PRIME MINJISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING MP,
ADDRESS TO ELECTORATE OFFICE STAFF, WORKERS CLUB, CANBERRA
MARCH 3 1992
E& OE PROOF COPY
Thanks very much for that very nice welcome and thank you
Bob ( McMullanr) for the introduction and for warming up the
crowd. It is always important, I think, for people at the coal face
of the Labor Party and its representation to know what the
Government is doing and to be aware of the general direction
and detail of the policy, and so therefore I thank you for
coming today and I thank the National Secretariat for
organising it.
It is important that when people, phone your offices and
enquire about details of the various policy changes that you
are in a position to know about the details and fit them
into a bill of context. And so it is very useful, I think,
for you to bother to come and to get that perspective and
get the perspective right.
The interesting thing about the ' 80s and early ' 90s was that
it was Labor that taught Australia change. It was not the
Liberal Party. The Liberal Party put Australia to sleep, in
policy terms, for a generation. And when we became the
Government, -the public of Australia were not used to change
and they never had change. The fact is we taught them
change, we taught the media change, we taught the whole
political system change. And the thing about it is, the
public now wants ' change. It's now become a driver in
change. So instead of the Government tugging along with the
community, the Opposition and everyone else, what's happened
now is that -the public are actually interested in change and
they are forcing' change and they're requiring change. And
when they thought in the last year or so that we were not
introducing change as quickly, they looked elsewhere for
change. And whenever anyone else proposed something which
was solid, then they lifted their eyebrows and looked. And
when of course the Opposition came with its GST camouflaged
as a policy change, they even looked at that. 7.
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But the fact is, it is we who have made the great changes.
We are the people who have decided that we can no longer
live shearing sheep and growing wheat, that would no longer
pay for our imports, and it would no longer produce jobs
where we needed-them in the capital cities, that would
consign a generation of Australians to the unemployment
scrap heap. These were the problems we faced when we came
to office in the early period of the 1980s.
We decided -that we had to re-modernise the Australian
economy, revitalise it, and we had to start investing in our
people. Anti we started investing in our school children by
keeping them on at school by putting them through
universities, investing in the aged as well as young peoplE.
and middle aged people. So we covered the spectrum, decided
to invest in our community, to talk to it, to operate a
policy of consensus, to get a better national resul~ t which
has totally changed the way in which Australia now operates.
That is, we have now become an international country. For
the first tiLme ever in the last twelve months the value of
manufactured exports exceeded rural exports. The big
service sect~ ors we developed in the ' 80s, like tourism and
financial services, are new to Australia and providing jobs
all over the country.
And so we have had this very big change running through the
1980s interrupted by the boon of 1988-89 and the recession
which followed. But, nevertheless, with a clear direction
out the other side to a low inflationary prosperous future.
Now the chal~ lenge to us was to keep those changes going, to
show that we were the people that stood back and said now
what should we do now, what changes are best from this point
on? And we had ' a process of consensus, we talked to people
in the business community and in professions and across the
community generally, the trade unions, the welfare
organisations and said we think we have a fair idea where
we're going, giv e us your views about where you think we are
now and we'l~ l see where that fits into our scheme of things.
And we produced ' One Nation'. And One Nation is the policy
of Labor from the ' 80s in the continuum. It's taking it
down into those areas of the micro-economy after the great
policy changes of the macro-economy have been left behind.
That is, as we now have the challenges to make Australia
more efficient and more competitive it matters greatly then
that we dea. with the States, particularly in these
instrumental. ities which have such a great impact on the way
in which the! country functions.
So we have said these things. How do we make Australia more
efficient? How do we make the rail system more efficient?
How do we get a container through a port more quickly? How
do we have FU competitive airline system? How can we supply
power at competitive prices? How can we train our kids? how
can we give capital support to do more in terms of
investment which is the sole generator of employment? These
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are the things we did. We sat down and said what can we now
do for Australia which is best?
And what marks us out different to the Liberal Party, when
John Hewson had to sit down as Opposition leader and say
what can I now do as leader of the Opposition, what should I
now do for Australia, what is best for Australia? He sat
down, rather, and said what can I do that makes me different
to Labor? Not what's best for Australia or how do I keep
these great policy changes going or how do I make the place
more efficient, but how can I be different? And then, of
course, he then decided on his goods and services tax, the
Hewson Consumption Tax. And he camouflaged it in all of his
other changes so that the nastiness of the tax wouldn't
become immediately apparent.
