TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING, MP
PRE-RECORDED INTERVIEW WITH MAXINE MCKEW, ABC tAM
PROGRAM, AUGUST IS, 1992
E OE PROOF COPY
MM: Prime Minister, we seemed to have come a long way in six months from the
pretty heady optimism of ' One Nation'f to I suppose, what you could say the
realistic qualifiers in this Budget.
PM: We've certainly reduced the growth forecast, but I think the important thing
is the economy is growing again and then we had the National Accounts for
the full ycar just a wcek ago growing at about 1.6 per cent. That's the same
as western Europe, but this coming year, the year we're in, this financial
year we're in, wc'rc going to be growing at a round 3 per cent on average,
nearly 4 through the year and in fact, faster than Europe, but about on
average the same as our trading partncrs if you include the North Asian
economics as wcll. So it is a reasonable rate of growth and it will start to
pull employment up.
MM: The task of ecoAver is obviously proving a lot more difficult than you ever
imagined it could be after you took ovcr as Primc Minister.
PM: I think it has bcen harder to ignite the growth that we now have and we
hoped we'd have more, but in the same period the OECD has now twice
revised down its forecasts for OECD arca growth, so has the IMF. This is
now pretty much a phenomenon that is a world wide one, but the main thing
is there is a role for Government, the Government has a job to do in kicking
growth along and protecting the people who have been hurt along the way,
the uncmployecd and also moving our social agenda along by such things as
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improvement of public hospital access under Medicare. increasing the_!& O
-pension, support for caters et cetera.
MM: You mentioned the unemployed, I suppose you never imagined six months
ago that you would have to face a press conference as you did, what a
month or so ago, and explain a figure of 11. 1 per cent.
PM: No, because that was occasioned by thc number of people looking for work
and one can never make judgements about this participation rate. If we had
thc same participation rate today that John Howard faced, we'd have
unemployment at 8.5 per cent or thereabouts. The fact is we were very
successful in the 1980s in employing Australians. The Australian
workforce is a quarter bigger than it was in 1983, we've kept most of the
1980s jobs and people not unreasonably had the expectation of finding
work. So when things start to look better they've obviously gone out there
looking and that's shoved the unemployment rate up to around I I.
MM: As you see it, it's obviously become a political and a social necessity, a
matter of social justice as you say to spend money on job creation schemes,
but does that go against the grain a little bit in that the jobs you're creating
arc not the new clever jobs that you talk about, they're not the sort of jobs
that will give us export income, that will make us hold our heads high in the
international arena?
PM: No, but in thc 1980s when I was Treasurer in this phase in 1983 we had the
Community Employment Program doing some of those things, we were
then developing the labour market programs which had more of a training
component to them and wc'vc now sophisticated those ovcr the period. So
those labour market programs will reach over 400,000 people this ycar so it
gives all those people a chance of having work experience and training and
that means that they're likely to get back into the full time workforce much
earlier, more quickly.
MM: And are you ready to go into top gear with thesc programs straight away?
PM: They're all programs largely which have bccn developed and which we're
adding to. The new ones were announced a couple of weeks ago in the
youth initiatives which I announced, that is the Career Start Traineeships et
cetcra, but the ones which arc here; Jobtrain, Jobskills, Jobstart arc all
existing ones which wc can wind up quickly.
MM: If you accept that a substantial element of that unemployment is structural,
job creation schemes won't do much about that will they?
PM: There is a ncw Budget initiative there for open universities, open learning
and that means that many Australians will be able to get access to tertiary
education who can't now, that is in addition to the 50 per cent addition to
places we've already put there, the 120,000 extra university places we'vc
created and the total remodelling of TAPE. So if we are, as wc have been
for most of the 1980s now developing a much greater skills base in the
conomy, producing more sophisticated products, it simply follows that the
sort of workforce who'll be producing those products will be a trained one.
We're putting the institutional things in place, I mean there's been a
rcvolution in the change and the participation rate in schools, in universities
and in technical education, and in technical education it's going to be
improved, so of most OECD countries there can be none making such a
transition so rapidly as wc are.
