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JONES:
Welcome to Lateline, Prime Minister, and congratulations on
the anniversary.
PRIME MINISTER:
Thank you.
JONES:
Three years on, is Australia what you want it to be?
PRIME MINISTER:
I never give up the desire to make the country even better but I think
we've achieved a lot in the last three years but I want to achieve
a lot more over the next three. We've certainly given Australia
an economic strength that I don't think many people thought was
possible three years ago, and that's our proudest achievement.
We really have been able to stare down the worst of the Asian recession,
although we're not completely unaffected by it. The other things
I'm very proud of are that we have rebalanced our foreign policy
in a quite significant way. When I became Prime Minister we seemed
to be the anxious outsider knocking on the door of Asia trying to
win admission and we seemed to be tending to ignore the rest of the
world. I think we've turned from an Asia only' policy
to an Asia first' policy. And just as well we did because
the turn of events in that part of the world would have disappointed
us if we had been too obsessed with that region. I'm also very
pleased at the beginnings of the creation in this country of what
I call a social coalition between the Government, the business sector,
the welfare sector and individuals to tackle Australia's social
problems.
JONES:
What do you mean by that exactly?
PRIME MINISTER:
Well, I mean that there are many problems in our country that the
Government alone can't solve, the welfare sector alone can't
solve, business alone can't solve, individuals can't, but
if we can coalesce, if we can work together with a common purpose
with each doing what it is best at - with the welfare sector doing
the nurturing and the hard-edged dealing at the sharp end in a way
that no other section of the community can. I was reminded of it today.
I met a lady from the St Vincent De Paul Society in Adelaide and she's
been, for 20 years, working with the underprivileged. She says when
she knocks on a door she's welcomed into any household. She said
often if somebody from the Government knocks on the door they're
looked at suspiciously. I think that summarises that those sorts of
organisations have a particular gift and a particular role which we
must support.
JONES:
We'll move on a little bit later to talk about those things but
first can we concentrate on the economy.
PRIME MINISTER:
Can I say there's one other thing I'm also very proud of
and that is our achievement in getting national gun laws.
JONES:
Can I concentrate on the economy for a moment?
PRIME MINISTER:
Sure.
JONES:
I'd like to just throw a few figures at you if I can?
PRIME MINISTER:
Sure.
JONES:
Business investment down more than 16%, the trade deficit at $1.38
billion in January, much worse than expected, exports to Asia down
30% and the current account deficit at a record high today, is our
fireproofed economy starting to smoulder?
PRIME MINISTER:
No, it's not. In dollar terms the current account's at a
record high but as a percentage of wealth it's not, it's
way below the record high. And our debt servicing ratio, that is the
percentage of our exports that is required to service our debt, is
below 10% and that's the lowest it's been for 15 years.
And that's a better measure of the capacity of our economy to
sustain a deficit. It is true that the last set of business investment
figures were down. It is also true that was from a very high base.
It's also true today that we had an unbelievable retail sales
figure of 5.2 and we have the lowest interest rates in 30 years, the
lowest inflation rate for more than 10 years or more. And all of the
indicators are, particularly the growth indicators, that we have been
performing well. But I've never said that nothing would ever
go wrong, you can't argue that. But if you draw a line through
the normal economic indicators the Australian economy is still performing
very strongly and we want to keep it that way but we have to work
at it.
JONES:
Latest business investment figures, though, in particular must have
concerned you.
PRIME MINISTER:
Well, I would rather they had been otherwise but I also know that
these things tend to seesaw somewhat. And whilst you should never
throw your hat in the air on the strength of one figure, you shouldn't
cut your throat on the strength of one either. And I think if you
look at the long trend, it's still very strong. But we can't
guarantee that Australia won't be touched in some way. All I
can report is that thus far we have survived better than anybody else,
better than anybody expected and, frankly, better than I expected
and I think anybody in my Government expected.
JONES:
When the Asian crisis hit we diverted, in this country, a lot of trade
to Europe but if there is a world-wide slowdown as it's expected,
and particularly in Europe, or even a recession, we're in some
trouble, aren't we?
PRIME MINISTER:
Well, if the rest of the world falls in a heap obviously that is going
to affect us, of course it will. But, on the other hand, if we run
a strong domestic economy then the fact that a number of the key economies,
such as the United States, continue to perform strongly will mean
that we'll continue to do well. But there's no way that
if the rest of the world, the entire world, goes into recession
and there's no sign of that incidentally, no sign at all
of course we won't be unaffected but I don't expect that
to happen and I don't think many economists do either.
JONES:
Does it worry you, though, the extent to which we appear to be reliant
at the present moment on the US economy and, indeed, on Wall Street
continuing its record highs?
