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Date: 6 August 1989 Time: 0940
Source: NATIONAL NINE NETWORK Programme: Sunday Programme
Jim Waley: In spite of continuing gloom at the state of the
economy, the leading voices of Labor's -federal government were
unusually silent this week, hushed perhaps in the hope that given
the stage to himself, Opposition Leader Andrew Peacock would
fluff his lines during his five day, five state mock election*
campaign. Well, the coalition's dumm~ y run is over, and so is the
government's forbearance. The Prime Minister Mr Bob Hawke is in
our Canberra studio this morning. Here to talk with him again are
Laurie Oakes and political analyst Alan Ramsay from the Sydney
Morning Herald. Laurie.
Laurie Oakes: Thanks, Jim. Prime Minister, welcome to the
programme again.
Prime Minister Hawke: Thank you very. much.'
Laurie Oakes: Before we get onto domestic politics, do you agree
with Sonny Remphal that half a dozen of our top rugby union
players going to South Africa would hurt or jeopardise the
Commonwealth Games?
Prime Minister Hawke: It must be on that side of the ledger,
and I sincerely hope that the fellows in question will not accept
the invitation. The simple bottom line is this that they are
being invited to go to a country in which there is dramatic
inequality of opportunity. There is dramatic inequality in the
funds devoted to education, sport and training opportunities for
non-whites. In the end the simple fact is that you can't have
equal sport in an unequal society, and I hope that our fellows
whose rugby playing capacities I admire enormously, I hope that
they will not make the mistake of giving comfort to a regime
which is still internationally unacceptable.
Laurie Oakes: Are you going to take any action to try and stop
them going?
Prime Minister Hawke: Well, two weeks ago we contacted the
Rugby Union Board and indicated the government's position on
this, that we hoped very much that they wouldn't go. But as you
know, we have never and will not go to the position of stopping
people's passports. This is a free society. As a government we
try to give a lead as to what should happen in terms of
international relationships, but I trust that the gentlemen in
question will see this in the broader terms. I don't, let me say
this also, I don't doubt the integrity of some of the people
within South Africa, in the cricket field and in the rugby field.
I am sure that there are people whose integrity is beyond
question who would want to see not only equal sport but equal
sport within an equal society. But this is not the way to go
because in fact the situation in that society, in some senses
worse, than its ever been before and they use these attempts to
have international recognition in terms of international sporting
contacts as an argument that they are condoned and accepted. So
I hope, as I said, Laurie, that our blokes will not, even if its
unwittingly, as I imagine it would be and certainly
unintentionally on their part, in fact be giving aid and comfort
to an abhorrent regime.
Laurie Oakes: We've got the British rebel cricket tour which is
on. Alan Border says it could happen with Australian cricketers
because the dollar rules. Isn't the sporting boycott thing
breaking down now?
Prime Minister Hawke: Oh, I think it's hard to say it's
breaking down. There are certainly cracks in it. I accept that,
but generally speaking they are pariahs in the international
sporting community. I think what we've got to remember is that
there are
Laurie Oakes: Their not really pariahs. We had a couple in our
test team that went to South Africa, and they're back playing
quite happily.
Prime Minister Hawke: Well, they've paid a very significant
penalty, and may I say that in respect of one of them you've
got Terry Alderman that penalty has been paid and he's making
a magnificent contribution now. But I think Australian cricketers
generally do understand that they have a commitment beyond
themselves and securing a financial futur'e, which is
understandable. They've got a commitment beyond that as we all
have. I mean, there are so many people who could make financial
advantage out of doing things which are not too proper. You've
got to have other considerations than just financial advancement.
Alan Ramsay: Prime Minister, you're opening tomorrow's
Commonwealth Foreign Ministers Committee Meeting in Canberra.
Prime Minister Hawke: Yeah.
Alan Ramsay: What's your attitude to tougher sanctions against
South Africa?
Prime Minister Hawke: Well, I think the right position, Alan,
is to concentrate on the line of enquiry which I initiated two
years ago at the Commonwealth Heads of Government on the question
of financial sanctions. I think that is the one and certainly
from indications within South Africa that's the one that they're
most worried about. They've got very very big rollovers coming
and there are indications that there's going to be a tougher
attitude towards them. The governor of the reserve bank in South
Africa and the Minister of Finance have already indicated that
existing sanctions have had a very very adverse impact upon them.
