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PRIME MINISTER
TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING, MP
INTERVIEW WITH JOHN LAWS, RADIO 2UE, SYDNEY, I11 MAY 1994
E& OE PROOF COPY
JL: listened almost in silence to the Budget speech last night, which has to
be a first. There wasn't much racket going on there was there?
PM: The Liberals were there, I thought, some wag yelled out at the end of
it, " get them the smelling salts", get them the smelling salts. As I
walked out I said, " I think they have all just sucked on a lemon." They
were the sourest looking lot. Because they thought this is the Budget
we should be delivering, all this growth, the good news in it of nearly
250,000 jobs. John Hewson, who in the election campaign was saying
we are going to have a double dip recession and maybe a depression,
could see himself up there wearing the laurels and accolade of growth
and jobs.
JL: So, you don't think the silence was..
PM: The silence wasn't out of regard for the Treasurer.
JL: It wasn't a bad sign, though?
PM: It was just, if you like, the silence of reflection.
JL: On what they have lost?
PM: Yes, on the opportunity.
JL: Well based on what happened to John Dawkin's Budget of last year, it
doesn't matter how quiet it was last night, the fun and games really
only starts now. You have got to try to negotiate the Budget through
the minefield of the Senate. Are you going to put up with objections
from the minor parties in the Senate again this year, or do you
anticipate there won't be any?
PM: Well I don't know if there will be any. Let me just say a couple of
things about the Budget, John, which I think are important. The first
thing to say about it, I think, is that Australians have earned this
recovery. We have had a very good reception of the Budget, but there
are always the sour puss commentators. If it is not pain it is not any
good. They can't say well look we have had a recession, we have got
out of it, we are now growing, people are starting to get a buck again, it
is moving on. No, no, they won't. " Hop in there with tax increases,
hop in there and get the Budget deficit down faster". We are getting it
down faster than any other Government in the Western World, to a
lower number than anybody else.
JL: Can I just say, apropos part of the reaction, you say that it has been
fairly well received. When you look at some of the headlines, has it
been well received? " Hope and pray". " Labor gambles on business."
" Gamble on growth." That's the kind of headlines we are seeing.
PM: But I think the key thing is what the business community say about it, I
think. Because they are the people who employ people, they are the
ones whose expectations about investment matter, and I just noticed
as I was coming up to the station this morning, on 2UE news there was
Macquarie Bank, Bill Shields from Macquarie Bank, an ex Reserve
Bank chap, saying that the Government's investment forecast and
growth forecast are pretty much as Macquarie Bank and other
forecasters had forecast them.
JL: Well, that is one saying that. You have got others saying that the
anticipated growth is not enough. And after all the anticipated growth
is only just fractionally over the OECD average.
PM: No, no. We grew in the year to March at 4 per cent. The Budget
forecast is for 4.5 per cent. The OECD average is about..
JL: Is about 4 isn't it?
PM: No, it is about one, 1 per cent. The Western World economies are
growing, on average, around about 1 per cent. Germany is actually
contracting, it is getting smaller, it is not growing, it is getting smaller.
Japan is just at about zero, the United States is growing at a couple of
percentage points, I think 2.5 per cent.
JL: The OECD average, it is certainly not the average being claimed by
some of the commentators. The OECD average is just about 1 per
cent?
PM: Around one, around 1 per cent. That is the position, and we are
growing at 4 per cent. I am not saying we are projected to grow at 4
per cent, we actually have grown at 4 per cent for the year to March.
And we are saying in the coming year, 94-95, from July to June next
year, we are saying we will grow at 4.5 per cent. Given the fact that
we have got low inflation, low interest rates, we have got a high profit
share, a competitive dollar, a much more flexible labour market. We
were growing at 4.5 per cent on average through the 1980s.
JL Are interest rates going to stay low?
PM: While ever inflation stays low, they will stay low.
JL Are you confident of that?
PM: Of course.
JL Just back to the Senate. Do you think the Green people and the
Democrats will behave themselves as far as this Budget is concerned?
PM: Well there is no tax increases in it, John.
JL But there is not all that much spending increase that they would have
liked, not as much as they would have liked.
PM: There is quite a bit. Just let me run through a few things. There is
$ 500 million over five years for Aboriginal health. There is $ 63 million
over four years for youth homelessness. We have got a national Asian
languages program in there. $ 169 million over four years for mental
health. $ 209 million over four years for breast cancer. $ 10 million for
child immunisation.
JL Is that going to be enough for them?
PM: Well, they are all the sort of things that they claim to be interested in.
And we have got $ 135 million there for the preparation of the
Australian Olympic Team between now and the year 2000, and we
have got $ 68' million in for foreign aid, extra foreign aid. So, the sort of
things which the Greens and the Democrats normally attach
themselves to are very much here. And, of course, the Budget
consolidates the White Paper: the largest attempt that certainly any
Australian Government has ever had dealing with the long term
unemployed.
