S JUNE 1985
E 0 E PROOF ONLY
TRANSCRIPT OF INTERVIEW BETWEEN THE PRIME MINISTER AND
JOHN LAWS, RADIO 2GB
JOHN LAWS:
BOB HAWKE:
LAWS: HAWKE: LAWS: HAWKE: LAWS: HAWKE: LAWS: HAWKE: As I promised, the Prime Minister of Australia
is my guest in the studio now.
Prime Minister, good morning and welcome.
Good morning, John, thank you.
Did you have a good holiday?
Beaut, thanks, John, marvellous.
You look very, very well.
I feel it.
Is Lizard Island as good as they tell me it
is? It is very good, very restful, not too many
people. Obviously you needed a rest because you
have iwalked into a turmoil on your return
really, haven't you?
I don't know about a turmoil, we ecpected
that there was going to be not only exrpected,. fl
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but we want a wide ranging community
debate on our tax proposals, and that is
what is happening and we are indebted to
people like yourselves. John, for the viay
in which you are facilitating that.
LAWS: Yes. I see a lot of headlines have been
pretty tough " Give way, Mr K11, the Sun
editorial said yesterday, a lot of people
saying that what you are doing io going to
cost you office, " What a rip-off", we are
reading here, there and everywhere; has the
reaction been greater than you thought it
would be?
HAWKE: No, much as I expected. I was a little bit
disappointed in some areas, John, that there
hasn't been the attempt to look at the package
as a whole.
Whien you are talking about tax reform in a.
country like Australia. of a system that has
been running down for over 30 years, then
it is inevitable that in an overall package
there will be elements that some people won't
like, and some elements that may. Just
considered by themselves, hurt them and so
if there is a. concentration on particular
elements you will get those headlines.
I just wish people would lookt at the package
as a whole.
LAWS: Is that the thing that has disappointed you the
most, the fact that people have been motivated
by how they are going to be affected themselves
rather than the effect the package will have
generally on the country?
HAW KE: Yes, I think so, John, although I understand
that people will try and see how It Is going
to affect them, but I think they have tended
to be mislead into saying " Well, look, some
prices are going to rise, It Is going to cost
us more", but what they need to do Is to
look at what additional money they are going
to get in their pockets from ' the very
substantial tax cuts that are proposed and
In net terms they wil be better off.
I think it Is a pity that they don't understand
that, but secondly and more importantly, if
they are concerned not just with assessing
their own particular position at this moment,
but if they were to think about what sort of
country they want this to be for their children,
whether they want a country which is going
to be efficiently placed'to best organise its
resources, then I think they should take
the wider view, and we do need to mahk
these changes to make Australia not just
more equitable but more efficient.
The country * wil pay a very high price if
we just .91Uow the tax system to run down
in the way It has been.
LAWS: Are people, do you think, really aware that
in fact some items are going to be cheaper
and some Items will vary very Lttle in
cost, and of course some and some consider
the most Important -will be more expensive,
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but all we seem to hear about is the fact
that things are going to be more expensive,
but not all things are going to be more
expensive?
H-AWKE: No, that's right. We have at the present
time a wholesale tax system which br-ings
in about $ 4.7 billion.
Vie are going to scrap that, that has a wvide
range of goods within it with tax rates ranging
from 7% up to 20% and up even further to
Just to name these goods cars, TVs, radios,
soaps, detergents, pet food, soft drinks,
insecticides, toys, toilet paper, watches,
shavers, cosmetics, toiletries, pens and
handbags they should all become cheaper
because the very high rate of wholesale tax
will be abolished.
LAWS: But is it not true that those items that in
fact wil be cheaper, or not very much more
expensive, are in fact the items more
likely to be bought by the higher wvage
earners than the lower wage earners?
HAWKE: I don't know. As far as I know, I think
most people buy toilet paper a bit of
class distinction there!
I hope that is true, I think so.
LAWS: I didn't hear You aay toilet paper in the
list. I certainly would agree i-ith thct.
But I mean to look at it generally, motor
cars, for . crample, tho biggcst savings will
be made in the biggest cars.
HAWKE: Yes, but nevertheless I don't think % je In
this society now think of motor cars as
luxury items, a commodity which are bought
only by the highest income people.
Your general point is right, John, that there
is going to be a whole range of goods which
are going to be cheaper and that is of
course one of the reasons vhy a 121% broadly
based consumption tax is not going to
produce a 12,% increase in prices, because
the estimated 6% increase in the CPI
represents an amalgam of price increases and
price decreases and price neutralities.
We have deliberately calculated that tax
cuts, that's in direct personal tax, in terms
of ensuring that people will be in net
terms better off.
Let me just give the figure again. The
average weely earnings figure, which is
$ 22,500 a year, an average single person
on that average weeldy earnings will get
$ 31 a week more In his or her pay packet
as a result of tax cuts.