Now I would think that the biggest opportunities are in the area
of financial sanctions, but, Alan, can I make this point. I
think you know it, but I think it's important that viewers know
it. Neither I nor my government have any interest in sanctions
as such. I mean, I abhor the necessity for sanctions. Sanctions
are not an end in themselves. They are instrument to try and
bring the South African government to the negotiating table. And
I wish they would come to the table so we could forget all talk
of any sanctions.
Alan Ramsay: You talk about financial sanctions. What about
trade sanctions?
Prime Minister Hawke: Well, I think the trade sanctions that
are there should be kept on. It's a pity that non-Commonwealth
countries are not giving the same sort of strength of support as
has been given by those within the Commonwealth. But there is no
doubt that they have had the adverse impact. There's no point in
relying on my judgement, Alan. As I say, there is the published
statements just a few months ago of the governor of the reserve
bank in South Africa and the Minister for Finance of the very
significant, tough and adverse impact that the sanctions have had
on South Africa. That's their own assessment.
Alan Ramsay: Prime Minister, before we go to domestic issues,
Paul Keating brings down his seventh budget just in, what, nine
days time. How do, can the Australian people expect him to be
any more correct this time than he was with his forecast last
year of which some of them were hopelessly wrong.
Prime Minister Hawke: Well, I, that's a fair comment and
question, Alan, but I think you need to make this point and put
it in this context. Paul and the government were not Robinson
Crusoe. Every perfectional public and private economist in
Australia underestimated the level of demand at that time. He
wasn't one ( phonetic) out. Now the governor of the Reserve Bank,
Bob Johnson, has indicated that they were wrong. We were wrong
O in underestimating the strength of demand. Well, that's the
nature of economics. We will do our very best to make sure that
the budget is premised on the best assessment we can possibly
make. And I think if you look at the whole period since 1983
we've done a fairly good job in getting it right.
Alan Ramsay: But it's going to be a budget, presumably the last
one before the next election. And I say presumably.
Prime Minister Hawke: Yeah, presumably, Alan.
Alan Ramsay: People can, shouldn't people be cynical about it
S simply because of this aspect of it?
Prime Minister Hawke: No, no, I mean cynicism is much more a
monopoly or preserve of the media as you know, Alan. But I think
you're fair enough, Alan, to say, alright, there was an
underestimate of demand last time but I believe that the evidence
is there that the policies that have been tuned since the budget,
I mean a budget is a year ago by definition. We've had the April
statement since then which has been a made a massive
adjustment, further very significant reductions in the public
outlay side involving the states and the commonwealth, a further
reduction of the public sector borrowing requirement. You've seen
the relevant fine tuning since August and that has been the mark
of this government, Alan, that we have made the adjustments as
you go along which are necessary. And we've got at the present
time the very tight policy to bring down that level of demand
which you rightly say was to some extend underestimated a year
ago. Alan Ramsay: Prime Minister, without asking you to give away
any deep secrets, its obvious now that there's going to be a very
very big surplus in the budget that Paul Keating will bring down
O seven or eight billion dollars. Won't that give you scope for
new tax cuts down the track? Perhaps early next year?
Prime Minister Hawke: Well, by definition if you've got, what
we've done as distinct from the Opposition, if you have created
a very substantial surplus by being very very efficient in
bringing down the levels of public outlays' as well as
rationalising your tax system, that gives you a position in which
you would be able to fund tax cuts as distinct from the unfunded
proposals that have been floating around from this undisciplined
S Opposition for some time now. Now, judgements would have to be
made as to what was the appropriate way of using that surplus.
Now it is true that one option would be in terms of overall
macroeconomic judgement if you wanted to try and secure a lesser
wages outcome, you could look at the question of a wages tax
trade off. Now that's obviously a possibility in that situation.
You would have to weigh that against what could be achieved by
using that surplus for other purposes in terms of retiring debt.
But that is obviously a theoretical possibility. What we would
have to do, what any sensible government and that's what we are,
what any sensible government has to do in the circumstances
confronting us right now, what's the best decision in terms of
economic outcome.