JL How much have you got for homeless youth?
PM: $ 63 million over four years.
JL What are homeless youth?
PM: Well, these are kids who just drop out of the system and find
themselves in the Kings Crosses of this world, and the St Kildas.
JL Because they don't like it at home?
PM: Well, some of them don't have homes. They just get driven away from
home.
JL: I think they get beckoned away from homes by Government subsidies,
in many instances. Obviously you are going to give them more.
PM: Well these are not subsidies, these are just refuges. But they are
largely run by the States, but these are top ups which we provide them.
But on the big agenda we have got, the key thing about this, is that
Government spending, that is outlays, all Government spending
outlays are running at less than the growth in the economy, and they
will do that right down to the end of the decade, which means the
Budget is going to go back into surplus later on in the 90s. In other
words, if you can keep spending below the natural rate of growth in the
economy, all the proceeds of growth then go off the Budget deficit.
And that is the sort of fairly good position we have got here now.
JL: Just back to the Greens and the Democrats, did you have discussions
with them prior to the Budget, on the Budget?
PM: I haven't, but we had a formal process this year, for the first time ever,
of consultations between the Government and the minor parties in the
Senate, and Ralph Willis and Kim Beazley, that is the Treasurer and
the Minister for Finance met them, and as far as I know they had fairly
good conversations.
JL: Did anybody warn them that you might change the proportional
representation system if they wanted to play up again this time?
PM: I don't think so.
JL: Would you change it?
PM: We only mention it from time to time, when something annoys us.
JL: I would have thought that that might have been an appropriate time.
Would you change it?
PM: That's an issue for the long run, I think.
JL: Well, given your position now, as you sit here in this broadcasting
studio, would you change it if necessary?
PM: The best thing is to see how the Senate performs on these things.
Look at the White Paper, John, the White Paper is a novel attempt, not
just in Australian terms, but in world terms, to actually case manage
personally half a million long term unemployed people back into work-
JL: Yes, well the White Paper has been well received, but that is a long
way from would you change the proportional representations?
PM: Yes, but that is a long way from the Budget. The answer is no. I have
no plans at this stage to change the proportional representations in..
in the Senate. But the fact of the matter is, that in terms of social
policy, the White Paper and the Jobs Compact, and the Youth Training
initiative and the entry level training from schools to TAFE, and the
Budget changes in Aboriginal health, and in breast cancer and these
things, the sort of things that a developed country should be doing.
And we can do it with a declining Budget deficit, and the Budget
coming back into surplus.
JL You are going to need the help of the private sector. In fact if it is not
with the private sector, none of this will happen, will it?
PM: One of the points the Treasury makes in its commentary on the
economy has been that there has been a sequential or rolling nature to
the growth in this recovery. The first wave came from consumption,
that's personal spending and housing. There has been another wave
there from exports and rebuilding of stocks, and now private business
investmqnFTI -[ d~ ome in as, if you like, the third wave.' Now, as you
know we have had a great paucity of private business investment since
the recession began three years ago.
JL But not enough.
PM: We have got 14.5 per cent growth in this year which is a real pick up, a
strong pick up. And that was the figure that Mr Shields from the
Macquarie Bank was endorsing on your news this morning.
JL Ok, before the last election, in fact, during the first of the debates with
John Hewson, I think 14 of February it was, Valentines Day, you said I
quote, ' We have got the growth, we have got the investment sitting
there, $ 130 billion, enormous, an absolute avalanche." I can't say it
with the conviction that you said it with at the time.
PM: Well you have got the voice to do it.
JL I am sure you are remembering the phraseology, " and once it starts to
go, the economy starts to move", that's what you said. Now, that was
nearly 18 months ago. " An avalanche of investment of waiting to fall
on us, $ 130 billion." According to last night's Budget we will depend
on growth to pay for everything, and that growth depends on
investment dollars, business investment dollars. But even Ralph Willis
last night, despite all the layers of gloss, said the business investment
had made little contribution to the economic recovery, and despite an
optimistic prediction of an increase in business investment of 14.5 per
cent, which you have just acknowledged, next financial year, that
represents investment spending, according to Mark Westfield,
Business Editor of the Australian Newspaper, of less than $ 5 billion.
So, what happened to the avalanche of $ 130 billion.
PM: They were the projects which were registered for the development
allowance. Remember we gave a tax concession which said you could
write off 10 per cent of your investment in a development allowance,
but you had to register, or apply, that was the process of application.
We have now got a large proportion of those registered, but the key
point in the election campaign, John, was I was saying Australia is
going to grow, and grow as fast as any other substantial economy in
the world, and John Hewson was saying, " No, no, we are going to
have a double dip recession and then maybe a depression."
JL: That's right, but you did say we had an avalanche of investment just
sitting there, $ 130 billion.
