TRANSCRIPT OF THE PRIME MINISTER, THE HON PAUL J KEATING MP
ABC RADIO 27 FEBRUARY 1992
E OE PROOF ONLY
McKEW: Mr-Keating, you've given us $ 2 billion in goodies. Have you suddenly
become Mr Yes. You used to be Mr No?
KEATING: I was Mr No when the private economy was so strong, the only sensible
thing to do was withdraw public spending and any public stimulus. But now the private
economy is so weak-and investment is so weak, the sensible thing is to lift public spending and
public capital works.
McKEW: We had two statements last year: a March industry statement and a job
statement in Novembe-r. On both occasions we were told that recovery was on the way, these
statements would boost confidence. Now, that didn't happen. Why is this statement different?
KEATING: It's got larger fiscal effects, and it's also got, I think, confidence-bearing
effects. Given that a lot of the funding is going to go in long-term infrastructure, in building
a national rail highway, in connecting the ports of the rail system, building roads, highways and
ring roads around capital cities. This is all basic infrastructure for Australia which Australia
now, as a trading country, desperately needs.
McKEW: But is business finally going to get the message: to start investing itself?
KEATING: There is a landmark change to depreciation in the package. It allows
business to write-off plant and equipment more rapidly. For instance, an item of plant and
equipment with 20-year life can now be written off over seven and a half years. Or a
life over 15 years. It gives business a cost of capital regime, a depr-eciation rate competitive
with any country you'd like to compare us with.
McKEW: Yoa made the point in the Parliament the other day that a lot of the
investment in the ' 80s. was frittered away. Where is the guarantee this time around that the
investment goes into the right places?
KEATING: Because we don't have a global financial market spreading credit around at
per cent a year. The fact of the matter is that banks will be more abstemious with credit.
McKEW: Are you sure about that?
KEATING: Well, they are. They've taken the loss. They've taken the hit. The fact is
though, that businesses now are changing their spending equity in these areas, and if they do
we'll reward them with a very, I think, efficient depreciation schedule and a better cost of
capital regime. What we've got here is a partnership of Government and business together.
Government spending at a time when private spending is low, using a fiscal situation which
it took this Government 8 years of painstaking work to put together. We didn't do as the US
did, and that is not take the big budget deficits back in the good times, we took them to a
strong surpluses. That now gives us the capacity to be able to spend Government money. It
is, after all, only about half a per cent of GDP. I mean, it's not extravagant, but it's sensible
and it's well directed and it's in time.
McKEW: What is ambitious is your forecast for growth: 4.75 per cent by the middle
of next year. How is that going to happen with the recovery so sluggish?
KEATING: I don't think that's ambitious at this stage. After the 1982/ 83 recession,
after John Howard and John Hewson's recession, the first year of recovery we had growth
running at about 6 per-cent or better. 4.75 per cent coming off this economy, the fundamentals
of which are much better: low inflation, a much better budgetary situation where we are seeing
a turnaround in the drought, an improvement in international prices, a change in the stock
cycle, 4.75 per cent is; I think a reasonably conservative estimate.
McKEW: Whiat we're not seeing though is any improvement in the global economy.
If we were to race ahead with that level of growth, wouldn't that cause us problems with a
sluggish global economy?
KEATING: We're not racing ahead. Also, as we pick up, so will they. They'll pick
up over time. But it's worth recording that the recession in Australia is met with the recession
in the US, Canada, Britain and France and the recession in those countries is deeper and the
malaise is greater than Australia.
McKEW: Indeed, you would have heard Alan Greenspan's point in the last 24 hours
or so. He's talked about a very faltering recovery in the US?
KEATING: You can't have the sort of roaring ' 80s, the financial blow-out at 20 per cent
credit growth a year, displacing equity with debt all over the place, with banks lending as they
were; and when it collapses, when asset price inflation collapses to come out the other side sort
of dancing along without any cut in GDP, without any recession. It was not likely to happen.
The thing to do was to get out of it, to get back to recovery. What we have come up with is
a 4-year plan to get us out of recession and into recovery, but built on improving our long-term
infrastructure for our trading future, and at the same time offering tax cuts which take the tax
rate to 30 per cent without Dr Hewson's 15 per cent string attached without the
consumption tax, while at the same time bringing the budget back to surplus.
