a-6. j i P. I
TEL: 20. RU9.92 18: 03 No. 012
' Il PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KDTINO MP,
O& A SESSION, AUSTRALIAN FINANCIAL RErVIEW POST BUDGET
DINNER, RECENT HOTEL, SYDNEY, 19 AUGUST 1992
E& OE PROOF COPY
Q: Prime Minister, last week the Treasurer in
consultation with the Governor indicated that there
would be no more cuts in interest rates in this
cycle, yesterday that position was reported to be
qualified. Could you please clarify that?
pm: You mean, would you like me to make your job easier?
what we say is that given that the inflationary
performance that we've been able to secure, that's
with inflation rates, the statistical inflation
rates below 2 per cent, and 2 per cent again in
forecasts for this year, that it will be our
performance on inflation and inflationary
expectations which generally governs what we do on
monetary policy, and also the conditions within the
economy. I think we would say that at this point
rates have fallen far enough, but if you want me to
say they won't be falling any further under any
circumstances I won't be saying that, won't be
saying that.
Q: Prime Minister, with regards to theFBT proposal on
car spaces could I ask firstly, who will supply the
car spaces where the person using the car requires
the car for his or her business? And secondly, will
it apply to car spaces at Parliament House in
Canberra?
PM: I don't think so, but you know the Departments of
State pay'to the Treasury. We make the appropriate
adjustments in terms of fringe benefit payments.
And I know things like this are dear to the hearts
of many here, but the fact of the matter is that
fringe benefits tax is a tax so that cash, or
substitutes for cash, for goods taken in kind are
appropriately taxed. Now when the fringe benefits
tax was established In ' the middle of the late 1980s
some concessional treatment was given, particularly
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with relation to motor cars and other things, and In
this case in parking, and I think all we are
essentially doing is tidying up an anomaly in the
design of a tax.
Q: Treasurer, it's9 how I remember you Paul.
PM: Loyalty, even after they leave us.
Q: A bit of a statement, you've been associated with
all but one of the past ten Budgets, end a quick
count this afternoon was six mini Budgets, and over
this period the Budget balance was moved from
substantial deficit back to surplus, then back into
deficit. Was this experience and your views changed
by the role of fiscal policy and the economic
adjustment proes na -wth respect to influencing
income net distribution?
PM: I don'It think so. No, I think that in the early
1980s it was appropriate to expand fiscal policy for
the Government, with private investment down, to
substitute for public investment and public
spending, and as then the recovery came through and
we saw boom conditions for most of the ' 80s, fromi
the middle to the late ' 80s, it was then also
appropriate to withdraw that stimulus and produce a
surplus, or surpluses. But now in these conditions
where the economy is finding it difficult to grow
with the sort of speed we would like, although for
the public sector I think, and the Government and
the Budget and fiscal policy, in promoting that kind
of recovery is I think important. That is, that in
terms of the shorter term movements in the cycle of
the economy, fiscal policy has an important, I
think, balancing role to play. That is, where in
the past people have believed that moeaY 0i
was the instrument most quickly to cpal of
this, I mean people have often said, commentators of
fiscal policy, the lags are too long, and the lead
times are too long, whereas the monetary levers were
available at the hand of the Central Bank. But as
we know the monetary impacts take quite some time to
come through and it may well be, I think it probably
is, the case that fiscal policy may be a more speedy
remedy in some cases to the national economic
condition. And so I think that the trick is to use both
instruments together, and of course with it wages
policy as well. And that is why we take the view
that in a complex society, a complex economy,
reliance upon simply one instrument isn't enough and
that's why we differ with the Opposition in
believing that, for instance, now where we have got
a Budget deficit of $ 13, billion or about 3.3 per
cent of GDP, that it would be an entirely
inappropriate thing to do to cut that in half, to
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withdraw 07 billion from public spending and
stimulus. That is, to take 2 per cent of GDp from
it would simply kill the recovery stone dejad. That
is entirely the wrong thing to do as our friend Dr
Hewson, is urging us to do. The wrong thing to do.