They will pay $ 16.80 a week more through
increased prices, they will therefore in
net terms be $ 14.20 a weeh better off.
If you take not that average weekly earnings
figure, people might nay that is a bit high,
take the figure of $ 19,000, where the 460
in the dollar marginal rate cuts in, the average
person there will get $ 25 a week more in
their pay packet, they will pay $ 15 a week
more in increased prices. In net terms
a week better off.
LAWS: What about those people who have a fixed
income?
HAWKE: There Is a range of considerations there
LAWS: A low fixed Income.
HAWKE: Essentially the package does these things, John.
To the extent that even with low Incomes
they are still within the taxable income
level, they get the benefit of the tax cuts
which will more than compensate.
To the extent that they are the recipients of
social welfare payments pensions or other
forms of social welfare payments, there will
be more than compensation, without running
through the whole range let me take the case
of the single pensioner, the calculation is that
the 61% increase hi prices would require
$ 6 a week increase in pension to cover that,
In fact, what will be given -ill be a $ 9 a week
incr'oaso. There will be substantial increases
of 14% in the areas of spouse rebates and
faintly allowances 14% increases, and so every
point at which there la a dependency upon
welfare payments the compensation will be
more than Js necessary to meet the price
increase.
LAWS: S71. A.
If a pensioner, for example, has a nest egg
set aside, a couple of thousand dollars or
ive thousand dollars or whatever it might
be, to make life a little more comfortable on
odd occasions, surely that $ 2,000, $ 5,000
or whatever it might be, Is immediately worth
121 less?
What you have to ask yourself is if they have
got this nest egg set. aside and it carries
an income stream which puts them in the
tax area, then they get the tax benefit
because the direct tax cut Is of benefit to
them, so that more than offsets, or vill
offset, what happens in regard to the increase
in prices that will occur as a result of the
increase and the imposition of a broadly based
consumption tax.
But if they don't pay tax
If they are in the region where they don't
pay tax and they are the beneficiaries, social
welfare beneficiaries, as I have said, there
is a significant over-compensation of those
benefits and those payments, and part of
that over-compens'ation has been put there
in pait to take account of the sort of
consideration that yoa talk about.
Yes,. but if there Is a saving set aside, in
fact in true terms that saving Is worth 12%
loss?
HAWKE: LAWS: HAWKE: LAWS:
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HAWKE: To the extent that prices go up, then that
tYll be so if the value of their saving doesn't
increase. It depends upon the form in which that
saving Is held, because, you see, if prices
rise then the prices of certain assets that
are held can rise as well, and therefore if
there Is a corresponding rise in the price
of the asset in which the saving is held
then they are not disadvantaged.
I concede that in some circumstances of course
what you eay is right.
LAWS: . The big leaguers, and there are plenty of
them about, are obviously going to try and
find a way to deal with the capital gains
ta.. One way that Is evident to me, and I imagine
to you as well, is if the family is ezempt from
capital gains tax I am sure vie are going to
end up with some fairly extravagent family
homes, aren't we?
IIAWKE: Well, I don't know, I don't think this has been
the experlqnce of other countries, John.
Yotq see, 41l the debate about the capital
gains tax seems to be to some extent put upon
the basis . hat rhat the Australian government
Is suggesting in something unusual.
It operatces in virtually every other country
in the world, and it hasnft produced these
oorts of results, I think that there are
limits upon what people will d, how they
will allocate their resources, I don't think
that they are going to deliberately distort
the wany in which they spend their money
to avoid something which I remind you is
not a tax on nominal gains, they are still
going to be able to invest in other assets
and to the extent that those other assiets
simply appreciate in line with the general
level of' inflation will attract no capital gains
tax.
LAWS: But surely if they are going to
HAWKE: I accept that there may b> e some element of
what you say-
LAWS: it is unavoidable though, Isn't it?
HAWXE: Yes. I meamn, if you are going to adopt the
capital gains tax for the basic reason which
I support It, and that is as a means of
helping the fight against tax avoidance and
evasion, then that is the justifIcation, the
basic justification, not the revenue you are
going to get. which is not much over
$ 100 millonhc in the totality of tax
revenues is rather small.
But isthe white paper points out, John, the
basic argument for a capital gains tax Is
as a weapon to stop tax avoidance and
evaclon.
LAWS: Some questions that listeners have aked
that I salt of you, I will do on their behalf
as I said I would will the taxes fall on
special dietary food, In particular for
diabetic children as they are excessively
expensive already?
HAWKE: John, the proposal Is for no exemptions, and
I want to say this to you, that the reasons
for that are as follows:
Firstly, if there Is one thing that has come
through to us and our advisers In the months
of work that has been done on the tax paper,
It is both from the countries where they
have these forms of taxes and from independent
experts is'to say no exemptions.
