. LJ.
TRANSCRIPT OF INTERVIEW WITH JOHN JOST, RADIO
27 OCTOBER 1989
E OE PROOF ONLY
JOST: What are the odds of an election before Christmas?
PM: I don't think there'll be an election before Christmas.
I've been fairly consistent about this. I've always tended
towards 1990. I've got no reason to change that.
JOST: Has the Liberal tax policy sort of helped confirm
that feeling?
PM: No. I think the Liberal tax policy the more it's
unfolded and all its implications understood it's going to
be a minus for them, a plus for us. I suppose in that sense
the more time we've got to expose that the better.
JOST: Still they do seem to be on a rise at the moment the
Liberals. This tax package, especially the child care
rebate seems to
PM: Which one? Which package are you talking about? We've
had three in this week. I mean they are constantly changed.
They change their child care package about as constantly and
consistenly as they change their leadlership. So we're not
quite sure. Now we've got the additional change revealed in
this morning's press that they're saying that they're not
going to index the benefits for lower to middle income
people that we've brought in. Something which they'd been
saying before they did. Chaney said yesterday yes we're
going to continue to do that and Peacock's office said no
that's not the position. I mean what is their package?
JOST: Well let's say they may be, concede that they may be
sort of a little bit vague on the course they're on, which
is what you're suggesting. But nevertheless the course that
they're on seems to have been greeted out there in the
community with a fair * amount of interest.
PM: Sure, I think that it was inevitable it's going to be
greeted with interest. After all when you've been waiting
for six and a half years for something you're going to be
interested in what pops out because they've been promising
for so long. And I'm not surprised at the beginning when
you see stories about rather largish handouts that people
will have some interest in that. But each passing day has
revealed these things, changes in what they are proposing.
There've been three changes in what they are proposing.
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There've been three changes now in what they've been saying
about child care. it's now revealed yesterday that they've
got a changed position in regard to indexing, maintaining
the real benefits of these family allowances. And of course
what's also been revealed is the total unfairness of the
package which is going to give back literally billions of
dollars under the abolition of capital gains tax to the
Federal President of the Liberal Party, John Elliott, and
his ilk. That's what's involved for one per cent of
taxpayers. They're going to give back through time billions
of dollars which would be collected for families to be able
to be paid on education and those sorts of things. But
they're going to give it to the few who don't need it and in
the process distort the whole pattern of economic investment
decision taking in this country. As those sort of things
come out the reaction will be devastating for the
Opposition. JOST: If only one per cent of the country are being
affected by the capital gains taxes though, as you say, are
the other 99% really going to worry about it much?
PM: Of course they are because if you are in a situation
where billions of dollars are going to be given back out of
the public revenue to the one per cent, that means that you,*
the 99%, are not going to have those billions of dollars
available in the Commonwealth revenue for payment on your
education, your roads, your bridges, your defence, or for
the lowering of taxation. Of course the 99% are going to be
worried. JOST: You have to explain that though don't you?
PM: It's not very difficult to explain.
JOST: Ok, but coming back-
S PM: I accept that. You're quite right. Yes.
JOST: Coming back to working families. After all if both
parents work and that's the way most people get by these
days they do deserve some sort of a break. And a very
measurable break is a bit of assistance with child care.
PM: And when the period comes which has really started when
we have to compare what we've done for families, whether
they're two income or one income families, we will literally
kill the Opposition. I know you haven't got much time now
but I'm prepared to give you a dry run on the comparison if
you like.
JOST: That's alright. I was going to ask, my next question
was when do you go to the polls, when you do go to the polls
will you be making some offers to the electorate? You can
do it now if you like.
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PM: No, I don't think we need to be making offers. I mean
I'm quite happy at this point to compare two things. The
record of what we've done in our six and a half years in
office with what they did. Let's just give something that
goes right to the heart of the family. Under the Libs when
they walked out of office in regard to education, because
they weren't getting the money from the wealthy in this
country, because they allowed tax avoidance to be the
fastest-growing industry in the country, they didn't have
the money to spend on education. That meant that only 36%
of our kids were staying on in school. Now because we've
reformed the taxation system and made the wealthy pay their
fair share of tax we have been able to get a situation now
where 58% of our kids have stayed on in school. In their
period they created 26,000 additional places in the tertiary
system. By the time we get to 1992 we'll have created
150,000. And at the same time reduce the levels of tax.
They walked out of office with a top tax rate of 60 cents in
the dollar. We've brought it down now very considerably as
you know to 47 and the lowest rate we've brought down from
to 20. So you've got all these things done because we're
dinkum about tax. making the wealthy pay their share.
