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PRIME MINISTER
TRANSCRIPT OF NEWS CONFERENCE, PARLIAMENT HOUSE
31 MAY 1989
E 0 E PROOF ONLY
JOURNALIST: What's your reaction to the debt Prime
Minister? PM: Well, there are a number of things I want to say about
that and I want to of course get it into perspective.
There'll be a lot of scaremongering undertaken by the
policyless people opposite us, the Hewsons and the Peacocks
and so on. Let's get the perspective right. Now firstly
the net debt of Australia is over $ 100 billion, a very
significant amount. In terms of the percentage of our Gross
Domestic Product, somewhat lower than it was at this time
last year, it's 31.7% of our Gross Domestic Product which
compares with 32.4% of the GDP a year ago. Now, I think the
thing that has to be understood is that the sort of
scaremongering comparisons that are made by the opposition
with certain third world countries are totally invalid
they talk about comparisons with Argentina and Mexico. Of
course in those cases the debt as a proportion of GDP is of
the order of 70-80% and of course most of that debt, what is
refered to as sovereign debt, were owed by the Governments
of those countries. You have to look at the composition of
the Australian debt. At the end of last year, which the
last point for which the breakup is precisely available, 61%
of that foreign debt was owed by the private sector, 61% by
the private sector, 14% was by the State Governments and
by Government authorities. The Commonwealth Government, the
Federal Government has no net debt. Now that's got to be
clearly understood as distinct from the sort of situations
in these third world countries to which the opposition has
such easy resort. The position here is the Federal
Government, the Australian Government, has no net debt with
the great majority of it being held in the private sector.
of course what in fact the Commonwealth Government has been
doing, by accumulating significant surpluses by three
successive years, have run down in its own outlays, we've
been able to accumulate a surplus and we've been using those
surpluses to run down our debt, they've been used to pay off
debt. Now, in respect of the private debt it's got to be
understood that that's being used to finance new Australian
investments both here and overseas. In respect to
Australian investments abroad they of course generate income
for Australia and the sort of movement over the last few
years is important to understand. We're already receiving
$ 2.6 billion in income from Australian investment overseas.
It's important to understand that's more than four times
higher than the figure of three years ago, a four-fold
increase in three years which is income coming to Australia
as a result of Australian investment abroad. So the final
general point that I want to make is to get an understanding
of how the net indebtedness to which I refer, which is just
over $ 100 billion, has in fact come about. What we've had
is a situation where when we came to office in 1983 as you
know the Australian economy was uncompetitive, it had
actually shrunk, there'd been negative movement in our
output the year before we came to office. The Australian
economy was simply uncompetitive, inward-looking. What had
to happen was there had to be a significant restructuring of
the Australian economy to make it more competitive, to be
able to take on the rest of the world both in terms of
import substitution and in the growth of exports. There is
no doubt if you look at the Australia of today as we go to
the latter part of the decade and in 1989 the Australian
economy is significantly more competitive. That has been in
part as a result of the signficant success of wages policy
which has involved an increase in competitiveness of the
order of 10%. We've had a very significant reduction in
real unit labour costs of the order of 10%. Associated with
that we've had a fundamental restructuring in increase in
investment. Investment is as you know now at a 40 year
high, a 40 year high investment in this country. That
investment that's been undertaken has been essential to
improve the competitiveness of the Australian economy to put
it into better shape to deal with the problems and
challenges of the future. We are getting that investment
now too quickly and I think some indication of the impact of
these high levels of investment on our current account
deficit should be understood. Let me illustrate it. If
business investment were now the same proportion to GDP as
it had been for the last 25 year average then instead of it
being as it is now, two and a quarter points higher than
that 25 year average, then the current account deficit that
S we've got would be about $ 6 billion lower than in fact it
is. So-when you take account of all those considerations
you'll see how nonsensical it is for the scaremongering,
Australia-downputting approach of the opposition. Their
scaremongering, their attempt to write Australia off, to put
it in the same category and league as Argentina and Mexico
is both grossly inaccurate, betrays a fundamental
misconception of the realities of the nature of our debt and
its composition and is an approach which is totally against
the best interests of this country. Any attempt to try and
divide up this figure as they do and match it against each
family in Australia and say each Australian family owes such
and such an amount is a nonsense and a stupid and pernicious
nonsense. The money is not owed by the Government of
Australia in itself or on behalf of the people of Australia.
overwhelmingly it is owed by the private sector and it is
owed for the reasons and with the results to which I have
referred.