The reason they say "~ no exemptions", recognitsing
t -hat there can be the sort of thing you talk
about perceived hardship is this, that
you immediately increa~ e enormously the
administrative costs because the retail outlets
have to have separate accounting systems,
differentia ted cash registers and so on,
whereas If you Just have no exemptions then
at the end of the month, the end of the
period, they-just take off 12j% and that is
It. it increases the opportunities for evasion,
* but also vcry Importantly, John, it goes
back to the point that you were talking
about before that IB not sufficiently recognised,
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that we do have now a very wide ranging
tax on goods.
LAWS: Will there be sales tax on things lke diabetic
foods for children, specific requirements?
HAWKE: There would be no exemptions yes, to the
extent that that was
LAWS: But I mean would there be sales tax existent
on those now that could be ' removed, I am
not sure?
HAWKE: No, generally speaking there is not on food,
generally. You get into this dividing line
between confectionary and food where you
have the stupidy that I think Kit-Kats attract
a tax and chocolate biscuits don't.
So there in those sorts of absurdities, but
I was leading to the point, John, that once
you have any sort of-exemption at all then
you have created the absurdity that we
have got now.
With this wholesale tax system you have tax
on certain goods, you don't have them on
others where there is a great similarlty;
you have a tax of 7% on some, 32r% on
others. That wholesale tax system is a total chaotic
mess. Successive governments independcnt
of political persuasion are always under
pressure if you exompt this, cer-mpt that,
have a different rate on this, a diffeecnt
A
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rate on that.
As far as the problems that are created by
having a tax on foods generally, or on particular
aorta of foods. I go back to the point, Joh-n.
tht the compensation that is going to be
given in tax cuts in direct personal income
is going to be very much greater than the
increase in prices associated rith the broadly
based consumption tax, as Is the increase
in payments of social welfare benefits.
So people are going to have more in net
terms than they otherwise would have.
LAWS: -Yes, but in specific areas, for example these
foods for diabetic children or specific
requirements for diabetic children, they iAUl
in fact be 12NA dearer because there is no
sales tax to tale off in the first place?
HAWK( E: Yes, that's right.
LA WS: And thero Is no avoiding that, you have to
tahe a hard line on that and say " That's
it"?
HAWK( E: it Is not a question of taldng a hard line,
It roally Is the point that once you tall.
about an exemption for one thing YOU Create
an administrative chaos and you create thc
* situation ivhere governments are going to
be subject to aaylng " Wlyou ernempt that,
w~ hy not, t1jis, why not that, w7hy not that?",
end if~ ve were giving people le1s by wany
of tax cuts on their direct tax area so that
in not terma they are w~ orse off, then yiou
would feel really bad about it and you
w~ oudn't do It, but there is that cushion
of surplus In the direct tax cuts and in
the nocial welfare payments.
LAWS: I underatand you are saying that it Is not a
hard line because you see it as a necessary
line, and when it is necessary It then ceases
to be hard, but I imagine the mothers of
the diabetic children are going to see It
as a pretty hard line.
Nothing can be done about It?
HAIVKE: . I see that they would see that as a difficulty,
and the probiem one has, John, is this
that if you are talking about difficulties
the greatest difficulties that have been
imposed upon people like that, ordinary
Australians, is that an increasing proportion
of the more privileged of us in this society,
the more privileged Australians, have been
avoiding tax altogether.
The most regressive burden that you can
place upon ordinary people, including the
sort of people tha~ t you are talldng about
here who have these particular burdens,
Is to have a tax system which Is breaking
down and imposing increasingly a greater
burden of tax upon ordinary wage and
salary earners.
Wihat this reform is about Is to create overall
a more equitable Dyntem where the tax
burden will) be chared more equitably, where
A 17
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people whatever their station In life, are
going to have to pay tax where they have
been avoiding it, so overall you will be able
to reduce the burden on ordinary people.
That is the main, and I believe a noble and
proper, objective.
If in the process of achieving that there are
some particular problems, t-ell, in a cense
that is unavoidable but you are going to
create overall a greater fairness in the
society, a greater equity.
LAWS: You know that I understand the motive of it,
because the day after it came out when I
talked to you on the telephone I said that
if we are all proper Australians we should
say " This is the way it should go because
the average Australian to going to be better
o'ff if the majority of Australians are going
to be better off".
I certainly understand the motive, and I
certainly see that realistically those people
who have been in a position to abuse the
tax. schemes-In Australia have abused them
out of hand and now they are going to pay
the price and many people don't like it.
I do, however, think it is pretty tough that
people like the families who have diabotic
children paid the price bofore by oubsldising
those who evaded and avoided tax, but
now they are paying the price again.
HAWKE:. Well, John, I hope you understand the point
I am making.
One gets no pleasure if a particular group of
people, wiorthy people, have some additional
burden placed upon them. I mean, that
is not something that you want to achieve,
but I hope you appreciate that the unanimity
of the advice, not from harsh mnonsters but
from well1 motivated people, the unanimity
of advice to government that if you have
exemptions then you are creating a monster
that will start to emerge again as something
which is destructive of the totality of
equity for everyone.
tf there was a way in which you could create
a perfect tax systemn in which there were
no problems for anyone then I would love to
do It, no-one would love it more.