PM: We are growing now already at 4 per cent, and investment is going to
play a part in that. But it is not just investment can I say? We have
also got private consumption picking up from 3.5-4.5 per cent, and
there is gross national expenditure up from three and a quarter to four
and three quarters, private business investment, 14.5 per cent, non
dwelling construction five and three quarters, plant and equipment
18.5 per cent. So, there is a sort of mix to it, but there is a big
component of business investment, but so there should be, given the
fact that we have got now a huge profit share in the economy.
JL: But where is the avalanche? Where is the $ 130 billion?
PM: Well, 14.5 per cent is a pretty big slug, old son.
JL: Is Mark Westfield wrong when he says investment spending at the
moment is about $ 5 billion?
PM: That number is absolutely wrong, absolutely wrong.
JL: Well Access says investment will increase by less than 8 per cent.
PM: Well they have been consistently wrong in the last couple of years.
Look, these are all the people who said to me when I brought the One
Nation package out they said, " Oh this is a great mistake, it is going to
bankrupt the country." I mean, it kicked us along in growth and as a
consequence we are growing faster than any other substantial OECD
economy. We are doing 4 per cent and the average is doing 1 per
cent.
JL: Yes, and I understand that to be fact, and I accept that as being fact.
But if you don't get the growth you can't pay for the programs, can
you?
PM: Yes. Look, basically what have we done here? We have spent in
large measure this year around $ 1.1 to $ 1.2 billion on the long term
unemployed, on the youth training initiative which is about getting case
managing for all young people under 18 who are unemployed.
Personally managing each one back into work, and changing some of
the incentives in the social security system so that low income people,
and particularly unemployed people, can take on part time work.
JL: Why did it take so long to get this training wage? Because Blind
Freddy could have seen that if you had to pay an 18 year old the same
as you paid a 28 year old, and if you could get a 28 year old, you
would take a 28 year old, and it was shoving youth out of the
employment circle? Why did it take so long for the penny to drop, or
did it only come about because finally the ACTU agreed with the
Government.
PM: I will come to that in a second. Let me just make this point. You see,
what some of these people say, " Oh well this all depends on growth."
JL: Well it does.
PM: Well the point I made is, well haven't we earned the recovery, haven't
Australians earned the recovery after the last few years. Firstly high
interest rates and then we had the recession, and we finally got the
books balanced again, and got some sense back into bank lending,
and taking some of the speculation out of the economy and got back to
a real basis of earnings and exports and competitiveness, we have got
the growth going now. What they are saying is, particularly some of
this more rightwing rabid characters who write columns for the
newspaper, sort of, " what are you doing spending $ 1.1 billion on the
unemployed?" And what they don't understand is, in this recovery we
are going to need a lot of skills and the skills formation is not going to
come from the migration program, as it has in the past. It is going to
come from our own labour market.
JL: And it came from the migration program for too long too, didn't it? I
mean, that is another thing that should have happened sooner?
PM: Well, it is going to come from new entrants to the work force, that's the
school leavers, and it is going to come from retraining 350 400, 000
long termed unemployed people, giving them work experience, getting
their esteem back up, and getting them back into work. Now, in a
country this wealthy, to say callously to 400,000 people who have
taken the brunt of the economic change, " sorry you have missed out,
and we will carry you as an underclass, goodbye." Is not only
inequitable, it is also inefficient because in this economy, this is why
the business community has been very, I think, supportive of the White
Paper the Australian Chanber of Manufactures, the MTIA, all the
people who actually employ people, have actually said, look, this is a
good thing, you can actually get some skills complements here in the
1990s. And, John, we will have this is the point what the White
Paper and the Budget which consolidates it says, as a society we will
not go the way of a low wage working underclass or unemployed class
as in the United States, as in Britain. We will not go that way.
JL: What's unemployment in the United States?
PM: What is it?
JL: About 6 per cent isn't it?
PM: 6 and a half?
JL: Ok, but we'll always have unemployment at about 5 percent, won't we?
PM: Well, I don't know but our participation rate is way beyond theirs.
JL: Well, when you and I have talked before I think we've agreed that
there would be an ongoing employment rate of about 5 percent so
we're going to have an underclass anyway.
PM: No, it depends how long people are actually... see, in the late 1980s
we had unemployment down to six and a half percent ourselves and I
think the average time people were unemployed was about three to
three and a half weeks. So, you've got a pool of unemployed people
but how long are they in it? And there wasn't a great pool of long term
unemployed people but now there is.
JL: Yes, but that period of time, wasn't that what your people, particularly
those on the Left of your mob, called the " decade of greed", when we
had unemployment down at that rate? Wasn't that because private
enterprise was employing lots of people?
PM: Exactly, it was. We had 1.6 million job growth in the 1980s and..
JL: Yes, but you make claim, or your Government makes claim
particularly Bob Hawke to the 1.6 million jobs, we created 1.6 million
jobs, but you didn't create them, the private sector created them.