We've been able to pay that out then in additional
educational facilities, additional family allowances indexed
for those in the community most in need. But they want to
go back to the same old system, let the wealthy not pay,
give it all back to them and then make those in the
community who are most needy pay the bill. That's crazy.
JOST: But they're still talking about, down the line, a
lower tax rate for everyone aren't they. You can't really
rely permanently on the last Liberal government.
PM: No, but what you can do is rely-on an analysis John of
what they are saying now. Their sums'simply do not add up.
They have been shown now to have a fiscal hole of the best
part of a billion dollars. In other words that means
they're going to have a looser fiscal policy than us if they
stick with what they are doing now. They have a wages
policy which will be disastrous because they'll just have a
series of pilots' disputes all over the place. They're
going to say to the strong you go out and you bargain with
your employers and if you can screw them, screw them. If
it's 20% or 25 or 30% you can get, that's alright. So that
will blow wages through the roof. What happens to interest
rates then? They go through the roof. If you leave all
that in that situation you're gone. I mean they just can't
make that sort of scenario work. All economic analysts now
Are just looking at this and saying it doesn't fit together.
In that situation what they say now about what they'll do on
tax simply cannot be taken for granted. They will not be
able to live with this unco-ordinated set of gimmicks which
they are going to call an economic action plan. They call
it an economic action plan. There's no commentator in this
country who thinks it's an economic action plan.
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JOST: They call the Accord a gimmick.
PM: Well you see I would rather take the statement of say
of Michael Camdessus. He is the Executive Director of the
International Monetary Fund. He came here last year. He
said the man who examines the economy of every country in
the world he said of the Accord that this had been
centrally important. He praised it. He recommended it to
other countries because this enabled a government to have
another arm of policy, wages policy. Look, we don't have to
be John just theoretical about this. I just ask you to go
back to 1981-82 because that's when they were last in office
and when they applied this policy. They said we don't like
the centralised wage system. They brought it to an end and
they let people go off and bargain. The transport workers
did it. And wages blew out by what 18%. What happened
then? We had the worst recession in 50 years. Another
quarter of a million thrown onto the unemployment scrapheap.
So don't let's be theoretical. They are promising now what
they had then.
JOST: Isn't it crazy though that the Accord is the only way
you can stop that sort of thing happening. That's what you
would argue. And the Accord does distort the pattern of
wages in the country.
PM: On the contrary. It doesn't.
JOST: The pilots would disagree with that.
PM: I mean if you say that it stops pilots getting 30%, yes
it distorts the pattern of wages.
JOST: But that was their opening claim. Let's face it.
PM: And, not only their opening claim but they varily
believe that that's what they would get. Why? Because they
looked at history. They looked
JOST: Three weeks later did they believe it?
PM: I don't know what they believe. All I'm saying is that
they were entitled on their reading of history, which was
pre-Accord history, to believe it. Because you know that
every time before the Accord what had happened was they put
their claim up and it was only a matter I mean you tossed
the coin. Who was going to give in first? Ansett or TAA as
it was then. They didn't realise it was a different world
under the Accord. So your'e right in saying that the Accord
distorts wage fixation if by that you mean it puts a break
upon the powerful being able to rape the community. Because
that's what would happen under the opposition.
JOST: You might be able. to argue with that with the pilots.
But the fact is that that sort of distortion probably goes
. into every workplace, on every factory floor, in every shop
in the country.
PM: If you talk about distortion let's just look at what
you mean by distortion. Under this so-called distortion we
have created over one and a half million new jobs in this
country as a result of this wages policy, what you call this
distorting wages policy. That's a rate of job creation five
times faster than under the Opposition when they were in
government and it's a rate of job creation more than twice
as fast as the rest of the world. So the word distortion is
crazy with respect to you. What it means is that the trade
union movement has agreed to modify their claims for
money-wage increases, accept reward for an improvement in
the social wage, through improvements in Medicare, education
and those sorts of things which are non-cost to their
employers but which are benefits to them. And in that way
we've been able to employ five times as many more people in
terms of rate of growth than under the Libs when they were
in with no wages policy. And if you call that distortion I
know which sort of distortion I'd like to have.
O JOST: One of the things that appears to people, to some
people, about this whole question of the Accord relates to,
it boils back to the inflation question. You get this
situation, it looks like a round robin. We get five or six
per cent in wages, we have an inflation rate that seems to
be just built in at six to eight per cent and they just seem
to chase each other permanently.
