9 October 2002
E&OE……………………………………………………………………………………
CORDEAUX:
Prime Minister John Howard, thank you very much for your time.
PRIME MINISTER:
Good morning, very nice to be with you again, Jeremy.
CORDEAUX:
Very good to be with you. These bushfires in New South Wales are just terrible, aren't they?
PRIME MINISTER:
They really are and the frightening thing is that they have come so early. It's only the 9th of October. The bushfires previously in and around Sydney of course really intensified around Christmas, so this is quite frightening. We've had such a dry winter, that has aggravated it and we can but hope and pray that the situation does not develop from here because if it does it's going to be a very frightening summer indeed.
CORDEAUX:
Yes, indeed. I don't know whether you saw the Financial Review, the front page of the Financial Review yesterday where they were talking about this market turndown and what it was costing the Government. They estimated something like $7 billion that it was going to cost the Government. What did you think about that, is that near the mark?
PRIME MINISTER:
It's always difficult to make declarations about what a market downturn is going to cost anybody because a downturn can transform into an upturn in a few weeks time. And when a market goes down, unless somebody actually disposes of their shares, it's a paper loss and that paper loss might be retrieved. But everybody is affected in some way by the share market downturn, not as badly in Australia as elsewhere because our markets didn't quite reach the same heights that many others did but we're all going to be affected in different ways. Superannuation funds especially are affected and the returns for superannuation funds are not as robust now as they were but once again the situation is not as difficult in Australia because our share markets, particularly the high tech stocks didn't reach the same heights as they did in other countries a couple of years ago.
CORDEAUX:
So the correction, it's not going to be so severe. It may not be the case with property, however?
PRIME MINISTER:
I think we have to be careful that we don't overdo the gloom about property. I mean, the property market in Australia is very strong and it does cost more to buy a home now than some time ago. Fortunately interest rates are much lower so people still find housing very affordable but we've got to be very careful we don't talk ourselves into some kind of retreat in the housing area that's not warranted. My sense is that a cooling off is coming. The first homeowners' grant has returned to its normal level and that will have an affect. Clearly many people have invested in units in the hope of getting a good return and they may find their returns are a little more modest and that's going to have an affect over time. I think there are sufficient self-correcting mechanisms built into the system, however, I would caution people against over extending themselves and I'd certainly caution lending institutions against taking any risks. We don't need to. We have a high level of home ownership, we want to keep it that way. We have quite low interest rates. I can't guarantee any particular level of interest rates except to make the observation that they're not going to return to the levels they were a few years ago, I’m certain of that, but as to an exact level, I can't be any more precise than that. So there is need for caution in relation to housing but there is no justification for talking ourselves into a retreat that need not occur.
CORDEAUX:
In fact, with global gloom spreading to markets and economies in Asia and there are problems just about everywhere you must be fairly pleased or even proud of the situation we've got here in Australia.
PRIME MINISTER:
There's no doubt we are doing, in a world that's pretty economically subdued, to put it that way, perhaps even more strongly in some areas recessed, we are doing very well.
CORDEAUX:
And the housing market and the housing industry has played a very important role in it.
PRIME MINISTER:
They've played a very important part. I mean, you've got to remember it was only, what, 18 months ago or more, two years ago rather, that people were calling on the Government to do things to stimulate housing. And we, by common consent, the doubling of the home owners grant for new homes did wonders for the housing industry at the beginning of last year and that's, what, 18 months ago. And I therefore think we should bear all these things in mind, keep everything in perspective. There's always a danger in Australia that we go from one sort of extreme expression to another instead of understanding that things normally bounce along in the middle. The housing industry will cool off a bit but that doesn't mean to say it's going to collapse and it doesn't mean there's going to be the bursting of a bubble. There's going to be a return to normalcy, let me put it that way, to borrow an expression once used by an American President, there'll be a return to normalcy in relation to the housing industry and that will be a good thing, but normalcy is not bust. Normalcy is steady, reliable growth with your investment being preserved.
CORDEAUX:
I don't know if you would notice that the Economist in Britain publishing a list of the best places in the world to live…
PRIME MINISTER:
They included a lot of Australian cities.
CORDEAUX:
Yeah, yeah.
PRIME MINISTER:
Well, that's very understandable because Australian cities are very livable, all of them, and we are very lucky in that sense. We have relatively low levels of crime. They're too high in absolute terms but relatively speaking Australian cities are safer than those of most other countries. We have a wonderful climate. We have an easy going, tolerant approach to people from different parts of the world. We have fantastic food. Australian food, value for money in food is one of the most attractive things about living in Australia. So there's a lot going for this country and it doesn't much matter whether it's Melbourne or Adelaide or Sydney or whatever, it's all pretty much the same. I mean, there might be marginal differences here and there but none of us would really experience the difference through living in different cities.