PM: Oh, yes but only... that was three times the rate of growth as the
Fraser Government had in the previous seven years. And the answer
is because the government had an Accord and it restrained wage
increases and it had a set of complementary tax cuts.
JL: So, you created the environment?
PM: We created the environment.
JL: OK, so if you created the environment for the 1.6 million jobs created
you must have also created the environment for one million now not
created.
PM: Well, absolutely and I have argued that point and accepted that point
in the course of the election campaign. But, what I've said is let's get
growing again and let's do the things to get growing again and I said
on election night we would not leave the unemployed behind. We are
saying as a society, certainly as a government and I think as a country,
we're saying we will keep Australian society cohesive and together.
We won't have someone slip out of the system. We won't have an
underclass.
J L Well, aren't you only able to do that by encouraging the private sector
to employ because I mean, they are the employers they employ you,
they employ all the parliamentarians, the bureaucrats...
PM: In the last year or so we've given them every thing that opens and
shuts. They've got a 33 per cent corporate tax rate, John Hewson
wanted to give them 42 percent, we've given them 33, the same rate
as Singapore.
JL But that's been for some time and it hasn't turned it around.
PM: No that's just been for 15 months. We've got the highest profit share
we've ever had, that is, the share of national income going to profits is
as high as it's ever been in Australian history, right at this very time.
You can see that reflecting in the stock market. We've got a
competitive exchange rate, we've got much more flexibility in the
labour market through productivity bargaining so, everything is set up
now for a big roll of investment and some of that is in the Budget.
That's where that 14 per cent comes from.
JL OK, now I know you wouldn't expect Terry McCrann to say anything
kind about it..
PM: Oh, look, Terry McCrann, there ought to be a law against people like
Terry McCrann.
JL I suppose he's entitled to his say. He makes the point this morning
that unemployment will only come down with at least 6 per cent growth,
that's to get real jobs. So, growth could get to 4.5 percent, according
to him it needs to be 6 percent before it's going to really bite. Do you
accept that or not accept it?
PM: Well, he's arguing for a lower Budget deficit. They're real characters
these guys, they say, " This depends on growth", and then they say,
" We're not sure the growth will be there but you should cut the Budget
deficit back." We say, " But hang on, if you cut the Budget deficit back
you cut back all that government spending, that will slow the growth
even further." They say, " Oh, no, no, no, that's not right, what it will
do, it will actually make interest rates cheaper and therefore we'll have
a big blow out in growth." I say, " But hang on, interest rates have
come down from 18 percent to five 18 to five and you're saying if
we have a tighter, harder Budget which may knock another billion or so
out of it all of a sudden we're going to have some miraculous reduction
in interest rates after it has fallen from 18 per cent to 5 percent.
You see, in the end these people are rabid, right wing idealogues.
They all roll out into their company paid cars on their $ 200,000 a year
salaries, couldn't care less about the unemployed, couldn't care less
about kids wandering around Kings Cross or St Kilda, couldn't care
less about kids who are unemployed under 18 couldn't care less.
All they want to do is write some thing for these financial markets so
you've got some 24 year old kid sitting up at a Reuters screen trying to
sell a bond to some superannuation fund. I mean, there's got to be
more to life than that. And that's why the public have got to peer right
past all the commentators and say, what has happened here? Terry
MCrann said, when I bought the One Nation package out, that it was
going to bankrupt Australia. Here we are, we are going to come back
into surplus in the 1990s in our Budget. We've got one of the lowest
government debts to GDP in the world, as the charts in the Budget
papers last night show.
JL: That's if all the predictions are right.
PM: No, no that's just right now. Let me just make this point to you. We've
got to the stage in public comment in this country where the culture of
criticism is so bad that they won't even acknowledge that Australians
have worked hard for this recovery and are entitled to it.
JL: Oh, I think the Australians acknowledge that and I think the Australians
understand that.
PM: I think the public understand that and that's why the government is
always in a relationship and conversation with the public and not with
the media.
JL: Yes, well, when you talk of youth unemployment why wasn't something
done about a training-wage a long time before this, because you
couldn't get the cooperation of the ACTU?
PM: Let me just show you this, your listeners can't see this but you can.
Chart 3 in Treasury Budget Paper No. 2, comparison of general
government debt. There's Australia, took at all the others. Look at
Italy, Canada, UK, France. There's the OECD average and there's us
look, we're about a third of it.
JL: Yes.
PM: We're amongst the lowest. It says, " Australia's public sector debt is
low compared with other OECD countries but with both gross and net
general government sector debt to GDP ratio as being amongst the
lowest in the OECD.
JL: Yes, but you've qualified that as saying public sector debt.