Alan Ramsay: Well, putting theory aside for a second, what
would be your wish? Would you hope to be able to cut taxes
further? Prime Minister Hawke: Oh, we have taken the view that if you
can do that equitably, then you would examine the need for
further tax cuts. But the thing that distinguishes us . from the
Opposition is that we have done it on a funded basis. We've made
O the tough decisions. First, create your position where you can
fund your tax cut, and that's what characterises us and what
distinguishes us from the Opposition. You go back to 1987. They
hadn't done the work, they just made the promises. They're doing
the same thing again now. I mean, how long do we have to wait
before they'll get to the position of saying where' the cuts are.
Where have they expenditure ( sic) cuts which will fund their tax
promises. Alan Ramsay: Prime Minister, Andrew Peacock even concedes now
S that interest rates might fall before the end of the year. How
far do you think they've got to fall before voters are prepared
to forgive and forget.
Prime Minister Hawke: Well, I don't know the answer to that
question, Alan. I think the important thing as I read the
political situation now, Alan, is that, I don't know whether you
blokes would agree or not, I think there is an emerging greater
understanding in the Australian electorate that we haven't been
caprices about the question of tight monetary policy, that there
are reasons and valid reasons for having the high levels of
interest to reduce demand. There's a greater degree of
acceptance. They don't like it, I mean I'm not being silly about
that, of course they don't like it. I think what they will want
to see out there are interest rates coming down and consistent
with that the application of the other arms of policy which will
keep the economy growing and keep employment growing. If you have
that consistency of factors, that is, the growth that's
characterised our six and a half years in government, the economy
growing, employment increasing and interest rates coming down in
that environment, I think that's the sort of mix that the
S Australian electorate will both want and, may I say, are entitled
to expect.
Laurie Oakes: Prime Minister, we'll take a break there and will
be back in just a moment Welcome back. Prime Minister,
interest rates coming down by the end of this year. The
announcement of tax cuts early next year, that sounds the kind
of scenario you need to win the election, doesn't it?
Prime Minister Hawke: Well, just let me make the point, you
were talking about interest rates coming down by the end of the
S year. You remember Alan said that that's what Mr. Peacock said.
Now, I certainly hope that's the situation. I'm not making any
forecasts. I hope that's the situation. And your question went
from that scenario for an election early next year. I've got
really nothing to say, Laurie, beyond what I've said all along
that I thought that this parliament would go its full term and
that tended to mean an election by the middle of next year.
Alan Ramsay: But surely, Prime Minister, you've got to get
interest rates down for the government to have a realistic chance
of winning next time.
Alan Ramsay: Oh, obviously, Alan, our chances of winning are
the election are very significantly improved by interest rates
coming down, but the point is that we are not mugs. We have not
pushed interest rates up because we like to get some art form
masochism, or sadism, and hurting people. They've been there for
a necessary purpose. Now once that purpose is achieved, and you
can be sure that the level of activity is coming to sustainable
levels, then your interest rates will come down. The policy will
be eased. Now the fact that we've got to have an election
sometime, OK, that's a fact there, but demonstrably over that
period we've made the economic decisions that have been necessary
for the time. I mean, you remember, Alan, before the 1987
election, I was told by virtually everyone that the economic
decisions I was taking then were a recipe for economic disaster.
Well, I just think that the electorate is somewhat more
sophisticated, and I think you'd agree, now than it was before.
Having said all that, obviously I want interest rates down and
down for some time before the election.
Alan Ramsay: Mr. Hawke, I realise that you're under some
constraints in talking about the budget, but I guess you can talk
in general terms.
Prime Minister Hawke: Alright, let's have a try.
Alan Ramsay: Well, how much embroidery are we going to see in
the budget.
Prime Minister Hawke: Well, embroidery I suppose, can be in the
eye of the beholder, like beauty. No, we will have a budget, I
can tell you this, we will have a budget which in my judgement
now will both be economically relevant and I think also
acceptable. Sometimes what's economically relevant is not too
acceptable. But I think this will be a well received budget
because it will have that mix of responsibility and toughness but
one which is also going to be addressing fundamental questions
about this Australian society and economy now and into the
future. Laurie Oakes: How much will be there to perhaps please the
battling home buyers. Have they got any hope at all of relief?
Prime Minister Hawke: Oh, Laurie, I can't go into those things.
