PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P. J. KEATING MP
DOORSTOP, PARLIAMENT HOUSE, DARWIN, 19 AUGUST 1994
E& OE PROOF COPY
PM: You want some general comments, I think, about the meeting and its
prospects. Well, let me begin by saying, I think, we've now been for
most of the last decade embarked on a program of opening Australia
up and inducing a productive ethic into the way in which the Australian
economy operates. The Commonwealth Government this Labor
Government took huge decisions in the 1 980s, removing exchange
cpnj~ qjs in 1953 and starting to knock the tariff wall over in 1 968-t6the
point where we'll have tariffs down by about five per cent by 1997.
The competitive breezes which then come with that through input,
competition, through a free flow of goods in the economy, a free flow of
funds all needs to be complemented by productivity change at the
workplace, by productivity change in all of the areas of commerce
including that of the big state utilities.
So, one of the principle matters under discussion here today is the
competition principles which are part and parcel of the Trade Practices
Act which under the recommendations of Professor Hilm-er should-be
extended to States authorities. In other words, we-got the same
competitive elements into those parts of the economy which formerly
have had them locked out. Because we know to keep the Australian
economy growing, to not run up against a Balance of Payments
constraint in the future, to produce more goods and services, we are
going to need to have the Australian economy supple and that means
electricity authorities, it means rail authorities, port authorities, just as
It has meant for the Commonwealth telecommunications and airlines.
Now, at our officials discussions we are at the point where there can
be a full embrace of the program which we adopted in principal in
Hobart at the COAG meeting. Now, there is some trepidation on the
part of some S5tates about this. I mean, in a sense, as there was with
the Commonwealth Cabinet when we decided to start knocking the
tariff wall over in the 1 980s. But, competition matters and competition
works and I hope it is not too ironic that a Labor Prime Minister has to
say to a collection largely of Coalition Liberal and National Party
Premiers who are always telling us about the virtues of the market, that
2
there is actually a virtue in marketplace competition. Now, I think,
they're saying ' well look, we can swim, but you are now asking us to
dive into the deep end of the pool. Now, I'm sure we're going to make
it, but let's think about it first.' So, they are coming to the edge and
standing back a bit, then coming to the edge and standing back a bit.
But I think, there is a tremendous opportunity to be seized here and
one that's really going to mean that for consumers we are going to see
lower prices, for businesses lower electricity charges, better water
charges, better gas access, all of these sorts of things.
Now, this is not a revenue matter. When the Commonwealth started to
pull tariffs down there was a tremendous cost to the Commonwealth
budget in lost customs duty. So, we didn't say ' oh well look, we are
going to lose custom duty here we'd better not do it.' We did it
because we wanted a new industrial society and that's what we have
got as a consequence. We've now got high technology companies
being born all over the country. We've got a massive shift in the
nature of our domestic producers who are now finding export markets,
you've seen the McisyRpr on the 700 exporters, all of that has
come because largely w've knocked over protection and we did it not
because of Influences on the Commonwealth budget.
Now, the States are saying to us now ' well look, there is going to be..
they have a number a $ 5 billion budgetary benefit for the
Commonwealth here and you should split that with us and this is
basically a money matter.' Well, it's not a money matter because
largely what is going to happen here, most of the benefit ought to go to
consumers. It is not a budgetary thing, it's not going to go to the
Commonwealth or the State budgets. It's really about getting some of
the monopoly profits back into the hands of business with lower prices
and consumers with lower prices. Now, the change is worth doing for
those competitive and efficiency reasons and not for any
consequential revenue effects.
Let me just for a moment give you an indication of how this $ 5 billion
number, for what that's worth, is way wide of the mark. The States say
there Is a $ 5 billion benefit to the Commonwealth in this. Well, as
Professor Hilmer said on the radio this morning, even if you add up all
of the States authorities water, gas, electricity, ports their Income to
States, it doesn't amount to $ 5 billion. But, were the Commonwealth to
collect $ 5 billion on it through its corporation tax you know the
corporate rate is 33 per cent to collect S5 billion at the rate of 33 per
cent we would have to be taxing $ 15 billion of profits. Now, what does
the State authority get? Would it get 10 per cent on turn over? So, if
they have got $ 15 billion worth of profits, what is the turn over? $ 150
billion. Now, the whole economy is only $ 400 billion. The whole
Australian national economy Is only $ 400 billion. So, nobody is going
to accept the notion that a behavioural change or a competitive
change is going to add $ 150 billion of economic value which would
translate to profits of $ 15 billion taxed at the Commonwealth rate of 33
per cent to a $ 5 billion benefit to the Commonwealth. It is just an
absurdity. Any benefit to the Commonwealth would be lucky to be
per cent of the $ 5 billion the States are speaking of and for our part, if
it is of those orders of magnitude, and it is, we don't mind to let the
States have a substantial proportion of that back.
