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Transcripts from the Prime Ministers of Australia

Transcript 9832


Photo of Keating, Paul

Keating, Paul

Period of Service: 20/12/1991 to 11/03/1996

More information about Keating, Paul on The National Archive website.

Release Date: 09/11/1995

Release Type: Interview

Transcript ID: 9832

TEL: *. ov9. Nov 95
PM: There are a couple of sleights of hand going on by the Coalition in my
short absence from Australia, and I just thought I would point them
out, and underline the significance of them. And they are that a week
or so ago, Richard Court presented an Access Economics report on
the distribution of FederallState financial powers, commissioned, it
says, by the Western Australian Ministry of the Premier and Cabinet,
on behalf of the Governments of the States and the Territories. He
did a press conference holding this document, and of the document
he said we don't want another Quebec situation, where people are
being forced out of the Federation. In other words, he was waving
around the threat of secession, or the prospect of secession, were
the States not to get a go on that thing they called the vertical fiscal
imbalance. Now, I had made this point in the Federal Parliament,
that when Mr Costello said that onhe of the first things he would be
dealing with in Government was the vertical fiscal imbalance, that
could only mean as it meant to the journalists who wrote the story,
and that was a transfer of taxing powers to the States.
John Howard has been on Richard Court's back, and he is now onto
the big smother in the run-up to the election. lie said that's a no-no
until we're into office. So, what was a secession issue for Mr Court
early in the week, by the meeting of the State Premiers on Friday, it
was really only a division of Commonwealth income tax. Now, first of
all the first thing to say about that is that's only the policy until a
Coalition Government, or were a Coalition Government were to be
elected to office. If a Coalition Government to be elected to office,
the bible of Commonwealth/ State tax powers will be this Access
Economics report. And it says let me just remind you of a couple of
things it says " our assessment is that a combination options
options 3 with other options 4 and 5 dominates the others as
potential avenues for future reform. That is, combining State income
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9. Nov. 95
taxes with possible increases in the wholesale safes tax, a broadbased
consumption tax, or payroll tax, so as to eliminate both vertical,
fiscal imbalance and the worst of the State taxes". That's their
principal observation recommendation. It says " eliminating VFI by
allowing the States to raise personal income taxes in aggregate, in
order to do away with net Commonwealth payments to States, the
States would need to levy marginal personal income tax rates above
the tax-free threshold, at the rate of 15.6%, the Commonwealth
making room by dropping its own marginal rates equivalently", it goes
on in the conclusion, ' lor Australians to enjoy the benefits that
competitive Federalism has to offer' whatever competitive
Federalism means one century after Federation -1" hen VFI should be
eliminated or much reduced. The elimination of VFI could be done in
several ways: allowing the States to levy personal income taxes or
sales taxes, or sales taxes, or somewhat less plausibly by a marked
increase in the more efficient State taxes. However, probably the
vest and most obvious way to eliminate it, would be allowing the
States to levy personal income taxes".
Now, It's as solid and as direct as that, and it has been commissioned
by the Western Australian Premier, his Government, on behalf of the
States. Now, at the meeting of State Premiers, Wayne Goss who
chaired the meeting presented the States position at a press
conference. And, not surprisingly, because he doesn't subscribe to
these views, he said that he and Bob Carr and the other Coalition
Premiers, would be content with a share of Commonwealth income
tax not new State taxes. But this is not at all the Coalition agenda.
John Howard and Costello their agenda is for State taxes and a
State consumption tax. And Richard Court made it abundantly plain
in the commissioning and presentation of this report, and he made it
abundantly plain by his backilip. So serious was it, we might secede
on Monday or Tuesday, but by Friday after having been nobbled by
Mr Howard he was going to go, lamely, simply for a share of income
tax So I'm just here to point out what that backflip meant. And we
are also seeing it now on industrial relations.
In Industrial relations, he haO his phase 2 proposal he was going to
stare down the unions, he was going to fight to the last drop of the
blood of the Federal Labor Government, and the rest. And what we
find now is that he has got another signal from Mr Howard run dead
on phase 2 of your IR proposals. But, the point we make it's phase
I which is the real problem. Phase 1 of the problem which is stil in
place, doesn't guarantee that workers will be as well off as they are
now. And remember the interview which Fran Kelly put with Mr
Howard I think I have got the notes of it here where she made
these points, and the reply was completely unambiguous in terms of
the direction in which they would be heading. Mr Reith said he
couldn't guarantee when asked persistently can you guarantee
that workers will be no worse off? He said paraphrasing him, but I
think you will find the paraphrase Is accurate look, we'll be doing our
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TEL: 9. Nov. 95 2: 29 No .007 P. 03/
best in the circumstances best to have fair and reasonable wages
and conditions. Not a guarantee. Twice he got asked about the
guarantee, and there of course, no commitment on the guarantee.
So, what we're finding is now that we've got this quotation from
Richard Court he ruled out his own State income tax with a
consumption tax, thats on November 4th in the West Australian, but
earlier in the week, he was so het up about it all he was talking
secession. Last week, he was going to tear the unions apart, he was
going to do all these things and remember the things that he has
dropped. He is now.. . Mr Reith is now running around saying that he
has made concessions to the unions, you know, that they thought
better of it, and they can now work with unions, he said. And what
they have proposed is that the most draconian of things they won't
now prosecute a union if it tries to become Federally registered.
Well, thank you Mr Court. He won't stop unions having * access to
industrial sites I mean, these are all the things which cut across our
very democracy, not some industrial law.
But, I think the most important thing that bears upon these 2 things
are the things that Mr Howard has said himself in the last couple of
days. And he got asked this question by a caller on a phone-in
program: " Mr Howard, the people who developed Fightback, who are
still in the parliamentary party, how are you going to balance the new
initiatives if you win Government?". ' Well, it won't be any problem',
said Mr Howard, " wie just don't have Fightback anymore". " I know
you don't have Fightback, but you have got the people who
developed it7, and he says " oh, yes". Then he has told us on
another radio program in the last day, that people know who their
people are. " People know who the players are", he said. He made
an analogy about football they know who are the players for the
various positions. In other words, it's not a matter of our policies
when David Margan asked him these questions. Let me give you
these answers he said this:' Margan said " not to reveal the
policies?", Howard: " No, no, no, no, no you know who the players
are you're not going to tell me that you don't know who the players
are". In other words, the players are the people who have held all the
positions which are synonymous with Fightback on industrial
relations, on state taxes, on consumption taxes, on all the things.
And then he said in the Courier Mail, just a few weeks earlier " One
of the groat advantages of my having laid out an industrial relations
program over such a long period of time, Is that if I win the election,
nobody can deny I have a mandate to change Industrial relations"
That's a mandate for the old Howard policies the policies of the
players that everybody knows. So, by making the point that you know
who the players are, you don't need the policies, what he is really
saying is you know what the old policies are. You know what the old
prejudices of the players of the Coalition are the people who put
Fightback together. And how perceptive is the caller saying well Mr
Howard, If they're the old players, and they're the old players who put

