i PRIME MINISTER
PRIME MINISTER/ MURRAY NICOLL, RADIO 5AN 4 FEBRUARY 1993
S. 0.2 PROOF ONLY
NICOLLt It was a little unexpected your ride into town
today. It presents an intriguing picture really, riding into
town to save the State. Is that what it's like. A State in
distress. PM: We1, I think it's calling it as it is. That is
there's been a big shadow boxing game going on now between the
Govt down here and the State opposition and the residual problems
from the state Bank and its aftermath are such that I know that
the Govt -fSA regardless of what it tries to do has not the
adequacy of resources to meet the problem; that is that the
residual debt which the State is now carrying, having funded over
$ 3BN intoe-State Bank is a burden which is too much to carry
and it will require Commonwealth assistance.
NICOLLs You're sayina only the State Bank can save us,
we're that badly off are we?
PM: Only the Commonwealth.
WICOLLt I'm sorry, only the sale of the State Bank.
PM Oh yes. I think the State Bank should be sold
because the franchise is still one of the best franchises in the
country that is, if the debts are skinned out of it, and you're
uot left with the actual business the franchise it's the
last great franchise left in the country. So, it's definitely
valuable, and worth a lot of money.
NICOLLt Now would you envisage it happening, the same as
in Victoria, a straight sale to the Commonwealth Dank,
PMg well, not to the Commonwealth Bank. In Victoria
there was a procaas where the State Bank of Victoria was offered
to other banks generally to acquire and that process would need
to be followed here. But, the biggest part of the process is
what'S called the due diligence, that is seeing what the
contingent liabilities of the bank are, because nobody is qoing
to -uy a problem, they'll want indemnification or to be certain
that the problem has been cleaned up, that they're buying the
business without all of its former problems. So, it takes time
to do a due diligence, that is a comb through the b6oke to make
judgments about all the contingent liabilities, the value of the
assets, and to arrive at a figure of nett assets and goodwill.
See, there's a goodwill attaches to the business because it has
such a huge support within SA. The franchise carries a lot of
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goodwill and when that's efttablishAd then that can be offered to
other financial institutions. Now, in Victoria, the American
investment banking firm and advisers Merrill? Lynch handled the
sale and it would require someone of that standing I think
probably to manage a sale process here.
NICOLLs So a parallel with the Victorian setup.
PHI Pretty much so I think, Murray, pretty much so.
And I think if the State does that, gets into a position to gat
it sold, there's then the question of compAnsation for the change
in the tax arrangements. At the moment there's a tax stream that
runs to the State Govt, that would transfer to the Fed Tax
Office. So we can capitalise that income stream and hand it to
the State as compensation. So if you look at the sale of the
bank plus the compensation package, this would meet some
substantial portion of the debt. But even after that there will
be such a refidual that I don't believe that the Sth Australian
people, the Sth Australian Govt's budget, cuts in govt spnding
or prevailing on the community with higher taxes, will meet the
costs. I think the risk is SA is in a debt trap from which it
can't emerge without the assistanceof the CommonwAalth Govt.
NICOLLi Of course the State Bank is not our only problem,
it's only one of a very considerable economic problem that the
State's facing, a narrow bass whic-h is rnally reatricting us.
I'm wondering if we'll ever get out of it.
PM Well, I think again there is a role for the
Commonwealth and there has been already now for ten years of the
Commonwealth Govt saying that it will intervene in the economy to
guarantee that a place like SA, a State like SA, which is
dependent upon a certain range of industries does have support.
And it's things like the submarine program, which the
Commonwealth decided upon some years ago, the Multifunction
Polls, the extension of the narrow to the standard gauge railway
into Melbourne, all of these things and particularly the support
for the car industry, all of these things are necessary things to
give the State of SA the industrial weight and ballast and
breadth it needs. Now, you know, I've made the point today, the
Govt is the only party in Australia that believes the
Commonwealth should intervene and make things happen in a StAte.
My opponent, J~ hn Heweon, doesn't believe that he doesn't
believe in intervening, he doesn't believe in intervention. Nowo
what we're saying is if you take the motor industry for instance,
you ask yourself the essential question, should Australia have a
motor industry. The Govt says yes, the Opposition says, well if
it can survive we'll have one. The Govt says, hang on, that's
not right, it has to survive. So you arrive at a set of
arrangements and tariffs that let's it6ukLve and grow.
NICOLL$ FCall, that's critical in this State. Does that
Mean that you'll extent the same assistance to the motor vehicle
industry that you exteanded to the sugar industry in Queensland.
