PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING, MP
COLLINGWOOD FOOTBALL CLUB POST BUDGET LUNCH
MELBOURNE, FRIDAY 13 MAY, 1994
QUESTION AND ANSWER SESSION
Q: ( Inaudible)... I'd like to know if you'd be interested in having an Accord
with business, you've had an Accord with the unions but what about an
Accord with business?
PMV: Well, the emphasis of the Accord was, the Accord started from the
1983 economic summit which was a cooperative undertaking between
the government and business and the trade unions to sit down and sort
out where our national income went and what we did with it. And, as a
consequence of this, we've seen a great behavioural change in the
workforce which has, over time, expressly, beneficially affected
business. And the consequence of that is now that the profit share,
that is the proportion of national income going to profits, is today as
high as it was in 1988 and in 1988 it was beyond any historical
experience in Australia. It was the highest profit share in our history.
And, we've got, as a consequence of wage restraint, we've got
endemically low inflation at around two per cent. So, low inflation
gives us the capacity to have low interest rates, a higher profit share
gives us the capacity to have investment and the government has built
on these things by introducing a 33 per cent corporate tax rate from a
high of 49 per cent, which it was not so many years ago. We've
removed the double tax on dividends, we've got a big tax break in
there for research and development, a 150 per cent write off. So,
there's a package of things and central to that is the Accord. So, while
the government's been able to sit down with the trade unions because
we're now a more decentralised labour market where the centralised
system of today is but a remnant of what it was and where most
wage fixation is done on an enterprise basis and that will continue to
become more the case in the next couple of years, the Accord
becomes more a state of mind than an actual instrument for setting
wages or prices or profits. But, the commitment from the trade unions
is that we'll have wages growth in Australia so as we have an inflation
rate competitive with our trading partners. So, the Accord is now 11
years old and the sea change in the Australian labour market has been
so profound that we can sit with one of the lowest inflation rates in the
world. So, while business doesn't sit at that table or didn't sit when
the Accord was entered into last in 1993 for the three years in fact,
business is always there because the very essence of the change is to
promote higher profits, to have a more flexible system of enterprises in
this country, a better system of enterprise bargaining and, of course, in
the end, greater competitiveness. So, business is, let's say, the silent
partner in the Accord but the clear beneficiary.
Q: I thank you for that explanation, it's excellent. However, in any game, I
put to you, we need two teams. We've got the government, we've got
the unions, but we need another player and that's business. So, you
can't win the competition unless you've got the ( inaudible)..... in the
game. So how about letting business get into the league?
PM: Well, what a government must do or try to do is create the conditions
for growth. This is where business gets its crack at the title, its piece
of the action. And as the Budget forecasts ( inaudible).... we're going
to be growing in the coming year at about four and a half percent. We
grew at four percent for the year to December and we're saying the
economy will grow, in the coming financial year from 1 July at four and
a half per cent. Now, the average rate of growth of the OECD
economies, that's the Western world economies, this year is one per
cent. So, we're growing now, much more rapidly than that and now
we've got a more flexible economy than we had in the 1980s where we
averaged four and a half per cent from 1983-90. We might be able to
do that with more ease now or even do better. So, this is where
business gets its chance at the national cake and where it's involved
and becomes central to the whole thing, through the progression of
growth. And, growth is maintained by the public sector hopping out of the way
as demand for savings, for investment comes through in the
investment phase of the recovery. And, this is what the Budget has
sought to do, to pull out the fiscal stimulus or the underpinning or the
cushioning which has, if you like, provided the shock absorber for the
community and the economy over the last three or so difficult years.
So, as now we are starting to grow we don't need the Commonwealth
cushion in there. So, we're now gradually withdrawing it but we don't
want to withdraw it too quickly unless the game collapses again, well
slows down, slows to a rate other than that which we could otherwise
attain.
