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Meet The Press -

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MEET THE PRESS

INTERVIEWS WITH SHADOW TREASURER WAYNE SWAN AND HSBC CHIEF ECONOMIST DR JOHN EDWARDS

DISCUSSIONS ABOUT LABOR'S REVIEW OF ELECTION POLICIES AND FUTURE ECONOMIC DIRECTION, THE PROSPECT
OF INTEREST RATE RISES AND AUSTRALIA'S ECONOMIC HEALTH

31st October 2004

MEET THE PRESS PRESENTER PAUL BONGIORNO: Hello and welcome to Meet the Press. Mark Latham turns to
the roosters to rebuild Labor's economic credibility.

OPPOSITION LEADER MARK LATHAM (from earlier media appearance): It is part of our response to the
election loss where we need to change, we need to change, change personnel in these economic areas,
and of course improve and change policy for the future.

PAUL BONGIORNO: Today we meet Shadow Treasurer Wayne Swan. But, first, what the nation's press is
reporting this Sunday, October 31. The Melbourne 'Herald Sun Sunday' has "Terror Tape Taunts Bush."
The paper says terror mastermind Osama bin Laden has thumbed his nose at US President George Bush,
raising the prospect of new attacks in America in the final days of the presidential election. The
Pakistan bureau chief of Al-Jazeera, the network which received the tape, gives this assessment.

AL-JAZEERA PAKISTAN CHIEF AHMAD MUAFFAQ ZAIDAN: The message from the tape is, you know, and from
both tapes is, look, after four years or three years, you know, of 11th September, nothing has been
changed. Osama bin Laden is there. The war has been launched against Taliban, against Afghanistan.
It was for the capturing of Osama bin Laden and Osama bin Laden is still alive.

PAUL BONGIORNO: 'The Sunday Mail' in Brisbane reports "US Turns Up the Heat." If the Bush
Administration wins the election, the paper says it may seek to replace the UN nuclear watchdog
chief with the Australian Foreign Minister Alexander Downer. The Adelaide 'Sunday Mail' says "Our
Troops in Drug Trials". The paper cites Army chief Peter Leahy admitting more than 1,300 of our
troops in East Timor were used as guinea pigs for an unauthorised anti-malaria drug. And the
Melbourne 'Sunday Age' reports most GPs plan to raise private fees. A survey of doctors in Victoria
and New South Wales has found Federal Government incentives to boost bulkbilling will fail. His
leader once dubbed him a 'rooster', but now it is a term of endearment. And this little rooster has
been given the task of leading the chorus in chanting Labor's new mantra, "It's the economy,
stupid". Welcome back, Wayne Swan.

SHADOW TREASURER WAYNE SWAN: Good morning, Paul.

PAUL BONGIORNO: Well, has your leader handed you a poisoned chalice? How are you going to rebuild
or build Labor's economic credibility?

WAYNE SWAN: Well, it's a great challenge. I'm going to be knocking on a lot of doors over the next
12 months as we flesh out Labor's new economic growth agenda. In fact, I think, Paul, I'll probably
need a new fitness regime to cope with all of those boardroom lunches and dinners, because I think
it is going to be a bit of a chicken salad offensive, actually. I've got a lot to learn out there
and we're going to take our time to flesh out a new economic growth agenda for this country.

PAUL BONGIORNO: Well, there's been a lot of criticism of Mark Latham's shunning of business. No
matter what you do, he's going to have to lift his game, too, isn't he?

WAYNE SWAN: I think Mark has said this is a priority for him as well. He's appointed an economic
committee of Shadow Cabinet to carry out this task over the next 12 months and Mark and I and other
members of the Shadow Cabinet will be moving around, moving around the boardrooms, moving around
the lunch rooms and moving around the community to get their feedback, so that we can put forward a
fresh agenda for the future.

PAUL BONGIORNO: Why is it important to do this?