PH; Wall, the motor vehicle industry-has been subject
to a phase down in tariffs over period 1988 to 1997, weirs now
two-thirds the waythrough it, ( words unclear) the two-thirds the
way through it.
NICOiLL The industry says you can't sustain the risk, not
here. P141 Oh, yes they can, yes they can. They can't
sustain zero, they can't sustain zero which is what John llewson
and Tan McLachlan want to give them, but the end point of the
L~ abor Govt's tariff change is an effective rate of protection of
N~ ow, it's a good compromise between the interests of
consumers and the interests of the industry and its employees
because cars which are now $ 201000, standard saloon care which
are $ 20,000, would have been before these changes, $ 30,000-
fewer people would have bought them and the industry would be so
Much waaker. But at zero, obviously if we take let's say a
Japanese manufacturer who's running 300,000 care on one run in
Japan, they're not going to come to Australia to build a plant
for 30,000 cars with zero protection. Why would they. At zero
protection why would they wear the disabilities of scale and
distance to build 30,000 cars here when they can easily go from
300,000 to 330,000 in Japan.
? 4ICOLLt So how much lower have you got in mind beyond the
Year 2000.
PHI Well, I think the nominal level of it's
effactive and nominal IS. The 35 comes with the export
facilitation progrAms. At thoseo levels I think it's a fair deal
for the motor industry.
NICOLLs Will you hold them at that beyond 2000.
PHI At this gtage I've got no intention of trying to
press them beyond that point. I was part of negotiations with
_ John Button with the various motor industry leaders in 1990 and
' 91 and of course like every industry, Murray, you know, people
make the claims and they press you, a Govt has to work out how
far it can go and how far the claims are real. We think we've
got the right result And I think the fact that the Toyota motor
company decided to build a state of the art plant in Melbourne,
you know, proves the point that is the proof of the pudding in in
the teating. They on the G~ ovt's tariff policy set up a world
state of the art car plant. Btit Bob Johnson from Toyota made
cler tatat zero thoy wouldn't have made that.. investmahi.'
Mitsibushi in SA have mada clear that at zero they won't make the
investment and that.' s why 11--made this clear before to the
people of SA that the Commonwealth Govt, Labor Govt, does believe
in a motor industry# will support it with the appropriate
mechanisms of support and will do the things that have to be done
to give SA an industrial base of some breahth, such an the
submarine program, such as the Co-operative Research Centres,
such as the railway programs etc.
NICOLLs Alice Springs to Darwin railway line, will that
last. PHI Well, that's a commiercial thing, it's not part of
the main frame rail system. If someone comes along with a
positive commercial story to tell on that, then I think that's
diffarent. Blut at this stage no one has emerged. We've had a
couple of JaPanese Corps in the late eighties express some
intareet in it.
NICOLLi They looked pretty responsible.
PHI Yeah, but they dropped away, no one has kept it
up. FICOLLt So a good viable commercial offer on the Darwin to
Alice Springs railway line would not be thrown out, it would be
given consideration. Not out of the question.
PH: it would be examined but we've got to see one yet,
Can I say though, in the One Nation StAtement what I proposed was
that we build a standard gauge from Adelaide to Melbourne. I
think that's far more important to SA, that SA be pulled more
tightly into the eastern States economy. And the thing that does
that is ba รต iCAlly the standard gauge line over to Melbourne which
of course SA has never enjoyed but should have had many years
ago* NICOLL: You're moving around the country at the moment,
you and the Leader of the Opposition and various Cabinet and
Shadow Ministers are all over the country. This Ls obvious
election campaign then and yet we haven't had an election called
yet. Say the word.
PHt Well, everything in due time. Issues have to ba
attended to. Last week we had a Cabinet meeting at tending to a
number of major issues including as you mentioned earlier sugar.
We have considered now, an a group, SA for some time. I met the
SA membors to discuss tha questiofts which were in the Statement
which I made today in The Advertiser.
NICOLLs Is this conditional by the way on the election. I
me~ n,-can you start thea prfo~ tess now thAt needs to be done if . Lynnw
Arnold sayg okay, we' 1l take that.
PHI Oh yes, we're already, we are already discussing
with Lynn Arnold and the Govt the compensatory package for the
sale of ( word unclear) the tax stream, the change in the tax
stream from the State to the Commonwealth Govt. That's already
happening now.
NICOLLs is this a fait accompli. Have you decided, you
and Lynn Arnold, that you will sell the bank.
PM No, I think it is his intention in the right
circumstances to sell the bank. He wants to know where we stand
on a compensation package. We're now negotiating that with him.
