would have othcrwise gone to Western
Australia or the Northern Territory?
PM: No, you will be getting assistance beyond that which comes in the pool. That is,
the Commonwealth will add to the financial assistance grants by way of direct
Commonwealth financial assistance, as we did for the Northern Territory and as
we've done for Tasmania.
1: It won't go through the Grants Commission.
PM; No, it would be an express policy decision of the Commonwealth, as it was for
those two States.
J: On the issue of the car tariffs and how that affects South Australia, what is
different about what you are saying now to your policy a month ago?
PM: Dr Hewson has reaffirmed in Fightback Mark It a zero tariff policy. He's saying he
doesn't believe the car industry Mr McLachlan said it for them he said it is
restructure or perish', was his expression. They're saying we don't particularly say
there should be a car industry. T'here's going to be a zero tariff, if you can survive,
fine, if you can't survive, bad luck. We're saying something totally different.
We're saying there should be a car industry, and we're saying that the tariff levels
which the Government have determined are ones which will keep the car industry
viable and let it grow. It was on the basis of those tariffs that John Button,
epsritnabcilpisahlliyn, g aan sdt amtey-soeflf-twheer-ea ratb lpel atnot iinn1t eVreisctt otrhiea . T oIty'so otan Mthoet obra sCiso omfp t ahnayt policy
that I believe that you'll get expansion from the current car companies of South
Australia. But only on the basis that the notion that you can provide some level of
protection that compensates for the small volume of production. Nobody is going
to invest in a state-of-the-art plant, to build 35-40,000 units, particularly when
we're talking about the Japanese, they can build them in Japan. I went to the
Toyota plant late last year where they have a run of 310,000 cars per year in one
production run. It's much more simple for that company to make that run
340,000 and build all the cars in Japan, than to seek to build such a plant in
Australia on a zero tariff with the disabilities of distance and costs and the
disabilities of scale. So there has to he some recognition of that in the tariff. The
Govermecnt recognises that, the Opposition doesn't. As far as the Opposition is
concerned, the car industry in South Australia can disappear if it can't stand on its
own two feet with a zero tariff. This Would be fatal to the South Australian
economy, fatal to the city of Adelaide.
1
J: You don't think there should be a slow down in the tariff cuts?
PM: We had a long negotiation with the car companies when we put these together, in
1988 and then in 1991, and they phased down to effective end paints of 35 per cent
average effective rates of assistance of 35 per cent. I think there's a reasonable
trade off there between the interests of consumers and the interests of car
companies, and the employment base of cities such as Adelaide in South Australia
in that kind of tariff level. If one takes the view that at zero and the survival of the
fittest, the fittest will be the 300-400,000 per unit through put companies in Japan
and elsewhere.
3: The economic climate has assisted with the balance of payments...?
PM: No, no. Thie proof of the pudding is in the eating. The Toyota company is one of
the largest motor companies in the world, it has the fastest growing market share of
any company in the world., it made a decision in the face of that plan to put in
what will be the most modem plant of its kind in the world.
3: That company's President, Mr Robert Johnston, was critical of the L abor Party's
plans..
PM: They made it quite clear, he said it by virtue of the fact they made a decision to
invest.
J. ( inaudible)
PM: The Toyota company decided to set up a state-of-the-art plant in Australia on the
announced tariff policy of this Government. That's it, say no more. They'
wouldn't have done it for zero tariffs, and Mr Johnston made that very clear to Dr
Hewson, as has Mr Quinn and everyone else here in South Australia. The zero
tariff policy in manufacturing is a zero Adelaide policy. That's Dr Hcwson's
policy.
J: sugar decision the other day and now help for the State Bank of South Australia
today, is that a reaction to bad polls?