WAYNE SWAN: Well, it's very important because we need to reinforce Labor's commitment to economic
growth, to a high-productivity economy, to a low interest rate economy and to an economy where
everybody gets a fair share.

PAUL BONGIORNO: Well, on Thursday the Government won control of the Senate and this is what the
Treasurer said it would mean.

TREASURER PETER COSTELLO (Last Thursday) : We'll also be able to pass legislation that we have
promised the Australian electorate at previous elections and been unable to legislate -
improvements in industrial relations, for example. Improvements in the unfair dismissal laws, which
are holding back small business. Improvements in relation to welfare reform. Improvements in
relation to reducing some taxes which we've promised in previous elections.

PAUL BONGIORNO: Well, is it all down-side for Labor now?

WAYNE SWAN: Well, we've got a very big task to keep this Government accountable for its promises
and we'll do that. But also to keep the Government accountable for many of the short-term fixes
that it has put in place in recent years, which aren't meeting the very great challenges facing
this country. For example, the skill shortages, the great challenges in infrastructure. So our
challenge will be to be a very effective, articulate Opposition that keeps this Government up to
the mark every day of the week.

PAUL BONGIORNO: The new Senate doesn't come into play until July next year, but we've had an
election. There's an enormous mandate for the Government. Should Labor allow the Government's
election bills as they're reintroduced through the Senate now, in light of that?

WAYNE SWAN: Well, we'll keep the Government accountable for their election promises and we'll do
that in the house and we will judge their legislation as we see it. But, our job is to keep them
accountable for their promises, but also to make sure that they meet the great challenges before
this country to ensure that prosperity continues.

PAUL BONGIORNO: There is an argument that Opposition shouldn't try to improve Government
legislation. They should let the Government wear the blame as well as the praise?

WAYNE SWAN: Well, the Government will have a full mandate from July 1 next year, but our most
important job is to keep them accountable to the Australian people. They made a series of
commitments during the last campaign and every day of the week we will be out there keeping them
accountable for those promises, keeping them honest. That's the job of the Opposition and it's a
much more important job now, now that the Government has got an increased majority in the House of
Representatives and complete control of the Senate.

PAUL BONGIORNO: Just going to the situation that Labor now finds itself in, isn't there a parallel
between Mark Latham now and Dr John Hewson in 1993? Mark Latham would have to have been as damaged
as Hewson was then, and I suppose going out, maybe he's got only 18 months left?

WAYNE SWAN: No. Look, absolutely not. Mark Latham has got a great opportunity to become the next PM
of Australia. Our task over three years is to put forward an alternative economic plan for this
country, a vision for the future to show that we are a strong, viable Opposition and a strong,
viable alternative government. That's the task we've got. He had 10 months prior to the last
election. We've now got three years to put that in place. I'm very, very confident we're up to the
task and that we can put forward that alternative and elect Mark Latham the next Labor PM of
Australia.

PAUL BONGIORNO: Many say that he's taken a big risk in appointing you Shadow Treasurer because
you'll be able to strut your stuff, show your wares?

WAYNE SWAN: Well, I'm going to be supporting Mark as strongly as I possibly can and so is Stephen
Smith in the economic portfolios and so will all of our other Shadow Cabinet ministers. We've got
to get a Labor government elected in this country and we're going to work very hard to do that and
we're all behind Mark in that task.

PAUL BONGIORNO: Are you saying to me then if he stumbles it will be his fault, not yours?

WAYNE SWAN: No. Absolutely not. I'm saying we will work as hard as we possibly can to get Mark
Latham elected PM of Australia. That's our task. That's our responsibility.

PAUL BONGIORNO: Time for a break. When we come back with the panel, some free advice for Wayne Swan
from the Treasurer. And, later, the views of Keating Government's senior economic adviser John
Edwards.

