TEL III, r~ t
IPRIME MINISTER 1
TRANSCRIPT OF THE PIME MINISTER, THE HON P J KEATING, MP
PRESS CONFElRENCE, PARLIAMENT HOUSE
18 DECEMBER 1992
E& OE PROOF COPY
PM; I would just like to make a fcw basic points about Dr Hewson's speech today. I
think the first thing I would like to say is that you just can't believe him. He said
he would rcsign if Fightback was changed, hc now said he will resign if he
changes it back.
Obviously his performnance today was of a person jolted by the fact that he was
saying things that he didn't believe. lHe didn't believe them, the audience who was
listening to him didn't believe them, I am quite sure that the press gallcry didn't
believe them, I didn't believe them, but I think what showed most particularly is
that he didn't believe them. I think what we arc seeing is somecone who made it
impossible for Australians to believe him as well.
What Dr Hewsons proposed today, he said the integrity of Fightback will always
be preserved irrespective of whatever wc decide to do. I think that just about said
it all. Thiat is, Fightback will be preserved irrcspective of whatever we decide to
do. So whatever changes he makes, whatever adjustments he makes to try and
garncr some support in the community from the heartless policies he has pursued,
he said we will still maintain thc integrity of Figlitback, and if that is true the
essential unfairness would be maintained.
So what are we left with after the presentation of Fightback Mark well for a start
a 15 per cent goods and services tax, only nowv it is more complicated. He has got
sonic things in and some things out. Food is out, but restaurant food is in, fast
food is in, other forms of food are in. It will be just more complicated and it now
raises just $ 22 billion instead of $ 27 billion. It raises nearly half t ' he income tax of
Australia, it is a monster, it is still there. Zero tariffs are still there, the Jeff Kennett
industrial relations policy is still there, and I noticed he even said the very same
things that Mr Kennett said in his pamphlets, what you have now you will keep
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said Mr Kennett in his pamphlet, Dr I-ewson made the same point today.
billion of cuts in Government spending still there, but what is new is a huge unfurnded
program in a delivery of a financial account that I would absolutely shrink
from producing in public, never would I have presented as Treasurer, or as Prime
Minister something so . shonky and deliberately false. All that Dr Hewson has done
is add $ 5 billion in asset sales in 1993-94 and $ 5 billion in 1994-95 on top of
what he already had there in the original Fightback Mark 1. So it is now a program
of $ 10 billion of asset sales in 1993-94 and $ 10 billion of asset sales in 1994-95.
You have got to bear in mind that at its peak the Australian capital market in 1988
only funded $ 13 billion to the whole private economy of Australia. In 1991-92 it
funded $ 12 billion to the whole private economy of Australia. It has all ready had
problems digesting the Westpac float and the Woolworths float. He is going to
have, just on the Goverinent's account alone, $ 10 billion in each year, it is
impossible for the market to digest and he is going to spend $ 3 billion of those
proceeds each year from it on his policies.
He says he is going to have a kick start policy, he has got the so-called Ralph
Committee, the rebuild Australia fund, it will be just likc the Cole Committee, it is
going to receive suggestions, it will receive suggestions until the election is passed
and then they will go exactly where the Cole Committee's suggestions have gone,
into someone's top draw. So, the $ 3 billion of infrastructure that is going to kick
the economy a long, I am quite sure that the Ralph Committee recommendations
will never sec the light of day.
So, the fact of the mattcr is that we have got basically a policy which is about
maintaining the essential unfairness of Fightback Mark I which is going to abolish
Medicare, Is going to replace it with a US style health system. I don't know
whether some of you noticed in the Australian today the references from that
American authority about the health system saying, the American health system is
moving to bankruptcy, the Federal Coalition of Australia is trying to adopt the
samc policy. Importantly, he has re-Imposed the co-payment on medical
payments raising $ 450 million. So, he is not just scrapping Medicare but he has
got a co-payment in there of $ 450 million.
