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PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING, M. P.
THE TREASURER, THE HON. R WILLIS, M. P, PARLIAMENT HOUSE
CANBERRA, FRIDAY 25 MARCH, 1994
PM: Well, Mr Willis and I were going to give you a comment about the
outcome of the Premiers' Conference and Loan Council meeting. I
tfihiik we've seen move into place today a very substantial reform to
Commonwealth-State financial relations. For the first time in at least
11f years we are seei ng -a formula for the Commonwealth dealing with
the States which provides a basis of certainty and growth to
Commonwealth payments to the States. We've given the States today,
for the three years, in real terms, that is, a payment covering inflation,
the existing base of Commonwealth payments to the States plus
inflation. And we've built into that population growth.
So, it will be the existing base, plus inflation, plus population growth
which Is really the most certain stream of payments the States have
had and one which can now grow along with national population
growth. Now, of course, in that there will always be the within-state
distribution and shifts in population which the Grants Commission
measures because, as you know, people leaving Victoria and going to
Queensland, all those sorts of things will come up in what is called the
relativities, every year. But, the pool of funds from the Commonwealth
to the States will now have that betterment factor of real terms plus per
capita or . population growth. Now, I think we've seen here a
substantial reform and even though you won't get all the Premiers to
say so I think they do, too. They certainly said that inside. And, it
means, I think, that the cooperation we were able to get at the Council
of Australian Governments in Hobart, we'll see again in the August
meeting as we now will not be having a discussion about the pool
next year or the year later, that being settled today. Now, I would just
invite the Treasurer to add his remarks to mine.
T: 1 think the Prime Minister has said it all. Essentia~ y, this is a very good
deal for the States. They are no worse off this year than they would
have been had the old formula applied. By 1996-97 they start to kick
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some real goals with the application of the real terms per capita
coming through and giving them substantial increases by that time.
And, in the years to come, of course, should the agreement continue
as we expect it would, then the States would be very much in front.
Over the course of a decade they'd be something in the order of $ 6
billion dollars better off as a result of this formula applying, assuming
that Inflation remains steady for ten years; $ 6 billion dollars better off
than they would have been with the old formula. So, for the States this
is a very, very substantial gain and one which should enable them to
considerably improve their services over the next decade or so,
J. Prime Minister, if that's the case why haven't the States been happy as
they've come out only one seems to have supported it?
PM: Well, when we said, " If you want to leave it as the status quo, that is,
as last year," not one of them wanted to leave behind a real terms
guarantee and population growth. I mean, no one really was prepared
to walk away with the status quo. And, I think that's the best test. The
best test, really, is what they say around the table. And, what they
said around the table is, look, this is the best thing to come our way,
let's have it.
J: How would you describe your relationship with the States after todays
meeting?
PM: Pretty good, really. Look, this is a federation, there is a huge pool of
national funds here which Is essentially divvied up and distributed in
one day. Now, the effect of G rants Commission reports, a change in
an old Capital Works Program with a very istoric distribution going
all those things -coming and going some States are better off and
some worse off. So, getting an outcome where most agree is a very
difficult thing to get. But, we got that.
J: Is there any talk of improving the States shaky revenue base and if
there wasn't do you think something should be done about it?
PM: Well, I think they'll pick up the revenue growth that comes with the
recovery, So, if they're getting not just real terms maintenance of
Commonwealth funding, but with population'as well and on top of that
they have the growth in their own revenues they're going to be in a
pretty comfortable position.
J: Premier Fahey told us that over the next three years Commonwealth
revenue is expected to rise by $ 26 billion, how much of that will be
given to the states now?
PMV: Well, as the Treasurer said, a proportion of it will be given to them as a
consequence of the formula. But, again, over the last three years
we've added about $ 25 billion to our national debt through the deficits
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which the Commonwealth has to run in the national economy. And, so,
now is the time for the nation to pay those deficits back. I know that
some Premiers had this quaint line, ' they're not giving the money back
to the people'. Well, the people are all the people and the nation, the
people, must have a reduction in the budget deficit if we're to keep low
interest rates, growth -and jobs.
So, the Commonwealth provides a natural stabiliser for the economy.
