PRIME MINISTER
TRANSCRIPT OF UNEDITED INTERVIEW WITH IAN MCMINN, RADIO
3AW, 22 AUGUST 1990
E 0 E PROOF ONLY
McMINN: Prime Minister, thank you for joining me from
Canberra. Last night's Budget seems to be between two
distinct areas and that is in terms of the popular Press,
Paul Keating being regaled for pinching pensioners and
yet from the Australian Financial Review, if you like, it
doesn't go far enough.
PM: Well that's been a lot of the reaction. Either you
wimped it or we've been too tough and that's reflected of
course, in the media release of John Hewson which he put
out last night. It was an economic statement that
Peacock would've been ashamed of I must say. He started
of f on the first page by attacking us for further cuts in
living standards and then spent the rest of it saying we
should've cut further. Now let me make the point, Ian,
in regard to those who say we should've been tougher.
There is no point in just being hairy chested for the
sake of saying look how many hairs I've got on my chest.
The point of good government and good economic decision
making is to exercise that degree of restraint which is
necessary to address the problems of inflation and your
current account deficit but without allowing the economy
to dive into recession. I believe that we've walked that
fairly difficult, tight path effectively.
McMINN: Well what do you make of the criticism that it's
half a Budget? There seems to be a fair bit put off in
it. PM: I've been quite open with the Australian public
about that. We've had a situation where we have
initiated more micro economic reform than has ever been
done in this country before and a lot of that is still
continuing. For instance, Bob Collins, the relevant
Minister, is accelerating work in the waterfront area.
But in two respects, that is in regard to Telecom and
telecommunications and the question of the airlines, we
require a decision of our conference, of our Party, to
enable us to make changes in that area. I've quite
openly said to the people of Australia, well until we've
done that we can't properly incorporate something into
the Budget on the assumption that we would get the.
authority of the Party. Now what we'll be doing is
having that conference next month and I'm confident that
we'll get a sensible decision from the Party and then
before the end of this year we'll be making decisions
that will accelerate that process of reform.
McMINN: There seems to be a lot of assumptions though,
Prime Minister. One of the assumptions, of course, is
oil and the Gulf crisis. I mean to what degree can there
be any guarantees that the figures that you're suggesting
that is the basis of the Budget will actually be
sustainable. PM: All we can do in a situation like that, Ian, is to
make the best sort of assumptions using the best advice
available to us in regard to oil and on that basis we've
used a figure of $ 23.00 that's US dollars a barrel.
Just let me make a couple of points to your listeners
that I made in the Parliament yesterday and add something
to it. The first statistical point to understand is that
the loss of oil from Iraq and Kuwait is about 4 million
barrels per day. Now fortunately, in a sense, this
crisis arose at a time when world oil stocks were at
about their highest level ever and in that situation it
is assessed that we could de-stock at the rate of about
one billion barrels per day relatively comfortably and
that would leave about 3 million barrels a day to be made
up by increased production from within the OPEC
countries. There's a fair bit of evidence that the other
oil producers are not only prepared but want to do that
McMINN: The Saudi's.
PM: Well there's not only the Saudi's, they are
certainly going to do it but others as well. Now if that
shortfall in production is made up, as it well could be,
then there is no reason to expect a continuing high
figure, it's very volatile, it was $ 20.00 a barrel before
the crisis. It shot up at one point to 30 but it's back
to about the mid 20' s and the $ 23.00 which we've used as
an average for 90-91 is consistent with prices staying
high for a while now and then falling back in the second
half of this financial year. What we've got to
understand is that the world is certainly less dependent
on oil today than it was 10 years ago. We haven't got
the same sort of parameters of crisis that existed then
but 10 years ago, Ian, the oil accounted for 5-1/ 2% of
the GDP of all the OECD and today it's The world
has become much more flexible today than it was 10 years
ago. It's digested the impact of the two oil shocks of
the ' 70' s and there's an ability to move to oil
substitutes in production. So all those reasons are
behind the figuring of the $ 23.00 per barrel.
McMINN: Are you concerned at all in the ACTU the
President position you occupied for some time? The
President, Mr Ferguson, turns around and says that the
union movement will not accept any moves to discount
wages if oil continues to rise.
PM: I noticed Martin's general reaction to the Budget
last night and I thought it was very positive and
constructive. Let me say this, that we're now in our
eighth year of government and I don't know how many times
the prophets have and predicted the death of the
accord. Now the accord has been a very, very flexible
instrument and there has been a great deal of
responsibility on the part of the trade union movement
and flexibility on the part of the Government to deal
with changing circumstances. Now I think that the most
likely situation is that the predictions that we've made
and on which the Budget is based will be brought out and
therefore the existing arrangements will not need any
reconsideration. McMINNf Well what do you say when you hear or read
headlines saying the elderly, the sick and the unemployed
will bear the brunt of Paul Keating's hold the line
Budget?
