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PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE MON P J KEATING MP
INTERVIEW WITH ANNA REYNOLDS RADIO 40R, 11I MAY 1995
E& OE PROOF COPY
AR: The Prime Minister Paul Keating joins us from Canberra this
morning. Good morning welcome to the program.
PM: Good morning Anna.
AR: Before we get to the actual nitty gritty, how do you think the budget
has been received? You have had a day or so to talk to people
about it now.
PM: Very well, I think. The main point of it, of course, was to sustain the
gro wth through the rest of the 90s. And to do that, we had to
essentially take some off the pressure of interest rates, and reduce
the demand by the public sector or by the Commonwealth
Government on the savings of the country. And we have done that
by changing quite dramatically in fact, it's the largest Budget
change we have ever recorded the Budget balance into surplus,
which reduces that call on savings, which leaves more savings for
Investment, which means there will be more investment and more
jobs. Therefore, the recovery continues on Into the 90s. We had
John Howard running around talking about 5 minutes of sunshine
we have now had 3 years of growth, we have been growing faster
than any other western economy. And now the Treasury is saying
that in the forecast period, we will have sustainable economic growth
and the forecast period Is in the next 3 years. So, we will have had
3 years of growth 3.5 years of growth and 3 coming. it gives the
lie to that cynical line.
AR: Are you satisfied that the pressure is significantly off interest rates
now?
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PM: As I say, It's a dramatic turnaround in the Budget the turnaround is
$ 12.9 billion. In other words, from the deficit we were running last
year, to the surplus this year we had a deficit last year of $ 12.2
billion, and we are going to be running a surplus of $ 0.7 billion so
there is a $ 12.9 billion...
AR: Yes, but the Democrats are saying, of course though, that it depends
on which figure you look at, and whether you actually take the
underlying figure excluding asset sales. Now, I mean, do you
understand the point they are making there, and their need their
indication that they want some sort of clarification with this Inquiry
In the Senate?
PM: No. Look, that's all. everyone tries to get their little tuppence worth
Into a Budget debate. As for the _ Remocats, the first thing they
always think of Is an inquiry about anything. So, what they don't
think about is the time and the waste in the Senate, and the public
expense. The fact is, the Commonwealth buys assets and sells
assets all the time. For instance, in Queensland, one of the things
we are building at the moment Is in partnership with the
Queensland Government the railways of Robena on the Gold
Coast. Now, that's an expenditure on the Budget. So, If we sell an
asset, it's a sale on the Budget, and the Budget is built on a cash
basis, and always has been. These things are only said by the likes
of John Howard to try to diminish the results. There was someone
on from Moody's in New York this morning on Australian radio
saying " look, we don't care how the Budget surplus Is arrived at
what it means is there will be a massive reduction In the bond selling
program In Australia this year". See, if the Budget has shifted by
$ 12.9 billion, it reduces dramatically the bond selling program the
number of Commonwealth bonds the Government will be selling
and that takes the pressure off Interest rates.
AR: Are you comfortable, though, with the way that sells the position of
the Australian economy to the Australian people I mean, the
Democrats are essentially saying you are being less than honest by
Including the asset sales In that figure.
PM: They are being completely dishonest In making that sort of
reference. I mean, you saw also the Secretary of the Treasury
publish a statement the other day saying that these numbers are all
basically put together I mean, the policies are put together by the
Government, and the collation of the numbers Is put together by the
Treasury. EconorniUpoicies are all about the degree of change one
year over th6-ityear, and the degree of change here is a $ 12.9
billion turnaround. And what that means is that we will be reducing
very dramatically out there in that marketplace every day, when the
Commonwealth is selling their tender Commonwealth bonds to
finance the Budget deficit, this year we will be selling vastly less,
and that will make... . that's why bond yields you will notice in the last
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week, the long-term bond yields have dropped by almost a
percentage point, and that has been confirmed now. In other words,
yesterday they stayed... they dropped even further, so now we have
seen because the market thought the Budget was going to be
good, they have dropped long bond yields by 1 and that Is a
terrific sign for Interest rates in Australia. Can I just make this point:
the short-term interest rates.. . the influence of the short term Interest
rates comes from the markets and also the overnight cash and call
rates set by the Reserve Bank, but then the long rates are set just
exclusively In the market place they are all about sentiment about
inflation, growth, sustainability, Budget deficits, the works. What we
have had there Is a one percentage point reduction In the last week
In the long term bond rate, and that has been confirmed yesterday
with a further small drop. So, that's the judgement that matters.