I mean, both on humanitarian grounds and may
I say on political grounds, there is no
politician, there is no prime minister, who
wants unnecessartly to create problems and
I certainly don't want to do It.
LAWS: No, well obviously you have endeavoured to
create what you consider to be a near to
the perfect tax system.
HAWKE: As'near as we can,
LAWS: Whflat about disabled people riheelchairs and
things 111, e th~ at that have been currently
enempt from taxation? Sr
-1-
HAVIKE: In the area where they were exempt from the
existing sales tax to the extent that you
are absolishing a sales tax which hasn't
applied to them, clearly If you now bring
in a broad based consumption tax in the
area where there wasn't a tax, then prima
facie they would be adversely affected.
I don't know whether in straight medical terms
like that, disability terms, whether there is
a consideration available for exemption there,
but again it seems to me that you run into
the same sort of problem that I was talking
about before, that once you create one
area of exemption you open up the whole
issue. But as it stands now it is true that if they
are not paying a wholesale tax, if they are
exempted there, and there is a non-exempt
broadly based consumption tax brought in,
then It would catch that area and it v; ould
have to be the case, I would say, that I
would apply the same sort of observations to
that as I did to the other area.
At the summit, John, these sorts of things
are going to be open to be put to the government.
I have made it quite clear form the beginning
in the election campaign that the ninth principle,
that is, a broad community support, is
imp6rtant. We are going into this summit not with t bol-na
charade. but to Listen intently to all the
submissions that are put on behalf of all
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groups in this country, and both Paul Keating
and I have said that the government will Usten
very closely to what Is said. we will sctudy
in the weeks after the summit very closely
all the submissions that are made.
It could be that in regard to the final decisions
that are taken that you could see some
particular areas where the general observations
I have made against exemptions would be
capable of Isolation, so that they would not
of themselves open up further claims for
exemption.
LAWS: I can tell you are concerned about the fact
that disabled people might have a 12,% tax.
HAWKE: I am concerned about It.
LAWS: Yes, I can tell you are.
HAWKE: I am.
LAWS: But then again you find yourself in a bind
because If you do permit exemptions there
you have over-ruled what you said " srongly
to me prior to that, so it Is not an easy
job, Is it?
HAWKE: It Is not an easy job. Let me, without
commitment, because one has, as I any,
to study very carefully all these considerations,
if a ggovernment were porouaded that
here wore some particular areas of, cay,
medical dllabfIfitles whore they quite clearly
tjore capable of isolation and never able to
be used as a precedent for other areas,
it is conceivable that you would be able to
do something in those areas.
But what any government would have to guard
against, John, which is what I was talking
about In my first answer, would be exemptions
which of themselves were capable of leading
to other broader classes of exemption because
that is what has lead to a wholesale tax
system now, which as I say Is a chaos and
totally illogical.
( Interview continues at 0930 and separately
transcribed) ø f
BOB IIAWKE:
Ii ( Continuation of Interview commencing 9 o'clock)
ø o
I'd like to have room to move where and I'm
now saying this obviously without commitment
but as you can see, I would be terribly worried
ohrmit mrr cno' a o hiQa hip if It e, nnn i, t it
in terms of medical terms, disability terms
Impose a hardship which didn't currently exist,
and I would think a government could look
at a category of that kind which clearly was
not capable of uses of precedent.
I would certainly liaten to those submissions
closely because there's no way I would be
about trying to do something for a disadvantaged,
a medically disadvantaged group, if It were
capable of avoidance in a way which wouldn't
open up rorts elsewhere.
I'm not saying that's a rort, but there could
be rorts elsewhere.
\ S
LAWS Oh no, I know. But then of course you're
going to find that the mother of a diabetic
child is then going to react.
H-AWK{ E: Yea. Well, I use the term broadly " medical".
If you've gone to two instances which in a sense
are medically identifiable a's either in the one
case a disability, a physical deformity which
requires a particular sort of vehicle or instrument
or apparatus to help that person.
The other was another sort of medical disability.
don't want by my comments to create a
situation where I'm breakting down the concept
of no exemptions of a kind which were capable
of applying to everyone.
If you could see a situation in strictly medical
terms which were not capable of then being
pushed to general type exemptions, then I
thitlt that's worth lookin g at.
LAWS: Thc supposed experts have had lots of things
to say, but a comment that I read that I
found interesting concerning Margaret Thatcher:
" Nnance Department economists reminded
Cabinet that when the Thatcher government
in Britain Imposed a big VAT, value added
tax, increased within a month of assuming
low office, low Income earners ivere cushioned
by the enemption of food items.
" Mrs Thatchcr's ultra conservative administration
exempted fuel and power and children's clothing
as well".
