Subjects: executive salaries; sub-contractors; Illegal immigrants; Alan

Jones and John Laws; East Timor; Jeff Kennett; Andrew Peacock; media laws;

Pura Milk Cup; Hey Hey It's Saturday.

E&OE..........

MITCHELL:

The Prime Minister, Mr John Howard. Good morning.

PRIME MINISTER:

Hello Neil. Good to be with you.

MITCHELL:

Thank you for your time.

MITCHELL:

Mr Howard. Are things getting a bit out of whack in Australia? We've got

Bureau of Statistics figures showing profits have gone up 17.3% in the year

to September. Wages have gone up 1.8% which means they're going backwards.

But that has to cause demands from the union, it has to cause division.

PRIME MINISTER:

You've got to remember that one of the reasons why employment has risen

and unemployment has fallen is that firms are more profitable and some of

that profit share is going into higher employment levels. So it's not immediately

quite as you put it. If you're asking me whether at a time of general economic

prosperity, examples in the corporate sector of excessive levels of remuneration

for example cause some resentment in the workforce, well the answer is yes.

MITCHELL:

Well look at Coles-Myer's Dennis Eck. Four million dollar salary, $8 million

share bonus.

PRIME MINISTER:

I'm not going to personalise it because I don't believe that the Government

should ever entertain the idea of interfering in remuneration levels of

corporate executives, and I recognise that there are competitive forces

involved. But what I would say to corporate Australia is that you've got

to exercise a degree of restraint and self-surveillance. You've got to understand

that at a time of generic economic plenty, if it looks as though one part

of the community is over indulging itself or helping itself too readily

that will cause resentment. Just as people in public life are required to

exercise reasonable restraint, so it is people in corporate life have got

to do so.

MITCHELL:

Well they're failing to at the moment.

PRIME MINISTER:

Well some do. I mean let's keep a sense of proportion, and I'm the last

person to condemn the need to remunerate the chief executives of Australian

companies at appropriate levels, at levels that are sufficient to attract

the right people. But in all of these things there is a sense of proportion

and a sense of balance and we've all got to understand. I've certainly recognised

it, and my colleagues I know recognise it. But although we are as a nation

very strong economically at the moment, there are areas that are missing

out and at a time of general economic plenty, if you're missing out you

feel it all the more keenly. You feel as though it's passing you by, that

other people are getting it and you're not. And I do understand that and

it's therefore very important in all of our actions of the Government, and

it's also important that corporate Australia in all of its actions as corporate

Australia understand that there are gaps between the not so well off and

the well off in the community. And we as a people that have always prided

ourselves on being very egalitarian and having the largest middle class

in the world. That used to be one of our proudest boasts. We've got to make

sure we retain as much of that as we possibly can.

MITCHELL:

So you do agree that some of these salary packages are just over the top?

PRIME MINISTER:

I think the perception of some of them is over the top. Absolutely.

MITCHELL:

Bank bosses in particular are cleaning up, Coles-Myer.

PRIME MINISTER:

I mean look, I don't want to get, because I don't think it's fair of me

to start singling out individuals. I'm not going to do that. I'm making

a general observation. It is not reading well in the general community.

Now, I mean quite properly business has a go at the Government when.and

individuals in the Government when they think we're doing the wrong thing,

or not doing the right thing, I mean in different economic areas I just

make the observation that there is a responsibility on corporate Australia

to recognise that just as in politics perceptions..just as in politics so

it is in business that perception is important as well as the reality of

the situation and it is not necessarily a good thing, it's certainly not

a good thing at a time when the whole country is so strong economically

but there are others who are.some who are missing out quite badly the perception

is that some are getting more than a fair crack of the whip.

MITCHELL:

Okay. We're getting some calls about this immediately, but I'd like some

other questions too. But Cameron, go ahead please Cameron.

CALLER:

Yeah Mr Prime Minister, I was interested in you saying that you wouldn't

interfere in executive wages but then again you'll go and you'll interfere

with workers' wages.

PRIME MINISTER:

No I don't interfere with workers wages.

CALLER:

I think the Government does by pressuring, and bring the point to the..

PRIME MINISTER:

Well we go to the..I'm sorry, with respect Cameron, Cameron?

MITCHELL:

Yep that's right.