PM: It just isn't the case. Because if you watch the
position that you had before the inflation rate when we came
to office was 11%. That's because you didn't have a wages
policy under the other mob. When you had wages blowing out
by 18% as they did under them of course inflation went out.
we reduced inflation dramatically. It's now down to eight
per cent. Of course what we are paying for still is the
result of the depreciation that occurred in ' 85-86 and plus
there's some more immediate factors th-is year. We're still
getting the impact of the flood. But in fact under this
wages policy you've significantly reduced the rate of
inflation from that we inherited. It was at 11% that we
inherited. We got the underlying rate of inflation down
before the collapse in commodity prices. We'd got the
underlying inflation rate down to five per cent.
JOST: Yes, but that was sort of, there was a bit of an
adjustment to Medibank there wasn't there?
PM: No, Medibank out. Medibank out. We had got the
underlying rate of inflation down to five per cent.
JOST: And we've got eight per cent now. It's a lot more
than our trading partners.
PM: It is. And it's a lot less
JOST: come down?
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PM: It's a lot less than we inherited too. It's a lot less
than 11%.
JOST: That's six or seven years ago.
PM: Well, that's what we inherited under their system.
Under their system you could be guaranteed that you'd get
back into double digit inflation immediately. Now I'm not
avoiding your question. We believe that, as we said at the
time of the budget, it will be in the second half of the
financial year that the rate of inflation will start to move
down. I believe the next two quarters will be at lower
rates than this one now.
JOST: How much lower?
PM: I would think that the inflation rate will be, by the
end of this year as we've said in the budget, will be down
to the order of seven per cent. Certainly down below what
it is now, or better.
JOST: what do you reckon interest rates will be on June
PM: I'm not saying that because we are in a position where
the level of demand in the economy is much higher than
either Government or private sector economists thought at
the beginning of this year. Therefore our policies must now
be directed towards getting that rate of demand down to
levels which give us sustainable rates of import. Now we'll
keep monetary policy tight as long as is necessary to
achieve that but not one day longer than is necessary.
JOST: I might add I've got a listener here who's just rung
in with this question. It's not a bard question actually.
' Who was the President of the ACTU whin wages, the Secretary
of the ACTU when wages blew out under -the other mob?'
PM: I was a Member of Parliament in ' 81. I'd gone into the
Parliament in 1980. But let me say to this listener. I
thank, I might have paid them for the question. When I was
President of the ACTU and this will be confirmed by people
on the other side I pleaded with Mr Fraser, pleaded with
them to change their wages policy. I said this is silly
that you're putting us into a position where we've got to go
out and use our muscle, get as much as we can in the market.
It's much more sensible I said to him that we don't have
that sort of position. So that's what I argued when I was
President of the ACTU. But they wouldn't listen to me. I
said well if that's your way well then we've got no
alternative. But I wasn't President of the ACTU during that
blow-out.
JOST: Fair enough. Coming back to that interest rate
thing. A major criticism that's made by a lot of economists
in this country is that we are relying too much on interest
. rates, that that's it. it certainly looks like that..
like that to the average-folk out there...
PM: Let me just tell you what the facts are. There are
three arms I mean I hate sounding like a Professor of
Economics but your question demands it. There are three
arms of policy. There's fiscal policy-
JOST: Yes.
PM: There's wages policy and there's monetary policy. You
say we're just relying on monetary policy. Let's look at
what's happened to fiscal policy. I'll just give you the
facts. It's the tightest it's been in the 35 years that
statistics have been recorded. Just 1o'ok at the facts.
Four successive years, real reductions in Commonwealth
outlays. Never been done before. Third year in a row of a
Commonwealth surplus. The public sector borrowing
requirement in the period of office, been a turn around of
eight percentage points. There's now in surplus. That is
all public authorities are in total not making a net demand
upon savings. Now those three things have never happened
before in the 35 years. So fiscal policy therefore as tight
as it's ever been.
JOST: Alright that fiscal policy
PM: Wages policy we've gone through, tighter before. Just,
there it is. You can see.
JOST: We're looking at a graph here.
PM: We're looking at a graph here. There's the whole
answer. The straight line is the measure of the level of
activity, it's over time. When it goes up the economy is
operating at its peak. Now what's happened in the past,
this is from June ' 68 up to when we c-ame to office.
Activity goes up, wages blow up, into recession. Activity
up, wages up, recession. It happened every time. There it
was. The worst recession ever for 50 years before we came
in. Activity up, wages blew out, you see there. What's
happened here under us? Wages flat, activity up, wages
flat.
JOST: But it's still
PM: wages tight.
JOST: But it still must be a disappointment to you then if
you can keep, on the basis of that document, that the
economy really isn't doing a little bit better isn't it?
PM: But the problem John is the economy is doing too well.
I mean I'm not saying that in terms of people are not
JOST: Well where's the growth then, the real productivity
growth in the country?