J*
Now, obviously she'd taken the line that
she didn.' t want any exemptions, but ultimately
had to bow to them.
HAWJKE: But let me say this, that you can't just make
a straight comparison between what Mrs
Thatcher did and what we're about, because
this Is a much more s~ ophi-Aicated, if I may
121sand more complete package bcuse
where we are different from others is that
we are simultaneously with the proposals for a
broad based consumption tax we're simultaneously
more than compensating by very substantial
cuts in direct income tax so that people in
net terms are going to be better off.
In other words, the impact upon the sort of
categories of people that you're talking about
-of increases in food prices and clothing; prices,
Is more than covered by more money in the
pockcets of those people.
LAW'S: John Mcflean, the New South Wales Labor
Council, has said today that the package isand
to quote him " stone dead unless food is
exempt from consumption tuxc".
HAWKE:-Yes, John has said that earlier and Paul has
replied to him. I don't accept that that's
an accurate statement of the position.
LAWS: What about charitable organisations? What about
meals on Wheels that really do a job to help
people that tire underprivileged?
-4-
What about the Matthew Talbot Hostel here
in Sydney and centres that help peoplo who
can't help themselves?.
HAW KE: Ifl terms of their purchases?
LAWS: Yes.
HAWKE: Well, as It stands now the purchaseo which
they make of goods and services would be
subject to tax.
W1hat you've Uot to appreciate is thet in the
whole area of Social W1elfare benefits that the
recipients are going to be in a, In net terms,
better position than they were before because
we're going to more than compensate weolfare
beneficiaries by the increase that will be made
in those payments compared to the Increase In
prices. So we're not ignoring -not only not ignoring
the area of people ivho are disadvantaged we're
going to deliberately ensure that in their
income terms they will be better off, so that
If you look at the vielfare area as a whole, dohan,
I thinlk you can see that we've veriy deliberately
taken Into account those concerns.
LAWS: Would there ever be a possibility that the
consumers tax could be turned to the benefit
of Australia? I wiau talking about it yest~ erday.
I was thinking outL loud about It yeaterday in
my radio programme which I spend a lot of
timo doing, that perhaps it could be to the
betterment of Australia if certain items created
and produced In Australia could be tax enempt
to encourage people to purchase those over and
above overseas Items and luxury Items.
For example, the good old Onkaparinga blanhets
which everybody needs, whether you're rich,
poor or Indifferent, Ieverybody needs a blanlcet,
if it didn't have a tax on It and people were
encouraged to buy it it would be Good for
Australian industry.
If h1owever People Wanted to go and buy Christian
Dior or I.. nvin blankets they would pay a bigger
price and tax on it as we.
John, the way in which you make decisions in
government about the encouragement of Australian
indus~ tvre and the~ trelativem nr1ce levels, of
HAIVKFAustralian products and imported proC
not via the mechanism of exemptions ii
consumption tax area.
You have your whole Tariff structure,
bounty sys tems, that vh olo apparatus
available to government to provride Inc
to Australian production and Austral. ia
consumption, and thnt'a the appropria
of doing it -not via the method of ex
In a consumption tax for all the reaso
before.
LAWS: I would have thought It wyould have b~
to encouraGe Australian Industry In tl
and make it a bit easter on people bu~
that are In fact essential. lucts is
ni the
tariffs,
13
o nt iv s
emo tion
ns I put
een good
at way
rinf-products
-6-
But then I. fuppose you'd have the producers
of the non-essential products not being too
pleased.
HAWKE: Well, you're opening up the whole range of
problems that I referred to before if you start
using exemptioins within a corni. umption tax
system for other purposes.
You've got a range of instruments as government
available to you to try and say we twant to
encourage that sort of industry, vis a vis imports,
and you should uae those instrumerts rather
than the exemption concept within a consumption
tax system.
LAWS: A lot has been made of the effect that losing
the expence account is going to have on
I know that you wiere Interviewed recently
in Adelaide on the subject. I've heard a lot
of people discuss it. I haven't quite seen it
the same way but In'' interested in how you ree
it.
HAWKE: Well, let me say this, John. Firstly I believe
that if a business deal is worth coneummating
it's not going to live or die on whether there
is a subsidigation of a meal in a restaurant.
If you and I want to complete a deal which tie
think is worth doing anC vie've got to do it
over a meal, then we're going to do that
irrespective of whethor there's a subaldisation
by the general taxpayer of our five course
meal and for you a bovely bottlo of Fronch
wine and for me, some beaut Perrier Water.
J think If we think that the deal's worthwhile
we'll go ahead and do it and consummate it
over that mecal.
Blut let me make the more obvious point. You've
travelled overseas, John. You've been to France.
