IAUSTRAI A
PRIME MINISTER
E 0 E PROOF ONLY
TRANSCIPT OF INTERVIEW WITH TELEVISION JOURNALISTS -TOKYO
MAY 1 986
JOURNALIST: Prime Minister, how worried are you about the
economic situation?
PM: Well, the first thing I want to say is that this is not
a time to panic. We have got to recognise that the deficit on
the current account is undesirably high and that we have been
put at a very considerable disadvantage by the drastic
deterioration in the terms of trade especially since last
October. Now the key elements of our policy to deal with that
have to be followed closely. That is there is a need to have
some slowing down of the high levels of growth that we achieved
deliberately in the earlier years. With that slowing down there
has to be a very firm level of fiscal restraint. The task of
the Budget forming process has, if you like, been reinforced
by these figures. And we need to do that because we don't want
to have a situation where there has to be more reliance on
monetary policy.
JOURNALIST:' You have already cut back though very heavily.
Is there much more room to manoeuvre?
PM: By definition when you have had three previous Budgets
when you have tried to cut back there and successfully in
areas of unnecessary expenditure. I means by definition that
the fourth time round the job is harder but we have to do that
because the less you do-in the area of the Budget the more
reliance there may have to be in ' those circumstances on
monetary policy. We also, in the-other arm of policy that is
available to us which has not been available to previous
governments, we must have a continuation of moderate wage
outcomes. I make the point that in the previous history of
Australia you never would have had the moderate'level of wage
outcomes with such high economic growth as we have been able
to have under the operation of the Accord. It is essential that
that continues. So the basic message that I am giving is that
we don't want some dramatic new policy directions but what we
must do is to ensure that existing elements of policy are
utilised firmly to meet the challenge which is proposed for
us as a nation by this unsustainable level of the current
account deficit.
JOURNALIST: Do you think we are headed for a banana republic?
PM: No I don't.
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JOURNALIST: Prime Minister you say that it is not a time for
panic but if there is talk of Australia becoming a banana
republic if we don't get on top of our trade imbalance
surely that suggests some alarm?
PM: Well, let me say if you look at the full context of what
Paul. Keating said you are saying if you don't firmly follow
through the arms of policy that I am talking about, if you don't
have the determination to do that then the alternative is the
sort of thing he was talking about.
JOURNALIST: -Do you share that view though, if policy is not
achieved in the way you have said?
PM: You know I don't go into this hypothetical business. I
simply make the point that Australians in 1983 showed their
capacity in combination with firm leadership by government
to act together in a way which brought Australia out of the
worst recession in 50 years. Never forget that. When we came
to office in the beginning of 1983 it was the worst recession
in 50 years. Now there had to be new policy directions
co-operatively shaped by government with the elements of * the-
Australian population. Now together we have got out of that
worst hole in 50 years. So I am certain we can do the same.
sort of thing against. Not that we are operating from a
low economic base. The problem is in a sense we are paying
the price for our success and the very high'levels of-economic
ac tivity that we have achieved averaging 5% in each of the
last 3 years well above the OECD average. So the problem
now is the challenge of success if you like and-we have
together to be prepared to do that and I am sure we can.
JOURNALIST: Prime Minister could I just ask you just to clear
up one point. The tax cuts will be on this August?
PM: I have said that the tax cuts are firmly in place as they
have been announced in the past.
ENDS