NICOLLs So we don't have to wait until after the election
to get the details.
PM: No.
NICOLLt And when are we going to have an election. Is
Parlt going back on the 23rd.
PMS Well, that's the $ 64 question.
NICOLL# As scheduled.
PHI Well, that's what I intend. And we have to call
an election by early April at the latest so it's not that far
away. a
NICOLLI Not far away, with Leo McLeay in the chair.
PM: well, in an election the House of course is
dissolved. NICOLLt I mean on the 23rd, if you go back on the 23rd
with Leo McLeay in the chair, not standing down.
PM: Well, he can't stand down. I mean the Speaker is
elected. The Speaker is elected by the Parlt.
NICOLLt He can stand aside.
PM: Well, it torns out you can't as the law turns Out,
I think he has to either be out of the country or ill. Anyway,
that's not the point,
NICOLLt The Opposition will be all over that like a rash.
PH s Oh well, the Opposttion has got plenty of
problems. We've got plenty of problems ready for them.
NICOLLsI think you've got a few of your own too.
PMe oh yeah, but that's public life.
NICOLLi Bob Mawke is having a bit of a shot at you at the
moment. He says;, he still Says that the ALP was wrong replacing
him with you back in He says if the Fed election was held
today the Coalition would probably win and he also says that the
Australiad people want a change of Govt.
PM: Well, he's entitled to his view. It's a free
country. NICOLLt Your response, is that it.
pMs I couldn't, you know, there's an old saying in
public life, the dogs may bark but the caravan moves on.
NICOLLt Okay. In other words who Cares about what Bob
Hawke thinks.
PMt Well, obviously he cares and good on him.
NICOLLs But you don't.
PM1 N~ ot vary much, no.
N4ICOLL: How much longer are we going to iee this betweenl
you and Mr Hewson. There's a feeling abroad in the country that
we really need leadership right now.
PM: Absolutely. The vory day I'm downi here talking
about the SA budget, the debt profile, the capacity of SA to fund
itself the breath of its industrial base, I've had to Contend
with John Hewson sort of attacking me. Well, you know, I hope
John wakes up to himself and gives it away.
NICOLL: Will you sue him?
VMS: well* let's see what he says about all this. I
mean, he made an intemperate claim it's the same sort of
intemperate claim he made about Bob Carr just before Christmas,
Baying you got to wonder about a follow that doesn't drive a car
and doesn't have children. It's the % Ame sort of intemperate
claim he made about renters he said you can alw. iays tell a
renter's house by the grass growing through the front fence;
they don't look after tha rlace. T mean, it's that sort of
intemperate quality and this was just anothar example of that I
think. NICOLL; Bearing in mind the parlq. g state of SA., let's
come back to that for a moment, and the Fed election, would you
consider making your campaign Apeech, launching the campaign
formally, instead Qf informally which has already be done,
formally launching it from this city perhaps.
PM Well, that's a matter an much for the Fed
orgAnisation of the Party as for me and these are things we have
not yet decided. So, you know, I can't be anymore prescriptive
about that than being able to say as I've just said. But I think
that the important thing is rather than the cosmetics of any of
these thingg, I think this is going to be an important election,
it's going to materially affect the fortunes of SA. Now I think
the people of SA have got to make a very, a reasonably acute
judgement here.
NICOLLt This state and WA are going to considerably affect
the fortunes of the Keating Govt at a Fed election.
PM: Well, they do in every election, they do in every
election. NICOLLi More so this year than perhaps ever before.
PMs Well, I don't know. No, I wouldn't concede that.
But the judg6oment will be which of the two parties is in the
first instance, interested in SA. In the second instance, is
prepared to take a hand in being certain that it doesn't fall
into a debt trap and can fund itself without an inordinate burden
on the community and a big cut in public services. Which party
will intervene in the economy and guarantee that the motor
vehicle industry stays in business and grows. which party will
broaden the industrial base of SA and intervene in it.
NICOLLi Can you giiarantee all of this.
PM; Well, I may, look at our record rather than our
words. Our record is the submarine program, the MFP, the
railways, the Co-operative Research Centres, fiscal equalization
which I supported for 9 years as Treasurer which pays a higher
proportion of the State pool into SA and the smaller states.
NICOLLt Record unemployment.
PM1 Than the bigger states. I'm just talking about
the state itself. Those things we've done and I made the point
today in the speech that sinee 1978 Australian employment has
risen by 28%. But employment in SA has risen by only 15. And if
you look at some states, Queensland, employment has risen by 53%
over the period. SA by 15. WA employment risen by 44% over the
period, SA by
NICOLLt It's all a bit embarrassing isn't it.
