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Meet The Press -

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GREG TURNBULL: Hello and welcome to Meet the Press. Well, 1.25 million Australians will be the
beneficiaries of this week's minimum wage decision. And it's a fair bet that most of them wouldn't
recognise any of these five people sitting in a room in Melbourne. But they are the new Fair Pay
Commission. And their deliberations produced a pre-Christmas bonus for Australia's lowest paid.

IAN HARPER, FAIR PAY COMMISSION (Thursday): The Commission grants an increase of $27.36 per week in
the standard Federal minimum wage. And in all pay scales, up to $700 per week. This covers just
over 1 million Australian workers.

Commission has lived up to its name.

GREG TURNBULL: The Government's main man on industrial relations, Employment and Workplace
Relations Minister Kevin Andrews, is our first guest this morning. And later, HSBC chief economist
John Edwards on whether another interest rate rise next month really is inevitable. But first to
what the nation's papers are reporting on what is in some States daylight saving Sunday, October
29. The 'Sunday Telegraph' trumpets the PM's $90 million God squad. How the Federal Government will
fund Christian chaplains to provide counselling for all schools. The 'Sun Herald' reports embattled
Islamic cleric Sheikh al-Hilali saying he doesn't need to learn English because most of his
constituents speak Arabic. In Brisbane the 'Courier-Mail' says retiring Democrats Senator Natasha
Stott Despoja is set to draw at least $2.7 million from the parliamentary superannuation scheme.
And the 'Sunday Times' in Perth says home owners can save thousands of dollars by moving quickly to
3-year fixed-rate home loans. And from Canberra welcome back to the program, Minister Kevin

KEVIN ANDREWS: Good morning, Greg.

GREG TURNBULL: Well, first if I could go to this issue of the $90 million that your Cabinet is
going to give to schools to fund chaplains, will they be Christian only and will that open up the
Government to claims of being monocultural?

KEVIN ANDREWS: Well, this is provision of money which schools can take up or not. It's for public
and private schools and it's not exclusively that a person has to be from a particular denomination
or not. I think there is a broad concern in the community amongst parents and indeed amongst a lot
of young people that having someone like a counsellor, like a chaplain, that they can go to and
talk to is very important. We've seen tragedies in recent days in schools, in NSW for example, and
a lot of people want someone that they can just talk to outside the normal teachers in the school.

GREG TURNBULL: Well, let's move to the big story in your portfolio of the week which was that fair
pay decision. It was larger than expected. Did you find it politically awkward to put yourself in a
position of having to welcome a larger than expected rise which was being condemned by the employer

KEVIN ANDREWS: I thought the decision was in the range of what the Fair Pay Commission would award,
remembering that it's some 18 months since the last decision of the Industrial Relations Tribunal.
We have a very prosperous economy in Australia at the present time, and as I've said on many
occasions I fully expected that there would be a pay increase awarded by the Fair Pay Commission.

GREG TURNBULL: The Government's own submission to the Fair Pay Commission before this judgment
apparently specified that for every 10 cents per hour increase there'd be a loss of jobs and with
this $27 decision the estimated loss of jobs would have been 236,000. Are you now walking away from
your own submission?

KEVIN ANDREWS: This is a matter of balance and the Fair Pay Commission took any likely impact on
unemployment into account and specifically did so in its decision. But can I remind you the Labor
Party was running around the country deriding the Fair Pay Commission for the last 12 months,
saying that this would lead to a slash in wages when indeed the opposite has occurred and they've
got egg all over their face this week.

GREG TURNBULL: Let's have a look at the reaction very quickly of the unions and one of the employer
groups in the form of Greg Combet and Peter Hendy.

ACTU SECRETARY GREG COMBET (Thursday): Well, we welcome this decision from the Fair Pay Commission
because this is a win for the ACTU and it's a win for low paid workers.

GREG HENDY, CHAMBER OF COMMERCE AND INDUSTRY (Thursday): The business community will be extremely
disappointed in the inaugural decision of the Fair Pay Commission. The $27.36 increase is a very
significantly high figure.

GREG TURNBULL: Isn't it the case, Kevin Andrews, that if the AIRC had brought down a $27 decision
you would have bagged it up hill and down Dale?

