E&OE....................................................................................................
O'BRIEN:
Prime Minister, are you concerned about the volatility of the dollar?
PRIME MINISTER:
Well, I don't talk ever about the level of the dollar. There
is a challenging international economic environment. That's
another reason why the Government should be returned whenever the
election is held because if there's one thing unarguably we
have, along with a lot of other things, over the Labor Party is
our management of the economy; how we've turned a deficit of
$10.5 billion into a surplus in two and a bit years, how we've
got the lowest interest rates in 30 years. And the volatility of
the world is a reason why you have to press ahead with the reforms
that the Government is pursuing, not a reason why you would go slow
on them.
O'BRIEN:
You're at least as privy as anybody else to the predictions
in the market place. You're hearing tonight that the dollar
could fall to 50 cents or even below 50 cents. Are you saying that
as Prime Minister, no matter what happens with the dollar, you would
be constrained even to publicly defend its intrinsic value?
PRIME MINISTER:
What I'm saying, Kerry, is that as Prime Minister I don't
have the luxury that money market dealers have of talking about
levels, and I don't intend to do that, I talk about the strength
of the economy. And I take that position out of a concern for our
country's future.
O'BRIEN:
Okay, you might feel constrained in talking about the dollar but
nobody else is going to be constrained, particularly if it keeps
falling and particularly in the heat of an election climate. That
must represent a potential political nightmare for you.
PRIME MINISTER:
Well, a country only has one Prime Minister and I have special
responsibilities.
O'BRIEN:
And you might not even want to talk about interest rates but there's
going to be plenty of talk about interest rates and speculation
about interest rates going up as well if the dollar continues to
fall.
PRIME MINISTER:
Well, I can talk about the fact that we now have the lowest interest
rates in 30 years and that the average homebuyer in Australia is
$300 a month better off as a result of the falls in interest rates
that have occurred. And one of the reasons for that, one of them,
is that we've got the budget back into balance and into surplus.
There are other reasons, but that is one of the very firm reasons
for a future level of interest rates. What I can say is something
I've probably said on this programme before, and that is that
I can guarantee that we'll pursue policies that exert downward
pressure on interest rates. I can't certify to a particular
level but I point to our record. In just over two years we have
presided over the largest falls in interest rates for homebuyers
and small business that this country has seen for 30 years, and
that is a very, very, very praiseworthy achievement.
O'BRIEN:
You know how ruthless the money market is, particularly in such
a volatile global environment - we're seeing Russia in deep
trouble now, we're seeing that impacting back on markets all
over the place. Are you concerned about the constraints on what
the Reserve Bank can do to protect the dollar during an election
campaign if convention prevents it putting interest rates up as
the last line of defence of the dollar?
PRIME MINISTER:
Kerry, I think the Reserve Bank has conducted itself in the national
interest in the time that I've been in government. I'm
not suggesting that it didn't before either. But I am confident
that the Reserve Bank will do the right thing by Australia. It's
required by the Banking Act to do that and I'm quite sure that
we will see that occurring. I remain very optimistic about the future
of the Australian economy. And the very fact that there are challenges
overseas are all the more reason why we have to press ahead with
things like taxation reform, because the world environment cries
aloud for a more competitive, a more forward-looking Australia,
it doesn't cry aloud for an Australia that turns its back on
reform and change.
O'BRIEN:
So, you're saying that the Reserve Bank should feel free to
do whatever it has to to protect the Australian dollar in the national
interest whether there's an election campaign...
PRIME MINISTER:
Kerry, what I'm saying, and I'll repeat, is that I am
certain that the Reserve Bank will do the right thing by Australia.
I'm not saying anything more or less than that.
O'BRIEN:
Well, can I ask you to clarify whether you believe there should
be a convention during an election campaign that the Reserve Bank,
the central bank, does not do anything to interest rates during
a campaign?
PRIME MINISTER:
Kerry, what I'm prepared to say to you is what I've said
before and that is that I'm certain that the Reserve Bank will
do the right thing by Australia.
O'BRIEN:
Economists are starting to paint world growth next year at somewhere
between zero and two per cent. And a leading Australian economic
forecaster, ACCESS Economics, says Australian activity may be cut,
quote: to a crawl' by the first half of next year. Does
that concern you?