There's no shortage of 5-star restaurants in
My instant pirgurnnt to that of cource was
there are more people in France, but your
answer to that va-s there are more restaurants
too. That's right. The ratio of restaurants to
persons in France Ws a much higher one than
here. The realitieu are of course that it's not seen
as necessary In other countries for the ordinary
person, the ordinary wagie and salary corner to
be subsidising people who want to have their
meals in restaurants and it's been rorted as well,
as8 you hnow,.. that where you have thesc backdating
of credit cards where executives ;-ill take their
families out on the weehend to a meal In a
restaurant and have the thing back-dated so it
appears to be a business exerctse during the
week this is a luxury that Austria can do
without, and all the experience of other countries
shows that the restaurant business Will Ltill
survive and prorqper. as it should.
. r
' a.
LAWS: HAhWKE:
LAWS: This i8 another question from a caller. What
Is Mr Hawke going to do to Incorrect the
imbalance of public servants to private
enterpise work~ force, assuming of course
that you cee it as an Imbalance, which Is
4.8 to 1 apparently at the moment.
Also how much longer can the Australian
economy stand this Imbalance.
H A WK( E: I'm not quite Lsure whlat the listener means about
the imbalance. The fact Is, if you loolc at
Australia as a whole, that 75% of the jobs in
Australia are in the private sector and that's
why since we've been in government vie've done
everything , we can to try and create the proper
environment for the pri1vate sector.
Indeed the 375, 000 ndditional jobs that we've
created sinvc we've been in office have been
very, very substantinlly In the privato -lector.
I'm riot one. who's here an apolof~ ist for or
protector of the public service. I thinh that
In the public service of the commonwealth level
and the stgtc level there hits over the years
accumulated certain areas where more loanness
can be Introduced.
We're gradually moving to do that and we'll
continue to do it.
But I want, to any thia to people: if you're
going to have proper defence forces, if you're
going to have a fair and substantial social
welfare ystem to protect those in the
community in need; if you're going to have
your roads built and your bridgeu built and
your tchools built and so on, then these
things don't just happen. You've got to have
a public service to help In the creation and the
delivery of these things to the people.
The secret, John, is to try and make sure that
you have a public service which is not unnecessarily
large or obese, and I can assure all your lioteners
that I am very, very responsive to this, and in
the long exercise, John, that we went through
earlier this year which led to a $ 1.26 billion
dollar saving in the May statement, part of that
involved considerable cutting back of claims for
additional respurce of bodies in the public
sector, and ' ll continue to adopt that approach.
LAWS: Will you make an attempt however to curb that
sort of public, spending?
HAWKE: I will say more than that: not only will I attempt
to curb it, I've already done it.
Just take the comparison between the previous
government and this one: look at all the nonsense
that they went on with that Razor Gang exerclse,
and it produced in the end something like about
$ 300 million.
In our first year in 1983 we had a very, very
substantial exercise. Again this year 11 billion
cutting. We just don't talk about hard decisions,
_ 101
as distinct from our opponents. They used to
talk, corm to the hurdle and say, 11Oh, that's
a bit difficult. We won't'jump that one".
It was in the area of the public service, in the
area of foreign banks, in the area of floating
the dollar. in the area of deregulating the
financial system. All these things that ought
to have been done to help the private sector,
to mnake a more toug h competitive Australian
economy, they did the-work,. wouldn't make the
decision. We do the work and we take the decisions.
LAWS: The 1983-84 wages for public servants amounted
to $ 4.9 billion. The projected budget for ' 84-' 85
Is 5.3 billion. That's a fair Increase.
HAWKE: Well, I can't say whether those fgures are
accurate. I'm not saying they' re inaccurate,
I just haven't got the statistics In front of me.
So I ' m just in a position where I can't say that
that's right or wrong. What's the source of
them?
LAWS: -The Bureau of Statistics.
R AVWK Is it -the Comnmonweailth Public Service Bill?
LAWS: It's the wages for public'servants. 4.9 billion
HIAWKE: Well, as I say, I'm not arguing about the figures.
I can't say ycs!. they're right or they're wrong.
Yj ; i
-11-
But let me just make the general point, that I
assure you and the particular listener concerned,
John, that where we can halt the growth of the
public uerv~ cc where wie believe that can be done
in areas where growth is not necessary, twe have
done it, and to the extent that we make decisions
that there can be some cutbacks in arezL3 where
there are too many, we have done It. We'll
continuo to do it.
I don't wiant to have one more public service
on the commonwcalth public payroll than io
necessary. It's not the earjest thing in the world just to say,
" Well, you're going to cut this, cut that, cut that",
but what you can do is to ensure that where there
have been requests which I think have been based
on past assumptions that you put a request up
and It will be granted and there'll be more public
servants there. 11e are very astringent about that,
and by the process of attrition in certain areas
there will Occur cutbacks.
