NATIONAL 9 N1: TWOIK CANBERRA BUREAU
PRESS GALLERY PARLIAMENT HOUSE CANBERRA
P11ONE: ( 062) 73 3300 FAX: 73 3097
Date: 11 March 1990 Time: 0900
Source: National Nine Network Programme: Sunday
Jim Waley: With the result of the Federal Election still
anyone's guess, over the last two Sundays before the poll we are.
talking again with the leaders of both major parties beginning
this morning with the Prime Minister, who is in our Melbourne
studio. The interviewers, Alan Ramsay from the Sydney Morning
Herald and Sunday's political editor, Laurie Cakes.
CAKES: Prime Minister, good morning.
HAWKE: Good morning, Laurie. Good morning, Alan.
CAKES: The coalition this week is re-jigging its campaign. They
are going to focus on the impact of the capital gains tax on
superannuation. New commercial featuring John Howard. They are
circulating a petition calling on the in-coming Government to
abolish the tax. Has the issue got legs?
HAWKE: I believe it has certainly got legs for us.
CAKES: In what way?
HAWKE: Because the facts are quite clear. They were put by
Alan, I think, at the start of the great debate. They haven't
changed and that is that less than 1 per cent of Australian
taxpayears pay capital gains tax. It is the basis of a quite
remarkable statement and I will just read to you because here is
the answer to it all. This is something that was said in 1980
by Professor Russell Matthe ws. He said: ' The essential problem
is to make the rich pay any income tax at all'. That is what he
said. The essential problem is to get the rich to pay any income
tax at all. And the reason why under the Liberals and before we
came in the rich weren't paying any tax basically. It was a
matter of choice because of the absence of a capital gains tax.
OAKES: But what about the question of superannuation funds,
Prime Minister. They don't represent the rich. As I understand
it today the Society of Superannuation Funds is going to issue
a statement giving examples of how the tax affects superannuants.
HAWKE: The facts about the superannuation funds are very, very
simple. When the tax was brought in 1988, 15 per cent tax, the
arrangements there were for that to be offset, at least offset,
by imputation credits. And that is that any superannuation fund
that is properly managed can have a zero position in regard to
the tax on superannuation. The point was to enable
superannuation funds to invest in Australian companies because
as those funds grow we want them to be investing in Australian
enterprises so they can have a net zero position of impact with
the tax and that is well known.
OAKES: But if the society representing those funds are backing
the Liberals are you saying that all funds under that umbrella
are wrongly managed?
HAWKE: We'll see what the superannuation says but I am telling
you quite clearly the facts are that under the tax arrangements
brought in that 15 per cent tax that is imposed is more than
capable of being offset by the imputation credits which the
holders in funds get in terms of the tax already being paid by
the companies. It can be more than offset. And the fact is that
it was the absence of a capital gains tax which meant that
billions of dollars that should be paid by those individuals and
companies in Australia was not being paid. That is what meant
that ordinary taxpayers were paying higher taxes than they need
to. The voters of Australia, I can assure you Laurie and Alan,
are golng to say we do not want a return to the situation of a
pre-Labor Government where the ordinary Australian taxpayer paid
more because the rich, as Professor Russell Matthews said, had
it as a matter of choice wjiether they paid any at all. It is
only with the capital gains tax that you can have equity in the
tax system.
RAMSAY: Prime Minister, interest rates certainly is an issue
with legs.
HAWKE: Yes, it is.
RAMSAY: With only two weeks to go to polling day, the banks
still have not responded to the Government's manipulation of
official rates by lowering mortgage rates. Now are you still
asking voters to take you on trust?
HAWKE: It's not a question of taking me on trust. I guess, if
you like, it is a question of taking the banks on trust. We had
no expectation that during the Election campaign, Alan, they
would bring down mortgage rates. But what they have said is that
the policies of the Government, which involved an initial
lowering of the official rates, they have said that will lead to
a lowering of mortgage rates. That is their statement and,
indeed, it must do because the cost of money to them is coming
down. The choice for the voters is quite clear. The banks are
saying interest rates will come down under the policies of the
Government. Under the Liberals there are two things which must
mean a rise of interest rates. One, the wages explosion, which
they do not deny must occur under their policies and, secondly,
the blowing of the Budget surplus. If you blow your Budget
surplus and have a wages explosion, interest rates must go up.
