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TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING MP
PRESS CONFERENCE, PARLIAMENT HOUSE, CANBERRA
23 MAY 1995
E& OE PROOF ONLY
PM: This is my third visit as Prime Minister to Japan, but it will be my first
official visit and, in fact, the first official visit of any Australian Prime
Minister for nearly a decade. So I think it has a symbolic as well as a
working dimension to it.
You know this relationship with Japan has been vital to Australia and
remains vital to us, which is a view which I have taken strongly now
over 20 odd years in my own relationship with Japan and its
companies and its governments. It is the second largest economy in
the world. It is our largest trading partner and it is the engine of
economic growth in East Asia.
Japan actually represents 70 per cent of the entire East Asian
economy. So the size of it should never be underestimated. What
happens in Tokyo, in fact, shapes what happens economically in the
region and will matter, always, to Australia and to our own lives and
the sort of lives our children will have as well.
More than ever, and more than any other country in the region, Japan
will be critical I think to our economic growth and our ability to create
high quality, interesting jobs for ourselves and our children.
Now, obviously, this visit is coming just about very close to the last
days of the 50th anniversary of the end of the war, which gives some
other dimension to the visit. The only thing I will say to you about that
is I think we should never forget the suffering and cruelty of that war.
But I think we need to remember, also, what has happened in the
years since and despite very different cultures and the legacy of the
war, we have, in the unlikely event, built a remarkable relationship with
Japan one of inestimable value to Australians and one which has, in
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very large part, also not only underpinned their post-war economic
growth, but underpinned Australia's as well.
So the relationship has grown from enmity through development of
trading rinks. It is now a very broad political and economic relationship
with growing, people -to-people, ties. Last year we had 720,000
tourists coming here from Japan and we have now exchanged 10,000
school exchange visits. So there are a lot of Australians who live with
Japanese families and the converse being the case here.
So I want to use the visit to reflect on that relationship in all of its
dimensions and look to the future where we are going in the region.
I will be having talks, obviously, with the Prime Minister. Mrs Keating
and I will be very honoured to be received by the Emperor and the
Empress for an official lunch. But with the Government I will be
meeting, not only with the Prime Minister, but with the MITI Minister,
Minister Hashimoto who, of course, I knew well in my Treasury years
when he was Finance Minster Foreign Minister Kono and other key
Japanese political, business and financial leaders.
I will also be visiting the Hodogaya War Cemetery where I will lay a
wreath to the 278 Australians who are buried there and the others who
died in the war.
In my discussions with Japanese leaders about our bilateral
relationship, I will be focussing on the things of economic and political
relevance in that and, also, the economic and political relevance in the
changing global environment. We will discuss regional, political and
economic developments, especially APEC. And you know that Japan
is hosting the third APEC Leaders meeting in Osaka in November of
this year and I will be urging Prime Minister Murayama and his
colleagues to work towards an ambitious and solid set of outcomes in
Osaka to carry forward, in a practical way, that historic declaration
which was agreed to at Bogor, in Indonesia, late last year.
So, in all, I see it as a chance to, again, get to understand Japan's
current thinking better, to advance our bilateral relationship and to
discuss these multilateral matters between us, particularly in this fast
growing area of the World, but multilateral both in the strategic and in
the economic sense and, of course, with APEC.
So I might leave it there and take questions.
J: Prime Minister what is the message that you will be giving the
Japanese about the trade dispute with America and will Australia be
taking sides on that?
PM: Well I think the side we'll be taking is Australia's side. rhat is, we want
Japan to continue to open Its markets. I think the Americans think that
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too. You know that Japan and the United States are both countries
with very low tariffs. We are not talking here about tariff barriers, we
are talking about informal barriers and they are of as much interest to
us as they are to the United States and many other countries. But I
think we would like these disputes settled multilaterally, not unilaterally
or bilaterally, particularly in deals which may harm third countries, in
which case in motor vehicles and motor parts, ourselves So, yes, we
understand the interest of the United States in trying to eat away at
that trade surplus by getting better market access. But one of the
stories about, particularly the United States which is the largest trading
entity in the world, wherever US investment goes, trade follows. In
Europe where there Is very strong US investment, the United States
doesn't have trading problems. It has it in Japan where its investment
is nothing like as strong as it is in other parts of the world and that gets
you back, again, to multilateral solutions like APEC. Trade facilitation,
opening investment policies, seeing a real and growing presence of
American investment in the Japanese economy and its manufacturing
and service sectors is the way, basically, to deal with these problems.
So, again, all pointers point to multilateral solutions and not bilateral
ones.
J: Will you be giving the Japanese Government an assessment of what
affect on Australia either them acceding to some sort of bilateral
arrangement with the US would have, or the US sanctions being
imposed how either of those scenarios would affect us?
