RIME MINISTER
TRANSCRIPT OF THE PRIMIE MNISTE~ R,[' HE HON PJ KEATING NIP,
NATIONAL SMALL BUSINESS FORUM, Q& A SESSION,
RAMADA RENAISSANCE HOTEL, SYDNEY, 19 ocToIIER 1992
E OE PROOF COPY
0: Industrial relations and cntcrprise agrcmlents; regulation of business at national,
state and local level.
PM: I'll just take up your first point about allowing employees to negotiate. Three
weeks ago I was in Japan and went to the Toyota plant where they produce in one
factory 300,000 vehicles a year and every day, every niorniing the plant manager
and the sub-plants managers meet with their employees to discuss thc days work,
the week's work, to see how the business operates. The emphasis is on common
goals and harmony and being part of the one thing which I think is part of the
success of the productivity of those particular plants and the innovation in the way
in which thcy produce things, because a lot of the innovations conie from the
ernployccs. Nowhere in that Structure do you see any sense of fracture, where one
employee on the line is negotiating with the company different to the one next
door to him or her. They negotiate as a group and therefore they take group
responsibility and pressure within the group produces an emphasis on cooperation
and working together and getting a better result. I think that is what I'd
say about the so called notion, it sounds well and good to say Ict all employees
negotiate, hut we and the organised workforce know that when one employee is
forced to negotiate by his or her self with a company, be it small or large, their
ncgotiating position is vcry weak. And whereas if they are allowed to negotiate as
a group, their negotiation position is better. The sign of the maturity of our
workforce is that when the wage share in the economy had to decline in the 1980S
in favour of profits for higher investment and employment, it did doclinc. And
that the whole emphasis on training, enterprise bargaining and productivity, a large
part of the impetus for that has comec from the trade unions themselves.
No system is perfect and there will always be problems within any set of
arrangements, particularly one built on the multiplicity of craft structures which
welye had in Australia, which we inherited from Britain so long ago. But it seems
to mc that all the flexibility which companies today wish to enjoy in industrial
organisation, be it in terms of rates of pay, or penalty rates or hours worked during
a day or week are now, by virtuc of all the agreements we've constructed in the last
six to twelve months, capable of being resolved in favour of higher productivity
and lower costs, and 1 don't see that co-operation being sustainable in a process
where awards expire and where you see a fracturing amongst employees. All the
flexibility which is required now in industry can come undcr S. 137 agreements
and the like, the only flexibility that there isn't in there is flexibility downwards.
There's flexibility up, flexibility laterally, flexibility diagonally, but there's no
flexibility down) the system is not geared to cut remuneration and, in the end, all
of this talk about dealing with employees, letting people speak for themselves, is
really about cutting their pay. That's what it will be seen to be and the bonhomie
will cease the moment the activity starts, and the moment that happens thc great
leap forward to be. made in productive co-operation and emphasis on productivity
and training and lower costs and sharing the benefits of bctter product, higher
product will evaporate. That's why the Liberal Party is quite wrong about this; Mr
Howard is going to announce a policy along these lines tomorrow they are quite
wrong about this, and it's we who have had to take Australia from the industrial
museum of the late 1970s and early 1990s with 300 unions, a craft structure of
organisation, and evolve it in a revolutionary way to a modern system which is
more enterprise specific, more industry specific. and where you are getting
without any loss of time with industrial disputation, without major mayhem along
the way a very large and important cultural change. And I say it's happened
because a Labor Government and the tr-dc union,; have qat down with business
and decided to make the country better and stronger by adopting a co-operative
effort. Going back to that ' them and us', managers versus employees, pushing
peoplc onto common law contracts and asking some poor l ittle character on
$ 16,000 a year to go and represent himself with a OC in the Supreme Court, is not
going to help anybody. The Liberal Party have already ignited a wage fire oncc or
twice in 1979-80 with wages growth of 16 per cent. We've got now average
weekly earning growth of three. John Howard is desperate to return to the scene of
the crime and get out and do it twice. We say ' pigs' to that and it's a rotten policy.
On the question of regulation, could I just say this: I share your view and the view
of everyone around here that regulation, that the Federal system of six States and
the Commonwealth and Territories has been a problem for the national co-
. ordination of business regulation -and by moving to a system of uniform standards,
and now having a structure under the Council Of Australian Governments; where
we have a meeting with the states which is not a financial meeting but a meeting
about issues and the micro-economy such as this, that we can resolve some of
these issues and already some have been resolved and we'llI he able to do more. So
rather than giving you a commitment, that yes we'll have it on the next meeting
agenda, I'm certainly quite happy to give you a commitment that we will keep this
matter very much under review, it's very much under notice, and wherever we can
advance the notion of a national basis of regulation, wherever we can remove the
multiplicity of a State base of regulation, we'll do it and do it with might and main,
because it is through no fault of anybody, just a nation of seven different
governments over the years, working on all these various issues has produced a
desperate result which is no good to any of us. We are very aware of it will
continue to keep our eye firmly fixed on improving the situation.
Q: GST and Wholesale Sales Tax.