But the contrast is that's not what we did. We sat down and
said what is the next thing we should do, and we decided on
these things. We decided at a time when private investment
was down to lift public investment, not a leap of logic, not
a change of policy, though we have had some commentators
saying that the change of policy is an entirely reasonable
thing. When the economy was booming in the ' 80s we withdrew
all, or as much as we could, of the public stimulus by
producing budget surpluses. And now that private investment
is weak we've decided to lift public investment, and we've
lifted it where it matters. It matters entirely whether the
port of Brisbane is connected to the railway line to Sydney,
it matters entirely whether the travelling time between
Sydney and Melbourne on the railway train can take trucks
off the road and deliver us an efficient, competitive,
relatively cheap freight service. It matters. It matters
that Melbourne can ship freight north to Brisbane and beyond
and west via Adelaide to Perth. It matters, it matters to
Australia. It matters that a ship can dock in Adelaide,
load cargo and deliver it within a day to a factory in
Sydney or Melbourne. It matters that a ship can come into
Fremantle and land bridge freight across the continent to
Adelaide, Melbourne, Sydney, Brisbane as the case may be.
These things are the basic machinery of trade, let go by two
generations of Liberal politicians. Two generations of them
decided to invest nothing in rail, two generations decided
to let that thing go, two generations decided simply to
respond to Country Party pressure for roads and to not think
about the way in which our highway system was developing.
To not plan for trucks mauling the domestic roads of our
capital cities, to not put the ring roads in, to not do the
things which even were part and parcel of their own
strategy. So these things matter. It will matter that a
business looking for electrical power can ask for bids and
have a bid from a Queensland power station, a New South
Wales power station, a Victorian power station and have that
power station fund the grid and supply that power. And that
power price might make all the difference to whether that
investment is undertaken, whether that business succeeds and
whether the product of that business in internationally
competitive.
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We have a great natural advantage. Countries should play to
their competitive strengths. One of our competitive
advantages is a coal seam right down the east coast of
Australia. One of things we should be able to produce
cheaply, very cheaply, is electricity. But while ever we
run these state-bound systems with over-capacity, undercapacity
all these other problems, we will never actually
realise that potential.
Now is this going to happen by taxing your Kelloggs
Cornflakes? Is the railway line going to improve itself?
Are the bridges going to be lifted? Are the roads going to
be straightened? Are the dedicated freight lines out of
Sydney going to be created? Are the electricity grids going
to be created? by taxing the old Weet-Bix or the socks and
shirts and shoes or the dry cleaning or the other services
which make up part of daily life. And, of course, the
answer is it won't. It won't, and what we've found now with
this Treasury study is that the Treasury has blown even the
distributional features of the so called Fightback
Fightbackwards is a better name for it, Fightbackwards, the
Fightbackwards program, the backward program of the Liberal
Party, the distributional features of it actually make most
Australian families worse off, most Australian tax payers
worse off.
So not only do they not tackle the big things which are now
the next phase in our changes, cracking all of these
problems in the micro-economy, railroads, ports etc. Not
only do they not tackle those, but as well as that they
actually retard the economy with a tax which lifts the
inflation rate, slows down domestic product and lifts
unemployment so says the chief modeller associated with
the Hewson Fightback package.
Now, that's what it's all about. I mean, again here is
Labor sitting down, taking its breath, thinking, talking,
deciding and getting another great raft of changes going,
including a big tax break for capital, with a new
depreciation rate. I never minded giving capital a tax
break in this country. We're the people that brought the
corporate rate from 49 to 39 per cent. We're the people
that gave them dividend imputation. We're the people now,
giving a world ranking, competitive depreciation schedule.
Because it's capital that creates the jobs. It's capital
that puts that basic investment in. But if you look at the
Fightbackwards program, they have got the company rate going
backwards, from 39 to 42 per cent, nothing for depreciation,.
nothing that will actually change the way in which
investment operates. And with the inflation rate rising,
the inflation rate doubling on Dr Hewson's own submission
and with it a consequent rise in interest rates.