There is no guarantee that food won't be put back in after the election, no
guarantec that the 15 per cent rate on the goods and servies tax won't become 17
or 18 per cent, like it has in every other country. He promises to do us the favour
of lifting taxcs on child care where now none exist. He said he will put a tax on
child care in Fightback, now he is making a big fellow of himself telling us he will
lift it when it was only lie who was going to impose it. Child care at the moment is
untaxcd and the same on food, he is going to make a big fellow of himself lifting
the tax on food. Food is untaxed. Now, he was going to tax it, but now he says he
won't, but hie will be taxing certain sorts of food like Kentucky Fried Chicken,
Macdonald's and the restaurants et cctcra. Hie said in answer to a journalist, I am
not sure I have got the quotc with me, I think I have, I will find it, that he was
asked about pump priming, he said, yes, this is when the Government spends a
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wholc lot of money it doesn't have. Now I put it to you with capital raising
capacity in this country of about $ 12 billion a year, does anyone seriously think
that we are going to send, on thc Governments account alone, $ 10 billion of asset
saics for two consecutive years, at a very time when this fellow says we need more
private investment? And as you know that moncy is not going to go to pay off
Governiment debt, what basically he is going to do is borrow it, take it off the
market and spend it, it is just the same as a borrowing, a point I think Mr Davidson
made at the press conference, which he wcll understands.
So all of the prctcnce about tight economics and accounting has fallen away, we're
back to the Liberals a la Howard Box Hill 1987 with a shonky set of numbers.
Peacock in 1990 and now Hewson for 1993. Let me tell you what the numbers
really are, if you take the asset sales and the FI3T compliance out the additions to
the deficit in year one are $ 6.6 billion, in year two, and year one is 1993-94, in
1994-95 $ 7.6 billion, and in 1995-96 $ 7.6 billion, and the rest of it is shonk,
shonk land, shonky numbers, shonky asset sales, the market would choke on the
so-called magic pudding of Telecom. There is no way this capital market can
fund $ 10 billion. A program like Qantas, which the Government agreed last night,
is at the outer limits of what this market can fund, this was proven with the
Commonwealth Bank, it has been established this year with Westpac and
Woolworths. Fancy saying we need private investment when the Government is
going to soak up $ 10 billion of private sector savings in a capitalisation program
like this.
So, I will conclude on these notes. I thought it was a very sad performance for
somcone who is making a speech, the contents of which he didn't believe, didn't
believe in, and the strain of that, I think, made it a very sad performance. But that
is where Dr Hewsori has taken our national politics. I told you he would. He said,
I spent a year putting Fightback together, when he presented it every i was dotted
and cvery t crossed he said, he then said I have presented it to the electorate for a
year and everything is right about it. The first whiff of grapcshot, the first poll that
really mattered, his courage fell, up went the white flag and out came the policy
which is totally alien to him and to his party and worsc based on funding proposals
which are a disgrace at this stage of our national economic history.
3. Mr Keating, why won't you be ablc to sell Telecom to overseas carriers?
PM: Let's keep it onto this for a start thanks Tomn ( Burton). I'll come back to you later
on that point.
J: Mr Kcating, it seems like Dr H-ewson has gone carefully through the list of all your
insults about Ferraris and food and everything else, he seems to have addressed
each onc of them.
PM: Do you think so?
I U L. 4
1: by changing the luxury tax on cars, by taking food off, how many insults do you
have left?
PM: It's not a matter of insults, no, we don't need insults to make these points. I just
told you a moment ago what's there. And what is thcre is still $ 10 billion of cuts
to government spending, a tax on everything except food, still going to destroy
Medicare, all the nasties arc basically still there, they arc only putting off the cuts
to labour inarkct programs by twelve months. Don't rely on my claims, just read
the thing.'
3: Mr Keating, why is your policy on kick starting the economy substantively better
than what Dr Hcwson is proposing? He's arguing that regardlcss of what you think
about the asset sales program, you haven't funded the kick start by anything other
than borrowings.
