PRIME MINISTER
TRANSCRIPT OF INTERVIEW WITH MIKE CARLTON, RADIO 2GB, 1 JUNE
1989 E 0 E PROOF ONLY
CARLTON: On the line from Canberra the Prime Minister this
morning. Good morning.
PM: Good morning Mike.
CARLTON: Where did we all go wrong?
PM: Well just let's get straight who's wrong. I mean the
presentation that you put, Mike, almost assumes that all
Australian families via the government owe this money and
this is perhaps not surprising seeing the way the opposition
try and put this story. They say ' here's a figure of $ 100B
there are so many Australian families, each Australian owes
therefore that much. Now that is a nonsense. The fact is
that the great majority of this debt is owed by the private
sector. The private sector have made decisions to borrow
offseas basically to finance investments in this country
which are providing employment and growth in Australia. Let
me give you the breakup of the debt as at the last figure
that we've got for it; 61% of the debt is owed by the
private sector, 14% is by State Governments and 25% by State
Government/ Commonwealth Government authorities like the
Electricity Trust and so on. The Commonwealth Government,
the Australian people's Government, owes no debt, no debt at
all. In fact because of the fact that we have now turned
our deficits that we inherited from the opposition when we
came to power, you're saying ' where have we gone wrong?',,
where we'd gone wrong was before. We inherited a deficit
which was approaching $ 10B. We've turned that deficit that
we inherited around from $ l0B into a surplus of
We're in our second year of surplus, the first time that
this has happened for over 30 years. Now we haven't gone
wrong as a Government, we've gone right and we owe no debt.
So the debt is owed basically, the overwhelming part of it,
by the private sector who've made decisions which will
enable them to accrue income to get it back. And as well as
that debt being in the private sector we should also
remember that in the period that we've been in Government
there's been a significant increase in investment overseas
by the private sector which is meaning that now we're
getting each year from that investment overseas $ 2.6B in
income which is more than four times what we were getting
three years ago. Now
CARLTON: But surely the average Australian is having to
foot the bill for these private borrowings with high
interest rates?
Pm: I was not going to ignore that part Mike, and you were
perfectly fair to refer to the high interest rates and I
know that your listeners are worried about that. Let me
make this point that the investment that's taken place
overseas and particularly in the last couple of years has
been welcomed because what we want to do is get investment
in Australia, particularly into our manufacturing industry,
to re-equip it, make it more competitive so that we can earn
more overseas and not have to import so much from overseas.
Now unfortunately the rate of investment increase that's
taken place in the last year or so is so high that it is
bringing in levels of imports that we can't sustain. So
this is where your interest rate policy comes in. We've
just got to slow the economy down somewhat now because the
simple fact is Mike, without getting technical about it,
we're importing so much now that we can't afford that level
of imports so what we've got is a tight monetary policy with
high interest rates to slow the economy down somewhat. But
we won't be slowing it down that much that we're going to go
into recession. We're going to keep growth and keep
employment and as we do bring that level of activity back
we'll be able to ease interest rates off.
CARLTON: The average Australian takes a look at it though
and they see the Bonds and the Elliotts and the other big
business buccaneers borrowing huge sums which we support
with our interest rates and then they run their profits from
all these huge sums through the Cook Islands or something.
PM: Yes and Mike that's why we have announced and that
was done by Paul Keating we've announced that there's an
end to these tax havens. They will be closed down and under
the announcement that's already been made with the
legislation to come under it then there will be no further
opportunity for this to be done. This whole tax system in
this country was built up under our predecessors. we've
spent years and years now since we've been in office closing
down avoidance loophole after avoidance loophole. The tax
evasion industry was described by the conservative's own
Royal Commissioner Just before we came into office it
was described as the fastest growing industry in this
country. It's this Government which by piece of legislation
after legislation is closing down the tax avoidance industry
and now with the closing down of the tax havens that
smashing of the tax avoidance industry which had grown up
under the Liberals will be finished. I can understand, I
mean I'm continuously thinking about what's the best way we
can conduct policy to ensure that your listeners, the
ordinary Australians, are not going to take an unfair burden
of this. We want to make sure
CARLTON: You see I asked them this morning what question
they most wanted asked and they wanted to know why they're
paying off 17% on their home mortgage so that the Bonds and
so can go and borrow big overseas for takeovers?