CORDEAUX:
On this black cloud that is kind of hanging over the world and the anxiety that people are feeling about a possible war with Iraq, what's your reading of the current situation, are things getting a little less tense?
PRIME MINISTER:
My sense is that the Americans and the British are making progress, it's moving slowly, in getting support for a tougher and new resolution through the Security Council. And that is a good thing because if the Americans can get that resolution through then that will assemble international pressure and opinion and direct it towards Iraq. And it's still possible, if that occurs, for Iraq to accept the verdict of the international community expressed through the Security Council and genuinely allow unrestricted, unconditional weapons inspections to take place and declare any weapons of mass destruction and participate in the dismantling and the destruction of those weapons. Now, if all of those things can happen there is no need for military conflict, none whatsoever. And what I find moderately encouraging at present is that we are moving in that direction. Now, there's still a long way to go. There's still resistance to the American resolution amongst the other permanent members of the Security Council but none of them has said we're definitely opposed to it and we're definitely going to exercise the veto. None of them have said that. China has not said that, France has not said that, Russia's not said that and discussions are still going on and I believe that that's a very good thing. We support that process, we very much support the need for a tougher resolution. The acceptance, so-called, by Iraq of the re-admission of weapons inspectors was not effective enough, was not good enough. And, interestingly, Hans Bliks, who's the head of the inspection team, himself has said that they won't go in if there's a new resolution in the wings. Now, that's a very good move. He had a discussion at the weekend with Colin Powell in the United States and all of it is looking as though we're slowly making progress towards getting a new, tougher, fail-safe resolution from the Security Council. Now, that's very good and if that can happen then the next step will be the passage of that resolution and the implementation of it. And it is within Iraq's hands then to decide to accept the verdict of the world communities expressed through the Security Council and do what it's asked to do under the resolution. If that happens then there is no need for military conflict. Nobody wants military conflict. I don't, George Bush doesn't want it, nobody does and if we can avoid it then that is terrific. On the other hand this problem will not go away. Nobody should imagine that we achieve anything by giving up because it's got a bit difficult and nobody likes it, of course we don't like it. And in a sense that's what Iraq has traded on for so long, in the hope that people will just get tired of it and give it away. Now, that would be a huge mistake because last year's events in America taught us that you can have sudden, unexpected events and destruction hurled at you even in large western cities and we just live in a different world now and we just cannot leave this thing unaddressed.
CORDEAUX:
I’m amazed, though, that people don't understand that without the tough talk and without the real feeling that America would go to war Saddam Hussein will not give an inch. The tough talk is very necessary to get a peaceful resolution.
PRIME MINISTER:
Well, if there is no pressure exerted on a country like Iraq and a regime like Saddam Hussein's, nothing happens, nothing.
CORDEAUX:
No.
PRIME MINISTER:
The reason this issue is now back in the Security Council and the reason that we are moving, perhaps, and I say perhaps towards a new resolution is precisely because America did the very things you said. If America had remained silent and said absolutely nothing this thing would not have been back in the United Nations. Those who criticise the Americans, and there's no shortage of them both here in Australia and around the world, should remember that if it hadn't been for the initiative of the United States - and the turning point here was the President's address to the Security Council on the 12th of September - if that hadn't have happened the UN would not be dealt back into the game, the UN would not now be a major player.
CORDEAUX:
We've got a great deal of Australian produce sitting there on the west-coast of the United States, 64,000 tonnes of it or something, and I see that George Bush has stepped in to do something about ending that dock strike over there. You'd be pleased about that.
PRIME MINISTER:
Well, I am pleased. He's doing something. He's looking to the American national interest. It's an industrial dispute that is hurting Australia and I’m pleased that he's doing that. I don't think it helps Australia's interests for members of the MUA to be going over there in sympathy with the long-shoremen, as they call them in the United States, the American wharfies. I don't think that achieves anything. We should be all acting in a way that promotes the Australian national interest and the Australian national interest will be served by this dispute being ended and I’m pleased that the President has moved to, I think, invoke one of their old laws [inaudible] or something and I hope it is beneficial.
CORDEAUX:
Do we have one of those?
PRIME MINISTER:
Well we have a different history, we have a different history.
CORDEAUX:
One of those old laws to drag out at the opportune moment might be a good…
PRIME MINISTER:
We haven't had many disputes in the last few years.
CORDEAUX:
No.
PRIME MINISTER:
We have had a very low level of industrial disputation, in fact, the lowest since before World War I.
CORDEAUX:
Prime Minister, would you take a call?
PRIME MINISTER:
Certainly.
CORDEAUX:
Hello, Frank.
CALLER:
G'day, how are you?
CORDEAUX:
What would you like to say to the Prime Minister?
