ILJ
PRIME MINISTER1
TRANSCRIPT OF THE PRIME MINISTER, THlE HON P J KEATILNG MP
INTERVIEW WITH MURRAY NICHOL" 5AN, 27 AUGUST 1992
E& OE PROOF COPY
MN: you're firing on the Opposition on this, you're saying that it's an irresponsible
attitude to the industry.
PM: They're basically saying we don't care whether we have a car industry. if
Australian car needs nccd to be satisfied exclusively by imports, that will do us.
Whcn Mr McLachlan was asked in today's Australian in a question and answer
session, hc said it's a matter for them to decide what changes they will necd to
make to exist. Now the fact is, that a zero tariff, given the fact that there's a glut of
motor carm In the Northern hemisphere, the big companics will just ship them into
Australia at marginal costs and thc Australian motor industry just won't exist, it
will just simply go out of business. These characters, that is Dr l-cwson and Mr
McLachlan, mean it. I mean they're not just mouthing cmpty rhetoric here. This
fellow McLachlan, who is a representative of South Australia, is rcally basically
saying that he and Dr Hcwson would wipe out the base manufacturing industry of
the State of South Australia.
MN: Is it that serious, can it happen?
PM: Too right.
MN: That simply wouldn't wipe it out, surely?
PM: Yes it would. Look, Toyoia is going to build a state of the art plant in Victoria, a
mioderm Japanese state of the art plant. Now when we made the judgements about
that, John Button, myself and others made the judgenment that a 15 per cent tariff
was as far as we could push tariff protection down and still keep a motor industry
notwithstanding the efficiency of that particular plant, and the renewed efficiency
of General Motors and Ford. What they're saying is It's zero. And a zero in a
small country like this, patrticularly with a glut of cars around the Northern
hemisphere, just marginally costing them, that is the marginal cost of production
just shipping into Australia, there's no way the Australian motor vehicle Industry
would survive it.
MN: But from 15 per ccnt down to zero is really not much of ajump when you look at
how big the tariffs wcrc before.
PM: We're giving them a chance to adjust. For instane, I'm not quite sure of the
Commodore price but the Ford Falcon which now sells for $ 23,000 for a basic car,
under today's protection of 35 per cent, would have been $ 33,000 without the tariff
changes. We've introduced a regimc of change along with export facilitation
where the motor vehicle industry has now adjusted to lower levels of protection by
selling, in the case of H-olden, world class competitive engines to Germany; In the
case of Ford, Capris, sports cars to the United4 States; and soon Vcrada wagons are
to follow. Ford today announced, in the same newspaper, 280,000 cylinder blocks
going to Japan and 70,000 engines. All of this has conmc from our policy mix, and
we'd made the judgement of 15 per cent, and the car industry made the judgement
that at 15 they can stay in. Zero is just going to knock themn out of the ring. All of
this is sort of naive and primitive views about primitive capitalism. This Is Dr
Hewson's view he has attacked Mr Prescott from BIIP, Jac Nasser from Ford, he
has attacked Bob Johnston from Toyota. He is basically saying big business are
fat bureaucracies, if you haven't come up the hard way and you're not a self made
person and worked your way through a merchant bank, basically you should be
left to the vagaries of the market. It's that sort of thoughtless ideology which I
think we can do without.
MN: The State Opposition says that our vehicle manufacturing industry is slack and
inefficient and has not, in fact, fulfilled the requirements of what you laid on it.
PM: Look, Dr Hcwson advised the Fraser Government as its principal in-house adviser
for 7 years, and in those years tariff protection went up, quotas stayed for motor
vehicles, the motor vehicle price wcnt up, we were not selling any more cars, and
Australians were doing very poorly from it. We're the people who have had to do
the hard task of introducing the changes, but we've done it with some
comprehension. We've given them export facilitation which means they can go
and export things with support, which would disappear under a zero tariff. We've
done the things which will actually change thc industry for the better and of
course, the revolution in industrial relations, in enterprise bargaining, and the
improvements in productivity and efficiency of motor plants, and the willinigness
of the car unions, and the employces of the car industry to sit down with their
managements and make these companies better, Dr Hcwson says give all that
away there'll be no national wage case for them, awards go, annual leave
entitlements go, sick pay goes, we're getting out of the award system, you now
make an arrangement person to person with your employer. So all of that good
will goes out of the door and at the same time we're going to drop a zero tariff on
you. You see, I think a lot of Australians thought look, this is him banging his
gums. The truth is he means it.
4z rif-Lu. y V-1-1-4 14LL. U I C r
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MN: Of course, realistically it's always been said that our market is so small that we
have onc too many manufacturers anyway.
PM: Well one has disappeared recently, Nissan. Thiat's the point. I mean the policy in
this sense has worked in the sense that we're now Setting down to a smaller
number of viable units. But remember this, Murray, this is a small market, it
produces around about 400-500 thousand vehicles a year. There's always going to
be some diseconomies of that sort of scale. And the notion that it's almost
experimental sort of capitalism, this sort of view that you don't take any notice of
the biggest company, BHP, you just say they're asking for handouts. You don't
take any notice of General Motors, or Ford, you say they're asking for handouts. In
other words, you don't even try to comprehend the changes the Government has
introduced with them, sensible changes, to produce a decent motor vehicle
industry which will underpin thc manufacturing base of say citics like Adelaide.
They'rc just simply saying look, frankly it's zero, and if it's imports it's imports, if
you can survive good on you, don't expect any help from us.
MN: A recent examination of our motor vehicle industry by a UK expert, acknowledged
as an expert by thc motor industry, in fact he was brought out by the motor
industry or parts of it, said that our motor industry Is very out of date and behind
the times as far as processes and procedures go. Not necessarily industrial
relations, I don't think he was looking at that, but the plants themselves he said
were very out of date and a long way behind the hotshots.