AR: So you would think that would...
PMV: Not the Democrats. and a silly Inquiry in the Senate.
AR: Speaking of a silly inquiry I mean, presumably they will get it
through, and then they will call on Government people to actually
give evidence, that sort of thing will there be co-operation?
PMV; You have go'. I understand that this Is all part of the trivia and
nonsense of Australian politics now. I mean, when I became
Treasurer all those years ago when I was left that absolute cesspool
of problems by John Howard at that stage, the Coalition
published -one forward-ouDr year estimate of outlays. When they
produced a Budget, they would show you what the next year's
outlays figure would be In projection what we show, is the 2 years
outlays figures 3 years outlays figures in projections, and 3 years
of receipts. In other words, we publish 3 forward estimates of the
deficit or the surplus 3 years out, and the Budget documents all have
graphically Illustrated trend changes in all of the spending programs.
It's the Rolls Royce of Budget documents world-wide there is no
country that produces Budget documents in the OECD like Australia.
AR: Nonetheless, you do have to live with the Senate there is not much
choice about that, and It looks like they will be making some noises.
And noises, too, from the Green Senators about the Increase in the
corporate tax, and saying particularly, worried about the effect on
small business. I mean, can you understand their concern there?
PMV: The Green Senators?
AR: Yes.
PM: These are the people who actually wanted to bang tax rates up for
high Income earners, who wanted to push the company tax rates up,
who want a fixed 20% fiat company tax for all companies. I mean, it
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wears a bit thin for them to be taking a point about the impact of
small business. We have made...
AR: I'm just wondering how you think that tax is going to impact on some
small businesses, who certainly in Queensland, are really feeling the
pinch at the moment?
PMV: If they're feeling the pinch, they are feeling it In the highest growth
economy we have ever had. We have been growing at 5% to 6%
with 2% Inflation, so If they are feeling the pinch, they ought to say
ofsmall business is not for me", because it Is never going to get any
better. This Is as good as It ever gets. To have an economy
growing at 5% with 2% Inflation is as good as it ever gets, so if they
are feeling the pinch, they have got to say " I had better go back to
PAYE employment".
AR: I mean, there are different sectors, obviously, performing differently.-
in the housing industry In Queensland, starts have been low, and
particularly In the growth areas where there has been a boom over
the last 6 months or so small businesses are worried about the
Increase In the tax on some building materials. Do you think that
could bite there, or do you think that impact is being overestimated?
PMV: The whole point of the policy has been to slow the economy down. I
mean, the Government.. . you have got to do some tdU~ ih things to do
kind things.
AR: So people have to suffer in that process?
PMV: No. Not suffer. Just understand this point we Increased interest
rates by 3 percentage points last November, quickly and sharply.
And that did have the effect of slowing the economy down. By now
Introducing a Budget with such a huge change as this a turnaround
of nearly $ 13 billion, taking the pressure off interest rates what that
means is that your average householder, and your average homebuyer,
won't be now In the position of fearing a sort of cascading
interest rate rises because of the decisions that the Government has
taken sensibly, correctly, timely, to change that spending profile in
the economy, and now to adjust the policy weights back on to
Budget policy away from Interest rates. That Is what Is going to
matter to the building industry the building Industry got to the point
where we couldn't keep the resources up to It that's material or
labour. And what happens then is the price of houses starts
rocketing away with price inflation. So, It slowed down yes, It has
slowed down, it will affect some builders, it may affect many builders
but in the longer run, It will pick up to a better growth trajectory, and
that will happen because of the policy decisions made in
October/ November last year by the Government, and by the
Government In the Budget on Tuesday night.