CALLER:
Well, I would like to talk about work-for-the-dole. I had an injury early this year and I started work-for-the-dole a couple of weeks ago and I'd like to know that…if I’m injured during working and it's because of my knee what…is it true that I’m not covered for work cover and they only pay for just the operations and seeing a doctor, is that right?
PRIME MINISTER:
Well, your medical expenses are covered, yes.
CALLER:
And what happens if I have to have a full knee reconstruction?
PRIME MINISTER:
My understanding is that that would be part of the cover. I frankly just have to check the detail, how far those ordinary medical expenses liability goes rather than say definitely it would cover a knee reconstruction. I don’t carry all that detail around in my head. If you’d like to leave your name and telephone number or address or both with the station I will get somebody to check that out and give you a call.
CORDEAUX:
I think, Prime Minister, they expect you to know absolutely….
PRIME MINISTER:
I’m sorry. I wish I did know but rather than mislead you I'd better check that out.
CORDEAUX:
Hi Bernie.
CALLER:
Good morning. Good morning Prime Minister.
PRIME MINISTER:
Good morning Bernie.
CALLER:
I’ve got two important figures that the people never see printed in our media or made any emphasis of whatsoever and they are the two most important figures I think that we are facing in the circumstances of today. One is our net foreign debt which as of the 30th of June of the past financial year was $390 billion according to the Bureau of Statistics. And the other is our GDP which is running down slowly getting less and less each month, each quarter, and currently it’s somewhere around about the $700 billion mark. Is it true that if our net foreign debt exceeds half of the GDP we could be seen as being bankrupt?
PRIME MINISTER:
No that’s not true.
CALLER:
Right.
PRIME MINISTER:
I understand your point about the foreign debt. I mean the figure you quote sounds broadly correct. In relation to the GDP I’m sorry I don’t understand that. I don’t think our GDP is falling. Our GDP is rising.
CALLER:
It’s increasing but….
PRIME MINISTER:
I thought you said it was running down. I’m sorry.
CALLER:
No it’s continuing to run on, run up, but not at the same rate. The rate is diminishing. Performance is not as great as it was 10, 15 years ago.
PRIME MINISTER:
I can’t agree with that because our growth rate has been greater over the last ten years than it was in the previous ten years. So if our growth rate is greater I can’t accept that our GDP is relatively declining. In relation to the foreign debt it is true that our foreign debt is broadly at the level you suggest. But there’s nothing odd about a country such as Australia having a large foreign debt because historically we have been a large importer of capital in order to fund development. We borrow money. We’ve always done that and we always will. The important thing is that our capacity to repay that debt has improved over the last few years The debt servicing ratio is much stronger now than what it was. As you probably know from your own experience borrowing either for a home or a business if you can afford it you can borrow more. It’s always risky and you face bankruptcy if you borrow what you can’t afford to repay and because the Australian economy has done so much better in the last few years and that’s measured by our national debt which is not our foreign debt, this is the money owed by governments, our national debt is now at 4.6% of GDP against the OECD average of 45% and Japan’s 130% and America’s 35%. Our economy can repay that foreign borrowing far more readily than it could have some years ago.
CORDEAUX:
And if you sold Telstra would you wipe that debt out completely?
PRIME MINISTER:
Well if you sold Telstra you would create a situation where there’d be, depending on how much you got, I can’t be certain about that, you’d be as near as damn it down to zero.
CORDEAUX:
How would that set us up?
PRIME MINISTER:
Well it would just make us that much more….
CORDEAUX:
Bulletproof.
PRIME MINISTER:
…..bulletproof against future adversity. When you don’t have any debt it means that if you do run into trouble it’s easier to borrow your way out of it because you’re starting from a position of zero debt. But if you have a lot of debt and you run into trouble it’s a lot harder to borrow your way out of it because you’ve already got a big debt obligation and that’s a very strong argument. If we were to sell Telstra, and we’re not going to sell any more shares in Telstra unless we’re satisfied that services in the bush are up to scratch, if we were able to sell more than you would use the great bulk of that of course to retire debt and that’s always been our position.
CORDEAUX:
If you are satisfied that the services are up to scratch in the bush, with the situation with the Democrats are you more confident that you can get it through the Senate now?
PRIME MINISTER:
No I’m not. I have always been quite cautious myself in predictions about our ability to get it through the Senate. I don’t take any votes for granted in relation to the minor parties. I assume the Labor Party will just oppose it for the sake of opposition as they do for just about everything. As far as the Democrats and the others are concerned it will be a question of talking to them once we have decided to go further and I don’t assume that because they’ve had a lot of internal trouble and Meg Lees has left and Andrew Murray remains understandably, understandably very critical of the Australian Democrats, I don’t assume from that that we are automatically going to find it easier to get Telstra through.