PRIME MINISTER:
Well, if it were accurate I would rather it were otherwise. If
the Government receives advice from the Treasury, from its advisers
about downward revisions and it's appropriate that that be
made known, then it will be made known. And I point out to you that
whenever an election is called there is now a proviso, under our
Charter of Budget Honesty, for the Secretary of the Treasury to
publish really a statement of the books so that everybody knows
where we stand before the election so we won't have a re-run
of last time.
O'BRIEN:
So you acknowledge that it is at least a possibility that ACCESS
might be right and that the Australian economy might slow to crawl
by early next year.
PRIME MINISTER:
No, I didn't say that. I haven't acknowledged anything
of the kind. Of course I acknowledge that from time to time there
can be variations in growth forecast. The evidence coming to me
at the moment is definitely not that the Australian economy is likely
to slow to a crawl. All the anecdotal and other evidence available
suggests that the Australian economy is still robust. Obviously
we are affected by the Asian downturn but we have resisted it with
great resilience and a quite remarkable display for resilience to
date.
O'BRIEN:
I'm quoting ACCESS because I imagine you would agree with
me in terms of independent forecasters. They've got a pretty
good reputation, in fact, the Liberal Party has seen fit to use
them in the past. And ACCESS says, quote: on balance, Australia
faces its worst international environment in decades,' and
many other reputable economists agree, in terms, that we could see
our economy slow quite markedly next year. What if they're
right?
PRIME MINISTER:
Kerry, I agree that the international environment's tough.
I do agree with that. That's all the more reason why you should
be, in Australia, following the policies the Government's following.
It's all the more reason to be in surplus and not in deficit.
It's all the more reason to have low interest rates. It's
all the more reason to face the reality that we need to renovate
and fundamentally change our taxation system. The taxation system
acts upon the nation's competitiveness and economic performance.
And one thing that's been blindingly obvious to every significant
figure on either side of politics in Australia over the last 20
years, be it Hawke or Keating or Hewson or Howard or Evans or Beazley
or anybody you want to name, and that is that our taxation system
is out of date. It was built in the 1930s when most of our economy
was manufacturing. And unless we fix the indirect tax system we're
going to have no resources in the future to fund the sort of welfare
provision that this country needs. And the international pressure
makes that all the more necessary rather than less necessary. The
people who are running around saying because of Asia we should stop
reforming couldn't be more wrong. It's because of Asia
that we must continue the process of reform because unless we do
we will face a far more difficult future.
O'BRIEN:
But if these economists that I'm quoting are right
and we don't know how long the Asian crisis is going to last
or how far reaching it's going to be if they're
right, won't that cut the surplus that you're counting
on, at least in part, to deliver your tax cuts in return for a GST?
PRIME MINISTER:
We are confident that the provisions that we've made in the
tax plan are responsible within our understanding of what the surplus
is likely to be. It is our view that there will still, on the information
available to us, be very strong surpluses in the years ahead.
O'BRIEN:
Now, that's on information available to you now in a very
volatile, global climate.
PRIME MINISTER:
Yes, but that's not said glibly...
O'BRIEN:
No, but it's volatile, isn't it?
PRIME MINISTER:
...and it's also allowing for a margin of further deterioration,
if I can put it that way. Not that I'm suggesting that there
will be a further deterioration. I'm simply wanting to make
the point that we have made very conservative assumptions. The Treasury
has made the figuring and done the assumptions and they are quite
conservative and we are confident of surpluses in the years ahead.
O'BRIEN:
But if growth does slow and the surplus is affected, but I'm
not saying wiped out, but is significantly affected, is there any
circumstance in which you would be forced to reconsider any of your
tax cuts or other compensation measures?
PRIME MINISTER:
Kerry, they stand solid, rock solid. I don't believe that
that circumstance will arise, so the question is purely and entirely
hypothetical.
O'BRIEN:
Well, we've all got to try and plan our future on the basis
of that hypothetical question.
