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Prime Minister discusses the level of unemployment and economic policies to deal with it -

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Prime Minister discusses the level of unemployment and economic policies to deal with it

DAVID MARGAN: First tonight - are you on, say, $60,000 a year? Are you prepared to give up about $200 a year to help an unemployed Australian get work? That's the kind of proposal the Keating Government has been considering, today. For the big earners, helping out is just one proposed solution to our 11.1 per cent unemployment rate. Fresh from today's Cabinet meeting, the Prime Minister, Paul Keating, is talking to Paul Lyneham.

PAUL LYNEHAM: Mr Keating, thanks for joining us. You've said you're not going to panic about unemployment, but many Australian families, of course, are now panicking, especially when they ....

PAUL KEATING: No. I said the Government's not going to panic about remedies, that is being panicked into remedies which don't help that unemployment. That's what I said, not that the Government isn't entirely and utterly concerned about employment and unemployment, but it's not going to be panicked as to remedies.

PAUL LYNEHAM: All right. But when you're in the dark - when you're in that tunnel and, say, Dad's lost the job or Mum's lost the job or they've both lost the job, surely, if the Prime Minister's even unable to say that we're past the worst of it, surely that just makes panic more likely, doesn't it?

PAUL KEATING: Well, we did see, in last week's figures - notwithstanding the higher number of people looking for work which threw the rate up - in terms of unemployment and terms of employment, there was 28,000 jobs there for the month. That's the first reasonably strong sign we've seen, that employment's starting to come through.

PAUL LYNEHAM: In that a lot more people came into the job market, didn't they?

PAUL KEATING: A lot more people came back looking for work.

PAUL LYNEHAM: And ended up with 11.1.

PAUL KEATING: That's what threw the rate up, that's right. If we'd have had the same number of people looking for work as the previous month, the unemployment rate would have gone down. But, so what?

PAUL LYNEHAM: Yes, but there's still an enormous under-employment throughout the whole community.

PAUL KEATING: Absolutely. The truth is, I think, Paul, the economy is recovering. It's recovering but not as quickly as we believe, but still it's going to recover solidly. The problem for the unemployed - well, over the course of the next 12 months - we saw some quite strong retail figures this week; private consumption is picking up; we've seen housing starting to improve ....

PAUL LYNEHAM: But you've been saying this for six months, haven't you, at the very least?

PAUL KEATING: Yes. But the growth to date, for three quarters, is 1.6 per cent. When we get the June quarter in, there's a reasonable prospect it will be around 2 per cent for the year, so that's not a claim, that will be a fact. Let me just say, in the following year - that's from 1 July, in the financial year we're in now - we expect it to be around the 4 per cent area, in other words, twice as fast again.

PAUL LYNEHAM: As distinct from the 4.75 in One Nation?

PAUL KEATING: That's right. A bit slower than then but still reasonably strong. The problem with it is it's productivity laden, or put another way, we're getting more output for fewer people employed. In the first instance, there's more output for fewer people in employment and it will take some time for those people in employment and the output to grow so that employers start to put on extra people.

PAUL LYNEHAM: Well, that raises the question, surely, of what percentage of those jobs lost in recent years are now gone for good. What percentage will be there in the future when the economy picks up?

PAUL KEATING: Well, I think - I think it's largely a cyclical employment effect.

PAUL LYNEHAM: That's because of the recession?

PAUL KEATING: I think so.

PAUL LYNEHAM: Not structural?

PAUL KEATING: There's obviously some structural qualities to it, but again, what you lose in one sense, you pick up in another by the fact that the economy, in the course of restructuring, is now doing things it wasn't doing seven or eight years ago. For instance ....


PAUL KEATING: Well, manufactured exports. They've gone up 300 per cent since 1983.

PAUL LYNEHAM: What of the argument, though, that to keep on cutting tariffs, at a time of such high employment, is really putting political ideology ahead of common sense?