JOURNALIST: Prime Minister, on the related question
PM: Could I I'm sorry Peter could I make the point
however that I'm not, having said all that and given the
detailed exposition of the composition of the debt and the
reasons for it, we're not saying that at that level it's not
a problem and that it doesn't require Government action.
But indeed the fact is of course, as I've said in the
Parliament and publicly, other than in the Parliament, we
are pursuing policies directed towards lowering the level of
activity. Every relevant arm of policy is tight. Fiscal
policy, as I explained yesterday in the Parliament, could
not be tighter. It's tight in unparalleled terms, three
successive years of reductions in real Government outlays.
You've got a surplus for the second year in a row and
there'll be a surplus next year and a public sector
borrowing requirement of zero now and a public sector
borrowing requirement in the next year which will be plus,
in the best part of one per cent. So you've got tight
fiscal policy, tight wages policy and tight monetary policy
and those policies are beginning to have an effect, will
have an effect, the effect which is necessary and that is of
lowering somewhat the level of activity in this country so
we won't be bringing in the same level of imports to go on
in an unsustainable way building to debt from the level of
activity in this country. So those things are in place
because we recognise that the country can't go on having
this imbalance between what it imports and what it exports.
JOURNALIST: I just wonder how long do you think the
electorate though is going to cop the political reality of
those high interest rates? The tighter they are the longer
it goes. How do you think you can wear that in electoral
terms? PM: Let me say this. That if you were looking in the short
term electoral perspectives, I suppose the implication of
your question not that you're putting it but certainly
the implication of what's been put by the Opposition, is
that we would become economically irresponsible, abandon
tight monetary policy. My judgement of the Australian
people is a more sophisticated one than I think that it is
of others, including the Opposition. I don't believe
provided that we expound the analysis in the way I have and
the way my other Ministers will do, I don't believe that the
Australian people would expect us to become irresponsible in
the conduct of policy because the simple fact, the simple
irrefutable fact is that if we were to loosen policy then we
would unleash upon the Australian economy an infinitely
worse and, in a sense, irrecoverable situation. It would be
short term economic lunacy and in political terms it would
in my judgement also be political lunacy because the people
would not in my judgement buy that sort of situation. Now
the Australian people are entitled obviously to expect from
governments or alternatives governments an exposition of
what they are doing to deal with the economic realities and
problems which the country faces. There is a clear choice
in the judgement for them to make. They are faced with an
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PM ( cont): Australian Government the Hawke Labor
Government which as a result of the policies it's pursued
has brought about unparalleled employment growth and I
remind you of the 1.4 million jobs which is reflected in
the fact that the unemployment level of more than 10% that
we inherited has been dramatically reduced, a reduction of
inflation from the double digit figure that we reduced to
less than 7% and trending down, and a situation now where
there has been a response from the business sector which we
welcome, to the call that we were making for a restructuring
of the Australian economy. The massive investment 40 year
high levels. Now OK the right things have been done which
have been reflected in great employment outcomes, much
better inflation outcomes, but now reaching a point where
there has to be moderation. Now they'll make the judgement
as to whether we've got the policies which can bring us out
of that boom situation to what is referred to as a soft
landing that is put it in non-technical terms, a situation
where growth can be lowered but still maintained so that
economic growth will go on and employment growth will
continue. Now our policies are there, we've demonstrated as
I said in the Parliament yesterday, in ' 85-86 that we can do
that. We came out of that problem period still with
economic growth and still with employment growth. Now we
can show that we can do that. Now against that what's the
alternative? The alternative is an opposition which hasn't
learned anything in the 19801s. You would think they had
been in some time warp, some cocoon where they had been
impossible, it had been impossible for them to learn
anything. Because what are they suggesting? They are
suggesting that there will be or let me interpolate on
myself because when I say they are suggesting, there is
not one voice and I'll come to that in a moment but what
they are saying is that they will slash the public sector
more that's what Hewson says but then the other
frontbench spokesman said, ' not on your nellie you won't,
you haven't talked to us'. You can get up and make your
autonomous statements about cutting expenditure but we won't
let you. So as far as you can see they may be talking about
cutting expenditure. They are talking about a wages free
for all and there is their greatest Achilles heel. Because
if we're going to learn from the 1980' s as I said in the
Parliament yesterday, you look at the two periods. In 1981
with the absence of a wages policy, wages explosion and the
economy falls apart. Under Labor the problems of 85-86,
relevant policies including wages policy, a soft landing.