PM: Well you might remember when I went there a few years ago, I said
Australia wouldn't be part of any trade agreement which would
disadvantage Japan and we will be reminding them of that and saying
we would appreciate the reciprocity, well if you like reciprocal,
sentiments. That is, they too take the view that in any settlement of
these disputes they don't impact on third countries like ourselves,
particularly countries which have a long and enduring trade and
commercial relationship with them and who have an important political
relationship with Japan. I mean I don't think anyone should
underestimate the strength of the political relationship Au~ t'a1ia enjoys
with Japan, or how useful it has been to both of us in : he recent past.
So all of these things, I am sure, will weigh on their minds.
J: If there are to be real solutions, though, the structural solutions are
going to take a long time and yet you have got, obviously, a lot of
impatience building up in Washington. Isn't there a collision of two
different timeframes?
P Well the problem underneath all of this is the savings balances. Japan
is a very strong saving country and the United States isn't and if you
look at Japan it has got a very big investment in their capital stock, in
motor vehicles, in quality, in price and that while there has been quite,
you know, substantial changes, really substantial changes in the US
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motor industry, by and large if you look at the US/ Japan relationship in
its totality, you are fighting all the time against the tide of those savings
imbalances. One of the ways that will change, of course, is opening
up more access in Japan and Japan spending more on domestic
demand, improving their infrastructure, their housing, these sorts of
things. That would tend to run down their savings and run some of
those surpluses away. But the other way where this is going to be
worked out is in the trade and investment opportunities in East Asia for
the United States and Japan and you can see just in the last six or
seven years how much there has been a weighing off by the Japanese
of their dependency on the US market as they have grown market
share in East Asia. All the more reason why APEC becomes important
and the Uruguay Round. That is, opening up opportunities in these
markets for the United States to invest and for Japan to invest into
trade and the same for Japan. Now you know that the United States
has a very large trade deficit with Japan. But it is not as large per
capita as the trade deficit we have with the United States. I mean we
have a much larger deficit with the United States, than the United
States has with Japan on a per capita basis. But we have a very large
surplus with the Japanese. So if the United States ends up with a very
large deficit with Japan but other surpluses around the area, it matters
much less then in the American current account than it would matter
today or mattered a few years ago. So that is why given the fact that
the propensity of people to change their savings habits is slow to
happen, then this is going to be particularly true of the United States
one feels and it will take a while, also, for the Japanese to change their
habits. That is, to start running down their savings and spending on
domestic demand and infrastructure. We have got to create other
trading opportunities and better trading environments for these large
relationships to be somewhat, you know, complemented by other
trading opportunities and you can see this very obviously in the
statistical change in the relationship between Japan and the
United States and Japan's reliance upon the United States market.
That has changed a lot in the last five years and I think it will change a
lot in the next five years.
J: Prime Minister, if you have got these two giant economies trying to
resolve their trade differences by way of trade war, doesn't that
undermine the very basis of APEC and put into doubt the Bogor
vision?
PM: Oh, I don't think that is right at all and you would have noticed in the
Financial Review today, Winston Lord, the US Assistant Secretary of
State for East Asia and Pacific Affairs, talking about the importance of
the Bogor Declaration and how it ought to be advanced in Osaka.
In other words, you know, in what is another one of these disputes.
I mean we had the autoparts one a couple of years ago and now it is
fully built up vehicles and these sort of frantic 301 actions and the rest.
Then you have a high ranking American official coming out talking
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about the global, or the blanket, solution the multilateral solution
tends to, I think, reinforce the point I am making. That is, that APEC is
one of the good things on the horizon given the fact that the G-7 is
doing nothing about any multilateral solutions to any further advancing
of reducing trade protectionism worldwide. The only group doing it is
APEC and I think Lord's articulation of that argument in Tokyo, a day
or so ago, underlines its importance.
J-Prime Minister do you have any evidence at all that Japan has taken
steps in any way to advance the vision of the Bogor Declaration since
it was made?
PM: Oh, yes, we have had a couple of quite good officials meetings at this
point and they have gone quite pleasingly for those of us who have
been Interested in really making certain that Osaka produces a good
outcome and I think you will find that also the influence of Indonesia
will be important in this, as President Soeharto was not only the host,
but, of course, the host during the formation of the Declaration in a
sense, passing on the baton to Prime Minister Murayama the strength
of his own position will not be lost on the Japanese either.
J: Prime Minister why did you agree to accept a Honorary Degree? What
is it for and would you look forward to being known as Dr Keating
afterwards?