Laurie Oakes: Luxury tax?
Prime Minister Hawke: Can't go into that, Laurie/
O Alan Ramsay: Can we try another one? What about the elderly
people in the community? I mean, over the years you've alienated
to some extent pensioners, particularly assets test and that sort
of thing. Do you think this one will get them back on side?
Prime Minister Hawke: Well, Alan, I'm not going to dodge your
question. I'll say something about it, but could I'just go to the
premise of your question first. I don't accept that we have
alienated elderly people generally. I think that there are some
we have, certainly with regard to the assets test we would have
S alienated the millionaires and the people who were getting the
pension before. But I think generally speaking there's now the
acceptance of the correctness of that decision. And I ask you to
remember this. Remember the fever pitch of hysteria of your
Peacocks and your Howards and your Opposition when we brought it
in. This was the end of the world as we knew it. What's the
position now? They have basically embraced the concept of the
assets test in regard to the pension, so I don't accept
altogether your premise. But now going to the question; I can say
this, without going into details, that the budget speech and the
associated budget papers will have a considerable relevance for
the aged.
Laurie Oakes: You've shown great forbearance, said nothing all
week about Andrew Peacock's mock election campaign. What's your
verdict? Prime Minister Hawke: Well, let me say, basically its been a
silence that's arisen from the fact that I've had my head down
and my bottom up in the cabinet room working on finalising the
budget. I mean, that's, we've been working, he's been mocking.
Now, as far as the campaign is concerned, I'm not here to knock
O Andrew Peacock. If they want to make the decision that that's a
thing that they should do, OK. It doesn't seem to me to have been
terribly impressive, and particularly, Laurie, when you remember
this. He started off on day one with the great initiative about
the inflation adjustment.
Laurie Oakes: Sounded a pretty good one.
Prime Minister Hawke: Ay?
Laurie Oakes: Sounded a pretty good one.
Prime Minister Hawke: But where is it now, mate. It's like
S wrestling with a column of smoke. I mean, what is it that you're
applying to. I mean, first of all, just look at what, for
instance has been said in the Friday, the week-end press. I mean,
it's quite clear, without being unfair, I don't want to be, to
knock Andrew in personal terms, but it's the unanimous opinion
that he doesn't understand. He personally doesn't understand what
was put. I mean, Milton Cobeman ( phonetic) said there on Friday
that an economically literate radio interviewer with half an hour
to spare would tear him apart, and so it's something that the
Leader doesn't understand. We don't know whether it's a policy
or a proposal they're thinking about. Certainly Senator Stone has
poured the great buckets of cold water on it, and there's
disagreement between them, as between Hewsen and Peacock as to
what goes in it.
Laurie Oakes: But what's wrong with the idea in principle, Prime
Minister? Why don't you do something similar?
Prime Minister Hawke: Okay, let me just go to it in some
respects. First of all, let me say it would be an administrative
nightmare and it would have the potential, the capacity, to
totally disrupt the economy. I mean, secondly, what flows from
that, wthat's required in the community is an increase in savings.
That i an increase in production relative to consumption. But
what d, ! s this proposal involve? It involves a tax break for
passive income and a very significant penalty for those who
invest, for those who invest in productive assets. Next point,
we are part of an integrated world economy. How ' couid we possibly
inflation adjust when nowhere else in the OECD has done it. Next
point, and this is not exhaustive but let's just consider the
next point, how can you partially adjust part of the system?
you adjust for interest rates but not for the depreciation of
assets... Next point, I mean, as far as you can follow from what
he says, he'd inflation adjust for new loans only. Now, just
consider the implications of that. How do you differentiate
between old debt and new debt? How do you deal with roll-overs.
It would be a massive disincentive for people to put away
outmoded financial arrangements and move to new ones. And, look
at it on the other side, if that's what he's going to say, only
allow inflation adjustment for new debts, on the other side only
have inflation adjustment for new deposits, so what do people do
then? They just redeposit. Or if they don't, it's one-sided, and
therefore its massively expensive. I mean, you've asked me for
I can go on, do you want some more?