MM: Despite those efforts, some of our employers are saying that the growth we
are likely to see will come via higher productivity meaning they will do
more with fewer employees.
PM-That's true and that means if you want to get unemployment down, you'eve
got to run thc economy fastcr., This is what I keecp saying to the OppositIion.
They want a policy where they have a pool of unemployment as a natural
check on wage growth. They're saying don't open the accelerator up, don't
let the place grow quickly, because a pool of unemployment is actually
handy to keep wages down; that's the Hewson model. Our model says if
you've got more productive businesses with a given level of output bcing
produced by fewer people, to produce more employment you've got to have
even more output, that is even greater growth. And how do you do that
without it spilling into wages and prices? Answer: a wages policy, an
Accord.
MM: But business is not investing in the first place.
PM: It's starting to pick up in these forecasts and part of that pick up we saw in
thc National Accounts for last year, investment starting to stir. But the
notion that we shouldn't be growing and that we should hold it down and
with some sort of miserable view that a pool of unemployment is actually
something that has a depressing effect on wages which ic is a good thing,
thc sort of nark conservative view is a view we won't accept.
pt. pfl,, b.." J~ a. e
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MM: What of the growth figure of 3 per cent though? That is not likely to make
much of a dent in unemployment, I mean the Budget forecasts say well
we're still looking at 10 per cent by the middle of next year.
PM; Down to 10 that's true, but again it's the direction which I think is important
and the psychology of the country, the direction Is important particularly
where those labour market programs picking up 400,000 of those people
unemployed. And through the year that's 3 3/ 4, in other words a 3 pcr cent
for year avcrage but the actual speed across the year is nearly 4 per cent.
That will totally change the psychology of thc country and I'm quite surc
that the public expenditure programs now, that is the highways, the $ 2
billion on roads, the national rail system, the ' One Nation' spending, last
week we ordered 3,000 tonnes of rail steel, a million concrete sicepers, that's
all starting to happen. I think as that happens and the Budget spending
happens and this regional policy of spending in the regions all that will kick
the growth along right at the right time.
MM: But Prime Minister there was another chilling commcnt in thc Budget
papers and that was that as wc see the recovery coming through there will
be a kick up in the current account. N~ ow what has the 1980s been about if
not trying to got that currcnt account under control?
PM: Yes, but ' We're now in the last few years ninning a large balance of trade
surplus, we're now running a balance of trade surplus of about $ 4 billion.
Thc current account debt came from the tact that we were running a trade
deficit, we were importing more than wc'rc exporting. This has not been so
of the last two or three years so we've still got a current account deficit that
is true, because of the interest payments on the old debt. But as invcstmcnt
picks up imports will pick up and slow that progress down, but again it's a
pretty modcst increase from 3 3/ 4 per cent of GDP; 3.1 to 3.7.
MM: But docsn't it worry you that we're seeing the growth in private
consumption, in housing?
PM: But again what's the answer? Demand management, sit on the ceonomy,
don't let it grow. the only thing to do is to add to supply, that is be ablc to
produce more goods and services, I mcan the grcat thing about Australia is
we have made this vast transition to elaborate manufactures and
manufacturing exports. Manufactured exports have trebled since 1983,
elaborately transformed manufactures have done the same and all we should
do is continue to add to supply and that's the way we'll beat the current
account. We won't beat it by trying to sit on the economy, that is kill the
imports by killing thc growth and killing employment.
MM: Our pcrformance, of course, Is depcndent on a stable international climate,
and again the Budget papers refer to the fact that if we see a further
contraction in Japan, then the forecasts are at risk.
PM: Well we've got ourselves growing In this, our trading partners arc growing
at 3 per cent on average, that's exactly as we see ourselves growing.
MM: Mmm, but that growth is again dependent on Japan, is it not?
