TRANSCRIPT OF QUESTION AND ANSWER SESSION SATELLITE HOOKUP
TO NEW YORK FOR McINTOSH, HANSON, HOARE, GOVETT INC BUSINESS
CONFERENCE 5 OCTOBER 1988
E 0 E PROOF ONLY
McINTOSH: Good morning Prime Minister.
PM: Good morning John.
McINTOSH: How are you? We are talking to you from a grand
room in New York and there are a lot of very interested
potential investors in Australia and they're looking forward
very much to hearing what you have to say.
PM: Thank you.
McINTOSH: So perhaps I could start with the questions.
PM: Yes.
McINTOSH: The first question Sir is on privatisation.
Privatisation has been a major feature of structural reforms
in a number of countries, not just in Mrs Thatcher's
Britain, but also in countries where the governing party has
strong links with the labour unions, like Spain and New
Zealand. Last year you raised the possibility that your
Government would sell off its interests in airlines and the
Commonwealth Bank amongst other things. What prospect is
there of progress in this direction from here on?
PM: Well just let me quickly make the point that what we're
concerned about here in Australia is efficiency in the
creation of the level playing field between public sector
enterprises and the private sector and in that respect we
have made significant changes in regard to the arrangements
covering the operations of the public sector. Let me take
the largest one, that is Telecom. we have removed a lot of
the bureaucratic regulations there. We have made decisions
which will open up Telecom to competition that they didn't
have before. That's most particularly true John in regard
to value added services and the maintenance of equipment
section and so that area of public enterprise is going to be
much more open to competition now than it was before. we
think that will make for greater efficiency. When I raised
the question of the possible sale of or disposal of some
part of some enterprises and I talk about particularly the
two airlines, Qantas, Australian national Airlines and
perhaps the Commonwealth Bank, my major concern was
questions of funding. I want to make it clear to your
audience that there wasn't any, and they can put it
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( PM cont) ideological type of drive about this, it was a
question of funding, a priority of resources and my Party
has decided that it needs to look at this issue. We have a
committee which is looking at it now. The question of
funding problems won't go away. The committee is looking at
it and I don't want to prejudge their work. But what I want
to say to your audience is that in this country there are
areas of enterprise which inevitably will be within the
public sector. You couldn't for instance if you take the
area of telecommunications and post, we have such a wide
spread population that the private sector would not be able
to sustain the degree of cross-subsidisation which is
involved in providing services to our far flung country
people now. So really what we want to do is to make sure
that where we have large parts of enterprise like this in
the public sector that at least they are open in important
areas to private competition. Now we're doing that and as I
say on the question of funding and whether there needs to be
some changes there that awaits the outcome of the work of
this committee and I'm not going to prejudge that.
McINTOSH: Well thank you for that answer Sir. The next
question I wanted to ask you is on the wage tax trade off.
You've indicated an intention to seek a trade off with the
trade unions involving smaller wage rises in exchange for
tax cuts. What chance is there that you'll be able to
achieve a trade off involving no wage rise at all next year
and and what size of tax cuts would you have to give to get
the unions to agree to no wage rise?
PM: Well I think it's rather unrealistic to talk about no
wage rise. But I ask your audience to remember the history
of this period in Government and what we've achieved. It's
quite remarkable by any standard. We have actually achieved
a significant reduction in real wages and in terms of real
unit labour cost there has been a return to the level of the
There's been an 11% reduction in real unit labour
costs. Now we are at a point we believe where we can
continue to improve the competitive position of Australian
industry by sensible arrangements with the trade union
movement. There will be movements in money wages but there
won't need to be the extent of movements in money wages that
there would have to be in the absence of the accord and the
social wage approach that we've got. So what it means is
that we will continue a wages policy which will maintain the
real wage position of workers but in a declining inflation
situation John. In this last year on the annual basis the
inflation rate was about We aim to have that by the end
of this financial year, that is June of next year, to have
that inflation down to 4 1/ 2 to 5% at the most. Now that
will mean that you won't need the level of money wage
increases to keep up real wages that you would otherwise
need and we have said to the trade unions that we look at a
significant tax cut as being part of this whole equation.