PM: That's right. But, this is the government Budget. You see, people are
saying, you'd better get that Budget deficit down. The McCrann's of
this world are saying, get the Budget deficit down but, hang on, our
debt to GDP is amongst the lowest in the world, we're going to be back
in surplus earlier. Let me look at this, another little chart here, it's
interesting. Look, it says, " International comparisons of fiscal targets,"
and they've got the targets. Our target is one per cent of GDP by
1996-97. The United States is 2.3, France is 2.5, Italy is 5.8, United
Kingdom is 1.5 and Canada is three per cent. The only other country
which has a target of one and will get there, as we will, is Germany.
Because it has got massive debt from the East German reconstruction.
We're actually going to be under one, now. But, do you read that in
any of that in the columns? Not a bit of it. You see, these characters
will not accept the principal commentary which is, these are facts, not
arguments.
JL: But, all this is going to be paid for by growth? It must be, it's the
perennial budget fundamental question, where's the money coming
from?
PM: The word ' paid for' is not right.., let me just make this simple point
about what is called the cycle of the Budgets. In 1989-90 when I was
the Treasurer we had a surplus of two per cent of GDP, or about $ 8
billion. This year we look like having a deficit, in 1993-94 of around
$ 14 odd billion. Now, that change is a change of $ 22 billion. From a
surplus of eight to a deficit of 14. That's $ 22 billion dollars worth of
cushioning which the government sector has given to the Australian
community to cushion it from the impact of the slow down of the
recession. But, when things start to grow again, when government
spending comes back and when receipts and company earnings and
employment pick up then, the cycle changes and the deficit starts to
come back to surplus. We're saying we're going to come back to
surplus in the later 1990s but we'll be back to a deficit of under one per
cent of GDP in 1996-97.
JL: Yes, but all this hinges on all of your projections, or all the Treasurer's
projections which I would imagine are the same being right.
PM: Well, what is the big number? The answer is 4.5 per cent. But, we are
already growing at four and have for the last four quarters for the year
to march.
JL: And you don't believe there's anything that can change that?
PM: No, I think Australia's really got the wind behind it now, in terms of
earnings and growth and exports.
JL: But, do you understand the sceptics who aren't prepared to listen to
the spin, as they call it in newspeak. I mean, you promised us, I think,
you'd bring home the bacon in 1988, soft landing in 1990, the
recession we had to have in 1991...
PM: Yes, but, John just remember, the 1980s were are period of great
bounty for Australia. I mean, we ended up with one and three quarter
million more jobs, basically, than we started with, and we averaged
four and a half per cent growth all those years through the 1980s we
averaged four and a half...
JL: So, you don't see the 1980s as the decade of greed?
PM: I see the eighties as well there was a fair bit of greed around but
there were tremendous opportunities around, as well. Tremendous
opportunities.
JL: And, don't you think we should encourage that sort of opportunity
again?
PM: Absolutely, and that's why we've got the company rate at 33 per cent,
we've got a high profit share, and we're also saying, this is not just a
recovery for the top end of town. This is a recovery for ordinary wage
and salary earners, that's why we reduced the tax rate on middle
incomes in the tax cuts before Christmas. And, we're saying, also, to
the unemployed and to other sections of society, " You'll be in this as
well. It's not just for the guys who are doing well."
JL: I know that you say this is not just a recovery for the top end of town
and maybe that is said in order to placate some of the left wing that
you've got to take care of but the top end of town has got to recover,
it's very important that they do recover.
PM: Yes, exactly, but it's your small and medium sized business enterprise
I'm interested in. They're the ones who'll put the extra one or two
people on. They're the ones who need the break in the labour market,
in the tax system, in general competitiveness and they are the things
the government is seeking to do. But, they'll need skills as this
recovery picks up and if we don't retrain that great body of long term
unemployed people we'll have skills bottle necks. And, when you have
labour shortages you start getting wage push inflation. And, that's the
thing we've got to avoid in 1996 and ' 97 and ' 98.
JL: So, you do subscribe to the theory, if you want more employees you
have got to have more employers?
PM: Well, I have always done that. I mean, let me make this point again
in the seven years between 1983 and 1990 the Australian economy
grew at an average rate of 4.5 per cent, exactly the forecast we have
for this year and this Budget. But, to grow at an average of four and a
half in some years you've got to be doing better than four and a half.
In some years we did five. Now, you compare the economy then, to
now. You never had low inflation, like now, we never had flexibility in
the labour market, in enterprise bargaining, like now. We never had
the linkages into Asia...
JL: Why didn't we have all of those things you've mentioned?
PM: Why? Because we had a slug of a government for 25 years, the
Coalition, that never did a damn thing about any of these things.
JL: But your people have been in there for ten years, you didn't do
anything about enterprise bargaining for ten years.
PM: Yes we did. We started in about ' 85 on productivity bargaining and
started to change the centralised system around.
JL: Yes, but nothing happened until the last 12 months.