So I'm sorry it's a long answer to your question Peter but
it's important. You're saying will the electorate cop this?
They don't like what's happening and I don't like having
interest rates longer for one day necessary, longer for one
day than is necessary. But I know that if we didn't have
them there we'd be doing a greater disservice to the
Australian public.
JOURNALIST: Today the Australian expert at Salomon Bothers
in New York said there was a 25% chance in his opinion that
Australia could go into recession next year. Are those odds
too high in your opinion and if not why not?
PM: I think the odds are not as high as that. Let me put
that comment into this background. The OECD has released
its assessment of what's going to happen in the OECD this
year and next year. Their assessment is that economic
growth in 1989 will be 3.25% and in 1990 next year 2.75%,
that is for the OECD area as a whole. In other words what
the OECD is predicting is a pattern of continued strong but
somewhat lesser economic growth and any reasonable
assessment which, may I say has been made by everyone other
than Moody's it seems to me, is that Australia will be part
of that pattern.
JOURNALIST: Are we approaching the point Mr Hawke, where
the level of private debt within the total is beginning to
harm Australia's credit worthiness?
PM: Well on the question of Australia's credit worthiness,
I mean I don't want to go through all the references, I
don't want to take up your time or mine because I've got a
function out the front in 5 or 10 minutes. But you are
aware of the statements that have been made by everyone
virtually other than Moody's; Salomons, Standard and Poors,
the Australian Rating Agency and so on, I mean Moody's is
one out in their assessment. Now as far as the private
sector is concerned they are making their judgements about
their investments in terms of their capacity to finance
their investments and no reason to believe that basically
those judgements are not going to be vindicated. I remind
you of what I said about the very significant level of
income flow to Australia now from those investments
fourfold increase in the past three years. But having said
all that I don't want to leave and I hope in nothing that
I've said to this point, have I left a sense of complacency
because the simple fact is that with the accumulation of
that debt then there is the repayment of interest involved
and that in itself is an inbuilt problem and that's why we
are directing all the attention we can to getting the
balance in the area of trade so that we are able to have a
lower level of imports which we can finance by our exports.
JOURNALIST: Prime Minister, given this current situation
and the need to correct it
PM: Yes.
JOURNALIST: Can the Australian people still expect the rise
in living standards you've consistently promised this last
year? PM: I believe they can expect what I said and that is, you
will remember I put a maintenance and then through time a
gradual improvement of standards. Of course, what you've
got to understand, given the Australian context, is that the
way we're going about that is the only way it can be done.
I mean you can't, if you are going to analyse and understand
what is proper policy making in Australia, forget your
history. I can't emphasise too strongly the relevance of
the graph in Attachment A to the Treasurer's April Statement
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PM ( cont): because the history is there encapsulated in one
page. The history of Australia shows in the past that
you've had, where you have the booming economic condition as
measured as the graph does, either by overtime or capital
utilisation. You've had wages going up with it, the wages
explosion and the inevitable breakdown recession following
it. Now what we've got now is a wages policy which will mean
remarkably a six and a half percent wages outcome, that has
been possible because of the tax decisions that we've made
and a combination of those wage decisions and the tax
decision will mean a maintenance and gradual improvement of
standards and a situation, we believe, which together with
our other arms of policy being tight as they are, fiscally
and monetarily, a reduction in the external problem that we
have to address.