That is, it provides the cushioning whenever there is a recession and
therefore it has got to have the financial capacity to take the debt out
when the good times come back.
Now, to say ' Look, sorry, the States get full payments in the bad times
and they also take all the joy in the good times," even I don't think they
expect us to accept that.
J: Mr Kennett says the extra $ 20 million for Victoria is disgraceful
considering the extra revenue you would get as the economy grows.
PM: Victoria did very well out of this and they are all saying look, lets get
population growth and the real terms guarantee that's the real
reform, let's grab hold of it. Now, they haven't been offered that in the
past and they did grab hold of it and I think Mr Kennett was chief
among them.
J: Are you saying you will continue real, per capita increases beyond
1996-97?
PM: I think that is our general intention.
T: The agreement is only for three years, but we would expect that that
agreement would roll on provided we had a co-operative relationship
with the States over that time. Now, we expect to get that in relation to
micro economic reform. We have made that clear as an element of the
proposal for the next three years and should that be forthcoming as we
expect that it will be, then we would be prepared to maintain real terms
per capita. So, that would roll on and the States would be very, very
substantial beneficiaries.
PM; As I said this morning, there is a maturing here of this relationship in
terms of the big micro reform agenda in COAG and in terms of funding
under this fofi-Tila so -the States now know whait they will be getting
every year in terms of the Financial Assistance Grants pool. There will
still be internecine interstate arguments about who gets what and what
population shifts there are and whether the Grants Commission got the
formula right, but that won't be about the pool; that will only be about
the distribution amongst themselves.
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J Would you prefer to see the maturity of the relationship reflected in the
Premiers' public comments?
PM: The more grist to the mill the better. I always think it is better for them
to tell the public as It really is. And as it really is, is pretty good.
J: What was the tone of the meeting compared to previous years. It
seems to have been pretty quiet?
PM: Compared with the 1960s... they were tough meetings. This was, what
we would say, wearying, but not harrowing.
J: Prime Minister, In terms of Cabinet reshuffles, have we seen the end
now?
PM;-I think you are seeing a new stock of competent Labor people coming
to ministries. One, a former Premier. You are seeing a new important
contributor to the Government-John Faulkner, go into the Cabinet. I
think the Labor party is very lucky that it can see people like Neal
Blewett and John Dawkins and John Kerin leave the Parliament and
see the kind of people who have replaced them.
J: But is this the end of the shuffle?
PM: It depends whether somebody resigns for some reason but I don't
expect there will be anyone from this point on resign and, I think,
probably you've seen the last change. But it is a good change and it is
a very good ministerial line up.
J: Why take science from. Senator -Schacht?
PM: Science goes into the Cabinet with Senator Cook and Senator Schacht
then will keep responsibility, amongst other things, for small business
and also for thie Co-operative Research Centres. So, he is going to
maintain his link with that science faculty which we've built into the Cooperative
Research Centres as well as being the Deputy Minister to
Senator Cook who will have science in the Cabinet.
J: Have you been concerned though about the problems that have been
occurring in the science portfolio since Chris Schacht took it over?
PM: I think the scientists are a pretty tough team to manage, really. I don't
know that anyone can do it easily. Again, it is not a case of cheers and
clapping from the side.
J: Would you have preferred to have the free hand at this time that you
had last time after the election rather than having to bow to some of
the factional pressures? T2E8L:. Mar. 94 8: 23 No. 001 P. 04/ 0t
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PM: There was no bowing here. Let me assure you, the three people whio
were elected yesterday were elected unopposed and each of the three
were three that I had suggested to people should be coming to the
ministry. As it turned out, the Caucus agreed with me about that We
will now have something like about seventeen ministers. Sixteen
ministers wilt have changed since the last election. That is a
tremendous change for this country. Energy is the life blood of politics.
Energy and Ideas. To keep that energy coming through Is terribly
important for the national government.
J: Are you saying you didn't want Mr Elliott in your Cabinet?
PM: No. It is not a matter of making judgements about Mr Elliott or any
other single person. It Is just that in terms of seniority and
contributions others have made, others had greater claims at this time.
J: Did Mr Brereton ask you for a change in portfolio?
PM: We are happy to provide you with some overview advice, but not open
heart surgery.
ends