McKEW: MT Keating you've talked about one nation. Could I put it lo you that it's
really a divided nation? Ten per cent who are unemployed and the rest who have jobs?
KEATING: Nothing like as divided as it would be with the consumption tax, where the
people on low incomes spend it all, so whether you tax their income or the expenditure is
immaterial, it's all one and the same. And where at the top end of the income system, where
they spend only some of their income, they not only don't wear the burden of the consumption
tax, but they get a tax. cut as well. That's the sort of division that will break Australia up, or
where the Liberal Party tries to wipe out trade unions. This is not what we're about. We're
about a partnership with business. There is no depreciation schedule like this in the Fightback
program. They are in fact going to put the company tax rate up to 42 per cent. There is no
partnership with business there. In fact Dr Hewson said I shouldn't have been talking to
business. He said they were only asking for handouts. There was no discussion with unions
about keeping the inflation rate low. Dr Hewson wants to blast it back towards 10 per cent.
So that's the sort of division. We call this One Nation, because we're pulling Australia back
together again, in a cohesive fight against the recession, back into recovery, using all of these
various areas of the community to come together.
McKEW: But over the next year or more, there's a whole group of people who will
be left out? Your forecasts say that we'll still have 10-10.5 per cent unemployment in the
middle of next year. If that's the case, electorally you're done in, aren't you?
KEATING: No. We're saying 10 per cent providing the direction is right, providing the
direction changes. We've got to stabilise unemployment and bring it down. It's the direction
which matters.
McKEW: 800,000 jobs. When will we see them?
KEATING: You will see them over the forecast period. As you saw over the first four
years of our Government, something like about 800,000 from memory. With these sorts of
growth rates, which Australia can afford, we can basically bring unemployment down.
Employment is entirely sensitive to product, the growth in the economy, the GDP. GDP is up,
employment is up.
McKEW: Aren't you asking people to have a lot of faith, though? You are basicaL~ y
saying re-elect us, say about May next year and the recovery will come later. They have been
hearing this for a long time, haven't they?
KEATING: That's why we've got spending going to families in April this year. That's
why we've got the rail, road and other infrastructure programs beginning as quickly as possible
to get that spending going, so we get out of this recession as quickly as we can.
McKEW: Why not more assistance to specific industries to help promote value-added
production? KEATING: KWEAeT'IvNeG : got a number of quite innovative tax measures here. We've got a
tax measure for pooled development funds that provide funds for small and medium business,
that can't get equity on the stockmarkets. They just can't get equity privately. As well as that,
we've got a proposal for pre-start industrial arrangements, for large investments which put
together large mineral projects or large resource projects, there is a development or investment
allowance available b4-yond the depreciation rates to encourage them to do that. There is a tax
provision for private provision of public infrastructure. So we will see in the future, private
provision of roads, rail, ports, electricity generation. They are the sort of things that will make
Australia stronger, and one of which actually rewards winners. If you get your major project
together, you get an investment allowance. So rather than picking winners, we are rewarding
winners. McKEW: You have attempted to diminish the Hewson Fightback package as nothing
more than an exercise in accountancy, as you've called it. But when that package was
released, it was seen aLs being very impressive in its boldness and in its scope.
KEATING: By whom, though?
McKEW: I think it was general acclaim.
KEATING: It's. basically a very nasty tax camouflaged, wrapped with a. whole lot of
changes. As you take the changes away, what's left underneath is a rapacious 15 per cent
consumption tax which will raise $ 28 billion. Dr Hewson proposes to give back only a small
proportion of that $ 9 billion in tax cuts.
McKiEW: Mr Keating, I haven't heard anyone as yet describe your package as bold
and sweeping?
KEATING: Well, if you don't think rebuilding the rail highway of Australia isn't bold.
If you don't think opening up the airlines for the first time ever, from the Liberal's two-airline
policy, to let the domestics fly internationally and Qantas fly domestically is not bold, I don't
know what is. If you don't call taking over technical and further education like we took over
universities, to change for our children, to give them an opportunity, bold, I don't know what
is. But if you think it's bold to tax the food you put in your mouth and the shirt you put on
your back, well good ( in you Maxine, if you think that's bold, then you've got a very different
definition of bold than I have.