KEVIN ANDREWS: Well, this decision when worked at, looked at on an annual basis, is in the range of
about $18 to $20, $27 over 18 months. We have got a prosperous economy at the present time and I
believe it was a fair decision. The change here is that we've got an analytical, researched
approach to the way in which minimum wages are set in Australia. In the past, we had an ambit claim
by one side and an ambit counterclaim by the other side equally and an arbitrated outcome. Under
this process we have a commission which undertakes ongoing research, which listens to and consults
with a whole range of Australians beyond the few days of hearings that might be held in the
Industrial Relations Commission and I think it's an eminently better approach to looking at how
minimum wages affect other aspects of the economy and I think the decision was a very reasonable

GREG TURNBULL: But interestingly, your very well qualified Fair Pay Commission has laboured long
and hard and come up with a result which I gather is directly equivalent to headline inflation. Why
don't you save yourself the price of a commission and just index wages if that's the case?

KEVIN ANDREWS: Well, I think it's important that we do have a commission. We made a policy decision
that there should be an independent body, which looks at minimum wages. We could have said the
Government will decide this or take a recommendation from a commission as they do in the UK but
we've chosen a commission, broadly based, with a long-serving Trade Union member as part of it, as
a business man as part of it, labour market economist - and said there is an independent role just
like the Reserve Bank in relation to interest rates. We should have an independent body setting the
minimum wage in Australia, and I think this first outcome is regarded broadly as a fair outcome and
I think it puts to bed the criticisms that have been made of the Fair Pay Commission and some
people ought to apologise for what they've said over the last 12 months.

GREG TURNBULL: Just quickly, this has been interpreted also as potentially playing into inflation.
I know there's debate about that, but some people say it will and create a dog chasing its tail
problem with prices and the PM himself has said that an interest rate rise next week is - well he
hasn't said it's inevitable but he said that it could be a case of a stitch in time, it could be
the interest rate rise we had to have. Do you agree that if we have an interest rate early next
month, that it will be better now than later?

KEVIN ANDREWS: Firstly, Greg, the Fair Pay Commission did address the question of inflation. And
their conclusion was that this increase in the minimum wages wouldn't have an inflationary effect,
and they obviously looked at this in some detail. I think in terms of whatever happens with
interest rates, and that's a matter for the Reserve Bank, one thing we wouldn't be happy about
subsequently is if there was some outbreak of inflation in Australia, because in terms of ordinary
working Australians and their families, nothing is more corrosive than high inflation.

GREG TURNBULL: All right, Kevin Andrews, we'll take a break there and when we return we'll invite
suggestions on who would really run the country under a Beazley Labor Government.

GREG TURNBULL: You're on Meet the Press with our guest Kevin Andrews, and welcome to our panel this
morning, Lenore Taylor from the Australian 'Financial Review'.

LENORE TAYLOR: Good morning, Greg.

GREG TURNBULL: And Philip Clark from 2GB.

PHILIP CLARK: Good morning, Greg.

GREG TURNBULL: Kim Beazley received an enthusiastic if entirely predictable welcome at the ACTU
Congress in Melbourne this week. But his message to the peak union body was pointed - a Labor
Government will govern for everybody, not just the ACTU.

OPPOSITION LEADER KIM BEAZLEY (Monday): As we go forward, I'll listen to you and work with you,
just as I'll work with those in business, experts and everyone else, but in the end the decisions
rest with us, rest with the Government.

LENORE TAYLOR, AUSTRALIAN 'FINANCIAL REVIEW': Minister, the truth is that we don't really have the
critical details of Kim Beazley's policy yet, so we can't tell whether what he just said is true
but it also means that you're boxing at shadows so far, doesn't it?

KEVIN ANDREWS: No, we know a lot about their policy already, Lenore. The Labor movement told Kim
Beazley he should rip up AWAs and he went out and announced it. They told him that we want
compulsory union bargaining and he went out and announced it.

LENORE TAYLOR: But we don't know his minimum conditions.

KEVIN ANDREWS: We want expanded right of entry, and he announced it, we want good faith bargaining
and he announced it. He protesteth too much because he's actually said, "I will deliver by way of
policy, all the things that you're demanding."

LENORE TAYLOR: We don't know his minimum conditions and that's really at the heart of the matter,
isn't it?

KEVIN ANDREWS: We know a whole range of other things. We know that they want expanded right of
entry into the workplace and he's going to provide that. Kim Beazley has simply repeated in the
last six months what has been demanded of him by his union bosses. That's the reality.