PRIME MINISTER:
Well, I can only answer directly to your question. I can only describe
the circumstance as it is. I can repeat to you that on all of the
information available to the Government the plan has been very conservatively
cast. We are the only show in town that's got the guts to tackle
the need for tax reform. We're not just offering a tax bribe.
The easy, lazy, conventional thing to do offer people a few
dollars of a tax cut and ignore the need for fundamental reform.
O'BRIEN:
Can you say, for hell or high water, come hell or high water, you'll
never ever back away from your tax cuts or your compensation package?
PRIME MINISTER:
Kerry, I can only repeat to you that it is a solid commitment based
on all the information available to us, conservatively cast, and
I believe and the Government believes, utterly deliverable. And
what makes it deliverable is that we're actually tackling the
hard bit. We're tackling reform of the indirect tax system.
The easy thing for me to have done before this election, whenever
it may be, would have been to say to the Australian people: here's
a tax handout, here's a personal tax cut, we don't need
reform, it's too hard to do it because of Asia. Now, that's
what people have done for the last 20 years with the exception of
John Hewson in 1993. And I think we're paying, I mean, we have
paid for it in the past and we will pay for it again. I mean, I'm
putting a lot on the line on this issue because it's not the
conventional thing to do. People would say the conventional thing
is just to offer the goodies without the hard bits and we're
doing both.
O'BRIEN:
I imagine you'd acknowledge that people are also putting a
lot on the line in deciding to support you and take you at your
word and I was intrigued and interested when you said only last
weekend that quote: "nobody's got total control over future
circumstances. You give answers to the best of your belief at the
time and if circumstances change sometimes you have no alternative
but to change."
PRIME MINISTER:
Well it's a generic statement of commonsense. What's
wrong with that?
O'BRIEN:
Well it sounds a very honest statement but it does leave the gate
open.
PRIME MINISTER:
Well it is an honest statement and it is equally honest of me to
say that on all of the information available to us, conservatively
calculated, and a set of assumptions made on our tax policy on an
equally conservative basis, everything we put down is utterly deliverable.
O'BRIEN:
That's a very different proposition to what you said three
or so years ago: there will never ever be a GST. You were content
then to say I can see into the future. There will never ever be
a GST.
PRIME MINISTER:
So are you saying that somebody in my position should never have
a different view on policy?
O'BRIEN:
Not at all? I'm suggesting that when you said it then....
PRIME MINISTER:
No, you're not comparing like with the like. You're asking
me whether on all of the information available to me as Prime Minister
do I believe the tax plan is credible and deliverable. My answer
to that is yes. If you're saying to me do I now have a different
position in relation to tax reform then I did three years ago the
answer is also yes. And I'm putting it out before the Australian
people in advance of an election. Unlike my predecessor who said
one thing before the 1993 election, scrambled back into office on
the basis of it, took away the promised tax cuts and increased every
tax he could lay his hands on. Now there's a vast difference
between the bloke who says one thing before an election and does
another when he gets back, and another bloke who says before the
election this is what I intend to do if you vote for me.
O'BRIEN:
Well when you say one thing before an election and another thing
after the election, there are your core promises and your non-core
promises. You're not totally innocent on that front.
PRIME MINISTER:
Yeah but look Kerry, we are having a fundamental debate about taxation
reform and about the credibility of the Labor Party and the Liberal
Party on tax reform. We are acknowledging the reality that the Australian
taxation system is rotting. It needs to be fundamentally changed
and the only way you can do that is to bring in a goods and services
tax along with a lot of other reforms. Because unless you do that
we are not going to have enough money into the future to fund welfare
in this country. I'm amazed that the welfare lobby takes the
view that a GST is bad. Indeed I would have thought if the welfare
lobby is interested in a steady stream of revenue into the future,
particularly at a State level, it would support what we're
doing. Because you can't go on relying in this country on a
wholesale tax system that doesn't touch almost two-thirds of
economic activity in this country. There was a time when that wholesale
tax system was worthwhile and was relevant to the Australian economy.
But two-thirds of our economy is now services, yet the Labor Party
is saying they should remain completely untouched by the indirect
tax system. And if you gone on doing that future governments will
have no alternative but to continue to rely on personal income tax
as a source of revenue and that is going to squeeze the middle to
a point where people on ordinary earnings are paying the top marginal
rate of tax.