Alan Ramsay: We're getting the impression you don't like it,
anyway. Prime Minister Hawke: Well, no, look, it's like a lot of things
in life and in politics and in economics, an idea which sounds
alright, but it is full of conceptual difficulties,
administrative nightmares and counterproductive economic.... I'l
tell you what, and you know I'm not bad, I haven't got a bad
record in predicting what happens on the other side of
politics. I'll tell you now, mark my words, they will not go into
the next election with this proposal.
Alan Ramsay: Prime Minister, bottom line. Why does the
government allow big businesses to be subsidised by ordinary taxpayers
on their borrowings, particularly only just for takeovers.
Prime Minister Hawke: Well, its not just a question for takeovers.
Now we've had this
Alan Ramsay: But often, often just for take-overs.
Prime Minister Hawke: No, just lets go back to this business.
We've had this line running around now for two or three years
about the way in which the result of the combination of what's
allowed for interest and the taxation arrangements that companies
don't pay their tax. Now, there are these points to be made. That
argument has been blown out of the water in detailed terms by the
papers distributed by Paul, by Paul Keating. It's shown to be not
true. Secondly, there is no government, Alan, and I think you'll
recognise this, there is no government that's done more than this
government to massively improve the equity of the tax burden in
this country. The companies, previously, were able to avoid an
enormous amount of tax responsibilities, and not now. Why is it
that the companies of Australia are now screaming out against
this government and against our tax commissioner for the
increased auditing of companies. For the first time now under
this government the screws are being put on Australian companies.
Laurie Oakes: Prime Minister, if I could interrupt, I think
you've made your point there. We're nearly out of time.
There are two more things I want to raise with you quickly, if
I can.
Prime Minister Hawke: Right. Fine.
Laurie Oakes: The first thing is the Anzus frigate project. How
do you solve the problem? Bob Carr, the NSW Labor Leader says
that if it goes to Melbourne as the Defence Department then
you'll be slammed by the NSW Labor Party
Prime Minister Hawke: Well, I made the point to the NSW
delegation when they came to see me that, and including the
Premier, I said, I seem to recall that when I had to make a
decision within NSW in terms of the third runway at Kingsford-
Smith or going out to Badgery's Creek, he pleaded with me to
make the economically rational decision, and with a wry grin I
conceded yes, they had me to do that. I said, we will make the
economically rational decision in this one
Laurie Oakes: Will politics play a part there?
Prime Minister Hawke: No, I must say that the Australian
newspaper had that all nicely wrong. It was almost to the point
of having to see my lawyer. And what I'm saying, and what they
know that I said to them, is that I will not allow political
considerations to determine this decision. Let me be quite
honest. Obviously, from my point of view and for the government's
point of view the easiest decision would be to say, look, we
won't even go through a process of analysis of what's been done
by the Defence Department, it will go to Newcastle. It would be
politically better for this to go to Newcastle. And in that
sense, all things being equal, I'd like it to go to Newcastle.
But, I'm going to have in the cabinet the considerations put
before me, and if on those considerations it is appropriate for
it to go to Newcastle I" 11 be happy.
0 Laurie Oakes: The final issue I want to raise
Prime Minister Hawke: But if it's clear, if it's clear it
should go the other way, that's where it'll go.
Laurie Oakes: The final I want to raise Andrew Peacock has
challenged you to a debate. The question is, are you game to
debate him, and if we arrange the debate here bn the Sunday
Programme next month, will you take part?
Prime Minister Hawke: Now, look, to be made. I will
consider a debate against the Leader of the Opposition in the
period before the next election. I'm becoming increasingly
sceptical in my mind as to whether it's going to be Andrew
Peacock who'll be in that position. But I'll consider it at the
appropriate time.
Laurie Oakes: You won't be in it next month?
Prime Minister Hawke: Oh, next month is probably a bit early.
But I'll, I'm not worried about Andrew. Just let me say this to
Andrew as I've said to other people, " don't make a mistake in
terms of thinking about 1990 in terms of 1984." They are full of
mistakes, the Libs, that would be another one.
Laurie Oakes: Prime Minister, thanks very much.
Prime Minister Hawke: Thank you very much.
Laurie Oakes: Back to you, Jim.
Jim Waley: The Prime Minister talking there with Sunday's Laurie
Oakes and Alan Ramsay of the Sydney Morning Herald.
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( Transcript by Monitair Pty Limited) Inquiries to
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S