0 PM: Well you're in Melbourne, I come from Melbourne, I
remember the vicious and unfounded campaign that was
particularly run by the Melbourne Press and
particularly the Melbourne Herald at the time of the
assets test. As I've said looking back to that, you
would've believed that it was the end of civilisation as
we know it. Now it was unfounded and unfair, that
campaign, just as it would be to try and mount any such
campaign here. Let's look at the two elements of the
Budget which affect pensioners. The first in regard to
pharmaceutical scripts. Perhaps the most single
important statistic in the Budget speech of Paul
Keating's last night was his reference to the fact that
it took almost 40 years from 1948 to 1985 almost
years for the cost of the pharmaceutical benefits scheme
to rise to 40 years to get to It then only
took another 4 years for it to rise by another
This country would've been faced with the disintegration
9 of a scheme of protection for those most in need in this
country if we hadn't taken some action to try and contain
these costs. Now we've done that it two ways, not just
by dealing with the question of pensioners scripts and so
on but also with the restructuring of the pharmaceutical
industry. But as far as pensioners are concerned, the
simple fact is that no pensioner will be worse off
because the question of the $ 2.50 per script up to
$ 130.00 and then it cuts out, it's free, will be
compensated exactly by the $ 2.50 a week increase in the
pension rate. Now it's quite clear therefore that this
is an important and absolutely necessary structure of
reform but which is not being implemented at the expense
of the pensioner. Now the other decision which affects
pensioners of course is deeming. Now the fact is, Ian,
as I think you'll appreciate is that under the system
that existed until last night, the pensioners of this
country were simply subsidising the banks. They were
putting millions and millions of dollars into very, very
low interest bearing accounts, 3 to and the banks
lending it at 18%. 1 mean that was just a straight
subsidy by the elderly of the banking system and through
the banking system of others.
McMINN: Well presumably they were trying to minimise the
amount of money they made.
PM: No, no. It was so that they would be able to retain
the benefit card. Now no pensioner will lose those cards
but under this system over the longer term there will
obviously be savings but not at the expense of pensioners
because what they can do is invest their money at the
higher amount and if they do that then as the statistics
in the Budget showed last night, many of them will be
better of f than as it is now. What they are doing is
simply subsidising the banks. Now* I concede that this
will be somewhat bewildering for some pensioners-
McMINN: Very confusing I would've thought.
0PM: and so we're spending money. We're spending
money to increase the resources within the Social
Security Department to give financial counselling
services to our elderly citizens so that they will know
exactly what they need to do so that they'll be
protected. McMINN: But they've reached the end of their working
life, Prime Minister. They would be confused, they'd be
upset. All of a sudden the rules have changed again.
PM: Yes, well the logic of what you're saying is that if
something is not operating properly, is operating against
the interests of the community and against the interests
of the pensioners themselves, you don't change it because
there may be confusion. I mean if government didn't act
because there would be either confusion or
misrepresentation about their decisions, we'd be back in
the cave. We would never progress. You can't, if you're
going to be a responsible government, decline to make
decisions on the basis that there may be either
misunderstanding or criticism. I mean, as I say, if you
acted on that basis you would never do anything.
McMINN: Prime Minister, Paul Keating made much of last
night saying that it's a championship fight, you can't do
it in one round. But I'd put it to you that the
Australian public has had round after round after round
of saying we'll hold the line, we'll be OK. I mean at
what point does the Australian public turn around a say
well we've had enough?
PM: Well let's look at round after round. Round after
round of economic decision making by this Government.
What fundamentally single most important statistic
emerges, it's this, that we've created 1.6 million jobs
which is a rate of job creation more than twice as fast
as the rest of the world. That's what's come out of
round after round of tough but proper economic decision
making. It's just no accident that Australia has a rate
of employment growth twice as fast as the rest of the
world from the decisions that we've taken. It's no
accident that we are now in a situation where we are able
significantly to increase our exports and reduce our
imports because in that way we're tackling the problem of
our external account and we'll be bringing our current
account deficit down by a full one percentage point of
GDP, or $ 3B, in this coming financial year. The proof of
economic management, whether in this country or in any
other, is that no decisions and set of decisions
calculated to meet the economic challenges confronting a
country are capable of being introduced without causing
some difficulties. Whether you look at the United
States", whether you look at Europe, whether you look at
the Soviet Union, there is no country in which proper
economic decision making can be done without causing some
difficulties. The essential thing that you've got to do
is to have you're target clearly in mind and the targets
are bringing down inflation, restructuring the economy so
we're more competitive and dealing with our external
situation. Those are the targets, those are challenges
and if we're going to make Australia equipped to meet
those challenges of the present and the future then all
of us have to be prepared to do things which for some of
us may involve some restraint and the delay of the
satisfaction of some of our aspirations.
McMINN: Prime Minister, I'd like to talk to you about
the crisis in the Gulf.
PM: Sure.