But, there Is another agenda here, can I just say this. The other
agenda is that a number of Premiers have said ' look, this is an
occasion to sit down and give us a chop at the Commonwealth's tax
base, let's get, you know in the bonhomie and fellowship of the human
race and the rest of it, why don't we decide how much of the
Commonwealth's tax base goes to the States?' Now, no one can quite
say the phrase ' revenue sharing', but that's what they mean. Now, let
me just say this about revenue sharing. If the States were revenue
sharing with the Commonwealth in the last three years, they would
have lost $ 2.3 billion. So, now the recession is past and growth is
back again, they are saying ' well look, we wouldn't have shared with
you in the recession, but we will share with you in the up side.' I would
say well, that's very interesting. Whereas we said look, look what we
have done, you gave some ground in February at COAG in adopting
the Hilmer competition policies in principle. At the Premiers
conference in May we showed our bona fides by giving you a new
financial deal for three years. That was real terms guarantee per
capita. That is the maintenance of your revenues with inflation
adjustment in real terms plus a population factor. This has given the
States more certainty than they have ever had, certainly since 1983
and I believe before that. I said, so, you gave a bit in February, the
Commonwealth has given some in May, now is the time to drive the
Hilmer reforms home and when we sit at the next Premiers conference
we can have a sensible discussion again about these things.
So, from my point of view there is no reason why all the States can't
agree to the elements of the proposals outlined in our draft
communique. That is, for competition principles, extending the Trade
Practices Act, the access regime, the pricing and cnie surveillance
regime, the competition council to look at the way in which mon-opaIes
might be treated in the future and with the transitional provisions there
is all the protection in the world in there for the States. And, really,
what we've got here is a bit of fear about the marketplace. A little bit of
fear about competition. Now, that is understandable, but it shouldn't
be enough to deter States from actually picking this up.
J: In the spirit of give and take that you talk about then, can you
genuinely proceed with Ralph Willis' threat to legislate the competition
measures without the States co-operation. It may be legal, but is it
practical?
PM: Well, one of the notions that is around they are saying, well, let's say
for what's called State Mandated Conduct, this is where a State agrees
to a particular activity be it an egg marketing arrangement or a sugar
marketing arrangement or something like that, that the States should
have an over ride of the Trade Practices Act. But, they can mandate
any activity. For instance, someone could mandate the Coles Myer
take over of Foodland and then we would be suspending the Trade
Practices Act, so we wouldn't be moving on from here in a progressive
way to reform with good competition principles, we'd be actually taking
the Trade Practices Act back before 1975. Now, one thing for sure
here, we are not going to go backwards. If the Commonwealth already
has these powers in this Act, then seeking to co-operatively extend it is
the way to go. But, we are not going to co-operatively go backwards
and I think that is the point.
J: But without co-operation will you go forward. Will you legislate
whether or not you have the States approval?
PM: Well, I think that there is enough respect for some market disciplines in
this meeting to get a degree of agreement, but I think States have got
to face this fact and particularly Coalition States. They can't go
embracing free enterprise and the marketplace and the moment a
Labor Government says ' well, what about trying a dose of it' they say
' oh, no, no, we won't have that.'
J: But, every Premier, even the Labor Premier coming in today has said
that they want a fair share of the benefits of this and they all talked
about billions of dollars. Now, is that just not on the table?
PM: Well, I've given you the answer to that. The value of the revenue
change here is not the issue. The Issue is whether the consumers of
Queensland and NSW and Victoria, say in electricity, get lower
electricity prices. Whether the business, the aluminium smelters and
other people get lower electricity prices. Whether the water
authorities, whether businesses which use water, including consumers,
get better prices. I mean, that Is the issue.
J: But, do you accept that revenue may not be the issue for you, but it
certainly is to them. They see you getting more money.
PM: Their budgets at the moment are growing much more rapidly their
revenues than the Commonwealths. That Is, state stamp duties on
property, on shares. Their budgets are responding, their revenue
growth has outstripped ours enormously in the last two years. So, the
States are now in a very look at Premier Fahey's spending in the
last six weeks a railway line to Parramatta, $ 400 million for a railway
line to the airport. Premier Kennett is telling us about the surplus in
the Victorian budget. I mean, the Commonwealth carries the cost of
the economy in the recessions. It takes the shock absorbing affect. It
has got to have the capacity to get back into surplus in the good times.
J: What about the argument for transitional assistance from the
Commonwealth as Professor Hilmer suggests. Any financial money
there and if so how much?
PM: Well, that's what we are talking about. I think we are prepared to talk
about that, but again, taking some notional GDP effect and then trying
to divide that into Commonwealth revenue is, you know, the games
that shouldn't be played on an old war horse like me.
J: Are you going to talk to Mr Fahey about Circular Quay, Prime Minister,
today?
PM: No, well, maybe I will, but that would be a side event.
ends