PHILIP CLARK, 2GB: Mr Andrews, he's on to something here though, isn't he? Isn't he right when Kim
Beazley says in addressing the ACTU, and he's addressing voters here too, when he says, "Look, it's
just ridiculous to think that an 18-year-old kid or a working mum can bargain on equal terms with
powerful multinationals." That's a message which resonates with working people who know what it's
like dealing with the boss. He's right about that, isn't he?

KEVIN ANDREWS: Look at the facts, Philip. We've put in place additional protections for young
people. You can't sign an AWA for example if you're under the age of 18 without the consent of your
parent or guardian. You can have the union or anybody else act as your bargaining agent for you.
Unions have still got a major place to play. If you look at the number of agreements that have been
signed in the six months after WorkChoices came into operation, 70% of workers covered by those
agreements are under collective agreements which are largely negotiated by the union.

PHILIP CLARK: But the individual agreements - it's still a case of small to medium businesses
getting the documents, having it done by a consultant and it's a take it or leave it basis. It
doesn't matter whether your father or mother goes down with you to the shop. The deal's going to be
the same, it's not going to be different because mum or dad's there, is it?

KEVIN ANDREWS: That's not the case. It's not what's being fed back to us. In the current employment
market, where every business in this country is crying out for workers and trying to retain good
workers, that's simply not the reality, and with an ageing population and the shrinkage or
contraction in the growth of the workforce it's not going to be the case in the future.

LENORE TAYLOR: Can I take you back to the discussion about the Fair Pay Commission. It wasn't clear
to me from your answer just before whether you do think this will have any effect on unemployment?

KEVIN ANDREWS: Well, if you look at what the Fair Pay Commission said itself, in its report, it
said that it considered the impact on employment and unemployment and the impact on inflation, and
it didn't believe that a pay increase of these levels was one that was going to have an adverse
effect on both unemployment and inflation. That was their considered judgment.

LENORE TAYLOR: Do you agree with them in terms of unemployment?

KEVIN ANDREWS: I think that is true. We are in a prosperous economy at the present time. As I go
around the country - wherever I go - business owners and proprietors say to me, "We simply can't
find the number of people that we need to do jobs." That's the broad situation that we're facing in

LENORE TAYLOR: So what was the point of the Government's submission to them then?

KEVIN ANDREWS: Well, the Government didn't put a figure in its submission.

LENORE TAYLOR: But a calculation.

KEVIN ANDREWS: The Government set out a lot of information that is relevant. The question of the
impact of minimum wages on employment is one which has been considered by the commission. The low
pay commission in the UK has also considered this, and generally there is a view that at some point
there is a balancing between the level of the minimum wage and unemployment. But in this case, and
in these circumstances, quite clearly, the Fair Pay Commission was of the belief that a $27
increase was not going to have an adverse impact.

LENORE TAYLOR: On stem cells, the vote coming up in the Senate, do you think if Kay Patterson's
bill passes in the Senate, that will be a good outcome for democracy, won't it? People will have
examined their consciences, made a decision, that would be a good thing, would it not, if that was
the outcome of the process?

KEVIN ANDREWS: Let me make my position clear. I'm opposed to the legislation on the substance of
what's in it. I think this is all based on a false promise but in terms of the democratic process,
yes, this is a proper democratic process just as the way we addressed cloning and stem cell
research in the first place was.

PHILIP CLARK: Mr Andrews, just looking at our commitment to Iraq - and there's been a lot of news
about this the last couple of weeks - just how much longer can Australia maintain its commitment in
the face of what almost universally seems to be a deteriorating security situation for foreign
troops. The question now across the Western world is surely not if but when - when is it going to
be for Australia?

KEVIN ANDREWS: Well the situation varies in different parts of Iraq. It's quite clear that there is
more conflict in the Baghdad central area of Iraq compared to some other places, but the worst
thing we could do for the people of Iraq who have voted overwhelmingly for democracy would be to
cut and run now and leave them in a worse situation. We have a commitment I believe...

PHILIP CLARK: Is it their decision or our decision?

KEVIN ANDREWS: Well, they made a decision in terms of voting for a democratic Government. There are
elements in Iraq that obviously don't want that democracy.

PHILIP CLARK: So we'll wait for them to tell to us go, will we?

KEVIN ANDREWS: What I'm saying is that the last thing we should do is what the Labor Party is
suggesting and just simply cut and run from people who want a democratic outcome. We are attempting
to assist that. We are looking at it in terms of increasing the ability of their own forces in Iraq
to do that, but just to run away from this situation I think would be quite immoral.