PM: Well I am not particularly interested in labels and handles, I think you
would have worked that out by now. It's something which is an honour
to Australia, not simply to me and it is basically about our role, and my
own within it, in the creation of a multilateral framework for trade and
investment in the Asia Pacific and finding, if you like, structures which
include Japan and take account of Japan's place in the world and I
mean I think that is the antecedence of it and I am more than honoured
by their thought in so acknowledging that work in this way.
J: Mr Keating you talk about encouraging the Japanese to a set of
ambitious and solid outcomes for Osaka. But how do you benchmark
that? I mean it was relatively easy with 20-10 and 20-20 at Bogor, how
do you advance that agenda, what is the benchmark, what is the
minimum?
PM: Well, there are issues there about coverage for instance: how broad
the coverage is, whether there are exclusions or exceptions, how we
advance the process of national country offers, these sorts of things
will be the issues of substance in Osaka. It won't be a simple
headline.
J: So, it is much more technical?
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PM: The whole thing is technical. Look at the Uruguay Round. It took
seven years to happen and this will happen much quicker than that.
J: Mr Keating, Dr Mahithir is foreshadowing some fairly dire
consequences of the debate over the Spratley Islands, will you be
talking to Mr Murayama about the Spratley's and if you are what sort of
Position will Australians have on that issue?
PM: I don't know. It may come up, not about the Spratley Islands in
particular, but just about the fact that the very obvious point, that is,
that China is emerging now as a major economy and a major force, it
has always been a major force in Asia, but it is now emerging as a
greater force with a stronger economy and all the more reason why
this is a great opportunity to multilateralise the interests of great
countries like China at this point in their economic history. I think that
is the main point.
J: Do you see this as a potentially volatile situation?
PM: I think Prime Minister Mahithir was simply speaking hypothetically. He
made that point clear himself about problems that can arise. Well, we
know problems can arise but, I think, the important thing is what we do
about setting frameworks up so that tensions between countries are
lessened, opportunities are increased.
J: Prime Minister, is this a good time for you to be leaving Australia
politically given that opinion polls suggested the Budget hasn't really
gone over all that well?
PM: You think I should stay home, maybe sit around in the office there and
talk to you on the telephone or something? Look, I am pretty happy
with the Government's progress. I think, what the Budget reveals is
that the Government is the only Party in this Parliament that has got a
set of structured policies. The change in superannuation will be
important to us all when all of us in this room are long gone from
Canberra, long gone from active duty. That superannuation change
will sit there in the service of the nation through into the next
millennium and also getting Australia back into surplus marks us out
amongst countries who have got discipline with low inflation. They are
things, I think, that were important taking the pressure of interest
rates these are all significant changes and the notion, in that context,
that the Government has got, if you like, long term difficulties beating
somebody who has got no policies. I mean, John Howard keeps
invoking the fifth amendment, he won't own up to any policies on the
basis that it might incriminate him or I won't show my policies because
that Mr Keating might pinch them. I think the public are going to say
' hey, cut it out, what are you playing us for?'
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J; So, if you think the Budget is going so well and given the fact that
interest rates have been coming down and unemployment has been
dropping, given all of that, are you then disappointed or can you
understand what..
PM: No, no, I think it is solidifying the Government's it is like the base
note and the treble note, they both take the same time to play, but
which is the one that has the impact on you? Let's call that big thud
from the Budget, it has been well received out there in terms of the
political weight of it in the community, which is good for confidence in
the country and good for the Government.
J: But it is not showing up in the polls as being well received.
PM; I think it probably is. It is just making our two Party preferred vote just
more solid, but I have said to you before, it is only a politician who can
read the hieroglyphics of the polls, never, rarely ever journalists.
J: Mr Keating, is the Government still fully committed to the sale of ANL?
PM:-That is a process which is on at the moment. Laurie Brereton has
touch with it. I don't have touch with it and haven't had for the last
couple of days.
J-Are you concerned by the threat by the maritime unions though, that
you can not sell
P M. To be honest, I haven't been across that.
J: Is the Government going to call an inquiry into the Hindmarsh Island
affair'?
PM: I am not here to go around the world for sport. I was here basically to
talk about the visit to Japan.
J: Prime Minister, to Japan, next week we will have another alarming
balance of payments number.
PM: Are you sure it is going to be alarming?
J. Are you sure it Is not?
PM: But, you are making the statement. I'm not.
J: OK, I'll bet you it is alarming. I bet it is well over $ 2 billion. No?
PM:-Well, hype and hyperbole is the stock and trade of the ' 7: 30 Report'
these days. OK.
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J: We have a situation where you can see that the solutions to these
structural problems are not quick.
PM: No, they are not quick no.
J: Meanwhile the Japanese face the prospect of perhaps becoming less
of a customer of ours for commodities that have been implicit in their
having a big domestic manufacturing base which seems to be moving,
off shore, at some speed. In the medium to longer term, what does
that say about our balance of payments?