So I think fiscal policy has got a sort of medium
term role about it, and it is a role which we played
through the ' 80saend we are still playing now. But
those who simplistically believed that I believed
only in surpluses and that now I should continue to
believe in them even though the economy has been
much weaker and that private spending and private
investment has been lower, then of course that's
wrong. I don't believe that and I never have. I
think fiscal policy has a very useful role to play
and a Government which wants to play it well, that
Is to design measures carefully and be cognisant of
the stimulus and the lags which can come with it,
can be using a very a useful device in the economy.
So I think fiscal policy is an exceptionally useful
thing and it ought to be used sensibly, and can be,
and I think we are using it sensibly. We have
produced now in this year Budget outlays of 4.1 per
cent of GDP real. The population is growing at 1.6
per cent so we have got about 2.5 per cent of the
outlays grove as part of, if you like, the stimulus
in this year's Budget. It is entirely the right
thing to have.
Q: Mr Prime Minister, what resources or assistance is
the Federal Government prepared to contribute to
actively promoting the Sydney Olympics 2000
campaign? And more importantly, howoes the
Government view the prospects of success for this
campaign?
Pm; Well I contributed on behalf of the Commonwealth
million to the campaign at a breakfast. They
must have had something in the Weetbix, I don't know
what it was but it was something there. And I have
coughed to the tune of $ 5 million on behalf of the
rest of us, and 5 now is better now than 5 later.
And as well as that the Commonwealth is going to
underlie a substantial proportion of the cost in the
event that the bid is successful. And at this stage
it seems that were the matter be decided now, I'm
told that Sydney has been faring very well. I can
only hope that remains into a year ahead, in
September next year when the decision is taken. But
the Federal Government is behind the bid, we think
it would be important to Sydney and Australia and
that's why we've put our money on the line in the
early stages to help the bid succeed.
0; Prime minister, is the Government concerned that the
change in tax status of limited partnerships may in
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fact discourage investment, equity Participants in
infrastructure projects? And is this In fact in
conflict with the Government's -agreed agenda that
these projects are in the national Interest?
PM: I don't think so. I think one has Just got to makce
decisions about these sorts of devices before they
start running. I think that is exactly what we have
done now, to think about all of the regulatory
structure we have established for companies. ' There
is no real point in letting people get their way
around that, all in the meaning of development. We
have given Australians, anyone who wants to invest
in this country, a choice of instruments, either as
sole traders or as single investors, or as trusts,
or as partnerships, or as companies. In many
countries of course equity is taxed twice, companies
are taxed twice, a tax at the compony level and the
distribution of their dividends are taxed as income.
This is not so in Australia. With dividend
imputation, largely we tax company income once. So
therefore there is complete neutrality between the
of companies as a vehicle and these other
things. Now the States to try to, I think, drag some revenue
their way have tried to interest investors in
setting up as limited partnerships, and the
attraction for many people is it means they walk
around in a regulatory structure which we have for
companies. Now I don't think that we want to
develop another stratum in investment in a way which
permits that to happen. That is, the mature thing
to do is to basically keep the company structure
such that all the cheques and balances we have now
developed, often learning lessons painfully, some of
the ' 80s lessons, mean that we should keep that
company structure in place. Before these things
start running away on us now is the time to act, and
I think we have.
Q: As a large section of the older unemploy d are
retrenched people from the finance sector, what area
of retraining do you recommend for these people?
Pm: well if you're a former Treasury officer, come back.
Q: And before you dismiss me, I live in Barton.
PM: Yes, but are you one of ours? Look, we are seeing
rationalisations, we have seen them now really from
the late ' 80s onwards, as the heady days of
financial deregulation and high salaries for all
sorts of people, have bought companies, financial
intermediaries to their knees and they have had to
make adjustments. ' And5 part of that has been in the
business they have been doing and the staff they
have been hiring. I think I can only say that as
1% Ir* economy grows again more strongly over the
course of this year, and banks start lending again,
and when the financial system starts to work again,
then some of those natural employment opportunities
are going to open up. Now I wouldn't think it would
ever get back to the sort of levels of employment of
the mid to late but again that remains to be
seen. I em not certain where the surfeit of people
from the financial industry should go. But I will
say there is a Commonwealth program for you all
somewhere.