PM: The rate of growth has been double what it was before.
The average rate of growth under this Government has been
over four per cent in real terms. But because we've had
such an enormous increase in employment, which is as I say
five times the rate of employment growth before, then that
doesn't show up in high rates of productivity growth. It's
shown up in more people in jobs. we are creating jobs
faster than ever before. If you've got employment going up
like that then productivity, which is a measure of the
relationship between output and employment, if your
denominator is going up then your productivity rate of
growth isn't so high.
JOST: Can I just go back to a little bit of unreconstructed
economics. PM: Sure.
JOST: And that is back to the interest rates. We're using
interest rates to try and contain spending. I mean do you
ever think that it might be very handy if you could ring up
the banks or ring up the Reserve Bank and say call in a few
SRDs the way you used to in the old days and literally put
your loans on a quota basis rather than using interest
rates. In other words just make people queue up for their
money, pay a less rate but not have than much money in the
system? PM: What you're saying is do you want to have a freed up
financial market or a regulated one? Quite obviously the
trends around the world, and correctly, is for a freeing up
of market forces. I mean it's not only happening in the
western world but it's happening in the eastern bloc as
well. The great benefits that we've -got John from freeing
up the markets is essentially in terms of employment and
growth. We've doubled the rate of growth of the previous
period and there is now, as you know, a situation where
people want to get a job they can get it now, which was not
what we had before. Now that's the important thing. But
we've got to shade off that rate of growth until we can get
a position where we can pay for the levels of imports with
that rate of growth. So the secret which we're going to
achieve is bringing down the rate of growth somewhat so that
there's not so many imports coming in that we can afford but
still at such a rate of growth that we'll employ the people
coming onto the labour market. And we are uniquely well
placed to do that. I wouldn't have interest rates, as I've
said to you before, higher for one day longer than
necessary. But we've got to do that because if we eased off
with interest rates there's only one thing that would
happen. What would happen then is that activity would just
explode more. You would have more imports coming in and
then you really would have to belt the hell out of the
economy. We're not going to do that.
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JOST: John Howard is coming back on the Liberal frontbench.
It looks as though he's going to take over a portfolio
that's responsible for microeconomic First up your
reaction to John Howard's return.
PM: I'm glad he's coming back on the frontbench.
JOST: It's a waste of talent having him on the backbench?
PM: Of course it is. You look at that frontbench that
they've got there now. They know themselves it's a joke.
It's a joke to have in terms of relative talent he should
be there. I'm glad he's coming back, Unqualifiedly glad
that he's going back on the frontbench. He should never
have been dumped and put on the back. And of course if he's
going to be in charge of microeconomic reform that will be
interesting too. Because we might ask him some questions
why in all the period that you were there Mr Howard as
Treasurer, why didn't you do anything about microeconomic
reform at all?
JOST: He might ask you the same question.
PM: And I'll have the answers and he won't. Because they
did nothing and we have done more
JOST: You've done a little bit lately.
PM: Not a little bit lately. what do you think about
starting in ' 83 with the deregulation of the whole banking
and financial system? Wasn't that a massive piece of
micro-economic reform? Just right bang at the beginning.
JOST: I'm thinking of ones like the * transport industry and
the waterfront etc.
PM: Ok, who made the decision, who made the decision, I
mean the two airline system? We did. I mean the two
airline system was the creation of John Howard and his
conservative mates. We've brought it to an end.
JOST: We don't have much of an airline system at the
moment. PM: I would say that what we're doing at the moment will
mean that we'll have a airline system which will be about
more efficient than the one we inherited. That's what
we're doing. Because we will have a significantly less
number of pilots operating at 60% higher productivity as a
result of what's happening now. That's what will happen.
It will be one of the most significant pieces of
micro-economic reform that this or any other country has
seen. where have you seen under any other government an
increase in productivity in an airline system of about
which is what will happen.
JOST: By when?
PM: Certainly by the first part of next year.
JOST: And the process of achieving this great step in
progress, the process has involved God knows how many
hundreds of millions of dollars
PM: And the alternative would've cost infinitely more and
forever. Because if we'd done what the Opposition said,
give into the pilots, have a 30% increase in wages for the
pilots, that not only would've ruined the airline industry
and the tourism industry, it would've wrecked the economy.
Under this, sure there's been pain in the process but in the
end Australia will be infinitely better off because it will
have an infinitely more efficient airline industry. The
alternative would've been to ruin the whole economy.
JOST: Well time will prove you right or wrong.
PM: Time will prove me right.
JOST: Thanks very much for talking to us today.
PM: Thanks John. It's been a pleasure as always.
ends