PAUL KEATING: Well, I don't - it's a very phased and gradual reduction - it started i n 1988 and it will end in 1997 - and I don't believe that the - I think it would be to dupe people to give them to believe that any pause in the tariff changes would protect their job. It won't change the way in which investors or business look at the Australian economy; it won't change their long-term plans for the economy. All I think it will do will be, basically, to kid people along their jobs are there.

PAUL LYNEHAM: Wouldn't it save some jobs for the next few years?

PAUL KEATING: I don't think so, no, because I think if anyone thinks that the tariff levels of a particular commodity are coming down, they're coming down, notwithstanding a pause, a phasing or what have you - I think that's there. I mean, the economy is in a state of change and it is a change which will produce stronger rates of employment in the '90s, but in a part of the world market where we can survive.

You see, Paul, if we want to change Australia - that is recede into the old economy to compete with the economies around us - you've got to take your wage rates back to the wage rates of Indonesia and Malaysia and these countries - that's $8 a week, $A1.30 a day.

PAUL KEATING: So we've got to get smarter.

PAUL KEATING: We've got to move up the international division of labour, and you can only move up, basically, by new products, new processes and new skills.

PAUL LYNEHAM: There's also the idea around, isn't there, of increasing the top marginal tax rate by a couple of cents to provide some money for job creation schemes? What do you think of that idea?

PAUL KEATING: Well, it's promoted by people who understand the Government's natural concern about the deficit, and they're saying to us: `Look, for years you have been competent fiscal managers; you are worried about the deficit. We'd like you to spend more money on labour-market programs. Would it help you if we said you should collect this on the receipt side and then spend it on the outlay side?'.

PAUL LYNEHAM: And what's the answer?

PAUL KEATING: Well, the answer is: If you want to give the economy a net stimulus - taking on the one hand and giving on the other, basically doesn't do that.

PAUL LYNEHAM: But it might take from some of the so-called fat cats and give to some of the kids. There's a certain sort of Robin Hood fairness about it.

PAUL KEATING: But then, as you call them, the fat cats won't spend.

PAUL LYNEHAM: A couple of hundred bucks a year? That's not much is it?

PAUL KEATING: No, but in terms of the net change to the economy from the Budget. At any rate, a couple of percentage points onto the personal tax rate will only raise, I think, of the order of $300 or $350 million.

PAUL LYNEHAM: That would help?

PAUL KEATING: Well, it would help, but it's not going to dramatically change the order of things. I mean, the Government can worry about fiscal policy. We have over the '80s. We're the only government that ever produced strong surpluses. Those strong surpluses in the late '80s are now coming - we're now enjoying, at least, the fact that we reduced Commonwealth Government debt in the '80s, so that now that the natural swing in the Budget is into deficit, we can accommodate it more easily.

PAUL LYNEHAM: But you look like starting off, in this Budget, with a deficit of $13.5 billion. That doesn't give you a lot of room to move, does it?

PAUL KEATING: Well, the starting point's not settled, but the problem - low inflation's a good thing but the first impact of low inflation on the Budget is to increase the deficit, because if all payments to the Commonwealth are growing more slowly as inflation's growing more slowly, the receipts collapse ....

PAUL LYNEHAM: Your tax take's down.

PAUL KEATING: That's right, therefore the deficit widens. So it's widening but, in some cases, wholly for good reasons.

PAUL LYNEHAM: Yes, but it does give you less room to move, does it not?

PAUL KEATING: Well, I don't think it's going to seriously constrain the Government in focusing on the things I think it will need, now, to focus on in terms of directly supporting and helping those who are actually unemployed.

PAUL LYNEHAM: There's talk, tonight, of this billion dollar job creation scheme, presumably in the Budget.

PAUL KEATING: Yes. Well, that's got no basis to it, that story. I saw that on the news. That's a total furphy.

PAUL LYNEHAM: Well, it is being put to you, isn't it, that you should run the deficit up to as high as 16 billion? Would that be imprudent?

PAUL KEATING: Well, I don't know who's putting that to us ....