Q: Mr Keating, in the early 1980s you were a very
fervent supporter of a broad based consution-taxthrough
your own option C. Could you please explain
what lead you to discard a policy that you obviously
so strongly believed in?
At Because I couldn't get the wage discounts that
should have come with it. That is, I didn't have a
right any more then anyone else did to blow the
national inflation rate to pieces by manicly
pressing on and adding 5 or 6 or 7 percentage points
to the price system and then letting it drift into
wages. So I tried to use those processes to secure the wage
agreements that would see us accommodate such a
change with decelerating inflation. That was one
reason. The second reason was that the direct tax
system, the income tax system was so severely
hemorrhagi. ng that really most people in the off icial
family gave up on this repair. That is they thought
it was so badly neglected and had so many conceptual
holes that the payment of income tax became entirely
an elective matter. And with support of the then
High Court that many people in the bureaucracy
believed that it wasn't capable of repair. So we
decided that one thing we would do is catch them
when they spend them. That was if it was sl. ipping
through income tax net to tax expenditure and
collect some of it there.
Now when the consumption tax proposal under Option C
was then denied to me for the reasons I just gave
you, we then went and repaired the income tax base
so much so that compliance levels came back up, we
put a capital gains tax into the system, fringe
benefits, all these other various devices to tax
income properly. And the end result is we've got
now one of the most secure, complied with tax
systems in the world.
So there was now no point in taxing expenditure.
But to go taxing expenditure now, to blow the
inflation rate back into double digits from the low
2 per cent we have after 20 years of wearing the
blight of inflation,* to., do it Simply in the name of
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some ideology with no prospect Of wage discounts,
but worse believing and selling it as a cure eli to
all the nation's problems, not just a simple tax
switch which Option C was, but selling it as come
sort of elixir or remedy is, of course, simply naive
and dishonest in the extreme. And that's why now a
switch to expenditure from income is a tenth order
matter, and at this stage this nation has got more
to do with its time and its attention with things
like enterprise bargaining, workplace reform,
training end education and the reel structural
transition issues, it's got more to do than worry
about a dangerous tax shift which will simply blow
the inflation rates to bits.
So if It can't be done with low inflation it
shouldn't be done. And at 15 per cent with poor
compensation for low paid people and a very big
burden as Dr Hewson proposes 15 per cent on all
people to have the proceeds driven by way of a
reduction in payroll tax and excise on petrol. You
understand that cleans the proceeds of the
consumption tax out. The tax cuts don't come from
the consumption tax, they come from cuts in
government spending. The whole of the proceeds of
the consumption tax comes are devoted to the
abolition of pay-roll tax and the reduction of
petrol excise.
So with when you put forward a proposition to
working Australians of low income that they should
have their food taxed, their clothing taxed or their
services taxed so that pay-roll tax should be
abolished but petrol made cheaper, it'. a rotten
deal, a rotten deal, and it's a deal that I think,
Australians in the end won't wear. Now the
Coalition wanted to be different, to propose
something different. What they're really doing is
proposing something extraordinarily dangerous. And
the trouble is even if they know it, they're not
obviously letting on, but they can't but help know
it. The obvious point also is that if someone is on
$ 25,000 a year or $ 30,000, whether we tax their
income or their expenditure is immaterial. They are
one in the same thing because someone on that level
of income has no savings. So whether you tax their
income or their expenditure it is one in the same.
But the person on $ 150,000 a year has savings and
yet you are only taxing their expenditure. So what
you'll see is a huge transfer of wealth from the low
paid to the high paid. And does anyone thinks that
with such a transfer on, they'd all have the support
they are now getting in the labour market for low
inflation, wage restraint,, high profits,
productivity bargaining, productivity increases all
of that will simply be under assault as a
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conservative government tries to shift wealth from
the lower orders of the income ranges up to the
higher orders by a very unfair and regressive tax.
And that's why I think it won't wash. And even
properly compensated would be a total extravagance
at this time in our economic history, but
uncompensated it's a piece of barbarism, fiscal
barbarism which I think would be rejected.