RAMSAY: But go back to what governments say, what politicians
say. In the 1987 Election campaign you said interest rates would
come down.
HAWKE: No, I didn't.
RAMSAY: They went up, considerably. Why should people believe
you now?
HAWKE: Very simply. We have been through this before. We had
the run on this in the debate. We underestimated and I have
said this. I couldn't have been more open and nor could the
Treasrrer. In 1987-88 we had a $ 15 billion accretion to domestic
demand capacity because of the favourable turn around in the
terms of trade. We all, every economist in the country,
underestimated the strength, of demand that became associated with
that situation. And, as a responsible Government, we had to
bring in tighter monetary policy because if we didn't you would
have had the simple situation that we would have had a totally
unsustainable explosion of imports and the economy would have
collapsed. Life in running a Government, running economic
policy, isn't simply an easy thing of saying: ' Oh well, we won't
take any notice of the changes and the circumstances and we will
just adhere to some concept of the past'. If you are confronted
with an unforeseen explosion of demand than responsible
Government means, if you are concerned about the long-term
equilibrium of the economy, it demands that you take action to
see that that level of consumption is brought back and we have
done it.
RAMSAY: Yes, Prime Minister, but out there a lot of people don't
understand all this and that sounds like a big fat excuse.
HAWKE: Some may, I don't doubt that. But, as you know, Alan,
I have always argued from the beginning of the campaign and,
indeed, before it that I have got greater faith in the
intelligence and the understanding of the Australian electorate
than my opponents and some commentators. I don't believe, for
instance, Alan, that the electorate is going to buy the nonsense
of this last week where Mr Peacock manufactured a $ 14 billion
hole in the Government's forward estimates and said: ' There is
a $ 14 billion hole there' That lasted less than one day but you
see they think they can insult the intelligence of the Australian
electorate. I don't think you can. I think if I tell them that
we had this great explosion of demand which would have ruined the
economy is we hadn't lessened it, I think that the majority of
people will understand and accept it. They won't like the fact
that there had to be higher interest rates. I am not deluding
myself about that. But they will understand that that was
necessary and, they have got to look at the choice. They
have got the banking industry saying that our policies, Alan, are
going-o lead to a reduction in mortgage rates. They know. They
know. Against that you have an explosion of wages which Mr
Peacock has not denied. If you have an explosion of wages and
you blow away our Budget surplus, those two factors together must
mean an increase in interest rates. That is the clear choice
they have got.
OAKES: Mr Hawke, one thing Mr Peacock said during the week was
that election campaigns reminded him of the movie ' Sex, Lies and
Video Tape' without the sex and the video tape. Does it worry
you that you have to tell fibs to people to win their votes?
HAWKE: I don't tell fibs to win their votes.
OAKES: Come on. Alan has already mentioned the 1987 promise
that interest rates would come down and in the same election
campaign you said inflation would come down. Back in 1983 you
promised there would be no capital gains tax. It's a pretty long
list. HAWKE: Okay, let's take them one by one. Let's take the last
one. In 1983 I said there would be no capital gains tax.
OAKES: We've got one.
HAWKE: Laurie, could I finish. I said there would be no capital
gains tax in that Parliament. There wasn't. You have
conveniently overlooked for reasons which I suppose are useful
just for fun the fact that the capital gains tax came in after
the 1984 Election. And in the 1984 Election campaign I
specifically said to the Australian people we will, after this
Election, have a tax summit at which the tax policy to be brought
in will be affected. So, don't give me that business, Laurie.