PM: Well could I say that I think the wholesale sales tax is being very
substantially maligned. It is not a perfect tax, but again it has a lot of
benefits, one is it adds 20,000 taxingpoints not 700,000 taxing points. One
is that you can have dissipate rates of tax, so you can tax things lightly if
you wish or heavily if you wish. You have a discretion, luxuries are taxed
heavily, other items are taxed more lightly. It raises $ 9 billion and therefore
has nothing like the sort of macro economic influences that a tax that raises
$ 27 billion has. But let me just go and tell you, you mightn't get this
numbers in the public debate, but let me tell you because they are correct,
but this is how the GST breaks down. The GST raises $ 27 billion, it costs
$ 9 billion to abolish the wholesale sales tax, that leaves $ 18 billion. It costs
$ 7 billion to remove pay-roll tax, that leaves $ 11 billion. It costs $ 6 million
to diminish the tax on excise, that leaves $ 5 billion, and the package for
compensation of social security beneficiaries, it wouldn't need to be
compensated without the GST, it costs $ 4 billion. So there is $ 1 billion left
for the tax payers, $ 1 billion, and the tax cuts are going to cost John Hewson
$ 13 billion, of which he has $ 1 billion from the GST to pay for it. Now he
has got to pay that $ 13 billion, which of course is nothing like
compensation, even if it were paid, from a package which the Department of
Finance says is $ 6 billion short of its savings, but even if it were intact it
requires a $ 10 to $ 12 billion cut in Government spending, and where is that
going to be cut obviously in education, social security and the like? So, the
social upheaval which would follow that kind of change is going to be quite
profound. So, that's why nobody is going to be paying $ 27 billion and
getting back less then full compensation and not making wage claims. So if
you believe that you don't think the inflationary effects are there, I can only
say to you that the Liberal parties modeller, Dr Murphy, in the wages up
case, that is, in the flow on to wages thinks inflation would be 10 per cent
and the Treasury thinks it would be 12. Well even if you put a discount
through those numbers, even if you called it eight, I mean the vandalism of
taking Australian inflation from 2 per cent to 8 per cent is profound, to
what, get a tax switch from income to expenditure? And of course in that
services will be taxed and a lot of the expansion of small business in a
service sector of the economy, which is now not taxed. So it will be taxed
and the one great employing possibility we have, where we have got very
high levels of labour, is in tourism because you can't get a machine to make
it better, or a machine to clean up the bathroom, or a machine to serve a
meal, and that industry which has been growing inordinately strongly over
the ' 80s and will continue in the ' 90s, will carry a 15 per cent flat tax upon
its whole service base. So, I think the GST is an entirely dud idea, as I said
it is a tenth order issue in an economy where we are seeing a fast cultural
change to an export basis where we are now exporting nearly 23 per cent of
everything we produce, nearly a quarter of all we produce, where we have
seen a huge shift in exports, where we have seen now a large shift in
productivity and now much more innovative things happening in other
enterprise agreements, a whole cooperative basis of organisation occurring,
it is just not worth it to put that a risk i. my view for a tax on expenditure
verses a tax on income when the income tax now working very tightly. We
have got now one of the most tight, direct tax systems in the world by virtue
of the changes in the 1980' s' and I don't think it is worth the risk. On the
qucstion of-sales tax and remittances, again, this is an issue in tax design
and costs, and I suppose every Government would like to say, wve will see
nobody out of pocket before remittances, but I think this is again just simply
whether or not we can afford it, and whenever it has been proposed to us to
change the timings or remittances we have not been ablc to do that. 1 think
this matter came tip at our last round, hut for the same reason we wercn't
able to do anything for you.
Q: Impediments to small business; payments of Provisional Tax
PM; Well, Paul, on the last element of the question first, I wouldn't wat to
commit the Government to an inquiry on the matter but I am quite happy to
look at the issue. We have asked the industry Commission, under a number
of references, to look at impediments to certain sectors of activity in the
economy, and if you think that something caii be & ained by an examination
of impediments to small business employ mcnt activity then we can certainly
consider looking at that, how best it ought to he looked and who by is
another issue, but we have the Industry Commission for such kinds of
references and it might he that it is something wc can think about. Anyway
I am certainly prepared to talk to you about it, and to David of course.
On the other question, look, this is a vexed question, I don't know whether I
can be profouind about it, Paul, that is in relation to provisional tax payers
and comnpanies, there is always this question about incorporation and the
costs and benefits, there were always substantial costs for being
incorprated until we introduced dividend imputation, because if you were a
single tax payer you were taxed once, if you were a single enterprise you
were taxed once, if you were a partnership you were taxed once, if you were
a trust you were taxed once, but if you were a company you taxed twice, and
I never saw the sense of that and we took that away in 1986, so that now
whenever cornp any tax is paid there is virtually a tax credit there against
personal tax. so, trying to get an equation between the tax treatment of
those incorporated and those not has always been difficult to do, you have
got two yard sticks in this, the individuals pay PAYE as you earn taxation,
whethcr they earn their income, those who are provisionally taxed enjoy at
least some concessions against the~ PAYE tax-. payer, whereas the company
pays later and enjoys, in your terms,' a $ r eater concession against those who
are uncorporated Again, thcse are timing in revenue questions involved,
we can always make this position more concessionary, I don't think I can be
any more enlightening for you then I was with the previous question, I just
don't know to what extent we are able to change the tax timing of
provisional tax payments so as to produce a ef-oser relativity to those who
ae incoprated on the tax payments treatment, those who are incorporated,
David menioned to me about these closed corp oration issue, which may
provide some opportunity, that is a structure which provides some
opportunity for a better equation, between those categories of individuals
and companies, I am not sure about that because I don't know enough about
it. But I am happy to look at that for David.
ENDS