So, we've got, we think, the right balances. That is, we provided the
cushioning for the recession, the Budget balance changed by $ 20 odd
billion, that meant there was $ 20 billion more being spent than would
otherwise be spent. But, now the economy is picking up we can
withdraw it and business can come in and take up the slack.
Q: Mr Keating my name is Tim Grant, I manage Beaurepaire, the large
Australian tyre company. We're a large provider of goods and
services to government at federal and state levels but I wonder why
federally, the government doesn't take a stronger stance regarding the
purchase of Australian made for government.
PM: Well, there is a policy which we've developed for government
purchasing and generally it devolves around suppliers who have a
record of supply with the Commonwealth. But, I don't think that
government purchasing government purchasing can be important
particularly in developing industries which might not otherwise have
the kick along that they have had without government purchasing.
Computer software comes to mind instantly as a locally grown
business in this country that would not be as strong as it is today
without the Commonwealth being a major purchaser of that sort of
product. But, the sea change in Australia in the last few years, of
course, is the fact that it's a much more open economy.
And now it is more open it means, generally, our manufacturers have
measured up to the competition and we're now doing things much
more smartly and much more competitively. I mean, the, perhaps,
most obvious place we can look is the motor industry. Look at the
quality of Australian cars today and the price, compared to 10 years
ago. And there's only one reason why it's there and that's because the
tariff wall has come down. Now were that not to be the case we'd be
still making expensive cars of much less quality because there is no
need to get to where the world insists that you should. As a
consequence of getting there, we've had major investments by general
motors, Ford is now considering where it goes with the Falcon
replacement, Toyota has made the decision to put a five million dollar
state of the art car plant in Melbourne and to feed its product into the
international system, Mitsubishi have just made a decision to build a
Mitsubishi Magna in South Australia for world distribution and is now
considering where it goes with the Magna sedan. This was
unthinkable ten years ago, that these decisions should have been
made. That's the reason why preference has been diminished in the
Australian economy over the last ten years and in the doing of it a
whole lot of clever industries and companies have sprung up. So,
while there's a role for government purchasing as part of that
preference in kicking a fledgling industry along, if we're basically down
to products which are long beyond their infancy and certainly we've all
got to agree pneumatic tyres are in that category, then making a case
for government purchasing is basically a bid for business and good on
you. But, I've got a bigger set of considerations to think about.
Q: ( inaudible)... something which was not qualified in the Budget is
the government's attitude to superannuation and in particular the
contributions for small and ( inaudible)... Could you give us some
indication here as to what the government's view is on this issue in the
future, because there is a lot of concern in that area as to what that
attitude is in the future?
PM: Well, let me, as an opener, say, " Where did the policy come from?"
And the answer was superannuation tax concessions before 1985
were available to people really only in the public sector and in the, if
you like, the softer places in the private economy. They were not
generally available. And, what we've succeeded in doing, as part of
the Accord which the first questioner referred to is we've got the
Australian workforce to take five per cent of their income as savings.
And that will soon be six, then seven, then eight, then nine and then
beyond that we'll have to decide how it gets to what we think the
mature contribution is, which is around ten or 12.
Now, it's a very great change to get a whole nation's workforce to take
a significant percentage of their income as savings and not as cash.
Because it builds national savings... ( inaudible)... it is very difficult to
get a behavioural change in the way or the propensity of a country to
save. And some countries are big savers, like Japan, that's why it
always has a big current account surplus. The United States is a
comparatively low saver so it has trouble with its trade accounts.
We're a middle ranking saver but for the capital formation needs of
Australia for its private investment we were not saving enough. And
the public sector was using too much of the savings. So, in the 1980s
we had the public sector dissave. We had the public sector move into
a period of saving by pulling the Budget deficits into surplus and we're
doing the same now.
But, we needed a complement to private savings. Now, lower inflation
will probably make private savings more palatable whereas the tax
treatment of savings with higher inflation made saving less palatable.