So just as a Government is providing a very low cost of
capital regime, via interest rates and depreciation, just as
we are really setting the place so the investment can really
start rolling again, here is the Liberal party saying, no,
no, no, what we ' think we are is higher inflation and higher
interest rates. The Coalition will actually stick the
company tax right up. And just while we are at that, we'll
have a confrontation with labour, we'll try and wipe the
unions out, we'll knock out national wage cases, there will
be no concensus under us, and if there is any inflation
moving I will just say to the central bank, stick the
interest rates up further, so says Dr Hewson. And we just
slipped back into a low growth mode. Not the 4 per cent in
our program that will deliver 800,000 jobs in 4 years, none
of that, but much lower rates of growth as they hit the
monetary brakes.
Now, in ' One Nation', we've tried to bring the community
together. To bring the unions together with business, a
partnership between government and business. We're trying
to get Australia going. No ideological approach, simply
looking at the problems and trying to get a result. And the
business community basically took the same view when they
were meeting us. There was no ideology. People said, look
forget all that, we are not here to say we want this, we
want that, we just want to get cracking again. We want you
to do this and do that, if you can do it. And we have
undertaken those, things.
As well as that we've done a couple of other very
interesting things. We're going to take the TAFE system,
the weak breed of Australian education, and make it a strand
of equal strength with the universities. We are going to
take that system closest to the community, beyond school,
TAFE, where people train themselves for the first time, and
retrain themselves and give it a status and a place in the
Australian education system of substance and importance. In
other words, we said its just not good enough to be A clever
country, one has also got to be a capable country. And that
means getting that capability up across our workforce, and
so we will see a revolution in TAFE and we will do for it
what the Commonwealth was able to do for universities.
Now John Hewson says, its irresponsible and its
unaf fordable. It's irresponsible, the package is
irresponsible and it's unaf fordable. He does not want to
invest in those children. when we came to office 4 children
in 10 only completed secondary school. They weren't worried
about the other 6 in 10 that were left to wander off and try
and find their way around, untrained, uneducated around the
labour market, drifting into all the problems that young
people drift intb in that sort of state. They were never
ever interested in lifting the retention rates in secondary
school after we did it. And at the same time we lifted the
intake in the universities creating the equivalent of a
dozen universities' since the middle ' 80s, 120,000 places
in higher education. They will embeace that, but their
feeble policy to that is, it should be freedom to achieve,
so that if you have $ 12,000 or $ 13,000 to send your child to
university, -that's as it should be. Places provided if you
pay for them. But to earn $ 12,000 or $ 13,000 after tax, you
have got to earn $ 20,000 or $ 25,000 pre tax, and for even a I
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two income familys it's half their income to send one child
to university. That's what they call ' equal opportunity',
that's what they call ' freedom to achieve'.
And so, they're quite happy to embrace our reforms... out of
the universities, having done nothing about themselves about
it themselves, but criticise it. But on the outside we'll
take the rest of those kids who can't find a place in
university because of their marks, or the available places,
or the inavailability of places, but who can have
interesting and fulfilling lives in a myriad of places in
the economy. They are now saying that it's irresponsible
and it's unaffordable, but they won't invest in our children
in this respect. And this is unbelievable, unbelievable for
a party which claims of itself to be interested in the
freedom to achieve and the right to excel and all the rest
of it.
The fact is, as always, it's only Labor that's ever really
interested in the great body of the Australian population.
They are about basically a tax break for the wealthy, and
what the Treasury study will show you, is the Liberal party
policy at its usual, that is, Fightback is not a package of
reform and change, it's an excuse for a tax. It's simply an
excuse for a tax. And a tax which shifts income from the
low paid to the high paid. And on the way through, make
sure that all the things that are worth doing, like giving
kids the technical education, like lifting the capacity for
capital investment in Australia, like fixing up the
industrial archaeology of the railways, like making certain
that the power system operates for Australia competitively.