And that's one of the reasons why we are maintaining our
intention to save the tax cuts until July the first next
year. one of the other reasons is of course in terms of
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( PM cont) proper economic management we don't want to have
an excessive level of demand which could lift our import
levels to an unnecessarily high level. Now as to the actual
measure of wage cuts let me say this that while I have great
involvement with and sympathy with your program I know that
you're not expecting the coup of this program that I will
announce the level of wage cuts on your program. You'd love
me to do it but I'm not going to. What I can say is these
things. Firstly so that we can get the greatest degree of
cooperation on the wages front and therefore maintain costs
pressures we will be giving a primacy to wage cuts at the
lower and middle levels of the income scales. They will be
very significant cuts and at the top level where we've
already reduced the top rate from the 60 cents in the dollar
that we inherited from the conservatives, to 49 cents in the
dollar, there will be significant cuts there, there could be
some staging of that. One of the parameters of course which
sets what you do there is the fact that we've reduced the
company rate to 39 cents and you can't for any significant
period of time have a major gap between the company rate and
the top income rate. So those are the sorts of
considerations. But I say in sum to your audience John that
the past five and a half years shows that by the combination
of wages policy and tax policy and social wage policy we've
done better than any other country in reducing real unit
labour costs and increasing the competitives of Australian
industry and we will continue to do that.
McINTOSH: Sir on trade there has been a certain amount of
confrontation with the United States in respect to certain
commodities. Does this weaken in your view the alliance
between Australia and the United States?
PM: No it's not weakened. It is the judgement of both my
Government and the Administration of the United States not
only interchange between us in private conversations, it's a
matter of public record on the part of the Administration
and my Government, that the relations between our two
countries in the alliance sense have never been stronger.
One of the features of the strength of the relationship is
that it follows that where we do have differences on a
particular issue we are capable with integrity and strength
to say to one another where we differ. We have expressed
concerns to the United States Administration about certain
aspects of the US Trade Bill and some of their policies,
particularly in the agricultural area. Now we understand as
far as the United States is concerned that certainly on the
part of the Administration they have a philosophical
commitment to free trade. They share our view on that.
They find themselves in the situation where they believe
they have had to take retaliatory action basically against
the Europeans and the common agricultural policy of the
Europeans. But as I said when I was in the United States in
June we know that the gun hasn't been aimed at us when these
policies have been brought in but it's not much help to an
Australian farmer to say when he gets hit in the head with a
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( PM cont) bullet that the bullet wasn't intended for you
sport, it was intended for the Europeans. It still hurts to
get the bullet. Now we've put these arguments very strongly
to the United States Administration and we've been able to
do that I know without in any sense weakening the alliance.
It is the view of the President, of George Shultz, of your
defence people, that the relationship has never been
stronger in those senses and that is an accurate assessment.
McINTOSH: An ancillary question to that is the United
States elections which are as you know drawing close
PM: Yes I've heard about that
McINTOSH: I can assure Sir you don't hear about anything
else in this town. Following you recent visit to the United
States which Party would you feel would offer the best
benefit to Australia on trade relations?
PM: What am I offered George? What's the offer Mike?
What's the offer? I mean who do you want me to No you'd
appreciate that I can't and I would not make publicly any
comment that would indicate any pre-disposition on my part
or the part of the Australian Government or people in this
issue. This is properly a matter for the democratic
processes of the people of the United States. But I can say
these things which I think perhaps are relevant. I have of
course known George Bush now for a long time and I had the
opportunity of meeting Mr Dukakis when I was there in June.
I took the opportunity in discussions with both George and
Michael Dukakis to put before them these things. Firstly
the importance to us of the alliance relationship between
the United States and Australia and I'm very pleased of
course that they both strongly affirmed their committment to
that relationship. I also of course put to both of them
Australia's concerns about the creation of a freer
international trading system in general and of course in
particular the need to include agriculture in the freeing up
processes that are now being discussed in the Uruguay Round.
I believe that both of them understand our commitments in
that regard and I think essentially they share our views.
So let me say that I feel that because of the basic nature
of our alliance relationship which let me remind your
audience rests upon our shared commitment to certain basic
ideals of freedom of the liberty of the individual, the
rights of the individual before the law, these are
fundamentals which we in Australia share with you in the
United States because our alliance relationship is based
upon that shared commitment, a commitment which has been
expressed both in war and in peace together then I'm certain
that whatever the outcome of the United States election the
alliance relationship between Australia and the United
States will remain strong and fruitful.
McINTOSH: Let me ask you some questions on labour reforms.
I could preface my questions by saying that Simon Crean has
been here and my observation is that he wowed the audience
on Monday. But you said that your Government has made a
start on matters like labour's market reforms, you've
achieved that in the coal industry some fairly basic things
like opening the mines for 6 days a week and eliminating the
month-long shut down over Christmas. Things that are fairly
elementary in other parts of the world are being proposed.