PM: The thing to look at is, basically, the trend improvement in exports.
Ten years ago we exported 13 per cent of GDP. We are now
exporting 22 per cent, but more I think, it might be 24 per cent from
memory. We are a long way towards doubling our exports to GDP.
Japan's industrial structure has changed, it has moved out of certain
industries, but other countries have moved into them. Korea is an
obvious one and where now, in the last three months, Korea has
become our second largest trading partner because we are exporting
products into that market. You know at Toyota, I had the pleasure of
opening the plant there about six weeks ago in Victoria, the day that I
went there they signed a $ 400 million contract, I think from memory
30,000 cars, to sell into the Toyota worldwide dealership. So, we are
getting the benefits of a change in the structure of trade with Japan
that is, in the so-called process of hollowing out, putting their
manufacturing facilities in other places and a shift in the nature of the
trade where in certain trades it is now, countries like Korea, are doing
more than they are doing. So, we are picking up the business there
even if we are losing it In Japan.
So, the main thing is* What runs our capacity to deal with the current
account? Answer savings and investment and competitiveness. The
savings are the point we tried to cover in the Budget. The
competitiveness, I have been telling you recently and I will repeat
again, we are 40 per cent more competitive now than 1983, that is with
driving the exports, R& D and education are driving the product
innovation. As that Treasury graph shows very obviously in Statement
two, you can see where the call in the public sector in the 1970s and
the shift in the profit share completely dislocated Australian investment
and we ended up with a big fall in the capital stock. That started
producing the current account deficits for us. Six per cent of GDP in
1980 and that started building up the debt and it came from a
merchandise trade deficit. We are now closing that up by a big shift to
exports, what we have now got to deal with is the block of old debt.
And, in part, we are dealing with that by the big stock of Australian
assets off shore which Statement Two was also quite instructive about.
We have now got $ 136 billion of assets off shore against $ 160 billion
of overseas debt and, of course, as I have said and the Budget papers
also say, from the superannuation changes alone, by the year 2000 we
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should have an additional two per cent of GDP in savings and in the
Budget probably more. So, in terms of medium term savings change, it
is really a very substantial one. That with the competitiveness should
basically see that change, but of course, in any investment cycle like
this, you will always see a jump in producer goods and by and large
they are things that we don't ourselves make and we will always have
a great bubble of those in the current account numbers and, I guess,
we will have to understand that as they come they will be producing
goods into the future. At least, they are going to give us a better rate
of return than the investments we had in the late 1980s where we were
using up savings, chewing up savings, but not for a great return in the
current account.
J: When will we see a stabilisation of the current account deficit under
the Keating strategy?
PM: You won't see it without a longer term change to savings which we
have now, I think, fairly solidly got into place and you won't see it
without the continuing entrepreneurship and access by Australian
business to markets around the Asia-Pacific in particular. That is what
the trip to Japan is about.
J: Is there a message In the polls that some of the Budget initiatives like
the savings strategy are going to take a while to sell to the electorate?
PM. I don't think so. I think the public were interested to see that the
Government actually put something solid under the economic growth
we have been having. They wanted to see a weighing off of pressure
off monetary policy onto fiscal policy. You have seen the bond selling
program dropped from $ 21 billion last year to $ 6 billion this year which
is, to call it a weighing off, is the understatement of the century. A
$ 15,000 million reduction in the bond selling program, is it any wonder
long bond yields dropped. And, I think, they think a good and solid
thing has been done and they have put that in their thinking and, as I
say, it just solidifies the Government's two party preferred vote.
J: The s elling of it isn't over, you had two weeks of very..
PM: Yes, and I think the Government had a very good two weeks. You
know that by nearly everyone you speak to. They thought the Budget
was well received. Frankly, John Howard, curling up and making
himself the smallest target possible, by saying nothing, as I say
invoking the fifth amendment saying ' I won't talk about policies
because they might commit me or incriminate me and I think I can go
to an election with no policies', I think he is kidding himself. But, the
public know he is kidding them.
J: Well, John Howard says everyone he speaks to though in main stream
Australia says that they didn't like your Budget?
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PM: Well, if you believe that, then you believe in fairies at the bottom of the
garden. The fact of the matter is the Budget was, I think, very well
received around the country. In fact, most everywhere I went, be it
Perth, Adelaide, Brisbane, running into all sorts of people, they thought
the Budget was well done. The thing is, there can be no credibility and
honesty in politics without policies. That is the foundation touch
stones of credibility and honesty. And, a party which wants to go to a
poll, as the Liberal party does, without policies will be neither credible
nor honest. Thank you.
ends