PM: The bulk of it depends on the United States', and some of it on Japan's, some
of it on Westcrn Europe's, and some of It of course in the South Pacific and
North Asia areas. Thcy'rc growing much fastcr than we are, but taken as an
average group it's about 3. Even if there was a shift in Japanese growth it
wouldn't change thc forecast much.
MM: You mentioned the US there. What of the possibility of a Clinton victory in
the US say in November? Now cven thc prospect of that is making the
markets a bit nervous at the moment.
PM: Could be, but one of the things I think Australians should understand, that is
the United States didn't fix their budget deficits in the 1980s, and iii the
good times thcy didn't produce surpluses. We did. And now thcy've got a
budget dcficit this ycar of 6 per cent of GDP, wc'vc got onc of 3.3. Ours is
going to come back towards balance, theirs isn't. And that's now why they
can't use fiscal policy as we can usc it to lift the stimulus and let growth
move in the economy. These are now options Australians have because of
good management in Budget policy.
MM: But if you had a Bill Clinton in the White I ouse next year, he'd be worried
about winning re-election four years hence, not so much worried about the
economy and getting that down from 6 per ent.
PM: Thc US political system has not been able to manage this cconomy, and
there's been this dichotomy between the power of the President, the
Congress, and the Executive. And they've not been able to manage fiscal
policy, and that's why they took no precautionary action in the salad days of
growth, and now why they're basically hoisted with these very high deficits
and no capacity to actually stimulate the economy.
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MM: Indeed, but if it's bad there it could be bad for us.
PM: It could, but I mean again, they're in a cycle and they'll pick their way out of
the cycle as well as we are. I don't think it's going to change our forecast
much at all.
MM: Well, just to some local comment. Business leaders here have cast doubt on
the 3 per ccnt. Thcy say it could be less optimistic than that
PM: I mean, you'd have to have a huge contraction in growth off our national
account numbers of last year that's the actual growth we've rncasured, the
statisticians measured, for the year to June 30 this year. For the last
financial year you'd need a contraction to produce some of those numbers.
No, we've got here I think conservative numbers, a conservative forecast at
3 per cent for year average growth, and 3 3/ 4 through the year.
MM: Is this Budget a plan for the future, or is it a palliative?
PM: No, no, it keeps the structural progress going, that's the point, and the social
progrcss. That big change to Medicare for hospitals, the change to the
social security programs, the 150 per cent for R D to keep that research
and dlot) cnt component coming through, on top of the huge change in
depreciation rates in the One Nation Statement in February the pooled
development funds, all of the other innovative tax changes which obtained
then and for the general business environment, low inflation, low interest
rates, a competitive exchange rate, a very high profit share and about to go
higher, a set of wage arrangements in place which will hold the inflation
rate below our trading partners. It's a-pretty good scene coming up.
MM: You referred bcforc to the training programs that are in place, and certainly
in the last month you've gone to a lot of trouble to gct a comprehensive
training program in place. Kim Beazley said on this point that what wc will
see in the future is the marr iage of training with national economic goals.
Now, some might say well that's only half the picture, why not go ahead and
marry industry policy to national economic goats, and much more
directional industry policy?
PM: Well it basically is. I mean look, we're saying sell your brains, train your
kids, keep them in school, put them through universities and TAFE, sell
innovative products, sell your brains. John Hcwson is saying don't do that,
let's sell the dumb products, let's cut thc wages to $ 3 an hour, let's cormpetc
in the low orders of the international division of labour, let's compete with
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the people on $ 15 or $ 20 a week in South East Asia, let's try to make the
things that we shouldn't bc making, and let's keep in the game by cutting the
wages of low paid Australians. We're saying, give that up, let's have a
trained work force doing clever things.
MM: To what industries would you like our young people to sell their brains, in
what areas should we be competitive and getting the exporting going?
PM: Well, all the ones we're doing now elaborately transformed manufactures,
services, education services, health services, tourism, financial services, and
in those clever parts of, you know, computer software programs.
MM: But are we doing enough? We've got the manufactured exports up, but
they're only up to about 25 per cent of our total exports.