LENORE TAYLOR: If I can take you to your home State of Victoria for a moment. How do you think Ted
Baileau is going in the lead-up to the November election. Do you think Jeff Kennett is advising him

KEVIN ANDREWS: I think Mr Baileau is doing a very good job. This is going to be a tough election
campaign like all election campaigns are, but I've been impressed with the way Mr Baileau has given
a new lease of life I think to the Liberal Party and the Coalition generally in Victoria.

GREG TURNBULL: Kevin Andrews, can I just ask you, at the Federal level, the Howard Government's had
a - you've got to say, a stable ministry for many years now. Some key ministers such as Peter
Costello and Alexander Downer in their posts now for more than 10 years. There's a lot of talk
about a reshuffle coming up, do you think that would be a healthy renewal and, if so, have you got
your eye on any other portfolio?

KEVIN ANDREWS: Look, these are matters for the PM obviously. I am quite happy with the job I'm
doing. It's not finished at this stage but if the PM thinks that I can do a better job elsewhere,
well then obviously that's something that he would consider, but I'm not going to speculate about

GREG TURNBULL: Finally, if I could bring you back to where we began with your own portfolio. The
ACTU and the unions generally are showing no inclination to give up their campaign. Next year is an
election year. It will be a big campaign year on this front. I suppose it's your hope that you
could have this IR bedded down so that indeed it won't be a major election issue. What are your

KEVIN ANDREWS: Well, Labor said that WorkChoices would slash jobs. We've seen 200,000 more jobs
created since March. Labor said WorkChoices would slash wages. We've seen a $27 increase in the
minimum wage. Labor said that this would lead to bosses and workers at each other's throats, and
we've seen the lowest level of industrial disputation ever in the history of Australia. WorkChoices
is working, it's working for the workers of Australia, it's working for Australians generally and
it's working for the country and I believe that, ultimately, that's the way in which the Australian
people will judge it.

GREG TURNBULL: Kevin Andrews, thanks very much for joining us this morning.


GREG TURNBULL: After the break, John Edwards, chief economist of HSBC, on inflation and interest
rates. And our cartoon of the week this week deals with John Howard's torrid time at the Pacific
Islands forum. Mark Knight of the 'Herald Sun' has our leader about to be installed on a spit as
PNG's Michael Somare quips "We promised you a warm welcome."

GREG TURNBULL: You're on Meet the Press. Well, the 3.9% inflation figure released through the week
is regarded by many commentators as a sure sign interest rates will go up again early next month
and maybe again in February next year. The CPI figures prompted these contrasting political

TREASURER PETER COSTELLO (Wednesday): You would expect in a strong economy that you would see some
price pressures. But it is important that we are vigilant in relation to inflation, that we keep
inflation low.

OPPOSITION LEADER KIM BEAZLEY (Wednesday): John Howard has lost control of inflation, therefore
he's lost control of interest rates.

GREG TURNBULL: Well, John Edwards is the chief economist with HSBC, welcome to the program. Well,
is another interest rate early next month inevitable and what about another one in February?

JOHN EDWARDS: Well, I think it is inevitable next week. We saw core inflation in annual terms going
up in the most recent release. So I think when the Reserve Bank board meets at the beginning of
November, they'll agree on an increase. I'm not sure whether we're going to see another one in
February. I think not. But it will very much depend on what the numbers between now and then tell
us. Certainly the Reserve Bank wouldn't have made at this point a decision about the number of rate
rises that will be required.

PHILIP CLARK: John, just how inflationary is the Fair Pay Commission's decision to award a $27 a
week increase to Australia's lowest paid? How inflationary is that now, this decision, and
decisions it will make into the future?

JOHN EDWARDS: Well, you might say if minimum wage workers didn't get anything at all, then the rate
of wages growth would be probably perceptibly slow and that might have an impact on making
inflation a bit lower, but I doubt the difference would be very great. It might be quarter of a
percentage point.

PHILIP CLARK: Over the longer term the Low Pay Commission, after all, was designed to lower minimum
wage rates not to maintain them. Is it going to be an ongoing inflationary pressure?

JOHN EDWARDS: The increase is almost exactly equal to the rate of increase of the CPI over the
period. If they stuck to that rule going forward, it would mean over time minimum wages fell
compared to everybody else's wages which are going up in real terms. It's just a question of how
quickly they approach their goal.