No, no it is: all subsumed in the barren ideology, the barren
accountancy of the ons and offs of the so called ' Fightback'
package. And that's why we are different and we're better. We've
always been better, and we're still better, because we are
the people who have decided what the change for Australia
was when Mr Howard and his then adviser, Dr Hewson, left in
despair in 1983. And Dr Hewson waddled off into private
life, and Mr Howard sat mute and chastened on the frontbench
looking at his handy work all around him. And we
said, this is the way forward, let's remove exchange
controls and float the exchange rate, let's open Australia
up, let's internationalise the place, let's cut the tariffs,
let's get the deficit down, let's produce a surplus, let's
get the tax system tidied up, make it fair, let's put our
kids through school, let's get to the point where we train
people, let's change the labour market, let's do all these
things.
Then we move onto the later phase, let's fix
telecommunications, let's fix the motor industry, now the
railways, ports, railways. I mean we are the people that
have the big vista, the big vision. And what's his big
vision? What his big vision is basically to go and tax your
Weet-Bix and your Cornflakes, and the shirt on your back and
your shoes, and to call this reform. And of course, in
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there the sleight of hand, he pretended to people that he
was going to give them a big tax cut, we will give you this
consumption tax, we will tax your expenditure but we will
give you a big tax cut.
And what we found was, that the GST was not going to give a
tax cut at all. The GST simply paid for a removal of pay
roll tax, cuts in petrol excise, and customs duty. In other
words, here we have this tax which is going to attack the
way of life of every Australian family which is going to
assault the low paid and the middle incomes, which is going
to totally change the way in which commerce is conducted in
Australia, which is going to lift our inflation rate, and
ought to remove pay-roll tax, cut the excise of petrol, and
reduce customs duty because the personal income tax cuts are
funded by what's called, fiscal drag, the impact of
inflation on the tax system. And so he says, aren't we
making big fellows of ourselves, we are going to give you a
per cent tax rate at 20,700 onwards through the middle
income ranges and that will give you an incentive to work,
but of course you pay a 50 per cent consumption tax. And we
said, hang on there is nothing remarkable about that, we can
give back the fiscal drag too. We always have. We have
more than given back fiscal drag from the period that the
Government came to office in 1983, with those vast tax cuts
through the 1980' s.
So we have done the same. A 30 per cent tax rate from
$ 20,700 but no consumption tax, no 15 per cent string
attached, no 15 per cent sting in the tail. A 30 per cent
tax rate by virtue of the fact that Labor can use its hard
won fiscal inheritance from all those years of producing a
structural Budget surplus and doing it with the Budget
whirling back in to surplus in 1995-96. In other words,
having produced $ 18 billion of surpluses, Labor can adopt
the ' One Nation' package and yet despite that and the
recession, and the costs of ' One Nation', seeing the Budget
come back into surplus in 1995-96.
So that's what we stand on. We stand on a package which is
about Australians working together, which is about
restarting growth and producing employment, 800,000 jobs
over a 4 year period. About breaking through other log Jams
in the economy in the micro area, underiding further
investment in our children, giving lower middle income tax
payers a tax break without a consumption tax and bringing
business back into that partnership by giving Australian
business one of the lowest costs of capital regimes in the
world. Now that's what we are for. And if that is not a
big view, if that is not the view that Australia needs to
continue to take it into the trading world, particularly the
Asia-Pacific, which is the fastest growing area of the
world, where you have got 6 and 7 and 8 per cent growth
rates where we can sell our produce into those markets, if
that's not the way forward, compared to this miserable
approach of taxing people the basic necessities of life and
then taking the proceeds of it and tipping it into the
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highest tax payers in the land, that's what he is about, but
that's what they have always been about.
I repeat, Fightback was never a package of reform, it was an
excuse for a tax and in Australian terms, it is simply a
backward step. ' Fightbackwards' is the right way to view
it, it is the right mind set in looking at their policies.
So, I will be happy to take some questions from you, but be
assured about this, that this Government has been the
motivator of change in Australia, it's been the agent of
change, the party which has taught the Australian people
change, has now encouraged them in change and it is the one
continuing still to make the changes, still with the big
view, the big vista, the big builders of Australia, is still
the Labor party, still this Government. And that's why we
are better, we always were better, and we will always be
better than this sort of Opposition which we now face.
Thank you.
QUESTIONS AND ANSWERS
PM: Now don't be shy, who wants to be first? Now you can't
have read the documents that well.
Q: I was just wondering if you could comment on Dr
Hewson' s solution to what he sees as no progress in
waterfront reform and his proposal to send in the
troops.