The labour unions don't seem to like this. There's more
talk of national coal strikes I understand. What assurances
can you give us as investors in these sort of places that
some real progress has been made on these basic issues?
PM: Let me say this to my American friends that we'll take
on the American coal produces in an unsubsidised fully
competitive way, particularly say in Japan, anytime you
like. We'll beat you because we are the most efficient and
one of the concerns that we have for instance in regard to
the Japanese situation is that we wouldn't like to see our
American friends and our Japanese friends come to any
arrangements in regard to coal sales which took into account
any considerations other than the truly competitive price
that can be offered to the Japanese and I say to you without
equivocation let's meet and compete on that basis. We'll
beat the pants off you every time. So we can't be going too
badly in the way we produce our coal. Having said that I am
not complacent about the industry. There is of course John
as you rightly say room for improvement and the decision
which has just been brought down by the Coal Industry
Tribunal certainly points the way to improvement. Now the
employers obviously ask for these changes and they have
essentially got what they asked for. Let me say this that I
think the employees, the rank and file members, understand
the inevitability of these changes and to the credit of the
leadership of the union they have recommended that the rank
and file accept these. There have already been meetings
which have endorsed that recommendation by the leadership.
It is my view that within a short time that will be the
confirmed position of the workers. In other words it may be
with some degree of reluctance that they will accept these
changes. Now let me say this to my American friends and any
other competitors around the world. We can beat you as it
is on price now, just watch out when these changes come in.
McINTOSH: Thank you. A couple of people have just left the
room.
PM: They'll switch into something else.
McINTOSH: There is a shortage of skilled labour. What
future steps do you envisage taking in education to start a
process of retraining and achieve certain structural changes
in the workforce.
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PM: Good question. Let me quickly just give you a little
bit of history and then the future. one of the worst things
that we inherited from the conservatives when we came in in
' 83 was an awfully low retention rate of our kids in
secondary education beyond the compulsory age. only 36% of
our kids stayed on beyond that compulsory age in 1982. Due
to a range of measures which my Government have taken we've
now got that up to 57% and by the end of the early part of
the ' 90s we'll have that up to 65%. So the basic building
block is changing. That is the kids are staying in the
education system much longer now and more of them will do
that. Now we are not only concerned with them staying there
but improving the quality of the education they are
receiving and in cooperation with the States that is being
addressed. Now let me then go to the area of tertiary
education. We've already very vastly increased the number
of tertiary places but I'm not satisfied with the increase
that's taken place so far John. What we're doing now is to
put in another $ 9 billion into tertiary education in the
next three years and that will create an additional 40,000
places which is the equivalent to creating universities of
the size of the existing Melbourne, Sydney and Adelaide
universities. Not only are we very very dramatically
increasing the numbers of places in the tertiary sector, we
are opening up the range of availability so that the kids
from relatively disadvantaged families and lower income, the
kids with a talent irrespective of income level of their
parents, they are going to get into the tertiary sector.
But we're also making sure that the tertiary sector becomes
more relevant to the needs of the economy. Now I don't take
the view that education is simply for the economy but you
can't have an education system which is irrelevant to the
economy. So we are cooperating with industry to make sure
that these additional places and vastly increased places are
going to be relevant. we know, all of us, in industry that
it's not only people who come through the universities that
are relevant to your skilled workforce. So what are we
doing there? We are doing these things. In our technical
education system, that's the TAFE system we call it,
Technical and Further Education, putting both more money
into that but we are cooperating closely with industry to
ensure that those courses are more relevant and make for a
more flexible workforce. So when you bring that together
more kids going through the education system, the actual
technical training area, more resources, more involvement of
industry, the tertiary sector, very very much more money and
more people going through it. But then very importantly let
me make this point to your audience. In one sense the
greatest revolution that's happening at the moment in
Australia is this. We have our industrial awards which set
out the classifications of workers in industry. The major
award in the manufacturing sector is the metal trades award,
some 350 classifications which have been -( satellite break)
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PM: ( pick up from satellite break) I was pointing out that
the major award in the manufacturing sector in Australia is
this Metal Trades Industry award. It's accumulated 350
different classifications over some 60 years. Now the
employers and the unions in co-operation with the Government
and the Arbitration Commission are working on that. By the
middle of next year that'll be wiped out, we'll have eight
classifications. This is going to be very important in
facilitating flexible training within industry, so that you
haven't got labour market classifications related to a
distant and irrelevant past. The classifications which will
be relevant to a changing present and challenging future.