PAUL LYNEHAM: Well, John Langmore says it, amongst others.

PAUL KEATING: Well, there are always big budget deficit bangers all round the place, here. I mean, they were arguing that back in the early '80s and are still arguing. I mean, there'll always be some people arguing that.

PAUL LYNEHAM: You dismiss this?

PAUL KEATING: Well, I'm not picking numbers on programs this distance from the Budget. I mean, this Government will focus on the - its effort on those people who deserve support and where we can materially help.

PAUL LYNEHAM: But will you be spending more to help them, Mr Keating, or is it ....

PAUL KEATING: Yes. We will be spending more to focus assistance, by way of direct assistance on labour market programs, as well as doing the things - as we've been doing - lowering interest rates again, watching the natural recovery come through and, with it hopefully, some employment.

PAUL LYNEHAM: There's also talk around, at the moment, of sort of work for the dole youth corps schemes - Land Care, working with local councils, that sort of stuff. What do you think of those ideas ....

PAUL KEATING: Well, we're working through those. Some of those things have got something going for them, but we're looking at a menu of things in the labour market area. But the one thing that we won't be trying to do - we won't be employing the policies of the Opposition who's got a two-pronged policy approach, and that is making prices dearer and wages lower - prices dearer with a consumption tax and wages lower by cutting youth and adult wages. We won't be having a bar of those sorts of things.

PAUL LYNEHAM: But do you think these sort of youth corps things are worth trying, if only to give kids a sense of purpose?

PAUL KEATING: Oh, I think so.

PAUL LYNEHAM: There's a terrible human cost out there.

PAUL KEATING: I think it's very important, particularly, that young people have the opportunity of work experience and, where possible, training, and these will obviously be the issues we'll be focusing on at the meeting, next week, on youth training, youth wages, et cetera.

PAUL LYNEHAM: How much do you worry about the personal damage this is doing to a generation of young Australians? Because we've got thousands of kids out there who don't believe this country gives a damn about them, haven't we?

PAUL KEATING: I mean, of course it worries me, it worries the Government. It always has. I mean, in the 1980s we committed ourselves absolutely to employment, that's why the Australian labour market is 25 per cent larger in size than it was in 1983. There's 7.6 million people in work today; there were 6 million in 1983. We've always, as a government, tried to focus that effort onto employment, but the economy is growing slowly.

I mean, just in the Financial Review, a day or two ago - which I have here, with you - it says `European Community faces worsening slump in confidence', and they've got 1991 growth at 1.1 per cent; 1992, for Europe as a whole, at 1.7; 1993 at 2.5. Now, most of the developed world is growing very slowly. We're trying to beat the rap; we're trying to make the Australian economy grow at least at a pace which will pull employment up. So this problem is common to western Europe, north America, Britain - most economies like ours.

PAUL LYNEHAM: Meanwhile, you're running out of political time and you face the prospect of going to the polls with unemployment at 10 per cent plus. How can you hope to win with that around your neck?

PAUL KEATING: Well, I think the issue has to be - people have got to say to themselves: `If the Australian economy has slowed in growth and is now starting to accelerate but we have not yet got the employment effects and we have a human problem of unemployment, who best to deal with that problem? Is it the Labor Party which believes in picking people up, training them, giving them job opportunities or supporting them, leaving them on - giving them at least the benefit of unemployment benefits, the benefit of Medicare, the benefit of these sorts of protections; or a Liberal Party which says: We'll throw them out after nine months; if you're sick you can insure yourself like the United States; if you don't carry your Blue Cross card in your pocket you don't get admitted to a hospital'.

PAUL LYNEHAM: So you reckon you're still in with a chance, do you?

PAUL KEATING: Well, the economy's got problems, particularly in the labour market, and the Labor Party - the Labor Government - is best suited to deal with it and its problems.

PAUL LYNEHAM: Prime Minister, we'll have to leave it there. Thanks for your time.

PAUL KEATING: Thank you, Paul.

DAVID MARGAN: And our thanks to Paul Lyneham.