PM: By Christmas this year waterfront employment will have
fallen by 50 per cent over the last two years. That
is, the same task being produced half as many people, a
per cent improvement in productivity. On the coast
our ships now have crew levels below OECD crew manning
sizes. And we have got to a point now where we have
got to wait for a pooled labour on the waterfront, to
waterfront employment by the stevedorian and companies.
In other words, with all the changes they could have
done in their years of sloth, in the Rip Van Wrinkle
years of Menzies, and the years which followed, we
never heard from Mr Howard or Dr Hewson when they were
running the place for seven years saying, oh look we
have really got to get into this waterfront it's a
problem, I mean low efficiency levels on the waterfront
are going to retard our national growth, going to
impede our competitiveness, never heard any of that.
The only response, and the first response we got from
him is the one you identified, we'll put the troops in.
Isn't this a classic view from somebody who does not
know about this sector of the workforce, does not know
about the change, does not know about society. As I
said, Dr Hewson would require a military map to find
his way west of the Sydney Harbour Bridge. Once you
take him ou t of the comfort station of the inner
Eastern Suburbs to where the people mostly live,
whether it be on the waterfront or in the suburbs
around it, or to the west where all the problems of
housing, pollution, educational opportunities and
health, and all those other things are, this is a
matter of which he is not conscious. That is, out of
sight and ou't of mind.
So waterfront reform has been a great triumph for the
Government and is now reaching its mature point of that
change. And it will improve, as a result of these
changes, by making the rail and port interface all
around the country, more efficient. So it won't be
just a matter of having an efficient waterfront, but
having an efficient interface with the rail system so
we can actually shift. Afterall, most of our
merchandise trade now comes up in bulk commodities by
containers and they're bulky, and every 1 1/ 2
containers you see on a train is one truck off the main
highways. It's a transport system which makes sense.
Basically rail carrying a greater proportion of
containers between cities and then the trucks doing
their distributional role in the cities. And this is
the way it should be, rather than the trucks racing the
trains up and down the highways.
Waterfront reform will be something basically the
Government has made enormous changes in, and where the
sterile, I mean, he is still on about the criticism, he
probably doesn't know that by Christmas waterfront
employment will have fallen by half. He probably
doesn't know. He still talks about it like he did
three years ago, before these reforms were undertaken.
So the fact is, they don't know what to do and wouldn't
know where to start, and they just take the changes
we've got, put it in their pockets and say oh yes we
will do better. I was making that point a year or two
ago, when they were talking microeconomic reform, I
said it was like building the Empire State Building,
and then having someone race up in the lift to put a
brick on top and say, ours is bigger. And that's the
Liberal Party they adopt all of our things and say we
will go one centimetre further, but never having the
wit or the courage to build the edifice in the first
place.
Q: Could you explain the reason for taking the 50 per cent
ownership controls off foreign investment in the coal
mining industry?
PM: One of the great concerns in the ' 70s was that we
wouldn't be able to reap appropriate national rewards
from the ex tractive industries in the hands of
foreigners without a substantial level of Australian
ownership. That's now, I think changed. There's been
a substantial change in the way in which some of these
industries are configured, we have had great change in
the ownership of the coal industry, and we now believe
that the 50 per cent rule was an impediment to further
investment in coal mining. In other words, we weren't
able to get new mines up while ever there was this
requirement that there had to be 50 per cent Australian
equity when the Australian equity paths were not really
available. And given the fact that we have now got a
much tighter income tax system, and we have got foreign
source legislation and all other sorts or capacities to
audit companies and to look at transfer pricing and the
rest, and given the fact that our big bulk commodities
have traded' into an international trading system, and
are not really in vertically-integrated companies where
you can transfer price, we thought the transfer price
risk was down, but the risk in terms of investment was
greater to us by having that rule there, so we removed
it. Which will make Australia freer for investment,
more attractive for foreigners to invest, and the more
equity and the less debt we get the better that debt
and current account scene is.
0: Does this also apply to the tourist industry?