OAKES: The inflation promise. The interest rates promise. They
all happened within three years. Or virtually within three
years. HAWKE: Okay, let's take the inflation. When we came to office
the inflation rate was 11 per cent. 11 per cent. By 1984-85 we
had halved it. Then we had the collapse of the dollar with the
collapse in terms of trade but it still under that impact didn't
ever get back to anything like 11 per cent. It peaked at 9.8 per
cent and it is coming down. But Treasury said that at the end
of this last year, 5.7 per cent, the underlying rate. We have
never-got anywhere near the 11 per cent inflation rate that I
inherited. So, in the period of the Hawke Government inflation
has been brought down and kept down below the rate it was.
OAKES: But it went up after 1987. After you made the promise.
It didn't go down.
HAWKE: Yes.
OAKES: You can't say that wasn't a fib.
HAWKE: I can because I am saying that we were mistaken. There
is a difference between a fib and an honest mistake shared by
every economist in Australia. Every economist in Australia
public and private, Laurie, as you know underestimated the
strength of demand and that demand pushed up inflation. Okay,
I cannot say to the Australian people I won't say in this
campaign and I have never said in any other that I can predict
with absolute certainty everything that is going to happen in
Australia and overseas. But what I can say with certainty is
that we will have the basic structure of policies. That is, one
of things which----
OAKES: But Prime Minister, if you know that you can't predict
with certainty why did you say inflation will come down, interest
rates will come down. If you knew you couldn't say it with
certainty it was a fib.
HAWKE: No, I don't believe that. I don't believe that is a
correct way of saying it because in respect of all the things
that we could do to affect these rates, we did them. Just as,
at the present time, Laurie, very simple, that a Government or
an alternative Government can do in its power to influence
interest rates and inflation rates are essentially these things:
Wages, and that is fundamentally important. Let me give you the
figures, Laurie, of what has happened in the period we have been
in. In these seven years our predictions about wages rates,
outcome for the next year, have been either on target or we have
somewhat overestimated the outcome. In other words, where we
have predicted wages outcomes we. have been right. So, that is
the basic thing a Government can do. Have control over wages
outcome. We can do it. We have done it in seven years. Out
opponents can't. There will be a wages explosion. The other
thing--that you can fundamentally do is the control of Budget
policy. Now, I have in the last three years had a surplus, a
Budget surplus, of about $ 17 billion. That is the first time
in the history of this couptry that is has been done. Against
that, our opponents will blow the Budget surplus by at least $ 6
billion. So I can say with certainty in regard to the things
that fundamentally determine these outcomes what will occur.
Against that the outlook is appalling under our opponents.
RAMSAY: Prime Minister, a lot of people think that this is a
pretty boring Election campaign. That after seven years you're
boring. Is this a deliberate strategy on the Government's part.
Send people to sleep.
HAWKE: Well, Alan, I'm not trying to send people to sleep and
if I am boring that may be the judgment of some.
RAMSAY: Very laid back, Prime Minister.
HAWKE: Well, I don't know about laid back. Certainly not cocky
or complacent. I believe that this is a campaign in which my
obligation, Alan, is calmly to tell the Australian people where
we've been and the sorts of policies we've been building on for
the creation of a better Australia and, importantly, I thought.
my obligation in the policy speech was to say: ' My fellow
Australians, here is where we are and these are the sorts of
things I have in mind in regard to education, science and
technology, children and so on. All these things that I have in
mind for building a better future'. Now if that's not sexy
and I guess the creation of 50 centres of research is not sexy.
But let me say this it will more than anything that any other
Federal Government has ever done I think determine the quality
of our research and our capacity to be competitive in the future.
Now, it is not sexy and exciting but I wanted to say it. I
intend to do it.
RAMSAY: Prime Minister, though I think that often you look
bored. That a lot of the life has gone out of you in the last
seven years.
HAWKE: Well, Alan, if we want to exchange views about how one
another looks I could say something about how you look but I
don't think that would be very elevating.
RAMSAY-I'm not standing for election, Prime Minister.
HAWKE: No, but you are making judgments about how people look.
RAMSAY: Yes, I am.
HAWKE: I am simply saying have never been more excited, Alan,
about being Prime Minister of this country.
RAMSAY: You don't look it, Prime Minister.
