TRANSCRIPT OF INTERVIEW WITH PAUL LYNEHAM, 7.30 REPORT
EDITED VERSION 12 MARCH 1990
E OE PROOF ONLY
LYNEHAM: Prime Minister, thanks for joining us.
PM: Pleasure.
LYNEHAM: The prevailing wisdom is that voters are very
cynical at the moment. Do you agree with that?
PM: No, I think the correct statement though Paul is
that probably more people are going to cast a vote for
the non-major parties than before. And as I've said, I
think one of the major explanations of that is of the
increased interest in environmental issues that has
obviously arisen not only in Australia but around the
world in the last three years.
LYNEHAM: The National Media Liaison Unit at least two
of its members, I've spoken with them over the phone at
your campaign headquarters in Sydney. Are they on leave
without pay or are they paid public servants at this
stage? PM: They would still be on their normal pay arrangements
as far as I understand. I don't know the circumstances.
If you'd like I'll check and give you the answer but I
would think they'd still be on their normal pay
arrangements. LYNEHA4: Is it proper to have the taxpayer paying for
people to help the ALP win power?
PM: I would simply say this, that if you look at the
situation that existed before we came into power, there
was a much more blatant use of people on the payroll by
our predecessors and you are aware of what happened then.
But as I say, I don't know, I assume they are still on
the same arrangements.
LYNEHAM: If you quote your predecessors, does that mean
your moral standards are set by the other side?
PM: It certainly does not. It seems to me that there is
an acceptance that in government you have people who are,
if you like, involved in not only making sure that the
people know what the government is doing, but also
monitoring what's happening. I think that's been a
feature of Australian politics. I don't think that I got
terribly upset about what happened before. I don't think
people should be now.
LYNEHAI: When will negotiations begin with the United
States on the Australian takeover of North West Cape?
PM: Quite quickly Paul. We have been in touch with the
United States and we just got the reply back from them at
the end of last week, from Dick Cheney, and they, as you
understand, have welcomed the idea. I'm glad they have
because I think it's very very significant. And they
will expect, as we do, for the negotiations to start
quite soon.
LYNEHAM: Did Dick Cheney have any objections to you
making this public during an election campaign?
PM: No, why should he?
LYNEHAM: Well, I mean, it does look to many as though
Washington is letting you drape yourself in the Stars and
Stripes, just as Menzies used to drape himself in the
Union Jack.
PM: Well, the cynicism is not only in the electorate,
it's amongst the commentators. There is no foundation
for that. Let me give you the reasons why it was
important to do it now, and as soon as possible.
Firstly, this is forward-looking. It is quite clear when
you look at our defence strategic approach for the future
that the use of our new submarines, which we are now
constructing in Adelaide, it's going to be a very very
important part of that future. The command and the
control capacity for those submarines is fundamentally
important. So we'd want to have a situation where we
have control of that. Secondly, the 25 year agreement
that has gone back from 1963, that ended in 1988 and new
0 negotiations were about to start for the next stage. It
obviously was much sensible that we put our proposal on
the table before that started. Thirdly, there's been
some degree of concern at Exmouth amongst the local
population there as to what their future might be. It
was appropriate that that concern should be allayed. For
those three reasons it was appropriate that as soon as we
got a response from the United States to our proposal
that we should advance it. And particularly that I
should announce it here in Western Australia.
LYNEHAM: And entirely fortuitous that it's during an
election campaign?
PM: It would've been announced any rate. The important
point that I'm making is that it should be done as soon
as possible and if the election had been held in May, as
was a possibility, it would've been announced now. It
wouldn't have been held till then.
LYNEHAM: Do you still stand by Paul Keating's claim that
current taxes on super fund earnings will not diminish
any potential end benefit by one cent?
PM: Yes I do. Most importantly what you've got now is a
contrast in the public arena between the political
statements of some people who are trying to support the
Opposition and the only factual source, which is the
Australian Tax Office, which points out that of the
13,000 returns of funds that have been negotiated, when
you look at it there's no net loss. And indeed I think
only some about 400 out of 13,000 had any net capital
gain in it, but which could be more than offset by the
imputation credits.
LYNEHAM: Let's look at that 13,000 Prime Minister. Are
you aware that they're less than 10% of the total of
160,000 returns on superannuation that will be processed
by the end of this month?
O PM: All I'm saying is that in respect of those that have
been processed, there is the figure.