McMINN: Before we get to that, you look at it from a
national perspective even in the answer to that question
you were talking about the United States, the Soviet
Union, Europe. From a position in Victoria, if I can
bring you to that, I mean here there is clearly a crisis
of confidence and you've got a situation where the
Budget's made certain financial statements, what hope for
the business community in Melbourne particularly, in
light of the fact that people just simply aren' t
investing. They're very, very concerned about the way
they live.
PM: Well just on the question of investment, let's look
at the scene nationally and that embraces Victoria. What
we have seen over recent years is record levels of
investment. In 1988-89 business investment as a share of
GDP was the highest
( tape break)
PM: as Victoria itself is concerned, Ian, I
obviously do not seek to intrude on the budget making and
economic decision making process of the Government of
Victoria. I have confidence that Joan Kirner and those
around her will make the decisions and some of them
tough decisions that need to be made to deal with the
particular problems that she's inherited in Victoria.
McMINN: She's inherited indeed. Prime Minister, looking
to the Gulf crisis, I am concerned, as anyone in
Australia would be concerned about the fact that we have
Australians there that could be used as human shields. I
mean what, if anything, can be done to well not stop it
but try to bring it to a position where some common sense
can prevail?
PM: I wish I was able, Ian, to be able to say to your
listeners and particularly to any of them who may have
relatives or loved ones in Kuwait and Iraq that I've got
an optImistic story to tell them. ' It would be dishonest
so I don't say that. I mean it is an extremely serious
situation. There is evidence of the disposition of a
number of foreigners being held as hostages there to
possible target areas although as far as we know at this
stage this does not apply to Australians, but I have no
reason to assume that it may not. Now the answer to your
question as to what do we do is that we do not succumb to
the totalitarianism of Saddam Hussein and condone his
acquisition by force of Kuwait. Because if our history
teaches us anything, it is that appeasement of dictators
is the certain route to an enlarged conflict. If the
relevant nations, particularly the British and the
French, in the 1930' s had stood up to Hitler when he made
his first move as he did in March of 1936 into the
Rheinland, breaking every solemn commitment he'd
previously made, then if the British and French had stood
up to him then that would've been the end. I mean it's a
fascinating fact of life that the German military command
had made a decision at that point on the basis that they
expected the British and the French to move in a stop
him, that they were themselves going to depose Hitler.
But the appeasement which really effectively started then
in March of 1936 and then went from the Rheinland to
Austria and then to Czechoslovakia, that led to the
greater conflict. That is a clear lesson of history and
we have to understand that in this present situation that
if we do not stand firm as a community of nations against
this horrific aggressor then the price subsequently paid
will be the greater.
McMINN: But it would appear to me and I mean I'm just
a journalist it would appear to me from all the reading
and listening and watching that I do that we're looking
at a conflict. I mean the US is building up forces
PM: Not necessarily so. I mean I have expressed the
hope and I specifically put this point to the Iraqi
Ambassador when he came to see me yesterday, I said look
just examine this in terms of the interests of the Iraqi
people, there is no way that a continuation of this
situation can be other than disastrous for the people of
Iraq. One must hope, Ian, that there are going to be
A 7
sufficient people there in Iraq, if not with the Leader
himself around him, who will rationally come to
understand that a continuation of this situation must
mean disaster for the people of Iraq. I mean either way
if it's merely a continuation of the embargo's, their
economy will gradually disintegrate, their capacity to
feed themselves will diminish and this will be a
disaster. of course if there were an escalation of the
conflict, so would that be a disaster. There is no way
in which a continuation of the present Iraqi course can
be other than disaster for the Iraqi people. Now that
reality must, one hopes, be increasingly dawning if not
upon Saddam. Hussein himself at least upon many of those
around him. Therefore I don't think we have to be
totally pessimistic and say that conflict is the only
answer: But equally we must be honest with ourselves and
say that is a possibility.
McMINN: Prime Minister, I know you're very busy but one
last question, and I mean this with the greatest of
sensitivity. If an Australian dies over there and as I
say I mean this with sensitivity I mean what will go
through your mind?
PM: Enormous sadness. I can't begin to convey to, as I
say, the relatives and the loved ones of the Australians
that are being held as hostages the two feelings I have.
That is one of absolute repugnance at the action of
Saddam Hussein and the depth of my feelings of concern
for these people. I just hope as deeply as I possibly
can that the sort of scenario that you envisage will not
occur and that sanity and rationality will prevail.
McMINN: And just looking back at the Budget, you're
happy that it's not a half-way house?
PM: Yes, I think we have struck the appropriate balance.
It would be easy to be, as I say, hairy chested and say
look how much hurt and harm I can inflict. But
inflicting hurt and harm for the sake of doing it is no
criterion of statesmanship or economic management.
You've got to exercise that degree of restraint which is
consistent with meeting the objective of keeping the
level of activity to sustainable levels but not plunging
the economy into recession.
McMINN: And hoping it will work.
PM: I believe it will work.
McMINN: Well let's hope it does. Prime Minister, thank
you very much for joining me on the program.
PM: Thank you very much, Ian.
ends