PM: I take the view that if you arc going to add a stimulus to the economy then a
stimulus is a net addition to demand. But he says surely stimulatory economic
policies do not work and an alternative approach is called for this is on
Novembcr 24, this is less than a month ago. He's upbraiding me in the Parliament
saying when 1, he sought to argue a case for stimulatory economic policies and he
referts to the 1991 Budget as stimulatory he said, given that One Nation was
stimulatory, and given that 1992 Budget was stimulatory, he then gocs on to say
sure conomic stimulatory policies do not work and an alternative approach is
called for. What we've seen today is not a refinement of Fightback, but a
capitulation.
1: But doesn't hie have a point though Mr Keating?
PM: Just a hang on a minute, I'll come to you, you haven't got to rush me. It is a
capitulation. Look, everyone of you know that he doesn't believe this, everyone of
you around this table know that he doesn't believe in thcse policies. Where is our
national politics getting to? He knows that, you know that. The fact is the
Government has believed, as we believed in 1983-84, as we believed in 1984-85
that when private sector spending was down, that lifting public demand was the
way to go. And it is the way to go this year, you can see it in our national accounts
two thirds of the growth that camec through a week ago on the national accounts
for the quarter is from public demand. What Dr Hewson is doing is trying to
change tile cast of his policy not to suit the economnic circumstance, but to suit
what he is hearing in the polls and where has the kick start comne from? It comes
from a committee which a business person is going to sit on, who is going to take
suggestions and does anybody believe that this would be a government intent upon
proposing thcse sorts of policies?
1: But Mr Keating first of all you say it is a capitulation and then you say it's as big
and as bad and as ugly as it ever was. You can't have it both ways.
110 . CIL-Z? L Q V % 0 11 W W
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PM: Because it is, it trics to do two things. No, Fm not saying it, he's saying it. He is
saying the integrity of Fightback will be maintained regardless. Ho is saying that
all of those basic things which rve just mentioned to you, the $ 10 billion cuts in
governnment spending are to be maintained, the tariff cuts are to stay where they
are, the wagc policy is to stay exactly where it is, the tax on everything but food is
to be there, the destruction of Mcdicare is to continue, co-payment is to be levied,
they are all there. But, he then says, but hang on, don't worry about that, its
fundamental nature is going to be camouflaged by a fiscal expansion and the word
listening must bc mentioned three hundred times in the text. He had the hide to
say, talking about democratic processes and the community had the right to be
heard, hc made a virtue of saying the community was wrong and that they needed
a leader who would put the right policies into place. This is just all cynical, poll
dr-iven stuff, you can see by the nature of his delivery and the nervous clapping of
his Liberal supporters at the Press Club.
J: But that's what you did before the One Nation Statement wasn't it Mr Keating, you
went around the country, you listened to peoplc and you brought up a policy, that's
what he's done..
PM: No, no, but I went and listened, I said that we are going to embark upon a
stimulatory policy, how best to deliver the stimulus. I listened to business about
depreciation, we listened about the infrastructure program and it was very useful
and the results of it, genuinely listening was there in the document. But what has
he listcned to? Here's the 24th of November, less than a month ago deriding
stimnulatory policies. All lie's listened to is Andrew Robb and his pollster, that's all
he's listened to.
Mr Keatinig, nevertheless whatcver your criticisms this obviously presents you
with a more difficult political situation, do you envisage some policy response to
this?
PM: My first response is the one I've given. This is basicay the same policy
camouflaged by the supposed notion of a stimulatory complexion that's been
delivered by a supposedly caring Liberal Party which we know is a nonsense, and
that the GST is morc complex and still a monstrous $ 22 billion of collect ions in
size. In other words you're asking me what message I'll givc. The message is
broadly the same as before except there is a fcw camouflages there now, be aware
of them and understand what Dr Hewson is doing.
I. rni asking you what you are going to do to try to match this policy which has
given you a new political problem?
PM: But you are always in the matching business, we've been in the government
busines and the govcrnment..