PAUL BONGIORNO: You're on Meet the Press with Shadow Treasurer Wayne Swan and welcome to the panel,
Michelle Grattan, 'The Age' and Steve Lewis, 'The Australian'. Wayne Swan has never been short on
ideas, but just in case, Treasurer Peter Costello laid down a few markers for him.

TREASURER PETER COSTELLO (Last Wednesday): The first thing they should do is junk Medicare Gold,
because, as we all know, that was an unfunded policy which had the capacity to haemorrhage the
public account in the years which lie ahead. Secondly, of course, they have to acknowledge that
when people receive a $600 family supplement, it actually exists, and when you take it away, it
actually costs people.

MICHELLE GRATTAN, 'THE AGE': Well, Mr Swan, shouldn't you in fact junk Medicare Gold? Isn't it
discredited after the campaign?

WAYNE SWAN: No, we shouldn't junk Medicare Gold because Peter Costello says so. We are reviewing
our policies and we'll take those policies through that process and through the Caucus over the
next month or so and then we will announce our approach from there. But, I mean, I just find that
so ironical. I mean, today there's headlines everywhere that bulk-billing is falling apart and that
Medicare in is crisis, and Peter Costello, instead of fixing that problem is giving advice to the
Opposition. That just shows what the problem is.

STEVE LEWIS, 'THE AUSTRALIAN': Mr Swan, just on Medicare Gold. Treasury found a couple of days out
from the election that there was a $700 million black hole. Doesn't that undermine your economic
credentials?

WAYNE SWAN: Guess what, Steve? Peter Costello won the election and he's the Government, so he can
get on with fixing the health system. We'll get on with reviewing Labor's policies and putting
forward a positive agenda for the future and we'll do it in our own time and we don't need Peter
Costello's advice on that.

MICHELLE GRATTAN: Well, just talking about time. Isn't it a bit of a nonsense to spend only a month
or two reviewing all of these policies when you're looking at an election in three years?

WAYNE SWAN: No, we are doing more than that, Michelle. We are going to put forward a new economic
growth agenda and we're going to do that over the next 12 months. We're having an immediate review
of the policies and the campaign and we will announce the outcome of that. Then we will move on
from there. So, we will do it in a considered way and we'll be out there for three years arguing an
alternative agenda. We'll have positive proposals in education and health and we'll announce those...

MICHELLE GRATTAN: Does that mean, though, that you don't look at those policies again? Say you
re-endorse Medicare Gold with a couple of bells and whistles and the schools policy. Do you come
back to that in two years, or do you say, well, that's it?

WAYNE SWAN: Well, Michelle, we will announce our approach in a couple of months' time. I think
that's the prudent way to go. We don't have to dance to anyone's tune. We don't have to dance to
what Peter Costello says. We'll take our time to announce our program. We'll get on with the job of
being a responsible Opposition, developing policies, but keeping Peter Costello honest. That's what
we will do.

STEVE LEWIS: Mr Swan, talk about dancing to tunes - the union movement is already sounding alarm
bells that you might be dancing to the tune of business. We had Doug Cameron accusing you of
cuddling up to business. We had Greg Combet, the head of the ACTU, also warning that Labor should
not jettison its union links. How do you respond to those claims and is possible to reconcile your
pitch to business with your traditional support for the union movement?

WAYNE SWAN: Well, of course it is possible to talk to both business and to the union movement at
the same time. I don't think my critics would ever accuse me of sucking up to anybody, whether it's
people in the union movement, the business community or for that matter the press gallery. I mean,
the truth is that we have to talk to all sectors of the Australian community. We have to talk to
people in the boardroom, we have to talk to people in the lunch room. We'll be out there doing both
of those things and most particularly we'll be doing that in terms of the development of a new
agenda for economic growth to secure prosperity in our community. So it will mean being in the
boardroom and being in the lunch room and that's what we are going to do.