TEL: 9. Nov. 95 2: 29 No. 007 P. 04/
Fightback together, what are you going to do other than give us
Fightback policies? And he says well, you know who the players are.
Now, this is a very I think damaging admission by Mr Howard,
because what he Is really saying is look, people now what I stand for
I stand for consumption taxes, I stand for hopping into unions, I
stand for individual wage contracts. It won't be a matter of the
policies it will be a matter of who we are, and what we have always
stood for. So, when you see that in the context of the gymnastics in
the Coalition this week, of Richard Court going from secession on the
Monday, to mute compliance on the Friday on State taxes, and then
going for rabid, anti-democratic draconian industrial policies one
week, and then moving lamb-like to an agreement with unions about
those clauses in another week, all I can say to people is you can
smell the rat in the Coalition camp. Mr Howard's nobbling Mr Court,
and what you will get were there to be a Howard Government, is all
the things that are in this Fightback, in this authors' of Fightback,
Access Economics In their new paper State consumption taxes,
State income taxes, particularly State income taxes, and of course,
the same Industrial relations pollices that Mr Howard has always
subscribed to.
J: made your run on this a bit early? Aren't you just a bit miffed that
they have acted to de-fang these issues before the next election?
PM: Oh, no. But Mr Howard is not de-fanging anything he is putting the
dentures back Into the Coalition dogrs mouth. He is saying we're the
same old people don't you know the players? We have always
been there. It's us the old team, the old Fightback group, we're
going to do it all again. I mean, what do you need? Flashing lights?
You know, do you need it put up on your pces? I mean, he is making
It obvious to you.
J: Are you saying that all the States are complicit in this arrangement ? 7
PM: No. I think the Labor States have traditionally rejected State income
taxes, but there is no doubt the Coalition States want one. Jeff
Kennett made clear when he said that 80% of the taxes should come
to the States. There's Jeff Kennett's remarks I'm not imputing
remarks to him, he made that remark. You have got Richard Court
making clear where he stands that's what they're after.
J: But didn't, at the very least, Mr Goss and Mr Canr show a little lack of
foresight from your point of view, in signing onto allowing Access to
do this report?
PM; I I doubt very much whether they did sign on. I mean...
J: Well, Mr Goss certainly did. He was there when the initial decision