1: You matched his in One Nation. T1E8L:. Dec. 92 18: 03 No. 031 P. 05/ 11
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PM:. No, no, but the govcrnment business has paid off pretty well for us. L. ast night we
were govcrnig, we saw a quite mammoth change to our international airline
system last night. This government has been continuing to make changes right
through the course of this year and for the next term of its governent, the
government will announce appropriate policy changes and settings which we're
already in the course of considering.
J. Mr Keating, Dr Hewson is now offering tax cuts for low to middle income earners
which arc much more substantial than those being offered by the government.
PM: We don't have GST Laura ( Tingle), that's why. We don't need to compensate
people for a tax we are not going to apply.
J: So you still think you can justify the tax cuts which arc basically aimed at higher
Income earners in the One Nation package?
PM: No, no there are people on two thirds of average weekly earnings $ 20,500.
Average weekly earnings is around $ 30,000, therc's two thirds of AWE and we are
taking the rate down from 38 to
3: Do you rulc out bringing it forward?
PM: Yes, but let me just remind you, who lifted the tax free threshold to $ 5,400 from
$ 4,900? Who cut the bottom rate from 30 per cent to 20 per cent? The
Government. And did we ever get any support from the Opposition when we were
doing it? No way. Who put in the Family Allowance Supplement? You know
what hc says, giving is thc sort of compassion that suffocates, this fellow has no
clothes whatsoever when it comes to support for low income people.
1: Mr Keating, do you rule out bringing your tax cuts forward?
PM: Yes. Michelle ( Grattan) I had the plcasure of delivering sixteen economic
statements on behalf of the Government. They had in terms of their figuring and
their deliverability, in terms of tax changes and policy changes a tightness that
we've never had before in Australian public life. We've done that again in the One
Nation package arnd we have been so precise about our commitments we put the
changes through, the compliance changes to the fringe benefits tax so as our
starting points would be within acceptable ranges. Here's this person, Dr Hewson
adding $ 6.6 billion, $ 7.6 billion and $ 7.6 billion to the starting point deficits,
saying don't worry we've got a shonky asset sales program, it's going to raise
billion a year. You say is that right Dr Hewson? What is the maximum raisings in
the private equity market of Australia? Oh $ 12 billion, so you're going to add ten
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3: You'd sell a lot of Telccom through trade Sales Mr Keating, you know that the Us
carriers and other will be very interested.
PM: We are not selling Telecom. We've got a competitive model.
J: privatised asset..
PM: Let Dr Hewson say that the major Australian carrier is going to be sold to a
foreigner, Ict him say so if that's what hie mnics.
J: ( inaudible)
PM: No, what he's saying is this will be raised in floats. That's what he's making clear
here.
J: asset sales.
. PM; No, he quotes McCaughan, up the back, talking about how much the Australian
capital market raised. " The capacity of the Australian equity market", page
" should comfortably cope with accumulative equity raising of around $ 12-15
billion". In other words, he's talking about the capacity of the domestic markets to
absorb these, not the foreign markets.
1: They arc going to sell some of it by trade sale.
PM: Maybe they could scll a bit of it by trade sale, but they won't sell the bulk of it by
trade sale. The thing is, does anybody think when the Commonwealth Bank
came along, which was what, $ 1.5 billion, the market digested it but only just
digested it. The underwriters were telling me at the time the market may not be
able to digest this. Woolworthis pulled its float because it didn't think the market
could digest it. Do you really think there's any credibility in these numbers, that
we're going to have an asset sales government programi of around $ 10 billion?
Really.
J1: Mr Keating, why don't you sell Telecom?
PM:. No, because I think there's a place for a private carr ier in the system. We've set up
a competitive model with Optus as a competitor. We're already seeing now a very
large lift in productivity, a very large shift in efficiency, a very big fall in tariffs.
1; What's the rationale of keeping Telecom in public hands?