So when you take account of all these things, what we are
doing as a government in terms of the primary and secondary
schooling, the technical system, the tertiary sector, and
what we're doing as well within the actual labour market
structure with the reclassification of awards, I'm confident
that American investors can be looking to a future Australia
which will have a well trained, flexible, committed labour
force. McINTOSH: is that as Chairman of McIntosh Securities I
constantly get asked, and that's on the subject of
retirement.
PM: Benefits or?
McINTOSH: You've obviously had a major role in convincing
the unions
PM: John, I'll swap your retirement benefits for mine mate.
McINTOSH: I've always wanted a gold pass. You've obviously
had a major role in convincing the unions and the Australian
electorate on the need to accept your government's policies.
I can understand that you would like to stay on to beat
Malcolm Fraser's record as the second longest serving Prime
Minister but you're 10 years younger than Ronald Reagan was
when he started as President of the United States. Can you
provide any indication as to how long you would intend to
stay in the job?
PM: I'll be around for quite a while yet John. I feel
strong, I'm confident, I have the support of the Party and I
suppose in the end, most importantly, I have the support of
the people. They are the ones who in the end make the
decision. I'm very fortunate John that, sure I'm leader and
I'm very proud of it and I think I do a good job, but I've
been very fortunate in having a very very good team around
me and that covers all the important areas and of course the
audience there is going to see one of the most important
members of my team, Paul Keating, tomorrow. He's been an
outstanding Treasurer. Together Paul and I and the others
have provided what is a very very outstanding government.
So that it's just not my own assessment, I would point out
and I hope Mr Howard is around there somewhere because the
new shadow minister for finance that he's appointed, John
Hewson, now you can hardly accuse him of being biased. He
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( PM cont): wrote just quite recently in the Australian
Business Review that the Hawke Government is the most
professional and most competent front bench since 1945. Mr
Hewson gets a number of things wrong but he's dead right on
that one. So I've got a good team and I intend to be
leading it for quite some time.
McINTOSH: Thank you for that answer. Perhaps my
penultimate question would be on world trading blocks.
There's some concern the world would be dividing itself into
trading blocks. of course we've got Europe in 1992, the
US and Canada, Japan and other Asian countries, or even
Japan and the United States. Does it concern you that
Australia might be left out of this process and if so what
would you intend to do about it?
PM: Let me say this. Australia's fundamental commitment
John, and ladies and gentlemen, is to the freeing up of
the international trading system. Sensible economics and a
concern for a sound and stable political world demands that
that be the outcome because history shows that if the world
degenerates into divided protectionist blocks then this is a
recipe for political disaster and possible conflict. In
this nuclear age we can't contemplate a degeneration into
that situation. So that is why Australia, not merely in
terms of our own perceived interests but as part of the
world community, has played a leading role in the
multilateral negotiations. It was Australia which led the
processes which created the Cairns Trading Group which has
now become a firmly established part of these processes.
We're trying to play a role essentially John in bridging the
gap between the United States and Europe in these
negotiations. AS we come up to the mid term review,
Montreal in December, we have said, particularly in this
area of agricultural trade, although that's not the
exclusive ambit of these discussions, Americans are
concerned that we do free up international trade in
agricultural products but they say, well, let's make sure
that at the end, the long term, we've completely freed it
up. The Europeans have been tending to say let's look at
some, perhaps, immediate moves. We have said you've got to
marry the two. You've got to have some short term harvest,
if you like, starting next year which will do something
about sort of freezing the processes of protection and
subsidisation in agricultural trade but married to a long
term objective. To the great credit of the United States
just two days ago in the official talks in Pakistan, they
have said yes there ought to be some intermediate changes.
We agree with that. Now we're expecting the Europeans to
respond to that so we are going to put all our pressures,
not only in regard to agricultural trade negotiations, but
to make this Uruguay Round productive. The world's best
interests are served not by blocks but by a freeing up of
the system. The world has benefited in the post war period
and we owe a great deal to the vision and the imagination
and the commitment and the initiative of the United States
in the post war period in creating the multilateral trading
system under GATT. We want to see that strengthened. For
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( PM cont): succumbed to any suggestions about detailed
discussions about blocks. we are watching what's happening
and I've responded to the invitation by the Japanese Prime
Minister when he was here in Australia just recently to set
up a study group to look at the implications of what's
happening in Europe and in North America. We're going to
look at that and all I can say is that in the worst case
scenario, if the Uruguay round didn't work and didn't
produce the optimum results that we want, then we would have
to look at the possibility of some association with others,
including Japan. We are part of the fastest growing region
in the world in the western Pacific, we would look at that.