PRIME MINISTER:
Well, it is always the case, Tony, that the rest of the world relies
a lot on the strongest economy in the world. It's always been
thus. And the interesting thing is that Australia has remained so
strong where the strength of Japan has been fairly sluggish for a
number of years. We have a very strong domestic economy. We are helped
by the United States but the fact that we run a very intelligent,
flexible exchange rate policy has meant that we've been able
to diversify our exports away from Asia to cushion the impact of the
downturn there. So a lot of what has happened has been due to the
strength of the American economy but even more has been due to our
own economic fundamentals being much better and far sharper and more
flexible than they used to be.
JONES:
When our dollar came under pressure last year and it fell to 56 cents,
I think it was, the US economist, Paul Krugman, said our Reserve Bank
was told that resistance to hedge fund attacks is futile. The fact
is that as a middle-sized economy we can only really fireproof ourselves
to a certain extent, can't we?
PRIME MINISTER:
Well, I think you ought to look at what's happened. I think one
of the spectacular successes of Australian economic management over
the last three years has been the management of the exchange rate.
I think the Reserve Bank of Australia has done a superb job and its
Governor is one of the stars of the whole play.
JONES:
Were you aware, though, of what was happening when those hedge funds
attacked our dollar?
PRIME MINISTER:
Well, Tony, as you could imagine as Prime Minister and the Treasurer
we keep in very regular contact with the monetary authorities but
you could also imagine we don't talk about those things and we
don't talk about the future path of monetary policy. One of the
good things about our economic management is that there is a significantly
greater level of independence in the conduct of monetary policy by
the Reserve Bank.
JONES:
Okay, let's talk about the GST. The Democrats are adamant they
won't let a tax on food through. Your Treasurer says it's
all or nothing and that seems to leave you with only two options,
either ditch the package or call a double dissolution.
PRIME MINISTER:
Tony, the vote will be taken on or about the 25th of June.
And there's a lot of water to flow under the bridge. There are
a lot of Senate hearings and there are a lot of declarations to be
made by people between now and then. And I'm not going to start
hypothesising or speculating about what might happen if the Senate
behaves in a particular way. I remain hopeful that the Senate, as
currently constituted, will pass our package. Now, I can't guarantee
that. I ask those who control the numbers in the Senate to remember
the verdict of the Australian people on the 3rd of October,
to remember that no government has more explicitly sought a mandate
in more emphatic detail than we did on our tax reform package. We
couldn't have been more transparent, open and forthright with
the Australian people. And I do ask those who control the numbers
to bear that in mind. But I don't think you're going to
get a final reading on this for some months yet and it really is futile
of anybody, no disrespect or discourtesy intended, to try and sort
of prod me beyond that response.
JONES:
What options, though, are open to you? I mean, the double dissolution
is your final option, isn't it?
PRIME MINISTER:
Tony, you've heard my answer.
JONES:
So you're ruling out a double dissolution.
PRIME MINISTER:
I'm repeating the answer I've just given.
JONES:
I want to move on to another core issue, unemployment. Peter Costello's
target of 5%, is that achievable?
PRIME MINISTER:
Well, we'd all like lower unemployment. He, incidentally, says
he wasn't particularly aiming for a specific target but he, like
myself and Peter Reith and all the members of the Government, want
a lower rate. I think it is possible to get a lower rate if we can
sustain growth, if we can remove some of the disincentives to re-entering
the workforce that exist in the welfare system at present. And the
taxation package, when passed, will help to do that. We need some
further deregulation of the labour market consistent with the Australian
tradition of a social safety net. I want to make it clear that we
are not a society that is going to walk away from a social safety
net, that's part of the Australian way. But I think consistent
with that there are some further things that can be done. Some of
them were canvassed in the now well documented letter from Mr Reith
to myself which listed a large number of things, some of which, of
course, we won't implement but others we'll certainly very
carefully consider. And I think it's very good that a Minister
newly appointed to the employment portfolio should get into the business
of policy formulation so quickly into his new job.
JONES:
There was another letter to you as well last October, an open letter
from five economists. They suggested that a wage freeze would generate
jobs growth and that tax credits would be needed therefore to compensate
low-income earners. Now, do you favour that sort of idea?
PRIME MINISTER:
Well, we're not disposed to do that. I think there are better
ways of responding to the problem, although one never wants to completely
dismiss all of the proposals put forward by a group like that. But
we certainly don't see any particular merit in relation to the
tax credit proposal because we have quite a comprehensive set of proposals
to reform the Australian taxation system that are going to help low
income earners and give people greater incentive to re-enter the workforce,
more so than proposed by those five economists.
JONES:
Is there merit in freezing minimum wages?
PRIME MINISTER:
I don't think that's the problem. That is not the problem.