PMSWell it means that there's got to be an effort
made on the part of Govts You c~ flt jusit say l. ook we'll leave It
to market forces an John Hewsoft does. if you may that, what will
happen in the industrial base of Sh will shrink further and the
employment base with it. SO, Govts must come out and do things
to maintain the ballast of the state which the Labor Govt has
done over a decade and which we'll continue to do.
NICOLL a So you'll see us right.
PHI. We'll see us right in this respect, we'll
continue with a policy of fiscal Oqualisatiofli that is, rather
than just per capita payments to the States we'll see that this
pool with an inordinate ahare for the smaller states to maintain
services, we'll see SA right in joining with the Arnold Govt to
sea that aome of that debt burdan is spread more widely than the
people of SA, that's the State bank debt burden, and we'll see $ A
right by guaranteeing that we focus on its industrial future
including the motor vehicle and components industry.
NICOLL: Would the same apply to a Liberal Govt. I note
you say specifically the Arnold Govt. If there's a Liberal Govt
after the next State election which is not far away.
PX1 Yes, yes, as far as I'm concerned. I mean, it is
the people of the State that matter, it's a region of Australia
which is important and you know, I Just don't believe that a
conlscientious Govt in Canberra can ignore a problem of these
dimensions. NICOLL: Just finally, let me ask you, probably the mst
difficult question of the lot, and that is look ahead 10 or
years, what's your vision for the country. To it possible for
you and we need this, we really need it desperately, is it
possible for you to tell us what you've got in mind for this
country. How you're going to do it in the next 10 to 15 or
years$ put I think Australia has already crossed the Rubicon.
It's become
NICOLLi We've heard it befnre.
PH4: Oh yes, but look, exports are still going gang
bust. As at two days ago you could isee it again
NICOLLs Imports too.
P1 No, no, look 10 years ago we were exporting only
14% of our national production. That's now 24%. 1 mean it's
been a revolution.' This is a much more productive country. It's
now enmeshed truly with the rest of the world oconomy as it never
was before 1983. Before we floated the dollar, removed exchange
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controls and lowerod general levels of protection, the Australian
economy was an isolated uncompetitive economy. It's now an
integrate cozmpatitiva economy and what the Govt's done the last
couple of yerand last'year in particular, is much more
successfully integrated Australia into the SE Asian and north
Asian economies. So if you look at the 90' s you'll find that
Australia is well sotup, it's a low inflation economy# it's got a
competitive exchange rate mechanism. It's got a change iii the
productive culture at management and with labor we're a high
productivity country at the moment. we're wall set up to hop
into that growth in the vortex of growth in the Asia Pacific
which will lift income and living standards through the 90' s and
beyond. I mean Australia has made the change. We've got further
to go but we have made the fundamental change which I was talking
about in the early to mid 1980' s and tha Australian people
deserve a tremendous amount of credit for making that change and
being so conscientious about their economic and social
circumstances. NICOLLt It's interesting that you mention Asia because
those countries do have long term plans. Japan for example,
thinks decades ahead. we don't, do we, we think from one
election to the next.
PM: Except, I mean I think we are now by getting the
line straight, that is do we want to be a closed economy shipping
a bit of wheat and wool, no. Are we happy to have only 3 kids in
completing secondary school, no. what have we got now. We'r
not just a closed economy shipping a bit of wheat and wool, we're
an Open economy, where this year for the first year ever
manufactured exports equal rural exports and the fastest growing
component of that is elaborately transformed? manufactures. This
year nearly 8 kids in 10 complete secondary school. Ton years
ago it was 3 in
NICOLLI A lot of them are thef a becausa they can't get
work. P1 Oh no. Well, there ara some thera obviously but
the retention rate has climbed right through the 80' s even when
employment was strong. And we're now concentrating on
Australia's greatest comparative advantage, which is its
education system. Education, research and development, product
innovation, elaborate transformation of products dovetailed into
the Asia Pacific. That's Australia future, not just selling
commodities which is what the Liberal Party locked us into and
where the debt came from. The debt of Australia started in the
late 1960' s and because basically we want through the Rip Van
Winkle years of Menzies and later, but the transformation of
Australia to a modern indtistrial country with a ' productive
culture didn't occur. It waited until 1983 before we started,
but we're well on the way now and I think AustrAlia has made the
fundamental change and will continue to make it & a the 90' B go
one End