0: Prime Minister, if you go back over the Budget
papers for the last four years or so, it appears
that the main objective of monetary 20lic? has
shifted from the current account, or equivalent the
excess domestic demand, to inflation. Was this
shift because the current account actually increased
as interest rates were raised and declined as rates
were eased? Has this experience of the late 1980s
influenced official thinking about the role and
impact of monetary policy following the floating of
the Australian dollar? And finally, if faced by
widening current account deficit in the future, will
the government again raise interest rates to try and
reduce it?
PM: Where did the current account debt come from? It
came from the fact that we were running a balance of
trade deficit, that we couldn't pay for our imports.
The Liberal Party after 30 years of office was so
bereft that it basically left us with a position
where they relied on commodities, and commodities
let us down. Above all, in 1980s we were running a
current account surplus of 6 per cent of GDP, it
was from trade or the absence of it that the current
account debt developed and started to derail rapidly
under an uncompetitive regime, and rose to about 38
per cent of GOP by the middle 1980s. Now it was
that growth in the trade deficit which produced the
current account debt.
At the moment we're now running a strong balance of
trade surplus. In other words, if we were not
dealing with the accumulated debt and the net income
deficit Australia would have made one of the
substantial economic adjustments to a higher level
of exports and import replacement and a better trade
balance. But that's not the position because we've
still got the net income deficit to deal with.
So it means, I think, that we've got to produce more
goods and services. That is that the correct
response for Australia is a supply side response.
That is, we've got to put in more productive plant
and equipment and produce more value added, which
we are doing of course in elaborately transformed
manufactures end all ! sorts of manufactured exports,
as well as in agriculturg, and as well as in
minerals.
V 4qt~ Ilpow. fte W S~ D,
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go while monetary policy will always have a role in
demand management of some kind, so too does f iscal
pD9l4cy. But in terms of the current accountT
think Australia has to press on until its Supply
capacity starts to catch up with the net income
deficit. And that's going to take time but that's,
I think, our only course. Because to try and sit on
the place and hold it down, this sort of double
digit unemployment, if that were seen to be the
remedy for the current account deficit, will I think
be a mistake because socially it wouldn't hold and
wouldn't last and it wouldn't deal with the problem
anyway. So I think monetary policy has its role to play,
it's obviously got a role to play in price
stability, it's got a role in demand management anid
again as Bernie Fraser said so eloquently during the
week, it's got to be done with all of the
instruments together. And that's why running a
complex economy is a complex matter where complex
judgements have got to be made, and some simple
resort to some draconian monetary policy to try to
deal with demand and inflation is, of course, only
the view of simpletons, and of course that's exactly
where I put Dr Hewson.
Q; Mr Prime Minister, could you please comment on the
economic performance of New Zealand and your
forecast for New zealand for the current financial
year?
PM: Look, I know that there is a bit of a sport
developing in the media about New Zealand and
frankly it's not a sport I like. I don't like it
and I think it's a great shame that the Liberals
have decided to try to come back to Australia and
push New Zealand down our neck, our throat. But let
me make a couple of points because I have never
accepted, never, that one introduces structural
change like economic change, but not in the
transition with growth and activity.
Now in the 19809 In Australia, we had an enormous
structural transition from an inward looking closed
economy to an outward looking one. We had such
things as the removal of exchange controls, floating
of the exchange rate, the opening up of the
financial system, the reduction in tariffs. But it
was all accommodated with an employment related
policy. That is, with the agreement we had with the
trade unions we sought to run the economy faster and
to turn the proceeds of growth to employment rather
than to see them spill away in a price and wage
round, or worse, not havq that growth at all
believing only that micro-economic or structural
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change should be accommodated at the Cost of higher
levels of unemployment.
I never accepted that view. I never accepted the
Lange/ Douglas view, never. I thought it was an unf-
Labor thing to do and I think it today. And I said
in the House yesterday and it's worth repeating that
when I beca& me Treasurer there were 6 million people
in the Australian labour market, there is now 7.6
million; it's over 25 per cent larger. ina New
Zealand, the labour market today Is exactly the same
size, in fact it is a little smaller than it was in
1983. That is, a decade on it's labour market has
actually fallen or got smaller. The other
Interesting point I think is that we had more growth
in the Australian economy then the 1980a than there
wasn total product in the New Zealand economy. That
Is, more growth in the Australian ecznomy than there
was total GDP in the New Zealand economy. And I
think those two facts speak for themselves. That
Is, a generation were left behind in New Zealand by
a Government that should have devoted itself to them
all in the name of microeconomic change,
microeconomic change which in the end let down those
people. Now it may be that New Zealand is picking
Itself up and growing, and I hope it is, but it is
certainly about time it is, it's a decade too late.