PM: Well, for a start there's going to be a new state of thc art plant with Toyota. But I
had the pleasure earlier this year of flying down to Adelaide and going out to
General Motors and opening the new paint plant $ 230 million I think, for a state
of the art, world ranking paint shop. Now that sort of Investment Is going In, and
the quality of the cars has I think improved enormously. So, the companies
operating in Australia are getting it together. But We started this change In the mid
1980s. We firstly abolished quotas and started to move to tariffs, and then move
the tariffs down, with notice, with assurance, with support, down to a 15 per cent
end point whcre they can survive, where Australians gct dcent cars at a decent
price. Not good enough for our opponents. Our opponents say, not ideologically
pure here, this is not the way to go. The way to go is to basically slam them, cold
turkey them.
MN: Have you had a chance to cast your eye over our State Budget today?
PM: I haven't seen it, no, I don't know any of the details.
MN; Probably a lucky man. We're in serious trouble down in this State, I know you're
aware of that. How do you regard us as far as propping up the Federal
Govermcent in our coming State election?
ILL
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PM: Well look, in the ' 50s and ' 60s South Australia sold itself as having comparative
advantage by having cheaper labour rates than the rest of Australia. That brought
industry to South Australia. As labour rates and wage rates evened up around the
Commonwealth with federal awards and national wage fixation, that comparative
advantage disappeared. And what John Bannon has sought to do is to try to reestablish,
if you like, the efficiency of South Australian industry on a competitive
nmodel basis. And that's why whether It be the car Industry In our cooperative
discussions, or it is in the ship building area In the contracts which were lct to
South Australia, or in the Onc Nation package where I announced the building of a
standard gauge railway between Melbourne and Adelaide, all of that Is to basically
bring South Australia into nearer, effectively nearer and more Integrated into the
higher population, bigger market centres of Australia and keeping it a relevant
place. And that's what I think a comprehending Government has to do. But to
take some sort of ideological view, you know to go back to some text book is of
course not only nonsense, but a great shanic.
MN: It just seems that we're digging our way further Into the dirt. We've now got a
State debt of $ 7.3 billion and that's gigantic. And I'm quite sure South Australians
are infectcd with a sense of desperation here and helplessncss, because we just
can't see anything coming right. We can't see It coming right state-wise, we can't
see anything coming right federally.
PM: Let me just deal with federal first. We're going through the 1990s with low
inflation for the first time in 20 years; low interest rates; basically a structural
budget surplus, once the rcession passes through and the economy starts to pick
up ag ain the budgets will whirr back into surplus in the ' 90s; we've got a
revolution in wage fixation and enterpris bargaining and higher productivity;
we've got a remodelled tax system, a 39 per cent corporate rate, full dividend
imputation; we've got a superannuation savings system which is going to pump
national savings into equities into Australian companics, we won't be out in the
rest of the world bidding for savings, we'll have our own in adequate measure. I
mean, Australia is going to be In a very good position in the 1990s. There's been a
great change in productivity. I was in Melbourne on Monday presenting the Best
Practice Awards for a great variety of companies, a couple of them South
Australian, Solar was down there for instance, but there was BHP, Toyota and I
think General Motors, and some of the other car companies et cetera. And what's
happening is a revolution in the way in which efficiency and productivity is
happening in Australia. And at each table from each company were the employees
of the business, the union representatives sitting there. And people were saying to
me, look this is one of the best programs to get an International bench mark for our
business, and to get awards on the basis of reaching those benchmarks to give us
international efficiencies in a sensible, humane way Is the way to travel. Now, all
of that is happening, and it's happening for South Australian companies. See we
had great growth in the ' 80s. The Australian labour market today is 26 per cent
bigger than it was in 1983. In 1983 there were 6 million people in the workforce,
there's 7.6 million today. In New Zealand, for instance, which we hear a lot about,
we've got fewer people in work today than there was in 1983. Now we've kept
most of that employment. All we've got to do is get that efficiency into place and
build those volumes, manufacturing and production volumes, and the employment
will come our way. So there's no reason to be looking gloomy about Australia
when we're now out of the recession and we're growing. Now as far as South
Australia goes, I think thc Bannon Government pursued a very sensible policy of
trying to find a solid, long term basis for South Australian industry, which by and
large it has achieved.
M N: Yes, well it didn't count on the performance or lack of by the State Bank. To you
now, and reports coming out of Canberra saying that you're in a quiet desperation
mode. is it like that?
PM: Well, do I sound like that?
MIN: No, you never sound like that.
PM: No I don't. Of course not, of course not, You know, there's always a bit of navel
gazing here along the press gallery corridor, people writing columns for the
weekend. But look, on the big brush things we're forcasuing growth in the
Australian economy the same as our trading partners through this financial year.
We just clocked up 1.6 for the last financial year, so we're out of the recession and
we're growing. We've got all the One Nation expenditures now coming through.
We've just Ict a contract for 3 thousand tonnes of rail steel. A lot of that will go to
Whyalla, BHP in Whyalla, to build that Adelaide to Melbourne railway line and
other railway lines. We've just let a contract for a million concrete sleepers. We
just announced a $ 2 billion road program for the year, $ 400 million larger as a
result of the One Nation package. All of this expenditure and the new spending in
the Budget is now coming at the time for thc economy to kick growth, activity and
employment along. So, from the Government's point of view we're putting the
blocks into place, the building blocks of a stronger economy Into place, and the
Budget just did that in fine style.
MN: Thanks for talking with us this afternoon.
PM: Good Murray, thanks again.
e nds