PM: Oh, no, no, no. We got enterprise bargaining in the late 1980s. The
great change we put in in the last year was enterprise flexibility in the
Federal Award area. So, even in places which are not organised,
where there are no unions, small to medium sized enterprises, they
can now vary their terms and conditions of employment...
JL: Do you regret that you didn't introduce that earlier?
PM: Well, I think everything takes time. You see, the rigidities and the
interlinking awards and the leapfrogging which characterised our wage
fixing system for 90 years can't be changed overnight. But we've now
changed it. But, my point is this, John, that with all those changes, if
we could do four and a half per cent growth in the ' 80s in a far more
rigid economy the chances of doing four and a half now in this flexible
economy much more flexible, and remember this, that 75 per cent of
our exports go to the Asia-Pacific. The Asia-Pacific is growing much
faster than North America, -Japan or Western Europe. This
government has set up structures not only in Australia, but outside of
Australia, for Australia.
JL: So, what do you believe our growth could be? I don't want to hold you
to it, I'm just thinking about the growth in Asia.
PM: This year I think we'll do the four and a half, as forecast and, I think, it's
possible for the Australian economy to grow at that pace or greater,
over the period. Now, we're forecasting, in a sense conservatively, our
growth rate drops back to around four per cent for the next couple of
years.
JL: Do you think you are making it easier for private enterprise to employ
people or do you think you are making it tougher?
PM: Oh, we're making it easier because, basically, now a good manager
can make the wage bargain that he or she thinks can kick the business
along. And that, I think, is the big change.
JL: I hear the greatest complaint from the private sector, or one of the
greatest, and there are plenty of them, but one of them, which I don't
think is unreasonable, is that it might be easier now to employ people
but it is very, very difficult to get rid of them.
PM: Well, I don't see that's valid. But, the point about it is, look, let's not
get gloomy about getting rid of people, the fact of the matter is that we
have, all of us, changed this economy from a closed, inward,
frightened little place, with a tariff wall around it in the 1980s and a
managed exchange rate and a sclerotic financial system to one which
is open and free, free and open product markets with low tariffs, open
services markets and open financial markets and great linkages now
into Asia, with low inflation, low interest rates and a competitive
exchange rate. The ball is at our feet, and where now 8 kids in 10 are
completing secondary school; ten years ago when we started on the
task it was 3 in 10. In two years time it will be 9 in
JL: How many of those kids are staying at school because they believe
they wouldn't get employed if they left?
PM: All the incentives have been to keep them at school because we don't
want the Australian economy to be a low wage, low brow economy.
We want it to be a high wage, high technology, smart economy doing
the smarter higher valued things and you can't do that without
education and research and development. Now, that's the sort of
economy we've got set up for ourselves. Only we can muck it up at
this point. The ball is at our feet.
JL: OK, when you say qualify that.
PM: Well, that is, by some characteristic of our economy or community we
don't take the opportunities up. I mean, by the business community for
instance not taking the opportunities up; by the labour market not
changing.
JL: Do you believe they will?
PM: No, I think they will. Look, John, I was in Vietnam three week ago and
I went to a function which the Australian Embassy had arranged and
there were 235 business people there from Australia 235 Australians
in Ho Chi Minh City. We've got $ 800 million invested in Vietnam.
Australians are everywhere in Bangkok there is a great group of them
there that I met. We've made the leap into Asia as we've never had it
before and that is what is holding some of this growth up. That is, that
exports which have been going gang busters now for years are doing
so because the linkages we have into an area of the world which is
growing much faster than north America or Japan or western Europe.
Now, if we continue to keep our competitiveness, get that right, but
believe in ourselves, have some faith in ourselves and not knock the
place or have these sort of crabby right wing journalists saying, " oh
well, look, there's not enough pain here, what we need is another sort
of I know they had high interest rates, but now let's give them high
taxes. Let's belt them around." This sort of notion that if it's not
painful, it's not any good; when do we ever get to enjoy it? And if we
understand that we do have tremendous opportunities here I'm sure
Australians are going to just grab them. In other words, in the terrible
sort of tall poppy cutting and knocking of Australia, basically the
community is in for the main chance, which is growth and opportunity.
JL Just back to industrial relations. I was saying yesterday that you have
done extraordinarily well, or somebody had, getting the unions on side
probably Simon Crean in the main with your assistance but, the new
Industrial Relations Reform Act would appear a major impediment to
getting ' changes in the work place. The flexibility promised by the
White Paper of last week is prohibited by this Industrial Relations
Reform Act because it reforms all the secondary boycott provisions, it
puts up barriers to the formation and retention of non-union shops,
you've got to advertise any work place agreement and consequently
the unions can get involved again. Are you going to have another look
at that?