Q: Prime Minister with the forecast to 10.5 per cent
unepl~) Metrate for this financial year, which is
the same as what it was on average for last
financial year, how are you possibly going to win
the next election?
A: Well It makes it difficult for us. I don't think
anyone but a fool would deny that. But the
elections in this country should be decided by the
governments who have been prepared to change
Australia. And this Government took Australia from
a backward frightened economy, inward looking
economy, to an outward aggressive economy where
structural change and change in the nature of our
industrial base became the order of the day. And
those changes continue apace to this very day. And
in the speech i gave you earlier I talked about the
quite revolutionary change in vocational education,
which I was able to announce in an historic
agreement between the Commonwealth and the States to
create a structure to sit beside the universities in
vocational -education, and as well, in the huge
number of places which have been added to our
tertiary capacity in education over the last half a
dozen years.
Those sorts of changes are the things which will
remake Australia. we'should be out there selling
our brains, selling innov ative products, getting a
margin on clever things, not going out there to
. RUS92 18: 03 No. 1
compete with low cost countries doing basically the
things they are doing In cutting the wages of
Australians whil~ e trying to do it. That's not the
clever thing, that's the dumb thing. That's the
thing that Raewson wants to do, go back to 3 bucks an
hour anid put people on basically low wages, to
produce products we should be long out of, rather
than go into the products which require education,
and which require research and development,. and
product innovation. They are the things we need.
This Government has been the Government which has
given Australia an open market economy. It maybe a
great irony that it took a Labor Government to give
Australia a true open market economy, but in doing
so grafted onto it one of the finest social policies
in the world access to health, access to
education, reformation of the social security
system, reformation of education system, and
occupational superannuation, long term savings in
retirement. It's been basically a social revolution
at the same time accommodated with the opening up in
a modern way of an economy.
They're the things in which the Government will seek
re-election and why shouldn't it seek re-election
and why shouldn't it be re-elected? And as we go on
through the period when that unemployment comes
down, we'll go into the 1990s with a low
inflationary period, historically low levels of
inflation, lower interest rates, a more productive
country, national savings being rationed to the
right places and not the wrong places by the banking
system after having been through the first phase of
deregulation, the learning phase, and where we'll go
with a smart society to do clever things in the
Asia-Pacific.
I mean, that's the vista that Labor holds up. What
does Dr Hewson hold? Basically, it's the Gordon
Gecko view of the world, greed is good, survival of
the fittest, if you're not a millionaire you're a
lay about, if you want health protection go and pay
for it, if you want to put your kids through
university let your old man cough up 15 or
thousand bucks a year to put you through. That's
his view. That's why I don't think he is going to
win.
0: if I can just follow up, does that mean you think
you can win the election with 10 per cent
unemployment?
PM: Of course I do, of course I do. Why would I waste
my time on some of you jokers if I didn't?
Q: Mr Keating, lastinight I listened quite attentively
to Mr Dawkins explain the need for Australia to
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develop our manufacturing Industris Could you
please explinto me how an extra $ 335 million of
local government expenditure will assist our
manufacturing industries rather than just
contributing to the number of council workers I see
propped up by shovels?
PM: That's not a very clever question, I've got to say,
not a very clever question.-So If you're looking
for marks I'd reward you low marks. Now let me give
you the answer. Unlike you, there are people out
there unemployed. And they're unemployed through no
fault of their own, they've been denied the
opportunity society can offer them. And one of the
great tragedies of unemployment is that people lose
their melt esteem, and they think society doesn't
want them and that they are of no use. And they get
locked out of doing some of the very useful things
the rest of us can do with the right of keeping
their self esteem up. And as well an that they lose
the opportunity to go and take on full time
employment, because as they are more stigmatised by
unemployment their opportunities wane. That's why
labour market programs, exist around the world.