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PM: No, well let me say that on the question of borrowing
overseas, I mean if the private sector wasn't borrowing in a
situation where we are importing more than we export the
simple fact is if this country or any country imports more
than it exports then it has to borrow to make up the
difference. If the private sector wasn't borrowing, the
Government would have to. That's a simple point. I mean
you don't have to be an economist to know that. If we have
a level of activity which means that we're importing into
the country more than we are exporting then it's that
difference that you have to borrow to pay for. Now because
the Government has been prudent in cutting down its levels
of outlays and is repaying its debt, it's the private sector
that's borrowing. Now in a sense, in a sense that's a good
thing to the extent Mike, that it's building up. What's
being imported is equipment to make our factories more
efficient and that's what we're getting significant growth
in employment. We've virtually eliminated the large
overhang of unemployment that we inherited.
CARLTON: Alright. Isn't a lot of that importing just
frills. I mean
PM: Well to some extent some of it is. I mean
CARLTON: You know CD players.
PM: You've got certain things that are regarded as luxuries
and so on. Now you've got to ask yourself the question and
some people are saying, ' well you put import barriers
against the imports of some of these things'. Well one
thing you've got to ask yourself, can Australia be going
around the world as we are, preaching to the rest of the
world that they have to have open economies so that our
farmers and efficient exporters can get a fair go in their
economies and at the same time then putting up barriers here
against imports. I mean you're going to look pretty funny
going around the rest of the world saying get rid of your
barriers, your protective apparatus which stops us getting
into your countries but as we do that we'll whack up
barriers against you. It's a pretty difficult situation to
do that.
CARLTON: Yes alright. Why not a tax break on savings? I
mean the little person with a few thousand, perhaps a few
hundred dollars in a savings account gets very upset paying
tax on that. Why can't you give tax relief on that?
PM: It's something that's in the public domain that's got
to be looked at. But just let me make these two points that
I don't think are too complex. On the question of savings,
if you give tax relief what you are doing is giving up a
certain saving because to the extent that there is a tax and
that goes into the public revenue, that is a certain saving.
I mean it's money not expended because it's taken by way of
tax. The question is if you give that tax relief back, is
the money going to be saved to the same extent or is part of
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( PM cont): it going to be spent and not saved? So you
can't delude yourself that by giving a tax break you are
increasing the stock of saving in the community. I mean
-that's quite obvious. So that's
CARLTON: Well you may well though. I mean people may feel
that if they may be encouraged to save, if they know the
interest on those savings won't be taxed?
PM: No what I'm saying is that the fact that you are taxing
that is by definition saving. It is not spent. Whereas if
CARLTON: If national saving was not saving for the poor
bloke with the
PM: I understand that. But I mean the question is normally
raised in terms of the community as a whole. The community
as a whole has got to save more and not spend, is it not
better to give the tax deduction? I'm simply making that
point that that's one of the things that has to be taken
into account. I'm not saying it's conclusive, it's one of
the considerations that has to be taken into account.
CARLTON: Well you have said earlier on, a few weeks ago,
that all economic policy was under constant review and being
looked at. Are you considering the possibility of a tax
break on savings?
PM: Well it's not specifically on our agenda but obviously
with the amount of discussion that's going on, it's being
talked about in the Press, what have you, people will
obviously be wanting to get analyses of these concepts. But
that's a different thing from saying it's on the agenda to
be announced in the near future. I mean I'm not trying to
to be tricky about that. If you have an issue like this
which is being talked about as much as it is obviously
you're having the issue analysed. You must do and if the
thing's being talked about as much as it is I mean I
wouldn't be able to make the points back to you now that I
am. CARLTON: So you are at least looking at it as a
possibility? PM: Well one's analysing the issue obviously because you
can't have something like that in the public domain and say,
' you know I'm ignoring it'. But I don't want to leave your
listeners with the impression that because we are properly
looking at the issue in terms of it being there in the
public domain that it's something that's on an eve of
announcement or something like that.
CARLTON: Prime Minister what's to prevent all this finally
ending in a massive recession sometime next year, that we
actually hit the wall? Interest rates are too high
PM: Well that's a good question. Let me answer it. We've
had in the 1980s Mike, two periods when we've had a sort of
a boom and bust type of situation. one was in the period
before we came to office. In 1981/ 82
CARLTON: The wages explosion?