LYNEHAM: These are less than 10% of the total returns
that will come in by the end of this month. You would be
a mug, if you owe money, to put your return in early.
The normal pattern, if you've got to pay money to the
taxman, you wait until the very last minute. Why is it
the case that these 13,000 represent any real sample at
all? PM: They represent the only sample that's available and
on the basis of
LYNEHAM: And in an abnormal year Prime Minister.
PM: Not an abnormal year Mr Lyneham at all. I'm simply
saying to you that what can be done other than to use the
returns that have been processed. Secondly, to take
account of what the major funds are saying. They've made
it quite clear, two major ones, AMP and the National
Mutual, have made it quite clear how they operate.
Thirdly, you've got to ask yourself the question, what is
the future, what is the future of a fund manager who does
not in fact take advantage of the provisions that have
been deliberately introduced to make sure that they
shan't pay any net tax?
LYNEHAM: Prime Minister, if it's only going to affect
one percent into the future, and not those four million
Australians in super funds, how is it the Treasurer can
tell us there's already five billion out there waiting to
be collected in the system, that it's the fastest growing
tax in the Commonwealth. Where's all this coming from?
PM: It's coming from the operation tax. It's got
nothing to do with the superannuation system.
LYNEHAN: Let's say I'm a small business person or a
farmer. I've worked hard, worked long in my business, I
want to move up, I want to get a bigger business in the
next town. I then sell my business where I live. I then
get copped with a bill for capital gains tax, just at the
time when I need that capital to go and develop my next
business to create more wealth, employ more people. Why
can't I roll that over if I'm going from one business to
a similar one after all, the Beddall Committee
recommended this why can't I roll it over and grow and
help the country grow?
PM: Well, ok. Well, let's just have a look at the facts
of the situation. Firstly, which is not clear in the way
you put your question, so let me make it clear, is that
you don't get taxed on the nominal improvement in the
value of your business. It's only on the real value. So
that is an element which is not taxed. Secondly, let's
look at the situation that's operated since the tax has
come in. We've had very very significant economic growth
in the country. I mean, it hasn't stopped growth. Let's
look at what's happened
LYNEHAM: Look at what's happened to small business Prime
Minister. PM: Ok, let's
LYNEHAM: High interest rates.
PM: Ok Paul, don't get too excited. We can go on.
Let's look at what's happened to business generally,
including small business. The fact is that we have had,
in the period since the capital gains tax has come in,
the highest level of investment by business, which covers
small business and large business, the highest level of
imvestment as a proportion of gross domestic product. In
the last year it was 13.5%.
0 LYNEHAM: Ten thousand small businesses have gone bust
since Christmas according to the Council of Small
Business Organisations.
PM: If the implication of your question is that it is
the obligation of a government so to conduct macroeconomic
and micro-economic policy that no business goes
bust, then I'm quite happy to argue that proposition.
Let's look at the facts over the whole of this period.
The facts over the whole of this period are these, and
never overlook them. 1.6 million new jobs with 93%, 93%
Paul of those new jobs going into the private sector and
overwhelmingly into the small business sector. You've
never had growth of the small business sector like you've
had in the seven years of the Hawke Labor Government.
LYNEHAN: Why are so many of them in trouble?
PM: Well I'll tell you the answer. The answer is very
simple. That in 1989 we'd had such a high level of
growth the previous year, as you know, the statistic,
very simple an eight percent increase in consumption, a
four percent increase in production and that gap coming
from imports. We had to slow it down. We had to slow it
down with high interest rates. If we hadn't, if we
hadn't slowed the rate of growth down, any loss of small
businesses that you've had would be as nothing compared
to what would've happened in the total collapse of the
economy. LYNEHAM: At the last election you told us we shouldn't
change horses in midstream because you needed another
term to finish the job. The net national debt then was
$ 83 billion. Now we're told you need another term to
finish the job. The net national debt now is $ 118
billion. How much more of this sort of job can Australia
stand? PM: It's very clear it can stand a lot more of what we
are doing and nothing of the alternative. Just let's
look at what's in place to deal with this issue on our
side and look at how that will be destroyed by the
policies of the Opposition. Firstly, we have in place
the facts more Australians than ever before at work,
better educated and trained, and with a better level of
technology and equipment than ever before. And that has
flowed from our wages policy. Against that, against that
a wages policy of our opponents which will mean a wages
explosion and the destruction of the economy.