I mean, it is clear beyond argument that if you have a wages explosion
which is not built on productivity growth you're going to have
a ratcheting up of unemployment. But that is not our problem at the
present time. We don't have a wages explosion and we've
had a very big productivity gain. People in work are much better off
now than they were three years ago because their real wages have risen
and their interest rates have come down. And that's why a bloke
who's got a job is doing very well now but the people who haven't
got jobs, as always, are not doing as well and they are the group
of people that we must continue to address our concerns to.
JONES:
It sounds like, though, we can rule out that idea once and for all
- the wage freeze, tax credit trade-off, for example, is not going
to happen from what you're saying.
PRIME MINISTER:
Well, I can only repeat what I've said. I mean, if you are, as
a government, trying to look at a whole range of options but equally
you're going to block off ones that you don't think will
work, well, you can only respond in the way that I have.
JONES:
Unemployment has some social costs of course...
PRIME MINISTER:
It does.
JONES:
And you've assumed a moral leadership on the drugs issue but
do you think you can persuade all of the States to sign up to the
idea of zero tolerance?
PRIME MINISTER:
Well, I'm not necessarily seeking them to do it. I mean, I assume
they all agree that we afford zero tolerance to drug pushers and they
all agree that we afford zero tolerance to the use of drugs in schools.
They are the things that I've talked about in the language of
zero tolerance as far as drugs are concerned. I think you've
got to tackle the drug problem in three ways. You've got to have
tough law enforcement measures, and that means co-operation between
the Federal Government and the State police. You must have adequate
education and you must have a lot of resources put in to treatment
of people. And it's only in the last few months that the Federal
Government has started to get into that area and I think it has been
a neglected area in the past. And we're allocating about $120
million out of our Tough on Drugs strategy for education and treatment.
Now, they're the sorts of things that we need to pursue and to
persevere with. And when I talk about zero tolerance in drugs I talk
about it in those two areas. And, quite separately from that, anybody
who's interested in safety in our cities will be interested,
at least, in what has happened in other countries that have followed
zero tolerance policing methods. But in a way that is a separate,
although related, issue.
JONES:
It is, but do you favour zero tolerance policing methods as well?
PRIME MINISTER:
Well, I favour anything that makes our society safer for the ordinary
law abiding citizen providing it does not unreasonably hurt other
people. And I think any society that has lived through the sort of
things that the people in New York have lived through and then moved
to an era where their murder rate has fallen by more than 50 per cent
are going to be pretty impressed by the things that have brought that
about. Now, I don't think you can necessarily translate that
to Australia because to start with our crime rate is not as bad, nowhere
near as bad. But I think you have to keep a sense of proportion. The
average citizen wants secure homes, safe streets and protection against
random violence and random robbery and burglary. Now, we all have
a responsibility to try and produce the conditions that reduce those
things.
JONES:
Why have you chosen this time to put yourself into the middle of this
debate?
PRIME MINISTER:
On drugs? Well, I haven't particularly chosen this time. I am
responding to what I properly see as a continuing national problem
and the drug menace in Australia is quite real. It is not, as some
people say, completely out of control and I think it's an overly
emotional statement to say the country is awash with drugs. But it
is a mounting problem. It worries parents, it worries me both as a
citizen, a Prime Minister as well as a parent and I want to do what
I can in co-operation with Premiers of all political persuasions to
improve the situation. And I do see it as an area where the Prime
Minister of the country has a responsibility at a national level to
try and improve the situation.
JONES:
Now, the heroin trials that you are so opposed to, they are technically
a matter for the States aren't they?
PRIME MINISTER:
No, not really because my advice is that in order to conduct them
you would need to import into this country pharmaceutical grade heroin
and that would involve an amendment to the federal narcotics legislation.
And it would probably be technically in breach of one of our international
conventions, not that I am saying that that alone is a reason why
you shouldn't do it. We make our own decisions in the end about
what is right for Australia. But we are involved for that reason.
JONES:
But you would stop a heroin trial going ahead on that basis would
you?
PRIME MINISTER:
We would not agree to nor would we sponsor the amendment of the legislation
to facilitate it and that is what I understand happened in relation
to the ACT. Now, that is the current advice that I have.
JONES:
So you would stop Jeff Kennett going ahead with the heroin trial if
he chose to do that?
PRIME MINISTER:
Well, it is my understanding that in order to have one you need to
import the type of heroin of which I spoke and that at present is
prohibited by federal law and the Federal Government would need to
sponsor a change to the federal law.
JONES:
Have you told him that you'd prevent him from going ahead with
a trial if he chose to have one?
PRIME MINISTER:
Well, he is aware from public comments that I have made over a long
period of time what my view is.
JONES:
If we could just talk about the trials themselves for a moment. Several
times you have pointed to the Swiss trials to point, to support your
position. But they clai