That' 1s why we'll put 400,000 people through the
Commonwealth's labour market programs this year.
And that's why $ 345 million to regional areas of
Australia, which is particularly hard hit by
unemployment, will be a useful thing to do, to give
those people work experience, and also to do work on
projects for which there's obviously always a
pressing need in local government, often and
invariably underfunded as it is. it's always
struggling for revenue because rates are the basic
areas of its income & part from direct payments from
the Commonweal. th. And therefore, financial support
for these sorts of projects in local communities is,
I think, important. You made the point about, and
of course need I say necessarily, it means that in
societal terms those people are getting a go and
they might not otherwise, which makes things just
better generally.
Now, you made the point about how are we going to be
a more clever country? The answer is, by doing
clever things. By putting more kids through
university, by getting retention rates up in
schools. I mean, how the Liberals could have ever
thought we could have been a clever country with 3
kids in 10 completing secondary school, God alone
knows. With 7 out of 10 children basically
untrained, how we could have ever been approaching a
very smart country. Those retention rates in
secondary school are now 7 in 10 and they are now
heading for 9 in 10, and the appropriate proportion
of them will go through university, and the balance
of them will now 6~ e picked up in a mature vocational
education system.
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That's how we're going to be producing the sort of
things, and the focus on research and development,
the focus on product inno-vaton, then higher prof its,
the competing exchange rate all are of that enormous
story of exports through the 1980s. We've literally
exported our heads of f through the ' B809 producing,
in many respects, elaborately transformed goods.
And there's no, the link that you make, which is
basically saying look, if they're not producing
something smart forget them, if they're out there
unemployed in Fairfield, in Bankatown where I'm
from, or Western Melbourne or Northern Melbourne,
forget them. That's the view that says you don't
really want a society like this, that you're putting
no premium on social value and no premium on
harmony, and not taking responsibility, but in a
country with large structural change and
particularly where demand is falling, that there's a
responsibility on the Government to deal with
unemployment. That's a responsibility I accept, and
particularly where demand is falling, a
responsibility on the Government to deal with
unemployment. That's a responsibility I accept and
one which I think society accepts. That'. why I
think your link between smart goods and smart
products and 335 million local councils is not a
proper link and not an appropriate link and one
which I think would be a great mistake for
Australians to believe should be made.
Q: We've seen a lot of deregulation and rationalisation
in the period of your Government. I wonder if it's
time now for the next step in that, to remove one
layer, or to give Australians the opportunity to
remove one layer from the Government structure
within Australia, move to a two tiered structure,
and possibly to elect you as our first President?
PM: Thank you for the compliment, thank you but no
thanks. Look, can I just say this. It is a fact of
our constitutional life and history that we have
States and local government, and if we were going to
the drawing board Australia would probably be more
appropriately governed regionally. That's not the
case. That's not the case today.
So I think the thing to do is to work cooperatively
as a nation. And the work which we've done with the
States in recent years is, I think, quite profound
in terms of success we've been able to bring in the
last 12 months in such things as a National Rail
Authority, and beefing up the development in
national rail in this country, in the development of
an East Coast Electricity Grid, where we separate
power generation fronfi distribution to create for the
first time a real market for electricity that could
only be done by cooperation between States and the
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Commonwealth Government, in the creation of the
National Training Authority where formally the role
of the States in technical and further education
became a dual role between themselves and the
Commonwealth. These sorts of areas of cooperation,
I think, can mean that in Australia, in things like
uniform regulation and uniform standards which we've
now agreed upon, are a good way and I think the only
way to be running Australia.
Now, one ca never be entirely overtaken by with
that bonhomie end give the States taxing powers and
let them split the Commonwealth Budget up and the
rest, because the Commonwealth Government should run
the nation's economy and run fiscal policy. Within
that, though, there's no cause why we can't have a
cooperative structure. And in doing that we have
the best of Australian governments, and the best
coming out of Australian governments and the
Australian people, I think, have been really well
served. Now, what our constitutional history holds in the
future only the young among you will know, but I
don't see it changing radically, not in my political
lifetime. And so the other view is to make the
existing structure work, and I think we're making it
work and I think Australians are getting value from
the relationship between the Commonwealth and the
States.