McKEW: You'd argue then, there's now a much clearer ideological divide between
yourself and the Opposition?
KEATING: Look, Dr Hewson had an opportunity as Opposition leader to stand back and
say, what should I do for Australia? What he stood back and said is what can I do to be
different to Labor? Oh they won't have a consumption tax, I'll have one. That's where he
started. Where we started is we sat back again and said what can we do now? We've made
the big changes to macr~ o economy, let's keep pushing the micro economy in rail, road, ports,
airlines, electricity generation, TAFE, training, it's Labor doing the usual reforms. It's alway's
us doing the big changes. What's he about? Instead of sitting back saying well I can use my
opportunity to make Australia better, oh no, I'll be different, I'll have a consumption tax. I'll
tax the low-paid and give a tax cut to the high-paid. Well, big deal! As I said some time ago,
it was a tenth-order issue. The first-order issue is jobs, recovery, growth, efficiency, the micro
changes, getting a container between Sydney and Melbourne, crossing the ports, being able to
run a decent tourism industry by flying in and out of Australia, training our kids. They are the
first-order issues, not whether you tax income or expenditure.
McKEW: Things are getting pretty personal between you and John Hewson, aren't
they? KEATING: Not with me. But you can't dare criticise him without him calling me. a
cheat, a liar, a distorter. He's very nasty. He's had such a dream ride for a couple of months,
if you dare criticise any of his things, he reverts to this sort of language, this sort of nastiness.
Now, he camne into the House yesterday with a censure motion of all things, because I dared,
he said, misquote the econometrician who put the modelling together for his GST package.
McKEW: He says you've got your facts wrong?
KEATING: I didn't. I produced the computer print-out of Dr Murphy's model which
showed that Dr Hewson's package actually reduces GDP, actually increases unemployment and
inflation in the 3 scertarios in the model. I gave him the computer print-out. The fact of the
matter is, here it is after labouring so long, his own econometrician says that Fightback actually
reduces GDP, increases unemployment and increases inflation. There is nothing more damning,
and I can understand why he was so hurt. But I can't understand him. He's so sensitive. He's
such a delicate little petal. He had to get in there with a censure motion of all things because
I misrepresented his econometrician. Tut, tut, naughty me. I won't do it again.
McKEW: John Hewson also, the other day, tried to suggest that you had no class,
because as he saw it, you were disrespectful towards the Queen. If he keeps that sont of thing
up, will that rattle you?
KEATING: That was just devastating. It really devastated me, that little comment.
McKEW: But you see what he's trying to do? He said well, we both come from the
same sort of backgrounds, but I have respect. Paul Keating doesn't?
KEATING: He has respect for old traditions but no regard for Australia. No respect for
Australia. McKEW: How can you say that?
KEATING: If lie believes that I cannot say that this is a more independent country, that
we're not tied to Britain's coat-tails, and I say it to the Queen of Australia not the Queen of
Great Britain, as The Age pointed out. If he thinks that we ought to be basically into British
boot-strapping, forelock tugging, and he calls that respect, it's not respect for this country.
McKEW: I think he was talking about being respectful towards the Queen?
KEATING: I was. I said that Australia had changed from a country the Age said
it, in fact I've got the editorial here, it said this: " when the Prime Minister addresses the
Queen, he addresses her as the Queen of Australia, and it is entirely appropriate for him to
articulate independent Australian attitudes." She's part of our change. She took the royal style
and title of Queen of Australia in 1973. She's part of that independence. She is not here as
Queen of Great Britain. But John Howard is talking about going back to 1950s. The fact is,
if we develop a constitutional museum in Parliament House, John Howard and John Hewson
ought to be the first two exhibits. Back down the time tunnel to the ' 50s to forelock tugging
and British boot-strapping and all that nonsense. Apparently we had some House of Lords
character on " AM" saying if they cut their ties with Britain, Australia will give up all of their
cultural inheritance. Well, Hewson and Howard believe that stuff.
McKEW: What about the British press? They sound as if they want to lynch you?
KEATING: As I said, when you look at a British tabloid editor, it's a particularly lowform
of human life, a British tabloid editor. So let's take no notice of them.
ENDS 1