What this government has done, what no other
government has done, is to impose the constraints
of the trilogy upon us, that is to constrain the
growth In public expenditurps, and that to a
very substantial extent Includes expenditure on
public se r vic6 salaries.
kiaving said all that, I think It is fair for us not
to in4~ l( lle in) thin orgy of 01. attack upon public
servants3.
j. fIT
-12-
Either w--e want defence anid education and
roads and social welfare or we don't. If
we want them and I understand that the
listener Involved and all listeners would
accept that those things are necessary for
a fair, efficient and equitable Australia, then
we've got to understand, as I say, those
things don't grow on trees.
They are delivered by human beings, employed
on behalf of the community.
W1, hen we talk about public servants, don't let's
dca~ lse them, let's understand that they ar~ e
people employed on behalf, not of M~ r Fraser
or Bob Havwlce or Paul Kecating or John Howard.
They are there to serve the public, to provide
defence for the public, to provide education for
the public, to provide roads and bridgres and
all these sorts of things for the public, and what
we ought to do is to try and have pride as a
community in acquiring a public service which
is efficient, talented -we don't want to have
our best people being leechcd out of the public
service Into the private sector. The public
is entitled to have high quality people there
ensuring that we get g. ood public service.
So I say, yes. there is fat that's accumulated
over time.: We're trying to cut that out. But
I am not going to be party to an attoec upon
public servants as euch..
LAWS: There's a very strong suggestion if the tax
reforms tire implemented, that you will then
require yet another army of public servants
to monitor and adminiuter It.
p f
-13-
HAWKE: John, the calculations about the increosed cost
that will be involved I think are of the order of
million.
That will certainly require some additional
public servants but I would have thought that
your ordinary listener would approve of the
fact that employing more people in the tax office
to cut out tax avoidance and evasion which is
what we've done, is to their benefit.
If we can ensure that people who've been avoiding
and evading their payment of taxes which h a
meant that your ordinary listener has had to pay
more. then if by the employment of more people
to get a more efficient tax system. if that means
in the end they are better off I think they'll
' welcome it,
LAWS: I would imagrine they would. Five of the nation's
leading business groups and you would know
them attacked the government's ta.. reforms
claiming they would severely damage the economy
and they would coct jobs.
I don't think that sits very well for the tax cummit,
does it?
HAWKE: Obviously I would have preferred that they
hadn't said what they did. It would be
dishonest to say otherwise.
But let m say this, that the emergence of the
government's White Paper has reflected to a very
-14-
considerabl * e extent the input of a number of
buuineas organlzationn including some of
those that are Included in that statement of
the five, and we have had inputs from
business repi'esentntives which suggest for
instance that the approach In the fringe
benefits area which is adopted In the White
Paper is the best way to go.
I think that those organistions of business are
like trade unions, like an ACTU. They have
a big constituency, a lot of people, different
elements in their constituency.
I think what they've done is to issue genoral
statements at this stage. I don't think it's
closed off their willingness or capacity to think
about the package as a whole and I'm, still
hopeful that out of the summit there can be
broad support.
Let me . rep * cat what I've said from the beGinning.
We do not go into the, tax summit with a closed
mind. I s aid carlier this wveol that I believe
if you're putting the beat position that there
should be the IV, that there shouldn't be
exemptions, but I've said-and I rdipent here
on your programme, it's appropriate that I
should thatwe are going to listen to wjhat
the business community a-nd the trade unions,
the welfare. community has got to say.
We'll itsten to them. We hope reciprocally they'll
listen to un.
We've put a lot of work into this. We are not
about doing something that would hurt the
Australian commuiity. That would be contrary
to everything that has characterised this
government since we've come into office.
We are about economic growth, and I say to those
business representatives, under what government
have you had the turnaround from recession
to record levels of growth.?
It's under this government because we've made
the decisions to produce that result and we are
not deliberately about making decisions which
would turn that growth process around.
i
I think that thcy will respond to those arguments.
LAWS: You don't agree that it would increase corporate
tax payments by up to 30%, as they claim?
HAWKE: No.
LAWS: A fair escalation, isn't it?
HAWKE: Yes, and it's not only trade unions which are
capable of maklting ambit claims, John.
LAWS: What about charities? They're currently
tax exempt to such a large extent anyway.
Care they buys for lotteres miss the
wholesale taxt. Their executive gets normal
perks like cars and things.
Are charities going to be affected? I imagine
they'd have to be, wouldn't they?
7. M
-16-
HAWKE: HAWKIC: No, John. It's not a fair assessment. I think
If you. look back to the very beginning of this
during the Ipst election campaign and everything
that I've sid throughout, I've said we've got
a responsibility as a government to do two
things. Firstly to analyac the inadequacies of the
exristing system, and then to fsay, " Well, here
are the avenues in which there can be reform" and
No. The whole question of. exemptions for
charities in regard to donations and so on,
that's not affected by these sets of proposals,
John. What about if they want to buy a car In order
to have a lottery? Up until this time they've
missed that 20% wholesale tax which will now
be gone, but will they pay the
To the extent that car6 generally are reduced
from a 20% wholesale tax down to 12generally
the price of cars should be better.