PRIME MINISTER:

What we do is we go to the commission and put our case, this is for essentially

the minimum wage case, but our philosophy more generally in relation to

wage levels in the community is that you have a guaranteed standard and

then what you get over and above that is a matter of negotiation between

you and your employer, or between your union and the employer. Now that's

our general philosophy. We don't seek to put a limit on that. We leave that

to the individual bosses or employers and employees. Now my point is that

you can't as a Government start controlling wages. That's crazy. It won't

work and it's anti free enterprise. But you can exercise a degree of self

restraint and be sensitive to the fact that when the whole nation is doing

well the people who are missing out, and there are a lot who are missing

out and I know that and in understand that, they're going to feel it all

the more keenly if they think some are getting more than a fair share.

MITCHELL:

Well is it fair to say that what you're saying to some of corporate Australia

is exercise restraint?

PRIME MINISTER:

Yes absolutely.

MITCHELL:

Okay. Mary go ahead please.

PRIME MINISTER:

Yes Mary.

MITCHELL:

Yes hello. I'd like to complain to you about the wages that have been [inaudible]

here. That's okay if they get a lot of money if the service is okay. Now

you walk into a bank, it's absolutely atrocious. You walk into Coles-Myer,

I mean they are the worst offenders in the world. Their shop [inaudible]

looks like a shambles. It's actually impossible to get some service in there.

So it's okay if they actually make the money as long as they provide a service

[inaudible].

MITCHELL:

I guess it's the customer's decision in the end whether you walk in...

PRIME MINISTER:

Yeah look, I'm not..I mean you've named two companies. Can I say I'm not

criticising those companies' quality of service. I mean I'm not a customer

of the Commonwealth Bank. I bank with another bank. My impression is that

Coles-Myer run a very good operation and their staff are very friendly.

That's the experience I've had. But look, I'm not getting into individual

companies. I'm making a general point.

MITCHELL:

We have got a pretty big gap there though don't we? Even accepting your

point about reinvestment. With 17.3% increase in wages..in profits, 17.3

profits, 1.8% increase in wages. It's a big gap.

PRIME MINISTER:

Well I understand that but you've got to understand that all of these figures

are aggregate figures and we have had a huge improvement in employment.

But the other thing you've got to remember Neil is that the thing that matters

and that is the take home pay has gone up a lot in real terms because on

top of everything else, also there's been a very significant reduction in

interest rates. Even though they've just gone up by a tick recently the

average mortgage is $300 a month cheaper now than it was four years ago

and that means a lot for the average family.

MITCHELL:

A bit more pressure on rates from the United States this week too.

PRIME MINISTER:

Yeah well the United States is the United States and Australia is Australia.

MITCHELL:

Okay. But it leads me to another area if we may just quickly, I talked to

the Treasurer about this earlier in the week. Tax changes for sub-contractors.

It's looking to me like an administrative nightmare. It's full of anomalies,

almost like another assets test. Are you wedded to this system?

PRIME MINISTER:

Well it was recommended by Ralph. The short answer is we think it's a good

reform, we think it's fair because what it will do is prevent people who

are carrying on a particular activity in reality as an employee turning

themselves into a company purely for the purpose of reducing their tax liability.

MITCHELL:

That's fair enough but it seems it's going to catch a lot of genuine sub-contractors

in there as well.

PRIME MINISTER:

Well I'm not sure that that is right. I mean there are certain criteria

that are going to be applied. I mean for example in the building industry

contractors are not in any way going to be denied legitimate deductions.

It's not going to alter their status in an industrial relations sense.

MITCHELL:

I mean it's not hard for, in the building industry, even a barrister, to

find themselves working for one employer for a year. Even though they're

still a sub-contractor, they get the big job and they spend a year getting

their income from one source. Now under the 80% rule they're now taxed as

PAYE taxpayers.

PRIME MINISTER:

Well barristers are now aren't they?

MITCHELL:

No no, they're business.

PRIME MINISTER:

No no barristers...

MITCHELL:

They're the equivalent of sub-contractors.

PRIME MINISTER:

Well no. Well no, I mean the last barrister I spoke to sort of paid tax

as an individual. He's not incorporated.