HAWKE: You may say so. But if you want me to be jumping up and
doing a jig then you are going to be disappointed. The sense of
excitment and pride I have about being Prime Minister of the best
country in the world is beyond description. Every day I wake up
and feel just tremendous and indescribable pride about being the
leader of this country. If I wanted to, and if you just gave me
a minute, I would tell you about not only in terms of what we
have done in this country but let me just mention in the last 12
months the leadership given for Australia in the world. In the
world. Firstly, here is Australia having the chemicals weapons
convention. Bringing all the nations of the world and the
industries of the world. Never been done before. Doing what had
never been done before in bringing all the countries of the Asia
and Pacific region. People had talked about it for decades.
Hawke brought them together to get Asia-Pacific economic
cooperation. The Hawke Government taking a lead in trying to get
a break-through for peace in Cambodia. The Hawke Government
taking the lead in the world in saving the Antarctic from mining.
And that is not the end of the list. Now those things give a
sense of great joy and excitment. Now, if I'm not showing those
by jumping up and down and saying I am excited about taking
Australia to the lead in so many areas of world affairs, well,
I don't apologise for it. But I can tell you the excitment is
there.
OAKES: Mr Hawke, one of the things you were excited about in
your policy speech was the extension of fee relief to private
child care centres. What is the cost of that promise?
HAWKE: The total cost of the package is of the order of $ 400m.
OAKES: What about this section of it?
HAWKE: I'll give the section. I haven't got the elements there.
OAKES: You see, there is no asking you. When Ray Braithwaite,
the Opposition front bencher, suggested this six months ago, you
were sneered at by Neal Blewett in Parliament. Neal Blewett said
it is balderdash to suggest that this extension would not
involved very significant additional cost. He talked about it
costing extra hundreds of millions of dollars.
HAWKE: All I can say, Laurie, is that the total cost of the
package which is made up, as you know, of the extension of places
and is made up of fee relief----
OAKES: But according to the ERC score sheet you issued, the
total cost for a full year of the new initiatives in your policy
speech was $ 144m. How can you have an initiative in that that
is worth several hundreds of millions of dollars?
HAWKE: Because our initiatives have been both funded and
expended over three years. That is what the score sheet shows,
Laurie. OAKES: If that is the case then Neal Blewett was talking through
his hat when he was criticising the Opposition.
HAWKE: No, he wasn't. The child care proposals in total in
1991, $ 86.8m; in 1991-92, $ 144.6m and in the third year,
$ 166.5m. There you get, Laurie, the total over three years of
the best part of $ 400m, carefully costed. But before we decided
on one cent of expenditure, whether it was in child care, roads
or anywhere else, we did the savings exercise first. There they
were set out. The savings identified in the February statement
$ 347.7m, $ 547.8m in the second year, $ 602.9m in the third year.
Every savings identified, costed by the Department of Finance.
And then, as I say I have given you the exact figures for child
care, of promis-e that we make totally funded.
OAKES: Prime Minister, we are just about out of time but I find
that is inconsistent with what Neal Blewett said. A final
issue----
HAWKE: No, don't just leave it there. You are talking about
something that was said before in regard to an unspecified,
uncosted, unfunded proposal.
OAKES: It's the same proposal.
HAWKE: No, it's not. That's not good enough, Laurie. What has
happened here is that very specific proposals, very specific
proposals, funded $ 86.8m. You can't get it very much more
specific than that. $ 86.8m in the first year, $ 144.6m in the
second, $ 166.5m in the third. Specifically funded, covered and
out of all that we have doe, Laurie, out of everything that we
have done, still a slight increase in the surplus at the end.
Against that, at least a $ 6 billion hole $ 2.8 billion for their
two-tiered tax, about $ 2 billion in regard to Medicare, $ 800m in
a regard to the whole fund by the Department of Finance, $ 700m for
roads. Over $ 6 billion unfunded.
OAKES: Okay, Prime Minister, you win. Thank you.
HAWKE: Thank you.
Va'Wr apt ~ a i i ~ u y a. he b i~ l
( Transcript by Monitair Pty Limited)
Inquiries to Peter Harvey, Press Gallery, Parliament
House, Canberra.