But unequivocally, Australia's best interests, the United
States best interests, the world's best interests, are
making the Uruguay round work, make it productive so that we
free up the system. That will be good for developed
countries like the United States and Australia and very
importantly it will give the best possible chance to the
developing world of lifting themselves up. Because in the
end the welfare of those developing countries depends upon
them being able to sell competitively into the markets of
the developed world. So that's where all our emphasis
should be.
MCINTOSH: The last question is a very general one. Is
there anything you'd like to say to our United States
friends here tonight that perhaps we haven't covered?
PM: Could I just quickly say this to our friends in the
United States. I repeat what I said before, our
relationship between our two countries is strong and
healthy, it's never been stronger. Where we have
differences we are able, because of the strength of that
relationship, to talk those differences through and we'll do
that. But my country, let me say this. I am proud to be
Prime Minister of Australia as we come now towards the end
of this century because I can say I believe without any
possibility of contradiction that Australia is now a more
open, competitive country than it's been before. I've given
you the statistics, I won't repeat them. we are practising
within our own country what we're preaching to the rest of
the world. we are making our economy more competitive,
we're making it more open. This has been possible because
of the change in attitude that we've engendered. The
attitudes of the past have changed, that we inherited, where
Australian was set against Australian, where there was
confrontation. There is now, at all sorts of levels,
realistic co-operation involving government but particulary
involving employers and workers because they see and
understand that the future of Australia depends upon it
being able to have competitive manufacturing and services
industries. we have just recently brought about a reduction
in protection of the order of 30%, that's what we've
initiated. When there was a reduction in protection back in
the early 170s it nearly brought the country apart but now
this has been accepted. But we know that while we have vast
natural resources and an increasingly well trained and
flexible workforce we know that we need the investment, the
( PM cont): expertise of people from other countries.
Therefore as part of our whole deregulation processes of the
financial markets and so on we have also liberalised our
foreign investment rules to the point where our friends in
the United States and elsewhere know they are welcome here.
So I say to you, we want you to come here, to bring your
capital, to bring your expertise, knowing that you're going
to have a government which welcomes you, a trade union
movement which wants to co-operate with you to ensure that
we have a growing and more prosperous Australia and you come
to a country, admittedly with only a market of 16.5 million,
but you come to a country which is a platform for expansion
and export into the fastest growing region in the world.
You come to a country which has excellent relations with the
countries of the region. You come to a country which has
relations with China which are acknowledged as being better
than any other country has with China, for instance. You
come to a country which is one of the most politically
stable in the world. So we are proud of what we are doing,
but not complacent, we know that there are challenges in
front of us but we have the right attitudes in this country.
We are co-operating together with one another in Australia,
we wan't to co-operate with others to come and work with us.
I say to your audience there, there is no country in the
world that in the last five and a half years has shown a
capacity properly to manage itself, there's no country which
has better relations with the relevant countries of the
region and others in Europe and around the world, there's no
country which is better placed in that respect. So we're
proud of ourselves but we're not complacent. We look
forward to working further with you because we just happen
to believe we're just about the best place on earth. But we
can be better and we'd like to be better with your help
McINTOSH: I have to agree with that. I can only say that
this conference I think I can say in all modesty has
been a great success and a large part of that success has
been due to the policies that you and your colleagues have
put in place in the last five or six years.
PM: Thank you very much.
McINTOSH: There's no doubt that your popularity and your
presence in the United States is such that when we have held
this conference and in particular this evening we had a
large number of people obviously wanting to attend to hear
what you had to say. We really appreciate your appearance
here this morning, your time. A measure of the extent of
your popularity and the extent of the interest in Australia
which I think your government has created, the fact that
around about 30 people have ventured across from Europe to
attend the conference. I think I can say that in a share
market which is not exactly buoyant at the moment, it's
interesting that so many people would want to attend and so
many people would want to hear political leaders from
Australia, union leaders and of course corporate leaders and
I think that that is a great measure of what you have done
since your government came to power five or six years ago.
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McINTOSH ( cont): We thank you very much for speaking to us
this morning. It's certainly been something that I'm sure
everyone in this room will be able to go away and think long
and hard about and recognise that, as you say, we have a
great country if not the best country in the world. I am
certainly proud of it and I think all the Australians in the
room are certainly proud of it and we thank you for
illuminating us and addressing us this morning.
PM: Thank you very much John, thank you.
ends