MITCHELL:

Okay. Well we'll take them out of it. I talked to Mr Costello, he seemed

to think some of them were. But take them out of it. What about the building

worker who is a sub-contractor. Sets himself up as a subbie, gets the big

job on Crown Casino with Lloyd, when he was there, and he works there for

two years. He's getting all his money from one source but he's still a subbie

and he'll go back to several employers. Why should he pay a different tax

rate?

PRIME MINISTER:

Well it's a question of.take somebody who is, and I've even been told the

example of people who are, so the tax people told us, some tram drivers

have turned themselves into companies.

MITCHELL:

Sure that's silly. [inaudible].

PRIME MINISTER:

Well okay, if you acknowledge, see you're acknowledging the point and that

is if the thing you are doing is properly in the nature of a employer-employee

relationship then the tax liability ought to attach accordingly.

MITCHELL:

Sure but you're throwing out a net that's going to catch.

PRIME MINISTER:

Well I'm not sure that when these rules are settled down, I mean we've got

another, there are quite a period of time before these things come into

operation, I'm certain any anomalies of that type can be ironed out.

MITCHELL:

Hello Trevor, go ahead please.

CALLER:

Hello, how are we?

MITCHELL:

Well you're alright Trevor. Go head.

CALLER:

Yeah good. Mr Howard, a question regarding sub-contractors. I'm a sub-contractor.

PRIME MINISTER:

What in?

CALLER:

In the ground maintenance area. I sub-contract to a reasonably big company

and probably 80% of my income comes from the one company, although I do

have my own, what would you call, suburban..

PRIME MINISTER:

And do you control the hours of work and where you perform that work?

CALLER:

Well I control the hours of work but I work at various sights for this company.

Like as an example I look after QANTAS out at the airport here.

PRIME MINISTER:

And do you provide much infrastructure? Is all the infrastructure provided

by you or by the, well the organisation that you do close to 80% of your

work for?

CALLER:

I supply the labor and all the equipment.

PRIME MINISTER:

You supply the labor and all of the equipment, yes.

MITCHELL:

So is he a sub-contractor or does he pay as PAYE taxpayer?

PRIME MINISTER:

Well there are a number of other principles and I think it sounds to me

as though he could, depending on, I mean there are a number of criteria

laid out and we have to, I'd have to know all the circumstances [inaudible]

MITCHELL:

What are the other criteria?

PRIME MINISTER:

Well the level of control over hours of work and where it's performed, whether

the same services are contracted to the public at large. Do you do that?

MITCHELL:

How can they be if you're doing all your work for one person for a particular

period?

PRIME MINISTER:

Yes but I mean is it in the nature of the activity that you could do that

kind of work for somebody else.

MITCHELL:

Well you could advertise for it but be unavailable to do it because you're

tied up with employee.

PRIME MINISTER:

Well yes but the point is that you may by dint of the particular work that

you do, it may be only work that you'd be able to perform. Not because of

time constraints but because of the character of it you could only perform

it for one company or one organisation which of course means that you are

more in the nature of the employee of that company than you are a sub-contractor

at large.

MITCHELL:

But you might be an employee for a year because you get the big job. I mean

you might be one company you're working for for a year, the next year you've

got 12. So you're going from one to the other where as you're essentially

the same businessman.

PRIME MINISTER:

Yes but Neil, I understand that in some cases that can happen but can you

also understand, and those who are being critical of this proposal, that

there are a growing number of examples of where straight employer-employee

relationships are being converted into independent contractual relationships.

MITCHELL:

But the tax office looked at it for four years and came up with next to

nothing. Look I guess we better not [inaudible] but I know there's a lot

of concern about it. I just think it could lead to enormous problems for

sub-contractors.

PRIME MINISTER:

Well I think if we have got an obligation to the generality of taxpayers

who can't do things to reduce their tax liabilities we've got an obligation

to them to make sure that there is equity, but to do it in a way that doesn't

interfere with legitimate arrangements when no tax avoidance is involved.

I think the rules that we're working out will achieve that goal.

[Commercial break]

MITCHELL:

The Prime Minister is in our Sydney Studio. Mr Howard, the Sydney broadcaster,

Alan Jones, seems to have a number of contracts which make John Laws look

almost virginal. What's your reaction to them?

PRIME MINISTER:

Well, I stated a view when this thing first broke and it was not specific

to either Mr Laws or Mr Jones or indeed anybody else and that is that if

you hear the view of somebody on radio or television for that matter you

assume that that is that person's view uninfluenced by any commercial arrangement.