0: My question relates to something I read recently in
the weekend newspapers, and it relates to your
tastes in music. I think you were quoted that at
times you liked Tom Jones, which I certainly do, but
also opera, but both at full volume. And I wondered
if either one of these or both combined contributed
to your political acumen?
Pm: my political acting?
Q: Acumen.
PM: Acumen?
0Q. Not acting, no.
Pm: We're all actors, I don't resile from that. Well,
it's not a Budget matter, let me say. But I think
if one is passionate about things and in politics,
and in political life, one has to be to do it, then
it's entirely likely one would be passionate about
other things. And one of the things I happen to be
passionate about is music, and I think that at times
when my spirits have flagged, and over the years
that's every now and again, not too often, then the
Resurrection Symphony'I of Mahler's or something
appropriate to the story like that, or even one of
TEL: 20. Aug. 92 18: 03 No. 012 '. 144.1
Strauss' songs or something of that order, does
revive one's flagging spirits. And if I feel
perhaps a little more uplifted I can actually turn
the clock back to the ' 608 and listen to a bit of
twelve bar blues, a bit of good ' 01 rock In roll and
all that. But I must say that I'm basically on the
classical end of the spectrum these days, even
though I keep the old library at hand.
0: Mr Prime minister, this question will be very simple
because you've virtually answered it earlier in the
evening. Do you think the Australian manufacturers
have the product range and capacity at competitive
prices to meet the rise in demand which will occur
when~ the economy recovers without a blowout in the
balance of payments?
J: Well I think probably in the first instance it
always takes a while to get that full capacity
utilisation levels back, because in any system where
it's running at part capacity it takes a while for
that response, for people to start rehiring people,
and to meet demand, which may in the first instance
be met in some part by Imports. But as we get our
wind back and start to pull full capacity out of the
system, I think that will be less the case. And
there was a lot of capacity installed in the 1980s,
I think people forget this. There was a terrible
lot of capacity installed and it's now not being
fully utilised, it's being seriously underutilised,
and as we build back I think we will find a lot of
domestic demand is satisfied by that. I think it
would also be the case that the investment
environment in the ' 909 will be so good in terms of
inflation, interest rates, the tax system, cost of
capital, depreciation, productivity, labour
relations, and with the highest levels of
profitability going to the traded goods sector of
the economy. That we will see more investment
instilled in plant and equipment, in productive
capacity, when we saw in the ' 806 that some of the
investment went into real estate, construction,
office towers, shopping centres, at cetera. And
given the fact now that the old belief in Australia
that inflation in property has waned substantially,
the next phase in investment, I think, will go into
income producing businesses and into plant and
equipment to add to Capacity.
So, I think there's a lot of capacity there
underutilised that will go up to, always it goes up
to the full hundred per Cent when demand starts to
really pick up in a consolidated way and a sustained
way, and I think then people will see the profit
potential of putting in more capacity and growing
more quickly. Notq you may always have this problem
of capital goods And capital imports, a surge of
capital imports to accommodate more capacity, in the
and that's of course what we must do, And I Gont
think that'sa ever been a problem carrying capital
goods on the current account providing you're going
to get a return on them down the track.
The only way out of Australia'I5 long term Current
account and indebtedness problems in with
production, and~ pouction is only going to come
from investment and t nly thing therefore to do
is go for it. Get all the conditions Into place to,
and they are coming into place now, as I say low
inflation, low interest rates, a competitive tax
system, big depreciation rates, 150 per cent for
R D for instance which we've just reaffirsed, a
pool of savings through occupational superannuation,
there's a tremendous stack of good points for
Australian investment in the 19909, and they're in
the end all the things which are basically going to
deal with our production problems and imports. And
it's more the pity that we had to end up with a
stock of debt to learn the lesson that you can't
simply do the unclever thing, and let the creativity
of your people fall by the wayside and not invest in
income producing things, things which add value,
believing that only the primary export sector was
our salvation. We've paid a very high price for
that mistaken belief, and with the price paid and
the lesson learned, I think we can now look forward
to much higher levels of production and in the end,
of course, dealing with the current account deficit
at source.
ends 20. Aug. 92 18: 03 No. 012