PM: The sugar decision has been onc which has been on for a couple of years. We sent
a refercncc to the Industry Commission in 1991, and it's come back, and we've
made decisions, and we made a decision the other day which will radically change
the sugar industry. The sugar industry is largely a State regulated industry, the
Commonwealth is only a marginal player in it, it only has a role through the sugar
tariff. But all the things such as land assignment and all the other pricing signals
are questions which devolvc to the Queensland Government. The Queensland
Government has a rcfort-plan for 1995-96 which wc'vc now bcen able to tail
into. So it was a sensible reform decision, it has nothing to do with hand outs
which is implicit in your question. In rcspcct of South Australia, you have a
problem if the national leadership of this country ignores or fails to understand the
problems of South Australia.
3: We've had this problem for a couple of years too.
PM: I know, and so have 1, but I've made it quite clear that the Commonwealth will
provide financial assistance. That's the key change. I've been speaking to the
Government about the problems now for months.
J. Co-operative research ccntrcs..
PM: It's in the press statement. One's on the wine industr! y iticulture, the other is one
sensor signalling and information, the other is on tissuc growth and genetic
engineering, there's a number of them. These things are all again there to direct
and try to foster the development of certain industries. We've set up 51
cooperative research centres across the country, and they are there to try to
promote areas of Australian science that will give Australia a comparative
advantage in the world through technology, and that has to be our long suit.
Australia's great comparative advantage is not its mountains of minerals or its
acres of wheat, Australia's great comparative advantage is its education system, its
research and development base. And it is that that we're promoting. We've
invested $ 250 million in cooperative re. search centres and we've invested with that
$ 650 million from the private sector. So there's now the better part of about $ 900
million or a billion dollars worth of effort going into these novel areas of scientific
research and development, and the development possibiliis flowing from them.
Dr Hewson says you shouldn't have that intcrvention, it's sullying the market, they
shouldn't be there, we don't believe in them. Whereas in fact, it's pulling together
companies, universities, specialist institutes to do specialised things that can give
Australia a huge Icap in certain areas of technology and in production. That's why
they're important across the Commonwealth and just as important in South
Australia.
J: ( inaudible)
PM: There's always a debate about MH-and MRC budgets with all the medical research
faculties around the country. This is a scparate program altogether. The
cooperative research centres are a separate program, which as I say has been so
successful we've matched $ 600 million of private investment with $ 250 million of
government investment in what is going to be a very novel thing. opened one
recently in Tasmania in Eucalypt plantation technology. T'here it is said that
years growth of a Eucalypt trce can be accomplished in 7 years, that the trees will
be more resistant to bugs, they'll be straighter, that they'll saw better for saw log,
that it will establish plantation. Thiese are the things where Australia obviously has
an advantage and should be pursuing it. And it's what governments should do.
Governments have to decide whether they're going to support particular industries
or particular enterprises, just as I've made the point to you about cars.
J: On the ca industry, why are you so inflexible by not agreeing to a mid-term
review on the tariff policy?
PM: Because the flexibility was all occurring in 1990-91 when we had these
continuing conversations with the motor vehicle industry. That's when all the
flexibility was.
J: They asked for 25 per cent?
PM: O, but there's a thing called the national interest, there's people out there in motor
cars that are now $ 20,000 that would have been $ 30,000 without thcse changes.
So we're going to sell more cars. That's going to be good for Australia, good for
the motor vehicle industry. It's a trade off. It's a matter of finding the right
balance, but the right balance is not zero. That's the point.
I. But we sell fewer cars now than we did 20 years ago.
PM: Yes, and why is that? Buyer resistance to price.
J: Why would it hurt to have a mid-term review?
PM: Because the review was mid-term. We started this in ' 88.
J: There's a lot of volatility in there, particularly with currcncies.
PM: Yes, and thc volatilities run in favour of higher protection for the motor vehicle
industry.
J: At this minute.
PM: The currency has fallen by 12 per cent in trade weighted terms, which far outweights
any shift down in the tariff, far out-weighs.
1: The currency must recover in the..
PM: I'm just saying to you, you make decisions on the basis on where you believe the
effective average rates of protcction can sustain and grow a motor industry that
gives a consumer a fair go, that we don't pay through the nose for cars, where the
quality rises, where we end up with export potential, where those balances lie.
And the time for all that flexibility was when we gave it the flexibility in 1990-
91.
ends