PM: Foreign~ ers always could invest 100 per cent in a
tourist: related investment, that is the case now. It
was onl~ y ever in mining that this 50 per cent rule
applied. But we have done a lot for tourism in the
packagE!. As I said in the Statement, tourism was one
of the great performers of the 1980s and one of the
stars I~ n 1990s. It provides a tremendous amount of
work and particularly for women, particularly and
especiEll1y for women. So for the industry we have
increased promotional budget of the Australian Tourist
Commission for simply advertising Australia abroad, we
have dramatically increased the depreciation rates for
structures, hotels, integrated tourist developments
etc, fo'r investment. And we've changed the
depreciation rates for all the things that go inside,
like carpets, kitchens and bedroom furniture and all
the other things, it is a much faster acceleration. As
is often the case, hotels are refurbished every seven
or eight years, it will mean a faster write off for
them, a. greater capacity, better cash flows, and a
greater capacity to do it. And the tax rule supporting
the development of a bigger level of tourist
accommo'dation in Australia, which will be our need. As
Australia becomes a more popular inbound tourist
destination, we will need more capacity and
accommodation then we have got now. And these rules
will greatly enhance the ability of people to add to
that capacity.
Q: I was wondering if you could explain the reasons and
timing of the tax cut.
PM: The Government has always given back more than fiscal
drag. Because it lowered the size of the public sector
from 30 per cent GDP to 23 1/ 2, it cut the public
sector back before the recession by 7 per cent of GDP
which is 30,000 million a year smaller. It meant we
didn't need a revenue share as large as we had, So
therefore we were able to finance the Australian public
sector with a smaller tax base. Therefore we were able
to give real income tax cuts in the ' 80s. So not only
do we give back the effects of inflation on a tax
system, but as well as that we're able to actually give
back some of the real level of taxation which was
formally holding a bigger public sector together,
financing a bigger public sector. Now, what we are
proposing here is because there is a cyclical effect
from the recession which has turned the Budget from a
surplus to a deficit, and because we now wish to add to
that deficit, to provide a stimulus to growth, recovery
and employment, we don't want to be making the deficit
larger by tax cuts now. But as a cycle turns and the
Budget comes back towards surplus, where those tax cuts
* become affordable, we're going to pay them at the
earliest opportunity in 1994-' 95 and ' 95-' 96, and they
will be paid from $ 20,700 upwards. So I make two
points to you, that in the 1980s the area of employment
that we concentrated those tax cuts in most was below
$ 20,000, to the low paid. Where I lifted the tax free
threshold from $ 4,900 to $ 5,400 and cut the first rate,
the rate from $ 5,400 to $ 20,000, from 30 per cent to
per cent, providing enormous tax cuts to those people
down the bottom, and of course we introduced the family
allowance supplement, which we added to substantially
in this Statement with another $ 250 million. And it
will remain again that low paid families will get
targeted and valuable support from the family allowance
supplement and from these changes. So the tax cuts are
being paid when the Government can afford it, when the
Budget can afford it, and even paying them, the Budget
will stiLll come back to surplus. I might just take one
more, then I have got to go back to a Caucus meeting.
Q: How soon will the job creation aspects of ' One Nation'
lock in'?
PM: They will start quickly I think, particularly the road
programs which can be built up quickly, the rail
programs will take sometime to start. But one of the
things we wanted to do was to inject some funds into
the economy to get spending going in the retail areas
and through, business generally, and that's why we've
made the one-off payment to families of between $ 125
and $ 250) so that families would spend it, and that
would generate activity and start to get business
going. So there is that happening in April. And as
that happens we will have the build-up from the
infrastructure program. And no doubt the depreciation
changes will bring forward investment and cause
investment to occur which otherwise wouldn't occur with
slower rates of depreciation. And of course we have
got the stimulatory effects of the low interest rates
which I reduced first in January 1992, over two years
ago, as they become an 11 per centage point reduction
interest rates, starting to really have their impact
inside the economy. So those things, that is the
general stimulus coming from lower interest rates, the
stimulus coming from the change from the Budget from a
surplus to a deficit, the one-off payment to families
and the build-up of the infrastructure program and
depreciation from investment, should start to get the
economy cradking again, and we will start to see those
growth numbers come through 4 3/ 4 per cent through
the year in 1992-3 which will get Australia back to
growth. Employment and growth are so tied together.
If you look back right to the 1960s every time you see
a lift in GDP you see a lift in employment. Where it
trails of f you see one following the other. If we get
activity up and GDP moving we will get it employment
moving and I believe we will.