c/ I
PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P. J. KEATING MP
DOORSTOP, CONDELL PARK PRIMARY SCHOOL, 14 DECEMBER 1994
E& OE PROOF COPY
J: What is your response to interest rates?
PM: Well, this is the fastest growing economy in the western world. This is
a great thing for Australia and for Australians and our most earnest
wish is to keep it going right through the 1990s. If we can keep this
sort of growth up that is, strong rates of growth but rates of growth
so that we can sustain low inflation and then the recovery. So, the
point of today's rise in rates is to shave the top off demand so we keep
this recovery sustainable, to keep all those thousands of jobs coming
through and we keep Australia with a great future.
J: two and a quarter per cent in four months, are you touching the
brakes or are you jamming them on?
PM: Nobody would expect to have the interest rates at this stage of a
strong cycle that we had at the bottom of the cycle and that is why we
have had a change. But; it is a change, I'm sure, that all Australians
will understand over time, it is going to give them much greater
prospects. For instance, this year we have had 4.5 per cent
household income per capita growth which is a phenomenal level and
that is because of low inflation producing higher real incomes. We
don't want to see that put asunder and we don't want to see too much
pressure on resources including the labour market, we don't want to
see too much pressure on wages. So, this is the way, if things are
getting a bit too strong, this is one of the ways we can smooth it out.
J: But, have you given the earlier rate increases a chance to flow through
before acting again?
PM: These are judgements. Monetary policy is as much an art as a
science, living off both the published data and anecdotal evidence
about the strengths of the recovery and I am sure the Government and
the Reserve Bank think that we are getting this right to give
Australians that chance. That is, a chance that very few countries like
us in the world have a chance of reasonably strong growth.
J: Are you looking at cutting expenditure at all?
PM: I hear today that Alexander Downer has committed himself absolutely
to cut expenditure. Now, when the Government brings down the
budget and when we have brought down budgets and statements we
explain everything, all the detail is there. Alexander Downer can't go
wandering around the countryside saying he will cut spending and not
say whether he will cut payments on health, pensions, schools, all of
the other areas of Commonwealth expenditure, income support, labour
market programs, so if he wants to say that he is about cutting back
the size of government, he has got to say where he wants to cut it
back.
J: interest rate rises for low income earners
PM: Well, there hasn't been a full flow through of the past interest rate
adjustments to housing. There has been quite a lot of competition in
the banking sector, but the point of the rise is actually to shave some
of the top off spending, that is the essence of it. So that we keep the
recovery going, so that people low income people, middle income
people, high income people can find in three or five years from now
we have still got a strong recovery, we have still got low inflation and
we have still got great opportunities which, as I say, if you look at a
comparable European country to Australia we are growing at the
moment at 6 per cent, they are growing between one and two. That
makes all the world of difference about jobs. We have had now
430,000 jobs growth since the election. Since the March election of
1993 we have had 430,000 job growth. Our labour for the first time
ever is past the eight million mark there are eight million people in
the workforce, ten years ago that was six million, so we have kept all of
those jobs and added to them and that is the key to it.
J: Do you think the demand for places will go up now?
PM: I think that there is a lot of competition in the workforce and in the
economy and, I think, a lot of the key people in organised labour know
that restraint in spending, some restraint in wages will keep low
inflation and what happens with low inflation your wage rise buys
more your wage rise turns into a real wage rise which buys more real
goods and that is not lost on the ACTU, on the workforce in general
and that is why they have been committed for so many years now to
low inflation.
ends