PM: Michelle ( Grattan), I'm not here to have an ideological discussion with you about
the Govcrnment ' s view in relation to public authorities. I'm saying we're not
selling Telecom. He's saying he wants to add $ 6.6 billion in the next financial
year to his deficit, and $ 7.5 billion in the subsequent years, and hc wants to call the
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magic pudding of Telecom his way out. If you go back to Fightback Mark 1, if
you look at the table on page 76 of this new document, where you see the lines
$ 9.8 and $ 10.1 billion, that was formerly in the first document $ 5 and $ 5 billion.
H-e's just added $ 5 billion on in two years. T7hat is, in ' 93-4 he's put another
billion on. 5 billion[ I $ 5 billion half of the raisings of the total equity market
and the same in ' 94-5. That is the total science of this document.
I: Mr Keating, you came to office 365 days ago, do you see it as a sort of
achievement that you've managed to kill off the original Fightback, or do you
regret parting with it?
PM: No, one of the things I said is I'd expose Fightback for what it was, and that was no
answer to Australia's problems, a document laced with ideological fetishcs, that
was unfair, that was inequitable, and that didn't do the right job. What Dr
Hewsoii's basically adnmitted to us by this shift is that Fightback wasn't the right
policy, that it was unfair and inequitable, and he sought to change it.
J: Were you too successful in changing his mind because surely this is much more
attrachivc to voters than the original document?
PM; Some of you were telling us that it was such a good thing not so long ago.
1: Mr Keating, do you think you need to take a pay cut?
PM4: If ever Dr Howson had the guilts about Mr Kennctt trying to jack up Ministerial
salaries and looking totally duplicitous while they were trying to cut ordinary
people's wagcs and salaries, in terms of the most paltry, token things in this
statement, I think that's just about got to be it. I never heard him talking about
private sector salarics In the ' 80s, I didn't hear him over saying that there should be.
restraints on the $ 1.5 and $ 1 million plus senior excutive salaries around the
place.
J. What effect will this have on your election timctable? Will it be pushing it out
further?
PM: That will be for mc to think about, Amanda ( Buckley), I don't know.
J: Mr Keating, you're saying two slightly contradictory things herc. You're saying
that you don't believe that Dr Howson actually intends spending the money
through the Rcbuild Australia Fund and it will never see the light of day, but
you're also accusing himt of speniding all this money at the same time.
PM: Let's get this clcar. If he spends the $ 3 billion in a way which was expeditious,
then the numbers upon which he is relying would basically add substantially to the
Budget deficits of thc country, and in my view, would not be covered by his asset
salcs program, and even if thecy are they are akin to borrowings anyway. But the
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notion that we're going to have a big infrastructure program delivered by courtesy
of Mr Ralph's committee, I think as a notion will only last th~ rough the election
period, and then I think that committee's work would be shuffled to one side like
the Cole Committe.
J: Do you think he can spend the money or not?
PM: The thing is) in the cnd you won't know. But if one relies upon the stated intention
of having a $ 3 billion stimulus to the economy, what rm saying is this will simply
blow fiscal policy in this country in a way which Irn sure the financial markets
and thc media would never have tolerated for a second from the Government.
J: You spent $ 2 billion yourself at the bc-ginning of the year.
PM: Yes we did, but we said why against the backdrop of putting in the savings bank of
the country two $ 8 billion surpluses and a heavy surplus in the first year. We've
brought down government dcbt from 24 per cent of GDP to 14. We've got one of
the lowest government debt to GDP in the world.
J: Now it's going up again.
PM: Cyclically ycs, not structurally.
J: Why won't you allow him the credit for the tax compliance changes and the FBT
changes? Why can't he usc the revenue for that that you're going to use?
PM: Because ours are devoted to the starting points.
1: That's what he's..
PM: No he's not, he's just trying to spend it, he's trying to garner out. We're required to
be totally pedantic about the points. I had someone asking me about it recently,
about what if we were a billion or two under balance. I said, ' let's not get a fetish
with all this', and that was reported as a fiscal revelation. Was it not?
3; He's entitled to spend money, isn't he?