PM: Wages explosion and that occurred you had great boom
in activity but you had no wages policy in place. wages
just went through the roof. In 1985/ 86 when the terms of
trade collapsed Mike, the situation was there that you had a
wages policy in place. We were able to control wages and we
came through that with a lower level of activity but with
still having economic growth and employment still rising.
Now at this period we've got a tight policy which we must
have for the reasons that I hope your listeners understand.
I just want to make one more point on that in a moment. But
we've got a wages policy in place which means that there
will only be an increase in wages of about six and a half
per cent in this year. Now that means with a combination of
the wages policy and the taxes position coming up in July,
that we're not going to have a wages breakout. So in a
position where the OECD has just announced that world
economic growth is going to go on at about 3.25% this year
and about 2.75% next year, we're in a world which is going
to be continuing to grow but at a slightly slower rate,
that's what we believe on the experience of the ' 80s we can
do here.
CARLTON: It's a big gamble. For instance, if the prices
for our wool and wheat and minerals fall, commodity prices
drop, if you keep interest rates on too long we'll hit the
wall with a huge bang won't we?
PM: Well, yes, and that's like saying that if your aunt had
a different anatomical construction she'd be your uncle.
The fact is that you can construct any sort of scenario and
say if it was like that then sure you'll get a different
outome.
CARLTON: The risks are there.
PM: of course the risks are there. I mean we don't live in
a risk-free world. That was not what was ordained for us
when we appeared on this globe and particularly at the
latter part of the 20th Century. The world is full of
risks. But the important thing is a world full of risks
demands policies and toughness and a capacity to make
decisions. And this Government has shown now through six
years of inherited difficulties remember interest rates
you talk about now, interest rates under this Government
haven't approached the level of interest rates under the
previous Government. They ruined the economy, they had an
additional quarter of a million people thrown out of work in
their last twelve months of office, they had double digit
unemployment and double digit inflation. We've got them
both down and interest rates under them hit 22%, 22% and
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PM ( cont): that's for 90 day bills, 22%. Ours is only
around 18%. Now that's high and too high but it's
necessary. The important point is yes we live in a world of
risks and dangers and problems and in this country you've
got two alternatives. The others who wrecked the economy,
threw people out of work at a rate never seen before for
years, with double digit inflation. We've created 1.4
million jobs, four times the rate of job creation under them
because we've got the policies and at the moment
unfortunately with the enormous growth that we've had, the
risks and dangers that are around that you talk about mean
that we have to have high interest rates. Because if we
didn't have high interest rates now the economy would
collapse like it did under the Liberals in 1981 when we had
the worst recession in 50 years. So yes risks, and what's
required is policies we've got them. The other mob are
still talking about doing precisely what they did in
1980/ 81/ 82 which brought the worst recession in history. So
risks yes, but we've got the policies to deal with them.
CARLTON: Here in Sydney the first home buyer they say is
now an extinct species.
PM: Well just let me give you the statistics on that.
Under the first home buyers scheme, First Home Owners
Scheme, we will be spending $ 17814 this year and there'll be
40,000 new home buyers just under that scheme, under our
scheme. I mean it just isn't right to say that, talking
about our country as a whole, the first home buyer is
extinct. The problem is, part of the problem is that the
level of home building activity has reached the highest
point that it has reached in our history. We've got to
scale it back. True it is, true it is that in Sydney there
are particular difficulties but with the co-operation of the
States where I called the State Premiers together there
two months ago we are now adopting policies in regard to
land release, which is you know the central part of the
problem, which through time will start to ease those
pressures. But you're quite right and I appreciate the
problems that are facing a number of people in Sydney.
Could I just say this Mike, I want to say to your listeners,
I spend you know the great majority of my time thinking
about these issues. What are the things that we can do to
try and make it easier in tough times? We don't want to
have interest rates higher for one day longer than they have
to be. But I want your listeners to understand that in this
situation where we are importing so much compared to what
we're exporting, if we didn't have tight monetary policy, if
we ease things off what would happen is that the dollar
would just collapse and in those situations you would have
then interest rates going through the roof, the total
economy would collapse. I honestly believe that with some
restraint at this time we are going to be able to come
through this in a way which will enable us to keep
employment growth and the economy going.