PM: No, because, look, secondary boycott things never made any
difference to the way so meone runs a business. What this means is,
instead of the rigid flexibility of awards which we had from the
centralised system, someone now who, let's say it's a business
employing eight or ten people in a federal award area, even though the
people may not be unionised, may never have ever been members of
a union or been in any way organised, those people can now vary the
terms and conditions of their employment in agreement with the
employer without reference to anyone. Now, the only condition we put
is that they can't be varied down. They can change their hours of
work, they can change their remuneration.
JL But they have to have agreement.
PM: Between them.
JL Yes.
PM: Yes.
JL But the agreement has got to be a majority approval, but the funny
majority you lot have down there is 70 per cent. I would have thought
51 per cent was a majority.
PM: I can't remember what we've got in the Bill, John.
JL Well, that's what you've got.
PM: The fact of the matter is, look, any employer with any nous these days
has got all the flexibility to actually get their employees together and
do something clever. Now, they are doing it. You see, one of the
reasons why last month the inflation figure came out for the year at 1.9
per cent and in the old days wage increases without productivity would
be pushing that rate up. The reason it has remained consistently low,
and it is very low, is because we are getting wage increases, but they
are paid for by productivity. So, it's not flowing into inflation and the
system is already working. The proof of the pudding is in the eating.
Just look at that inflation rate, I mean, we are not in a recession now.
We are growing stronger than any substantial economy in the world
and yet we've still got inflation at 1.9 per cent. In the same part of the
cycle in 1983-84 when we came out of the 1982-83 recession we had
inflation at 11 per cent. We've got inflation now at 1.9 per cent and we
got it because, basically, the system is more supple, flexible and
productive.
JL: And do you believe inflation will stay that low?
PM: Well, we've got it slightly higher in the Budget at 2 and 1/ 4 per cent.
From 1.9 per cent to 2 and 1/ 4 per cent.
JL: If it goes to 2 and 1/ 4 per cent will interest rates stay down or go up?
PM: No, I think there is no reason why interest rates should rise on the
forecast. Because, we've already got interest rates running at 5 and
1\ 4 per cent or 5 and 1/ 2 per cent on bills for instance which is a real
rate of interest on the short ends. That is, the real rate is taking the
inflation from the nominal rate of interest if the nominal rate is 5 and
1/ 2 and inflation is 2 per cent the real rate is 3 and 1/ 2 per cent. So,
we've got a real rate of about 3 and 1/ 2 per cent.
JL: You see, because that's where the confusion exists what's a rubbery
figure? I mean, what is the real rate and what is the anticipated rate?
That is where the discrepancy lies. Somebody said last night, I don't
know whether it was Ralph Willis or not or somebody in an interview
later, that we had the lowest income tax rates in the world.
PM: We are. Australia is the lowest taxed country in the western world.
Again, that is confirmed in the papers..
JL: Well, I'm just looking here, for the average wage of $ 35,000 here, we
pay 22.6 per cent tax. The same rate of pay in Asian countries has
much, much lower rates; Indonesia 23 per cent; Malaysia 16 per cent;
Korea 15.6 per cent.
PM: But, they are not OECD countries, John.
JL: But, these are the countries we are dealing with.
PM: I know, but, they don't have a developed road system, the don't have a
developed health system.
JL: Japan doesn't, Singapore doesn't.
PM: Singapore is a city state. It is as big as the city of Sydney. I mean,
once you put the roads down they are down for the next twenty or thirty
years. Look at Australia, you've got to run highways.
JL: It is a bit bigger than the city of Sydney. Japan 10 per cent; Thailand
10.4 per cent.
PM: Yes, but Japan's rate of tax is about the same as Australia's. That is,
Japan and Australia are within a decimal point of one another as the
two lowest taxed OECD countries and we are.
JL: But, when you say the others aren't OECD countries, that of course, is
quite right. But, they are the countries in whom we have been
encouraged by you to place great faith because this is obviously where
our trade is going to take place.
PM: That is true, but you can't compare their general revenue effort with
ours when we run a fully developed economy when they don't. But,
what we have done for it to say, but, we do trade with them, and
therefore as a concession to that point we've cut our corporate rate to
33 per cent so at least our businesses are on the same competitive
footing as a business would be in these countries. But, in terms of the
general community of Australia, we've got now a very low level of
taxation because we don't have a consumption tax; we don't have
social security levies.
JL: But, it's not the lowest?
PM: It's the lowest in the OECD.
JL: Sure, but we are not dealing directly with OECD countries. Haven't we
got to take the comparison between the other Asian countries.
PM: Yes, well, go around Malaysia and go around Korea and see what
conditions are like outside of Seoul or Kuala Lumpur or these places.
It's just not like Australia, they are not developed countries.
JL: But, these are the countries with whom we have to deal?
PM: Yes, but we don't want to end up like that.
JL: I agree.
PM: I mean, they are trying to end up like us. They are trying to get to
where we are.
JL: OK, well now Prime Minister, tell us what we, as a nation, have now
got to do?
PM: I think, what we have to do is to consolidate our gains on inflation.