PM: No, he's not entitled to require of us standards of accountability and then come up
with a shonky little operation like this.
J: If thc money is there for you, it will be thcre for him if he does the same things.
PM: Yes, but we're not add ing these amiounts, wc'rc not adding..
J: I'm talking about thc compliance to the F13T changes.
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PM: Put it this way, I give you those as a guide. Thc 6,6,7.6. if you put the FBT and
compliance monies off it, it comes to about what $ 5 billion or $ 6 billion,
something of that order.
I: Mr Keating, how did you actually gct to those figures, because you said $ 7.6 in the
sccond year, whereas if you take the second year the balance itself is about zero.
PM: You're quite welcome to talk to my staff about that, or the Treasures staff.
J: I was just going to say it looks like the figure is something like about 4.
PM: No they're not, I've got a tabulation here, but you can talk to the staff later.
1: Mr Keating, why is your deficit acceptable and a deficit not acceptable for Dr
Hcwson?
PM: The point I made yesterday, Glenn ( Milne), was this: if the Opposition wants to
deliver parts of the Government's policy, let the Government deliver it. The
Government believcs in it. Let thc Government deliver it. And the Government
said, after putting away massive surpluses in the ' 80s, that it is appropriate for
public demand to be lifted during a period of low private demand, that a fiscal
stimulus was appropriate and necessary. So has the GJovernmcnt of Japan said
that, so has President Clinton said that, so has the OECD Secretariat urged that
world-wide. We're in the mainstream, he's out of it. All I'm saying is, we're the
people who have brought the big fiscal imbalances in Australia down, we're the
ones that reduced the govcrnment debt, and we're the ones that are saying that a
stimulus to the economy is appropriate because we believe it to be appropriate, we
believe it to be ncecssary, but it will be a cyclical stimulus, the structure of the
budgets will return to the kind of balance we had before the recession began.
J: But isn't your problem that he's jumped right into the mainstream?
PM: The thing about that, Michelle ( Grattan), is that I'll just make it very clear to the
public, that all the big nastics are still there. He's not in the mainstream with a
per cent tax on goods and services, he's not in the mainstream with zero tariffs, he's
not in the mainstream with the Geoff Kennett industrial relations policy. We'll just
say to the people of Australia, when he makes these protestations about listening to
people and shifting his ground, don't bclicve him.
J: On tariffs, is thcre a temptation to draw a bigger contrast between yourself and the
Opposition on tariffs. by being more lenient about tariff cuts, in particular to the
sugar industry?
PM: We madc value judgeincnits over an extended period of time, after talking to
industries over a period of years, about where the end points ought to be on tariffs.
And I think we got them right. But in a lot of cases they are not zero.
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j When will you announce the decision on sugar tariffs?
PM: I think Mr Courtice has presented his rcport, did he not, in the last wcck or so?
We'll consider that and make some statement.
J. When?
PM: I'm not sure.
J: Mr Keating, does this policy makc you inclined to stay and attack it for a while or
arc you inclined to perhaps go for an early election on thc basis of the policy
today?
PM: I'm inclined not to tell you, Tom ( Burton), not that I want to rob you of a good line
in The Herald.
J; Are you waiting for tile next polls?
PM: They came out interestingly, didn't they? Taken thc weekend after the
announccmcent he made on thc Tuesday. Wednesday, Thursday, Friday, Saturday
four days later, and the Coalition seemied to dctcriorate further. These are only
straws in thc wind, I know.
J: Does this give you enough material to kccp doing Dr Hewson slowly, Mr Keating?
PM: I like to think I've done a reasonable bit of that to date.
J: Why do you think he was wearing his socks onl thce beach? He said he was not
wearing his socks.
PM. don't think that's a matter of..
3: How did you know about his socks?
PM: Apparently people reckon he had socks on, I don't know.
J: As I said, he'll stand fluff on the niavcl, but hc won't stand sand in the toes.
PM: And why do you say that, what was that based on Mr Keating?
J: It was based on an cyewitness, was it not?
ends TEL