MICHELLE GRATTAN: But isn't an agenda for economic growth a sort of big, nice, fuzzy catch-all?
What does this mean in practice in terms of your industrial relations policy? Did you get it a
little bit wrong or a lot wrong? Is it going to be a total overhaul or just a minor tinkering?

WAYNE SWAN: Well, we're going to develop our agenda for growth over the next 12 months. Industrial
relations is a very important part of it. Making this economy much more productive, so we can get
the high growth, low interest rate, low-inflation environment we need is very, very important.

MICHELLE GRATTAN: We seem to have most of that, though, already.

WAYNE SWAN: No, we haven't secured it for the future, Michelle. I mean, there's a skill crisis out
there, which is putting huge costs on business. It's a huge constraint on growth. There's an
infrastructure problem out there. There's an ageing-of-the-population out there. We've got to bring
all of these things together. Industrial relations is part of a wider picture. We're not going to
dance to the tune of Peter Costello or anybody else as we put our policies together over the next
12 months.

STEVE LEWIS: Well, Mr Swan, just yesterday your leader Mark Latham said Labor is going after the
new middle class and he identified those as people like contractors. In the election, the PM took a
particular initiative to voters, support for contractors and stopping unions from basically
intervening. Will you support that approach?

WAYNE SWAN: Well, I don't know what that approach means, Steve.

STEVE LEWIS: ...in relation to workplace relations, specifically.

WAYNE SWAN: Steve, when we see the detail of the legislation, we will look at it in the normal way
and we'll respond to it in the normal way after we take those proposals through our normal
policy-making processes. But look, John Howard won the election. They ought to get on with solving
the problems that are out there, which are a big restraint on growth and which are restricting
opportunities for many Australians. We'll keep them accountable for that and then at the same time
we will get on with the positive job of developing an alternative agenda for this country.

MICHELLE GRATTAN: Well, one thing they are going to do to try and solve some problems, as they see
it, is bring back their industrial relations legislation. You were talking before with Paul about
the Senate. What are you going to do in response to these bills? It's no good saying you'll decide
when you see them, because you've seen them a million times already.

WAYNE SWAN: Well, I can't imagine that we will be changing our minds on those bills that we've seen
before...

STEVE LEWIS: So you'll continue to oppose unfair dismissals?

WAYNE SWAN: What we are going to do is we will judge new legislation - we will judge new
legislation on its merits...

MICHELLE GRATTAN: But you'll hold firm on those bills that have been presented before in your
Opposition?

WAYNE SWAN: Yeah, we'll stick to our principles. We'll stick to our principles. We've articulated a
principled point of view on those bills and if they're the same bills, I would imagine we'll have
the same attitude. In so far as the Government may have new legislation and new proposals, then
we'll judge those on their merits. That's principally, in industrial relations, a task for Stephen
Smith, but we will look at those on their merits when we see them.

STEVE LEWIS: Just on the issue of tax reform, Mr Swan. Do you believe that there should be further
tax relief offered, particularly to people at the top end of the $80,000-$85,000 range, if you
like?

WAYNE SWAN: Well, Steve, we're going to look at tax as part of the development of the new agenda
for growth. But, let me just say this more generally, I mean, I absolutely believe that we must be
internationally competitive, that our integration into the world economy is a critical part of
producing a high-growth economy that provides for secure jobs for the future. And I will judge tax
and infrastructure and industrial relations within that framework.

STEVE LEWIS: You seem to be suggesting then that people on $80,000-$85,000, people in this city,
for instance, are not particularly rich and can look forward to further tax relief under a Labor
regime?

WAYNE SWAN: I'm not suggesting that at all, Steve. What I do know is that people in this city can
be on joint incomes combined of around $80,000-$85,000 and not be rich. That is certainly the case.
But if they are living in the regions of Queensland on joint incomes of $40,000 or $50,000 and be
relatively wealthy in those communities.

PAUL BONGIORNO: You say internationally competitive, but Australia's top personal tax rate is so
much higher than the top business rate. I mean, that can't be allowed to continue, can it?