That is, we have to always think about price increases and wage
increases; we've got to keep the notion of productivity, the whole
productivity culture in front of us; in preserving that inflation rate we
preserve our core competitiveness. That keeps us in the market
places of Asia and the Pacific and, to that extent, North America and
western Europe. They are the things that will basically drive us. Then,
I think, we have to keep a premium on education and training as we
are to make sure that we end up with a skilled work force producing
clever goods and not a low income work force producing things that
developing countries are producing. And, above all that, we've got to
keep Australia as a cohesive society. We've got to be determined that
we shall be an inclusive place. That everybody is part of the
Australian family and there's not just part of the game for the wealthy
and well-to-do people with the middle income earners doing it hard in
the middle and those on low incomes doing it tough or the
unemployed. That we keep the place as a cohesive whole. Now, if we
do that, we'll do what the Americans have not done, what the British
have not done in the 1 980s there has been basically an underclass
rip away from American society. You've got a very high proportion of
low income employed people, but people below the poverty line on
abysmally low wages and you've got a body of unemployed people as
we have.
What the White Paper is, is a statement which says we will not be that
kind of society. That the Australian ethos of the fair go and
egalitarianism will remain a core part of the culture under this
Government and in the Australian community. So, we get those three
things together, maintain our competitiveness, keep an emphasis on
training and product innovation and keep the place together and
cohesive, I think, Australia can be a country, the envy of many in the
world.
JL When will we start to see the results of these things when put in place?
PM: I think, we will start to see them relatively soon. One of the challenges
in the next two years is to develop a private case management and job
pl acement market to sit beside the Commonwealth' Employment
Service so, if an employer needs somebody, with confidence they can
ring a certain agency and find somebody relatively quickly who they
know they have personal experience of. I think, it is also important for
Australia's young people: there is a lot of alienation amongst young
people because they think society doesn't care for them or doesn't
care about them. I think, to be personally case managing them, oneto-
one, understanding their personality, their educational..
JL You'd have to employ an awful lot of people to do it.
PM: Yes, we've got to employ about 3,000 we think to handle 125 cases a
year, personally. But, you'll get to know the person, understand the
person, their educational qualifications, their aptitudes, their work
experience and they'll go away saying " well, look, I'm not on my own, I
haven't been forgotten, I'm not just cast aside", and, I think, that ' s
terribly important particularly today when many young people who drop
out of school early find that they can't get work because the sort of low
paid, unskilled jobs which existed 25 years ago don't exist now.
JL In the time that you've been Prime Minister, have you achieved
everything you wanted to achieve?
PM: No one can achieve everything they want to achieve, but I do want to
see Australia set up well at home and abroad. That is, set up well in
terms of a productivity culture in our industry, but a community culture
which has a premium on each Australian personality remaining
important.
JL: What's the best thing you've done since you've been Prime Minister?
PM: I don't know, it's for others to judge I think, John.
JL: What's the worst thing you've done?
PM: Well, whatever it is I wouldn't tell you, not here.
JL: Later?
PM: Later maybe. Look, I think if we can get that kind of society and I think
we are getting it now, we've got a tremendously good social security
system, it's targeted, it's relatively inexpensive in world terims.
JL: But, is it really working?
PM: Yes, look, it has held the country together through these last couple of
difficult years.
JL: Why have we got more people on it then?
PM: Because we've got more unemployed people, but...
JL: So, it's not working?
PM: No, that's because the economy wasn't running at its optimum, but the
system is working because it has picked them up and it's managed
them and it's now managing a lot of them back into work.
JL: Why do we have more poverty now than we had before if the system is
working?
PM: We don't have more poverty.
JL: Yes, we do.
PM: No, I don't think that's right. I mean, Australia is a much more
JL: We were not going to have any by the 1990s according to your
predecessor.
PM: Australia is a much more fully employed place than it was ten years
ago not withstanding the recession. I mean, largely we kept of those
1.7 million jobs that were created in the 1980s, we've largely kept them
all. What we haven't done is we are not adding to new ones at the
pace that we were formerly adding to them and that is what we are now
changing this year with 230,000 job growth and in the Budget
forecast for another 240-250,000. So, that will make a difference. The
social security system, the health system means that Australia is a
very equitable place, I believe, and what we've got to do now is just
make sure that the proceeds of growth are spread to employment and
to education and that we continue to make these linkages into Asia.
JL: OK, thanks very much for your time. As usual you have been
generous with it and thank you for the explanations. I still think there
are a lot of things that need to be answered and I'd like it very much if
soon, and I won't hold you to it, but if soon you could spend some time
with us and talk to the people who listen to us around Australia.
PM: A bit of talk back. I'd look forward to that.
JL: You like that don't you?
PM: I like that, yes. I like an intellectual challenge, John. Thank you very
much for the opportunity and I thank your listeners.
ends