O'BRIEN:
And alongside your tax package are you relaxed and comfortable
about going to this election on your record with unemployment?
PRIME MINISTER:
I believe our overall economic record is first class. I would like
unemployment to be lower, of course I would. But we have generated
300,000 new jobs in the time that we've been in Government.
We've turned a $10.5 billion deficit into a surplus in just
two years, a year ahead of prediction. We've got the lowest
interest rates in 30 years. A very strong level of business investment.
And as the next necessary step, we alone have the courage and the
commitment to embrace proper reform. You can't have tax relief
and tax cuts without lasting tax reform any more. That option has
gone in this country.
O'BRIEN:
But those...if you win the election and you then get your package
intact through the Senate. We've then got to wait, we will
have to wait two years for your tax reform package to be in place
and then at least three years before it begins to have any effect,
whatever that will be, on the economy.
PRIME MINISTER:
No it wouldn't be three years. But Kerry we are at least willing
to undertake the responsibility of fundamental reform. I mean the
Labor Party knows. Kim Beazley and Gareth Evans in 1985 were Paul
Keating's strongest supporters of a 12.5% consumption tax and
they know, and you know, everybody who's followed politics
in this country in the last twenty years knows that deep down that
the next great thing to be done to fix the Australian economy is
to fix the tax system.
O'BRIEN:
But right now we're talking about unemployment. Tomorrow night
Peter Costello will be on the programme with Kim Beazley to talk
about Labor's record.
PRIME MINISTER:
Yeah, but can I also say to you that one of the advantages of the
new tax plan is that you will reduce the costs of doing business
in this country by $10.5 billion a year. And that is....
O'BRIEN:
But right now unemployment is stuck at almost exactly the same
level it was at when you came into office. Long term unemployment
is up and youth unemployment is up.
PRIME MINISTER:
Well one of the ways that you could get that down would be to reduce
the cost of doing business in this country...
O'BRIEN:
But that's two years away. What are you going to do in the
first two years?
PRIME MINISTER:
Yeah but Kerry, if we're talking about comparisons the Labor
Party had 13 years. They left us with a high unemployment rate.
Kim Beazley took it to 11.2%. They left us with a tax system which
is in decay. They left us with a huge deficit. Your complaint apparently
is that it's not acceptable to tackle the need for tax reform
because it's going to take two years to do it.
O'BRIEN:
No I haven't said that and I'm not making a complaint.
I'm asking questions and in particular at the moment I'm
asking about unemployment. Your tax reforms would begin to be implemented
in July of the year 2000. Right at this moment unemployment is stuck
at 8.3%, youth unemployment higher than ever before, and so on.
So what will you do in the first two years of your next Government
to get the unemployment rate down? What vision do you have for that?
PRIME MINISTER:
Well if the Labor Party and the Democrats had passed the unfair
dismissal law that we put up a year ago I believe that unemployment,
particularly youth unemployment, would have been lower because the
strongest complaint that I still get from small business about capacity
to employ relates to the unfair dismissal laws. And let me remind
you and the viewers that the Labor Party and the Democrats and the
Greens have persistently blocked that measure in the Senate and
we'll put it up again if we win the next election. Now, I'm
not saying that alone would solve the problem but it does....
O'BRIEN:
Do you have new measures to tackle unemployment in the next two
years?
PRIME MINISTER:
One new measure is to change the taxation system.
O'BRIEN:
I'm saying in the next two years because the predictions are
that growth will slow. If growth slows unemployment will go up.
What will you do to tackle that?
PRIME MINISTER:
Well a lot of things. I mean I would offer in whatever economic
climate we face a set of policies that will keep interest rates
low. I mean you talk about levels of unemployment. Levels of unemployment
are affected by interest rates. They are affected by the overall
investment climate as well as by the micro-elements of employment
such as the unfair dismissal laws and the operation of industrial
relations policy.
O'BRIEN:
And if the dollar continues to fall interest rates will almost
certainly go up. That, I'd assume you'd agree, that would
send a bad message to small and big business in terms of investment
and in terms of jobs.
PRIME MINISTER:
Kerry, you know fr