But what normally happens In regard to
charities Is, I think, companies make donations
in respect of the cars. I don't think that the
attitude of companies is going to change.
There's a groing body of opinion that says
both you and Paul Keating refuse to compromise
on the taic package so that you'll be allowed a
chance to dump it saying, % Wtrileldv ean d
you didn't want it".
is there any truth in that?
LAWS: H AW KE
LAWS:
-17-
I think as a government we havc a responsibility
to say, " Well, we thinIc here is the best iway of
doing it".
I remain convinced in my mind on all the
discussion that's taken place to this point
that the preferred option in the White Paper,
John, Is the best way.
I concede It's not without problems. Of course
there are problems, but I'm not going to lead
a government which walks away from issues because
there are problems involved in It.
I don't think Autstralians want governments like
that. We paid too heavier a price between ' 75 and
' 83 for a government which. walked away from
decisions because there were problems..
I repeat the floating of the dollar, the
deregulation of the financial system, the
entry of foreign banks, the establishment of
appropriate relations between the commonwealth
and the state governm~ nts. In oil of those
fundamental areas It was clear what the right
decivion wns.
But there were probleme involved In it, so
government walked away from It, and average
Australians 1paid a heavy price.
In all of those areas we' ye made the decisions,
despite the suggestion there wecre problems
because we knew it was right for. Austraa
In this process, John, what we've done is to
nay, " eIwe think this is the beat wiay of
going." Wie know there' are problems because it's so Important,
the whole tax urea.' We're not going to Impose that
upon you, we're going to open it up for discusssion.
If in that process of diacussion in the community
at the summit, before It, and after it If out of
all that it's clear that the Australian community
very broadly thinks there's a better way they
prefer to go, well then, okay. We will respond
to that.
But I think at this stage leading up to the summit,
I've got a responsibility and Paul's got a
responsibility of arguing what we see on the
best evidence available to us as the best thing
to do for Australia.
I believe it is, but I don't go to the summit with
a closed mind. I'm going to listen Intently and
I'm going to study intently everything that's
said, and if at the end thcre is need for refinemcnt,
then there will be refinement.
But I've got a responsibility to put what I think
in the right.. case now.
LAWiS; If there's going to be need for adjustment on
a Inlrge scale, will you just drop it?
H A WKE: I don't think the community reaction to this
point has talhed about the dropping of tax
reform.
-19-
LAWS: Of this particular tax reform?
HAWKE: What I think could emerge and I'm being
hypothetical now I hope It doesn't because
I think the preferred option is the right one.
It could be, John, that you could have a situation
where it's said, " Look, there are certidn
refinements of that which would appear to command
a much broader community support".
If that -were to happen it's not a question of
dumping something but it is a question of
refining something.
We've made it clear that our minds are open.
But there is a difference In responsibility.
It's not a point of Kcating and Havwke standing
back and saying, " We've done our job there
it is", now we wait for the summit and listen
to what people have got to say.
If we believe on the evidence that's available
to us now as a result of a hell of a lot of
work that's gone into this, and let me juc't
interpolate there to say no government in its
right mind does something which it t Inkc is
going to be against the economic Interests of
a country, or against the interests of the
majority of people.
We believe fervently and with integrity that
" this is the right way to go, so we are out there
trying to sell it, John.
But I say on this ais I've said from the beginning
of the asaumption of Prime Ministership, I've
never beikeved in public life that I am necessarily
right on everything that I tackle.
I hope that I've done my best to get to the right
conclusion. But if it occurs, that in this process
up to and at the Bummit, that we can see that
there's either a better way of going or a way of
going which Is going to have broader support,
then we'll listen to that and we will certainly
be disposed to try and do that.
But In the meantime if I believe and If X~ eating
believes that on the evidence available to us
to this stage. that this is the best thing for
Australia, then I'm going to try my best to sell
it.
LAWS:-Has the going been tougher than you imagined
it would be?
HAWKE: Much as I thought. I think by and large, John,
that if you looked no, tried to make an objective
assessment, I think what you'd have to say is
this: no one's come up with a detailed alter~ native
pack~ age which they say is better to meet wihat
99% of Australian people say is the caze, that ithat
the existing system's crook. It's gone,
it's had it," it's unfair, Wte inefficient.
No one's really in all the discussion come up a-16
said,. " Look, here we are that's better".
They've pointed out some things they don't
like, and I think we haven't donp too badly uo
far. Y3ut it's a tough process.
A* CC
-21-
LAWS: Sure is. Thank you very much for your
time. You've given us a lot of it as usual.
We're very grateful for it, and good luck.
HAWKE:; John, could I say a very sincere thank you to
you. I know you don't agree with every single
bit of what we're doing, but at least you are
facilitating, I think, an objective discussion
and debate about it and I appreciate that.
LAWS: Thank you, Prime Minister. 0 0
A