LENORE TAYLOR: To what extent do you think that inflation will in some way impede the parties'
abilities to spend next year in the lead-up to the Federal election. Will it still be at a level
where they might think twice before big pre-election spending promise?

JOHN EDWARDS: I think the trajectory of interest rate increases is a very, very big problem for the
Federal Government, first of all, because people don't like rate rises, secondly, because it makes
it much more difficult to argue that Labor will be associated with rate increases, but thirdly, as
you suggest, it's certainly true that any excessive spending next year in the Budget, there's a
surplus down there for about $10 billion, probably $12 billion, it's certainly open to the
Treasurer to offer more tax cuts, larger spending. But it would almost certainly attract a charge,
I think, that it will merely drive interest rates up.

LENORE TAYLOR: What would be excessive spending in your view?

JOHN EDWARDS: Well, I think if the deficit compared to this year was say reduced by $5 billion -
sorry, the surplus was reduced by $5 billion, that's about a critical point.

GREG TURNBULL: What about looking back at the big, big tax cuts in the last Budget - were they
overdoing it? Because there was a lot of debate about that, wasn't there? Should we be blaming this
coming interest rate rise on the May Budget?

JOHN EDWARDS: Well, I think you could reasonably make the point that the big test of the impact of
a budget is the change in the surplus in an underlying sense from one year to the other, and in
that sense the tax cuts were not excessive. On the other hand you could certainly say that if we
hadn't had tax cuts household spending would be a bit lower and we mightn't have as much pressure
to have another rate rise.

LENORE TAYLOR: Access Economics came out recently with the view that they think the bottle-necks in
the economy are already starting to be opened up and that therefore growth will accelerate. Do you
agree with that because if that's true, then a lot of what Kim Beazley's economic sales pitch is
built around will have less potency, won't it, if he can't argue that he's the guy to fix the
bottlenecks in the economy?

JOHN EDWARDS: I'm not quite sure what Access Economics is forecasting. I think growth will
accelerate next year but not very much. It will be above 3% after all at the moment, the last
numbers it's below 2%. If it goes above 3% which I think it will, that's fine. I think Access is
saying closer to 5%. How they get the number, I have no idea.

PHILIP CLARK: On climate change, the drought and climate change are big issues this country faces.
We've been late to the plate on this because the Government says if we sign Kyoto it will damage
our economy, but by all accounts if we don't do something about this it will damage our economy
too. This is a big issue for Australia. How much is it going to damage our economy?

JOHN EDWARDS: In the long-term, climate change is perilous for us and it's certainly an issue we
have to address. It's not going to damage it next year or the year after but in the long-term we
have to be part of a global agreement on restraining it.

LENORE TAYLOR: Nicholas Stern's report is coming out this week which apparently shows that in fact
the long-term effects of doing nothing are quite serious and could in fact lead to global
recession. Is that seen as a credible sort of a report in economic circles, will you be looking at
that in terms of your work?

JOHN EDWARDS: Yes, Nicholas Stern is a very credible economist. He's put out some good material
already on climate change, I'm looking forward to reading the report.

PHILIP CLARK: The Government's going to have to spend on this, whether it's taxes or subsidies for
switches in energy use. It's going to be a Government cost, isn't it?

JOHN EDWARDS: Absolutely. It's going to be a Government cost and the cost is going to fall partly
on taxpayers and partly on those industries which are biggest users of carbon-based fuel.

LENORE TAYLOR: From an economic point of view, does it make more sense to try to encourage the
change in the economy through subsidies like the one to the solar power station this last week or
through some sort of price on carbon?

JOHN EDWARDS: I don't think it makes any sense at all in the long run to just do it in terms of
subsidies. You have to do it in term of prices so that all the participants in the economy can
adjust and that really means a carbon tax.

GREG TURNBULL: John Edwards, finally, we need to go, - I don't want to put you in the uncomfortable
position of being an unlicensed financial advisor but should people lock in their home loan rates
or not, given the medium term outlook?

JOHN EDWARDS: I think fixing is quite attractive at the moment because generally speaking long-term
rates are lower than short-term rates. I don't really understand why more people don't fix,

GREG TURNBULL: John Edwards, thanks for being our guest this morning. That's John Edwards from HSBC
and our thanks also to our panel this morning, Lenore Taylor and Philip Clark.