WAYNE SWAN: Well, these are all issues for the future. I'm not going to pre-empt those issues, but
I can assure you we are absolutely committed to a high-growth economy, and that means being
internationally competitive and meeting the great challenges which are posed by the development of
China or the challenges that are coming in trade, skill formation, infrastructure and so on.

PAUL BONGIORNO: OK. We're right out of time. Thank you very much for joining us today, Labor's
Wayne Swan. After the break, HSBC chief economist and former Keating government advisor John
Edwards. And the cartoon of the week - Leahy in 'The Courier-Mail' homes in on Mark Latham
appointing two former rivals to key economic portfolios. Farmer Latham spares the axe for the
roosters, which prompts Smith to ask Swan, "And if he stumbles, are you thinking what I'm
thinking?"

PAUL BONGIORNO: You're on Meet the Press and welcome to HSBC chief economist John Edwards. Good
morning, Dr Edwards. Interest rates, as we know it, are at the cutting edge of the political
debate. What's your assessment? We had good inflation figures in the latest quarter. Some
economists believe we'll still see a rate rise before the end of the year, that is in December.
What's your assessment?

HSBC CHIEF ECONOMIST DR JOHN EDWARDS: Yeah, well, I'm one of those economists. I think we probably
will. I think there's a case to raise rates, because inflation, although it was quite modest in the
September quarter, is nonetheless - we expect it to go up over the course of next year. Those are
the sort of circumstances in which I think the Reserve Bank would look to, you know, a gentle
increase in rates.

PAUL BONGIORNO: While rates are nowhere near the 17% they were 10 years ago, is it your analysis
that households still are suffering as much now because of the size of their loans as they were
back then in trying to meet their mortgages?

DR JOHN EDWARDS: Well, it's true that servicing commitments compared to income earned are around
about the same today as they were at the height of that difficulty in the early '90s. But of course
these ones have been entered into voluntarily. People knew what they were getting into, whereas in
the early '90s it was, as it were, imposed on them by the government. So there a is difference and
I think we are going to be able to see a little increase in those rates without, you know, the
economy falling in a heap.

STEVE LEWIS: Dr Edwards, looking ahead for the Australian economy, the Treasurer seems to be
suggesting that the future growth forecast might be revised downwards. Do you believe that will be
the case and what do you see as the major pressure points on the Australian economy going ahead?

DR JOHN EDWARDS: Well, I think in the immediate future, we know, for example, that building is
slowing. We expect that consumption will be a bit slower next year, maybe business investment and
perhaps exports won't be - they'll be growing but perhaps not enough to make up for the difference.
So it's our expectation that growth will be a little slower next year but not much.

STEVE LEWIS: So, to sum up, this is as good as it gets in terms of the economy?

DR JOHN EDWARDS: We've had 13 years of uninterrupted growth. It's been an excellent period in our
economic history. I expect it to continue but perhaps not quite at the same rate as this year.

MICHELLE GRATTAN: Just going back to interest rates. How high do you think they will get
eventually? Will this be the first of a number of rises or just a one-off one that doesn't go any
further? And, secondly, what do you think the pressures might be that the Government's election
promises put on the economy?

DR JOHN EDWARDS: Well, I think on interest rates, the most we're looking at is probably half a
percentage point, so that will take the mortgage rate up to 7.5%, a little bit above its average
over the last decade.

MICHELLE GRATTAN: And that would be it for...?

DR JOHN EDWARDS: And I think that would probably be it for the reasons that Paul mentioned,
household debt is so high. On the Government's promises - well, we're yet to see what they intend
to stick with, whether the revision to the Budget forecast is going to make any difference. My
sense is, given that the path of future surpluses has been moved up, that it's not going to make a
lot of difference to the economic outcomes if the Government implements everything it committed
itself to.