CORDEAUX:
The drought is something that has leapt out at us and God knows what damage that is going to do to our economy going forward. It’s interesting to see media magnates and other people and personalities and businessmen coming up to this Farmhand drought relief appeal. I don’t suppose money is the total answer to the problem.
PRIME MINISTER:
Well, money is not the total answer, but it's an important element.
CORDEAUX:
What will the Government do?
PRIME MINISTER:
Well, the Government's already done a great deal. I mean one of the things that we have done is a few years ago introduce a scheme call Farm Management Deposits and they work like this - when you have a good year as a farmer, and many of Australia's farmers did have a good year a couple of years ago, you can put your…part of your income into these deposits before you pay tax on them, while they remain in those deposits, you don't pay any tax and you earn interest on the deposit. But when you run into a bad year, as many of them are now, you pull some or all of your deposit out and you pay tax in the year in which you pull it out, and because you don’t have much other income, the rate of tax you are paying is lower than it would have been the year in which you put it in. So, it's really a tax reduction scheme as well as a deposit scheme. And there's about $2 billion in these farm management deposits at the present time and I had an estimate from Treasury yesterday that suggested that the tax currently foregone is close to, and estimated this financial year, to be close to $500 million. Now, this is a direct tax incentive, if you like, which has encouraged people to put money into these farm management deposits. And of course, you can see how it will work to the advantage of those farmers in this very difficult drought year. A couple of years ago they did well. They earned a lot of money, sensibly - a lot of them put money into these deposits. Now, they're strapped for cash because they haven't had a crop and they pull the money out, but because they're not getting out any other income, they're paying a lower rate of tax. And it enables some of them to handle the adversity of the current drought a lot better than would have been the case a few years ago. It really is a very effective scheme. On top of that we have the normal exceptional circumstances where if an area is declared, then people become entitled to welfare assistance for a period of at least six months and depending on their circumstances, other benefits as well. So, there's an ongoing level of support from the Federal Government, there could be other things that we will do depending on how circumstances unveil, of course at a State Government level, there is short term emergency assistance provided by State Governments as well. And I think the public expects in these situations governments to work together to help our farmers.
CORDEAUX:
[Inaudible] you've got a question from the Prime Minister?
CALLER:
Yes. I’m wondering why they want to sell telecom when it's such a good income for the Government and the people of Australia?
PRIME MINISTER:
Well, let me stress again, we'll not going to sell the rest of Telstra until we're satisfied that conditions in the bush are up to scratch. But generally speaking, you can't go on indefinitely with a situation where a company is half-owned by the public and half-owned by private shareholders. It prevents the company competing fully in the market place, for example if it wanted to raise capital in order to expand or to invest in new areas, it can only borrow, it can't issue new shares because the Government is not going to buy a whole lot of new shares. There are a whole lot of restraints placed on a company when it's, to use the colloquialism - it's half pregnant. And that is the situation of Telstra at the present time, we've already sold nearly half. And in the long run you can pass laws guaranteeing the delivery of basic services. And this idea that when Telecom, or Telstra, or used to be called the old PMG fully a Government operation, that everything was efficient is ridiculous. In fact, the cost of telephone calls in Australia, relatively speaking, has fallen over the last 20 or 30 years. It's one of those things that have got cheaper and I constantly hear people talking nostalgically of the good old days in relation to Telstra and the PMG, but those good old days really didn't exist. The telecommunications in this country is infinitely better now than it ever was.
CALLER:
It's a couple of minutes to ten, just quickly there is some word Prime Minister that if you did sell the remainder of Telstra, some of that money could go to what we could broadly call drought proofing Australia, which the bush would have to be very much in favour of. Do you think there is any possibility of ever drought proofing this country, if you had enough money?
PRIME MINISTER:
I've asked all of the experts that are available to me to get together all of the information they have on what might be done to achieve that goal. It's been talked about for many years and there's going to be a presentation made to me and to a number of my senior colleagues in a couple of weeks time from all the sources available to the Government - the CSIRO and everybody else. I've got an open mind. If I could be persuaded that there were some really big things that could be done that would make a huge difference, I'd be very happy to have a look at them. And as far as Telstra is concerned, well let me answer the question by saying this - that if we were to sell Telstra, and it would only be after we're satisfied about the bush, then there would be over time, every year there would be interest savings because we wouldn't have as much debt and obviously that would give you a capacity to do quite a number of other things. But I don't at this stage want to start talking about what we're going to do if we sell Telstra, the rest of Telstra, because Jeremy we haven't decided to sell the rest of Telstra. What we have said is we won't sell the rest of Telstra unless and until we're satisfied that conditions in the bush are up to scratch. Now, when that happens then is the time for us to start talking about the circumstances under which it might be sold.
CORDEAUX:
Prime Minister, great to talk to you, have a wonderful day.
PRIME MINISTER:
Thank you.
[ends]