LYNEHAM: Did you see the Industrial survey today
Prime Minister?
PM: Yes I did indeed.
LYNEHAM: Very gloomy.
O PM: Not very gloomy at all. What's happened is that in
fact I mean you want it both ways. Your question is
just about debt, so what's been driving the debt upwards,
the current account deficit? It has has been that we've
been importing too much. Most of it's capital
investment. So when I take action, as I have with tight
monetary policy, to slow it down, I get attacked for
that. LYNEHAM: Prime Minister, the bottom line is that demand
has to stay below production if we're going to stabilise
the debt. I mean you said this yourself fairly recently
PM: ( inaudible)
LYNEHAM: Exactly what does that mean?
PM: It means this. That what you've got to continue to
do in Australia is what we're doing. And that is to have
a massive restructuring of the Australian economy. To
get what we've done, a 54% increase in manufactured
exports in the last four years
LYNEHAM: But it means you've got to keep the reins on
for a fair while with tight monetary policy, doesn't it?
PM: No, it means that in fact the combination of tight
fiscal policy remember this. That in the last three
years, in the last three years $ 17 billion of budget
surplus, which has paid off the whole of our Commonwealth
Government debt. Now you've got to keep on having a
surplus. Not blow it out by the $ 6 billion hole on the
outlays side that the conservatives were talking about,
let alone the billions of dollars that they'd give back
by way of the abolition of the capital gains tax.
LYNEHAM: Both sides are now saying vote for us and
you'll get lower interest rates. Andrew Peacock said
significant and sustained. Isn't it a fact that neither
of you can really do very much, that if they do fall it
won't be very far?
PM: On the contrary. Good question, sharp answer. The
banking industry itself has said in regard to the
existing policies of this Government that interest rates
will come down. That's the statement of the banking
sector which sets interest rates.. Against that the
inevitable fact Paul that interest rates must rise under
the impact of the coalition policies for two reasons.
Wages explosion. Secondly, in regard to the surplus of
government, we have now, as I say, a $ 17 billion surplus
in the last three years. They'll blow it because they've
got a $ 6 billion hole and they're also going to ruin
their budget surplus situation by giving billions of
dollars back to the, one percent. So as a result of both
a wages explosion and the destruction of the Commonwealth
Government budget surplus interest rates would have to
rise. LYNEHAM: And they will come down under you?
PM: Well, as I say, don't just rely on my statement
which is based upon
LYNEHAM: Well what is your statement?
PM: My statement
LYNEHAM: Massive, as Mr Peacock used to say?
PM: No.
LYNEHAM: Significant and sustained?
7
PM: If you've got a problem with Mr Peacock about his
incapacity to adhere to words, you have your argument
with him. I rather enjoy your arguments with him. As
far as I'm concerned, what I've said during this campaign
is that the banking sector itself has said that interest
rates will come down.
LYNEHAM: And they'll be sustained falls?
PM: I believe so.
LYNEHAM: Of course you said yesterday that you couldn't
be held to anything that you didn't control, that would
be an honest mistake rather than a fib.
PM: What I said was obviously what I must say. I can
control these things. I have demonstrated that I can
control wages outcome in this country. For seven years
Paul, in regard to the wages outcome, we have either been
on target or we'ye somewhat overestimated
LYNEHAM: But not the inflation that erodes those wages?
PM: We've gone through this and very simply let me
repeat on this program what I've said before that like
every other economist in this country, in the public and
the private sector, we underestimated the level of
demand, LYNEHAM: We don't vote for every other economist Mr
Hawke, we vote for you and Paul Keating.
PM: Adn I'll tell you what, and if you vote for me what
you'll get, what you'll get is a continuation of record
employment growth, of a rate of growth of the economy
twice as fast under us as under our predecessors...
average rate of 4.4% economic growth, a rate of 3.5% of
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which has demonstrated that it can deliver a wages
outcome, a sustainable wages outcome and not a wages
explosion, and you'll vote for a government which has
done what has never been done before. In all those
years, 30 of the 33 years before I became Prime Minister,
the Libs and the Nationals in control. They never got a
budget surplus once. In three years, after rectifying
their mistakes, a $ 17 billion surplus which I've used to
pay off the Commonwealth Government debt overseas.
LYNEHAM: Prime Minister, thanks for your time.
PM: Thank you very much indeed Paul.
ends