MICHELLE GRATTAN: So you completely reject the Labor argument that these won't be affordable over a
period?

DR JOHN EDWARDS: Well, they're not going to be affordable if we run into trouble, but on the
current - on a path of surpluses, assuming reasonable growth, they are going to be affordable, yes.

STEVE LEWIS: From your perspective, we've heard Wayne Swan talk about making Australia
internationally competitive, what advice do you have for the Government about doing that? Is that
essentially about lowering our tax rate or are there measures that the Government needs to address?

DR JOHN EDWARDS: Steve, the way I think about it, we've had - the 13 years of excellent prosperity
we've had have been vastly due to growing labour productivity, that is, growing output per hour
worked. So the challenge for the Government and the challenge for the Opposition is to figure out
ways to keep this going. One way, I think - one thing we ought to be spending a lot more time
looking at is the quality of our physical infrastructure - energy, roads, our ports, airports. Are
they going to be adequate over the next decade? Should we be spending more or should we be spending
less? What should be the balance between the State Government, Federal Government, public and
private? That kind of assessment I think we ought to be making but we're not.

MICHELLE GRATTAN: Infrastructure is obviously one priority of Labor because they've put it in
Stephen Smith's portfolio very specifically. More generally, what do you think Labor needs to do to
rebuild its economic credentials? You come with a record from an adviser to a Labor Government, to
the Keating Government. What would be your advice now?

DR JOHN EDWARDS: Well, I think they've got to do what Wayne Swan says he wants to do, which is to
create an agenda for growth to tell a story about the economy, which is plausible and which goes to
sustaining our prosperity. I don't think that's beyond them but they've certainly got to do a bit
of work.

MICHELLE GRATTAN: How do they reconcile this tension between the business constituency that they
want now to appeal to and their union base, because these constituencies are looking for two
different stories, surely?

DR JOHN EDWARDS: Well, I think the legislation that's currently before the Parliament, that is
unfair dismissals for small business and extending the allowable - reducing the allowable matters
for - and I don't think that they're going to be a big problem for the economy, that is, whether
they go ahead or don't. It is not going to make a huge difference. I think on industrial relations,
Labor's real problem is to back out of any suggestion that it would reintroduce the Australian
Industrial Relations Commission into enterprise bargaining. I think that's where they've got to
make a move and I rather suspect they will make.

STEVE LEWIS: It's inevitable then that there is going to be bloody conflict with the union movement
if you try and de-empower the IRC, surely.

DR JOHN EDWARDS: Well, the union movement is not going to be entirely happy with everything Labor
does, I don't think, but that's an area in which I think they'll have to move.

PAUL BONGIORNO: That was the one area, the cutting-edge argument that the Government was able to
use, that it was basically Labor trying to redress the balance in the unions' favour. You say
they're going to have to alter that view?

DR JOHN EDWARDS: I think so. Of course, when I was in the Keating government, the union movement
supported, indeed pushed for, the introduction of enterprise bargaining. So I think there are
various ways in which the union movement can be reconciled with that.

PAUL BONGIORNO: Just briefly, what's your assessment on the oil shock? We saw what it did to
Australia in the '70s, indeed to the world. Are we heading for an oil shock?

DR JOHN EDWARDS: Well, Paul, I don't think it will have a huge impact on us here. The entire
additional cost of oil in the year to September was one-tenth of 1% of our GDP. So, for Australia,
not a huge effect. Unless it affects other countries to which we export.

PAUL BONGIORNO: There was another argument that in fact it could help us by making our gas and our
coal more valuable as an export?

DR JOHN EDWARDS: That's true. It's been part - the increase in the price of oil has been part of an
increase of all commodities, many of which we export.

PAUL BONGIORNO: OK. Thank you very much for joining us today, Dr John Edwards from the HSBC Bank.
Thanks to our panel, Michelle Grattan and Steve Lewis. Until next week, it is goodbye from Meet the
Press.