So that big behavioural change in inflation will make a difference to
savings just by itself. But, other than that we've got superannuation,
as a device which does two things: it provides something nearer to a
working income in retirement through self provision and it adds to the
stock of national savings. That's why the policy is there and we're now
a long way through it. Now, it is universal but it's private and it's
privately managed. There's not one big government fund, it's
managed by the private savings institutions of this country and it's
provided privately.
Now, because it's universal there's always going to be people who are
casuals who slip in and out of the system. If they're not there for the
long run employment and where the collation and tabulation of their
savings and their superannuation benefits becomes more difficult.
We've been examining that and, as you know, the banks have now
made a bid for these savings ( inaudible).., of the superannuation
industry is trying to hang on to that which they believe is theirs and this
is something we are yet to determine. But, we think there is some
difficulty with people moving in and out of these things and therefore
some, more ready portability is something which would be desirable on
all accounts on the part of the employee and the employer and the
country. So, we haven't resolved precisely where that is going other
than that the employers are obliged to fund those contributions under
those Accord arrangements given the fact that all of those employees
would otherwise be taking those contributions in higher wages. But, it
is something which I think, when we sort it out and get it working well,
will just add to the strength of superannuation as a vehicle in this
country.
Q: ( inaudible)..
PM: Well, on the first, I think, you are confusing the point about the $ 1
billion budget deficit and 1 per cent of GOP. The Government in ' One
Nation' never talked about a $ 1 billion budget deficit ever. We talked
about getting the Budget to a deficit of 1 per cent of GOP in 1995-96.
But, then after the February 1992 ' One Nation' statement we had a
further unforeseen deterioration in revenue and the Treasurer reported
to us, I think, something like a $ 6 billion shift in revenue down. So, we
put back by one year the 1 per cent of GOP target which is now at
1996-97 and not 1995-96.
Now, what the Budget said on Tuesday night is that we will now be
within that 1 per cent target by 1996-97 and what we have in the
Budget estimates now, is .9 of a per cent of GOP. So, if we don't do
any better than where we are now, we believe we will be under 1 per
cent of GOP by 1996-97.
Now, the only other country in the world that will reduce its budget
deficit that rapidly is Germany. All the other countries, let me just
quote you from the Budget paper, the only other countries which are
likely Germany, have got a target of 1 per cent by 1997; the US, 2.3
per cent by 1998; France, 2.5 per cent by 1997; Italy, 5.8 per cent by
1996; UK, 1.5 per cent by 1997-98 and Canada, 3 per cent by 1996-
97. Australia in contrast will be at 1 per cent or under 1 per cent in
1996-97.
Remember I was talking earlier about the cushion. If the
Commonwealth simply says, as some financial commentators, I might
say non-discredited by the way, non-discredited, people have been
consistently wrong for nearly a decade and saying well, look, let's get
the budget down to balance quicker. So, the Commonwealth says
well, ok, let's rip the cushion out goes, a lot of the private sector
investment we're seeing today. So, we are going to have a very rapid
consolidation of the Commonwealth account, but it's got to be at a
pace which keeps the thing going.
You see, a lot of these people say the ' One Nation' thing, you know,
remember that and the implication is there's something wrong with it
and some of that implication you'll question. The fact is it did exactly
what it said it would do. It got Australia going again and we're growing
somewhere at the moment between 4 and 4.5 per cent faster than any
other substantial western world economy. And that is happening
because fiscal policy in the ' One Nation' package in particular and the
current fiscal policy has been right. Now, in the last election we had
John Hewson telling us we were going to have a double dip recession
and a depression and things are going to get worse and he had the
gun sight ads blowing the unemployed away. We've had 235,000 jobs
in the last year and we're now, as I said, growing at over 4 per cent
and we'll have the budget down to around 1 per cent of GDP by then.