TEL: 9 . NvN. 9o5.02: 0279
PM; Well, even If that is true, that doesn't mean that he must comply with,
or sign up, to its recommendations,. But it very much clearly
means that Richard Courts militant presentation of the Access report,
and his banging the secession drum, makes very clear what his
preference is.
J: Are you saying the States aren't all that serious about seeking their
own State income tax?
PM: They want their own income taxes. Look, it's the 1991 proposal it's
the Greiner proposal. it's the Coalition proposal. They were going to
do it in Perth they wanted their State income tax, but not only that,
[ they wanted] the right to set their own State tax rates themselves,
and what's more, cheekily at the time, they said if the Commonwealth
were to give tax cuts or any tax benefits by way of arrangements
under the Accord, we actually had to compensate them. I mean, you
J: ( Inaudible)... economic growth may have slowed too much affecting
the labour market * how quickly do you see the labour
market.. .( inaudibre)...?
PM: Well, the economic growth has slowed from an unsustainable to
a sustainable And we're seeing, consistent with that, very
strong growth still in the job vacancy series. Were seeing strong
investment expectations the economy is in a very nice position. Its
on a sustainable growth path, with good investment and low inflation.
J: ( inaudible) not worried by an increase in the unemployment
PM: Well, we have had the biggest fail in unemployment in a year, and
what we have seen in the past Is whenever you see these very large
takeup in employment, we have seen these pauses, or these
plateaux, until the economy sort of catches its breath again, and
moves along. Now, at a 3-4% clip, the economy Is till going quite
J: Is the economy in nice enough shape... has there been enough of a
pause or a breath to consider that the next move In interest rates
might be down?
PM: Well, again, that's for longer portents for markets to make a
judgment about, I think. But a lot of the judgments are already in on
that we have seen the long-ternm bond rate drop from over 10.25%
to around
J: On taxes are you saying that a party leader who supports a
consumption tWx and changes their mind, shouldn't be believed?
TEL: 9. Nov. 95