JOURNALIST: Mr Hawke, that original statement suggested the
maintenance of living standards this year and an increase in
real living standards next year, is that still possible?
PM: I think on the scenario I've put, yes.
JOURNALIST: Prime Minister, on another subject, should
Australia even be considering an extradition request from a
country, from Chile, given that country's rather appalling
record on human rights and lack of judicial propriety in the
past? PM: We have expressed consistently, not only in regard to
Chile but universally, we have no geographical
discrimination as distinct from the Opposition. We have no
geographical discrimination when it comes to the
condemnation of human rights abuses. our condemnation of
human rights abuses applies whether it is Chile, South
Africa, the Soviet Union or wherever and no Government, I
think, has done more both generally and through Amnesty to
identify itself with condemnation of the abuse of human
rights. Coming particularly to Buschmann, we're examining
that position. Let me make these points about it. Firstly,
if a request for extradition were based upon an allegedly
political offence or in regard to one where there was
capital punishment, extradition would not be granted. I
understand in regard to Buschmann there is some question
been raised about the regularity of his visa application for
entry to Australia. That is being looked at. of course if
it was an irregular visa entry that he made then he would
not be allowed to stay in Australia. But that's not
extradition. Our attitude on extradition will be governed
by the considerations that I've just referred to.
JOURNALIST: Prime minister, do you accept the alliance
between Labor and the Greens in Tasmania or do you consider
it could be politically risky?
PM: well I accept it. Well, it's not really in a sense
JOURNALIST: Do you welcome it?
PM: Lab Green is better than Gray.
JOURNALIST: ( inaudible)
PM4: I haven't finished. The position there is that I
believe that the Governor and I hope that this is not said
gratuitously I believe the Governor has acted
appropriately. That capacity of Mr Gray to govern will be
tested when the Parliament resumes on the 28th. I believe
that the Accord that has been struck between the Labor Party
and the Independents will stick, therefore that means that
they can form a Government after Mr Gray has been tested on
the floor of the Parliament. From my understanding I think
the Accord that has been reached is a) relevant, and b)
workable. So I think the people of Tasmania are in for a
distinct improvement in Government.
JOURNALIST: Do you think IMF and the OECD would agree with
Moody's that the pace of economic adjustment will be stepped
up PM: Well, I just go back to what I said before, you go to
Moody's. I mean, why all of a sudden are we, as distinct
from everyone else, hanging on Moody's and Moody's alone?
Moody's are one out in their assessment. In terms of the
pace of adjustment I think we are entitled to say ' look at
the record in six years'. We have been prepared to make
adjustments, that we're not hidebound by some commitment to
there is the Budget day, you don't do anything through the
year except on Budget day. We have consistently been
adaptable and responsive in the making of economic policy.
Let me remind you, we're still in the month of May, earlier
in this month we took $ 2.7 billion off the States and the
public authorities and when you take account of $ 360 million
just last month on ours, there's a $ 3 billion decision in
terms of taking off from the area of public demand and
public call upon savings. That's what we've done within the
last month. So that is also in the context where we've
delivered also on the wages tax deal. Also within the last
month there's been a tightening of monetary policy. Anyone
who suggests or implies that the Government is not
progressively moving to tighten, and tighten policy and make
relevant decisions, is either dumb to the nth degree, asleep
or politically malicious. Now you can apply whichever one
of those you want to who's ever making the statements.
JOURNALIST: Mr Hawke, what do you think about the idea of a
merger or joint venture between Ansett and Qantas and do you
think the way the work of the Committee on the two airlines
has become bogged down signals that that issue is off the
agenda until
PM: Well, let me just say in regard to this suggestion I've
seen about a merger between Qantas and Ansett, it's a
fascinating one which hadn't occurred to me, I think hadn't
occurred to very many other people. I don't think, if I may
put it that way, that it's necessarily got a lot of legs
the important thing or wings, but let me say that what we
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PM ( cont): are serious about is looking at how our public
enterprises are going to be able to function in the public
interest. That's what we've got to determine and I'm quite
happy about the way the processes of examination are going.
ends