And, including paying the tax cuts which you referred to. These were
brought forward and by some, I can't remember exactly, I think five or
six months, a $ 3 billion round of tax cuts and we'll deliver on those tax
cuts as we've delivered on every other round of tax cuts since the
Accord. The first tax cuts were negotiated under the Accord of 1984
and what we've said for the second round of the tax cuts, we've put
things back we've brought the first lot forward, we but the second lot
back and said that we'll pay them when fiscal conditions are
appropriate probably in 1998.
So, in terms of the Government's macroeconomic management of the
economy, we have got back to growth, quite high growth, and with low
inflation. I know of many other countries that would like to be in this
position. Can I ju st say about Melbourne, you asked me about Melbourne. One
of the things which the Committee for Melbourne has pressed on me
for years is letting Melbourne develop itself its airport and we
announced, my colleague Laurie Brereton announced here in
Melbourne about 3 weeks ago, that in the White Paper, the regional
development section of it, that we would start to prepare for sale the
Federal Airports Corporation and sell off the assets. One of which will
include Tullamarine airport. I think, that gives Melbourne a real
chance to wind the capital it wants to wind into the airport and to see
the thing grow and prosper. Qantas is going to be floated. Qantas
will be, in this financial year, a private sector business. It will have
per cent ownership of British Airways, it will be part of the British
Airways world system. And Ansett is now an international carrier for
the first time in its history as a consequence of the ' One Nation'
statement. In the ' One Nation' statement we took away the bunkum of
having one airline flying outside of Australia and a couple flying in.
We now have the similarities between domestic and international
carriage of passengers. Now, Ansett is going to be flying to Japan and
Bangkok and Singapore and other parts of the Asia-Pacific.
Therefore, if Ansett and Qantas are both commercial companies and
Melbourne has an unrestrained capacity to develop its airport and
services, then, I think, it's then up the to the city, to the State to say to
those companies there is value in having more frequencies out of here
and it's not something then the Federal Government is responsible for.
Not that we are now.
So, I think, that giving Melbourne the status in its airport and seeing a
couple of strong financial secure private sector airlines in this country
should mean that a city with the promise and tradition of Melbourne
and the state of Victoria should have no trouble later in attracting the
kind of frequencies that can display Victoria to the world and not only
that, as the kind of commercial intercourse which it needs to participate
fully in the Australian economy.
Q: Mr Prime Minister, as an Australian, I am staggered by your suggestion
that you paid for Jeff Kennett's trams But as usual, we paid for those
trams and Jeff Kennett's contribution ought to be recognised
( inaudible)
PM: I was only cracking a joke about Jeff being co-operative. The thing is
the Commonwealth has many choices about where it wants to fund
programs and one of the choices was into Victoria. Some of the
smaller states that have less than the revenue base than the State of
Victoria would say, that if there's any priorities for Commonwealth
expenditure in transport or anywhere else it ought to be not in the
major two States of Victoria and New South Wales. That has not been
this Government's view. We have, therefore, sought to talk to
Victorians about their State. I mean, this is where the conversation
with the Committee for Melbourne has gone on for years now about the
city, about the airport, and one of the things which I said in the speech
is that they're also looking now to see what we can do to build the
Domain tunnel.
Now, let me tell you this. No other Commonwealth government would
build a Domain tunnel. You wouldn't have had a Coalition build a
Domain tunnel in the State and that's why I was making a reference, if
only to the co-operation which, I think, the Commonwealth does
have with the States and which, I think, is imperative in seeing cities
realise their full potential. Because, if it refers to the State mean
administering something like the Domain tunnel and managing the
airport or doing things in the housing sector or the Commonwealth
can play a role. Which, we believe, the Commonwealth should do.
8
Where the traditional rule has been the Commonwealth is not into
regional development, it's not into urban mainstream arterial roads, it's
not into budget transport infrastructure, these are things which the
States have traditionally had. We haven't taken that view.
What I'm saying is: I don't want Jeffrey to put his name on the makers
label of all of them, but to leave a bit of space for the rest of us.
ends