PM: Well they're higher now than rural or mining exports for the first time ever.
I mean the Liberals should have hung their heads in shame that for 310 years
the whole post war trade in goods and serviccs passed us by, we were just
basically into producing a bit of wheat and wool and a few minerals. As
important as they are, and remain, they are not enough and they don't
employ people in cities. You can't say get a job at the back of Queensland
or in Wcstern Australia if you live in Sydney or Melbourne. So we had to
re-establish, we had to rebuild the basis of our manufacturing and our
services because this community didn't have its share of intcmnational
services.
MM: Prime Minister, in terms of the political battle you gave a bit of a chestthumping
speech to the Caucus the other day along the lines of ' you ain't
seen nothing yet'. What have you got in mind?
PM: Wc're going to paint Dr Hcwson and his policies, which are basically about
survival of the fittest, the Gordon Gecko view of the world, you know
' greed is good' and if you're not a millionaire you're a layabout stick a
consumption tax on everybody, make the low paid people give tax cuts to
the higher paid people, mnake people pay for their health care regardless of
their income, no Medicare, you have a right to go to university if your
parents can afford full fees 12-15,000 a year. We're saying that's not the
view, that the mix we've got, the blend between an open market economy
introduced by a Labor Government, ironically introduced by a Labor
Govcrnmcnt graftcd together with a really comprehending and
compassionate social policy, with a role for business and a role for the
unions, in an evolutionary change in the labour market. That's the model for
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Australia. Not some sort of late " 70s. Thatcherite model which is basically
built upon the greed syndrome if there's a quid for you go and get it, and if
there isn't there's no point to you. And that's the difference between the
parties. And that ideological difference is going to become more apparcnt
as the months go on.
MM: Don't you think the electorate, though, with reservations might say we might
as well go for that because we want to punish Labor, they have given us I1I
per cent unemploymcnt?
PM: Look, we get New Zealand thrown up to us as a model by Dr Hewson.
There are the same number of people in jobs in New Zealand today as there
was in 1983, in fact fewer. In fact, by a modest amount, fewer. In Australia
there is 25 per cent more people in work. When I became Treasurer the
work force was 6 million, it's now 7.6 million. We had more growth in
Australia in the 1980s than there is GDP, total product, in the New Zealand
economy. We've madc thc great transition to an externally oriented society,
we've built onc of the best social security safety ncts in the world. 1 mean,
why should the community punish us to reward a set of coalition layabouts
who got us into this hole in the first place, a person who was advising the
then Treasurer for 7 years, who left us with a massive current account
imbalance, ballooning foreign debt, a 10 per cent inflation rate, nearly I1I
per cent unemployment, 10.5 per cent uncmployment, and a hopeless sort of
outlook? Why should that group ever be rewarded by the electorate vis a
vis a government which has taken all the courageous changes and tried to
make something of Australia, to give it a place in the world,
notwithstanding thc fact that the game got overheated in the late 1980s and
the result is the rcecssion. It has been the recession, but the same recession
that we see in Britain did you know that Britain has just slipped back into
negative growth. I mean, we're now growing at 1.6 for the year to June,
they arc actually contracting 1.5. The United Statcs is in a recession, Japan
is in a recession, France is in a recession. This has been part of the dcbt
hangover of the ' 80s and the collapse In asset prices. And to say lct's throw
the baby out with the bath water, let's take the Governmcnt that really made
the post war changes, that made the courageous change to an externally
oriented society, that made all the social changes, the structural changes,
and what will we have back? The Gordon Gecko of Australian politics, to
give us the ' greed is good' syndromc. Thatcher, 1979, who wants that?
MM: Prime Minister, I suppose you're not holding your breath about a Kirner
victory in Victoria. Isn't thcre the same sentiment about the Federal
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Governmcnt, to a certain extent, as t~ cre is about the Victorian Labor
Government?
PM: I'd hold my breath for a Goss victoi.* in Queensland, though. What point's
that make?
MM: Prime Minister, thank you.
PM: Thank you, Maxine.
cnds