TEL: 9. Nov. 95 2: 29 No. 007 P. 06/
PM: No. If you are making a reference to me, and you are, what I did was
cut then Government spending by let me refresh your memory by
6% of GDP. From 30.5% of GDP, to 23.5% just under 24% of GDP.
In other words, the Commonwealth doesn't now need a tax base in
consumption, because it's a smaller public sector.. That's the
difference between 1985 and now. But to give the States there
would be 3 tax bases. There would be a Commonwealth income ta~,
there would be a State income tax, and a State consumption tax. You
give the political system 3 bases, it will go and spend it. It might not
spend it at the Commonwealth level this year, but over time, the
States and the Commonwealth systems of government will spend the
money, and we won't get a second chance to get out of the hole that
Mr Howard left us in, in the early 80s we won't get a second chance
to buy down public spending in the way we did in the 1980s. So,
when we looked at a consumption tax in 1985, we had
Commonwealth outlays around 29-30% of GDP. By the time it got to
24% of GDP under the Labor Government, we didn't need a
consumption tax, and that's the point I have made consistently.
J: Last Friday, all the Premiers signed up for a fixed share of
Commonwealth revenue including the Labor Premiers doesn't that
leave you isolated from the States?
PM: Oh, no. I It leaves me in the box seat
J: Why?
PM: Because we have the powers, and...
J: But you're at odds with all the States, even the Labor States?
PM: Well, that's been part of my-condition for nearly a decade. And I'll tell
you why in the last 3 years, in the period 90-91, the States would
have lost about $ 3 billion, had they had a fixed share of
Commonwealth income tax Now, how can the States cop a $ 3 billion
loss? How could their school system not withstanding the massive
cutting you have seen by Jeff Kennett in schools and in health it just
pales into insignificance compared to the cuts that would need to be
there in public services by a loss of $ 3 billion over that period. So,
effectively, the Commonwealth would have had to have kept up the
payments, either in nominal or real terms. So, in other words, the
Commonwealth carries the burden on the down-side, but then loses it
on fth up-side when it needs the money to bring the deficit down, or
to produce a surplus. Because the Commonwealth is the shockabsorber
in the national economy, the Commonwealth Budget is a
shock-absorber, the State Budgets are not. What the States need is
revenue adequacy from the Commonwealth which we're giving thern
by a real-terms per capita guarantee, that is real-terms maintenance
with a population factor. But to give them a share of Income tax?-If,

9. Nov. 95
we ever reached a point again where the Commonwealth Income tax
fell, they would be screaming blue murder that they want more money
from us. I mean, it's just an insincere ploy that they know has not a
snowballs chance in hell of happening, from us.
J: Mr Keating, are you inclined to pick up Gough Whitlam's suggestion
about a referendum of the Senate's power to block?
PM: Look, I have been away, and I haven't followed this debate around
November 1 ith, and I really haven't seen what Gough has said.
J: Mr Keating, on CHOGMV Jim Bolger says he doesn't think John
Majors in a mood to change his mind. Is that the right sort of
attitude ( inaudible)...?
PM: Well, I mean, I think, our position is that we're not in a mood to
change ours, either. That is, this is an indefensible position by the
French, and no amount of sort of post-decision rationalisation can
make it defensible, and that's the position we will take.
J: So what as a minimum would you be expecting to come out of
CHOGM in response to the French testing?
PM: Well, our clear condemnation of their decision.
J: Are you concerned that Internal politics may lead to something a bit
softer. ( inaudible)...?
PM: Well, there's no doubt that the French will be calling up favours all
around the world, amongst Commonwealth countries. And It won't be
changing Australia's position. I mean, we will secure all we can from
the process, but our position will be crystal clear right through.
J: But doesn't it rather weaken things that Jim Bolger is already saying
that we'll agree to disagree, and leave it at that?
PM: Well, I know he has said that, but I don't know what that means in
terms of the documents, the communiques etc. But I will be making
very clear to him In fact, I'm going to speak to him in less than an
hour, to say to him that our position is that we should have a clear
condemnation of France for Its testing program. And of any other
country testing weapons, consistent with the communique of 2 years
J: Prime Minister, what's your view of suggestions that CHOGM should
also be censuring Nigeria over its human rights record would you be
supportive of a move like that?
PMV: Well. I think that I would be. It depends of what comes from the floor
on this Issue, but our position on human rights is clear, and of course,
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TEL: 9. Nov. 95 2: 29 No. 007 P. 08/
we don't support as a party, as a Government the death penalty,
under any circumstances, least of all these kind of circumstances.
Do you think Charles should be allowed to marry Camilla?
Oh, well, I think it's time for me to leave on that note, Niki.
J: PM: ends.

Transcript 9832