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AR: I noticed one of the resyonses this morning from the Bankers
Association to the increase in corporate tax Is that they say the extra
taxes they are going to have to pay will be passed on to consumers
in terms of higher fees I mean, is that the sort of outcome you were
actually predicting?
PM: That's just a bit of nonsense for the media. Their profits are at such
extraordinary levels, they will just take the hit on their profits, as they
should. In other words, they have got a licence from the
Government.... . you see, those big banks ANZ, the Commonwealth,
Westpac have got a licence from the Government to operate as a
bank, and they have got a great monopoly position, and because of
that, they have these very high profits. Now, what we are saying Is
that they can share some of those profits with the public.
AR: So you don't think they should have to pass on that extra cost they
they will have to bear by Increasing fees to consumers?
PM: They are already on the nose with people through Increasing fees.
People are moving to smaller banking institutions because they don't
like the way the indifferent way -Finey-are treated by the major
banks. And If they want to after a Budget poke their tongue out at
people and say "~ we'll pass some more charges -onto you", more
people will vote with their feet and leave them go to the smaller
institutions. Their profits are so strong, that they will take this
and say its a mere bagatelle for them.
AR: Thinking about the overall way the Budget has been received there
has been a fair bit of emphasis here In Queensland on the way it will
affect certain industries, and people talking about not being able to
buy a new car, increased car prices, this that and the other I mean,
what do you think is In it for the average person?
PM: The biggest thing In It for the average person Is the superannuation
change. What we have put into it Is that the 9% under the
superannuation guarantee charge which the Government put Into
the Budget In 1991 from the changes which were negotiated with the
Trade Unions under the Accord In 1986 we started 3% In 1986,
then we moved it to 5% on a voluntary basis under awards, then to
the superannuation guarantee charge where it became compulsory,
to 6% on 1 July this year. That rises to 9% at the end of this decade.
To that, on Tuesday night, the Government has added 3% by way of
employee contributions, and 3% by way of the One Nation tax cuts
paid Into their superannuation accounts. So, as a consequence of
Tuesday night, we will be adding 6 percentage points to the 9%
already available under the superannuation guarantee. So that
means that every person In the country every wage and salary
earner will have 15% of their wages and salaries going Into a
national superannuation scheme, and what that will mean I gave
the example yesterday of someone on average weekly earnings it
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will mean that someone who was on say $ 33,000 a year, at the end
of their working life, will pick up a pension of $ 30,000 a year, coming
from a lump oum of juat on $ 0.6 million. go a porcon on $ 22,000 a
year, will end up putting away a kitty of $ 0.5 million, and that will
then equal an annuity over the rest of their lives of $ 30,000 a year.
Now,..
AR: It's a long-term, type of benefit for people, though, isn't it are you
confident you will be able to get the message through, or do you
-think It will be hard to sell In the run-up to an election?
PM: You have got understand this, Anna, that the time my generation
I'm 50, 51 the time my generation Is 65, this Is the post-baby boom
boomers, so called baby-boomers there will be twice as many
retired age people as there Is today. The pressure on the pension Is
going to be so inordinately high, that this scheme we put in Tuesday
night is going to protect the Income In retirement of not just all the
baby-boomers, but all of their children. And, even some of the
people older than the baby-boomers. In other words, this scheme Is
already going to be at 9% by the year 2000 that's only 5 years
away. And it will go on, but let me make this point to you could you
imagine the Liberal party having the courage, the wit, the
Imagination to sit down with a workforce over a 10 year period, and
piece together a national savings and retirement Income scheme?
AR: All right, we will take that up with them at a later date. Mr Keating,
we will have to leave It we're out of time. Thank you very much for
joining us.
PM: Thank you very much indeed, Anna.
AR: Prime Minister, Paul Keating.
ends.