Now, that, my attitude, is if the cap fits, wear it irrespective of the

individual. I have been asked before I think by you or perhaps by you and

others, would I comment on the evidence that so far has been given before

the broadcasting inquiry. The answer is, I am not going to comment on the

specific evidence while that inquiry is still going on. I don't think that

is appropriate. I shouldn't as Prime Minister set myself up as a judge in

a particular proceeding but the principle.when this first broke I was asked

this question - I think I was in New York at the time -.

MITCHELL:

Well, we've seen the criticism then of John.

PRIME MINISTER:

But I was asked the question. I mean, you say it was seen. I mean, I was

asked a question can I just make it perfectly clear, the principle I then

stated and I restate now is not I don't think to apply that specifically

to one individual, I'd apply it to anybody.

MITCHELL:

Okay. Are you disappointed by what you are reading?

PRIME MINISTER:

Well, I said at the time that I'd be very disappointed if that were the

reality and it would apply to anybody.

MITCHELL:

Could this jeopardise any of the appointments Mr Jones holds? I think he

has got at least one Government position hasn't he?

PRIME MINISTER:

Well, you are inviting me to do what I said I wasn't going to do and that

is effectively comment and I don't think I should.

MITCHELL:

Okay. Now, the illegal boat people, do you agree this is costing hundreds

of millions of dollars?

PRIME MINISTER:

It is. It has become quite expensive.

MITCHELL:

How many have been sent back immediately do you know?

PRIME MINISTER:

Well, I haven't got the figure off hand but the turn around has been very

quick but it is not an easy situation. And one of the reasons why we are

so attractive is that there's a view around the world that we are an easy

touch and we have been trying as a Government to tighten the laws for, I

think, up to a couple of years now. It looks as though the Labor Party is

finally going to cooperate and help us put some legislation through but

this should have happened some time ago.

MITCHELL:

What's wrong with the principle, which is as a lot of people put of course,

is that when people arrived illegally they have no right, just put them

on a boat or plane immediately and send them back.

PRIME MINISTER:

Well, sometimes there is nowhere to send them back to straight away. We

try as far as humanly possible to do that but if they were put to sea in

unseaworthy craft and they drowned I don't think that would be seen as right

or humane or decent.

MITCHELL:

Well, what about hiring a jet? Put them on a Qantas jumbo and send them

back.

PRIME MINISTER:

Well, you have got to negotiate the return of the people because that jumbo

jet might be refused landing rights.

MITCHELL:

Yeah. The Uniting Church has said today that the automatic detention policy

is racist. What's your reaction to that?

PRIME MINISTER:

Well, that is wrong. I mean, that is a very uninformed, unreasonable remark.

I think it is for a country like Australia that's opened its heart and its

shores to genuine refugees for decades that is a very unfair and inaccurate

remark and it contributes nothing to an intelligent debate of what is a

very difficult issue. I mean, we took more Indo-Chinese refugees on a per

capita basis in the 1970s than any country on earth.

MITCHELL:

Would you be willing to legislate to remove the rights of these people when

they arrive?

PRIME MINISTER:

Well, what we are trying to do is to tighten the law. I mean, we have tried

to tighten the law as much as we can and so far we are being obstructed

in the Senate. Now, I hope that is now changing but I think we would have

presented a firmer face to would be boat people earlier if we'd been able

to tighten the law earlier. And we'd have been able to do that if we'd have

got cooperation from the Labor Party in the Senate.

MITCHELL:

Still Foreign Affairs reports today that some of our relationships with

Japan were a bit strained that you badgered them over East Timor.

PRIME MINISTER:

Well, I heard that report. I did urge the Japanese Government to make a

contribution to the East Timorese fund. Bear in mind this is the fund that

made it possible for poorer Asian countries and others who couldn't afford

it to contribute peacekeepers. Now, I would have thought everybody would

agree it was a good thing that you had a variety of countries contributing.

I mean, many of the countries in the ASEAN area said, yes, we'd like to

be in it but we can't afford it.

MITCHELL:

Did you get a reaction from Japan or were they.

PRIME MINISTER:

They were very helpful.

MITCHELL:

..resentment, do you think?

PRIME MINISTER:

Well, I didn't find any