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Transcript of interview with John Laws: Radio 2UE: 9 March 1993



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PRIME MINISTER

TRANSCRIPT OF THE PRIME MINISTER, THE HON P J KEATING, MP INTERVIEW WITH JOHN LAWS, RADIO 21.,E 9 MARCH 1993

E&OE PROOF COPY

Laws: The phones have been runn'rg hot the last few days.

Keating: You're all faxed up.

Laws: Absolutely, and with some simii-difficult questions. But we will do it this way we will take a fax or two, then we will h;r/e a break, then we will take a call or two, people wanting to talk to the Prime Minister, If you haven't already got your call organised, ycu do it by dialling 906 8899, but the rest of Aus tralia ycu dial 008 022 880, and if you would like to send a fax on the run that is simple, our fax number is 02 906 8300. This fa'c ccmes from Burringbar. You were in that area yesterday, I think?

Keating: tip In Richmond, .. near Tw:ed Heads.

l.s.ws: Burringbar, NSW. Question for Mr Keating. The adult dole payment Is a little over $148.00 per week, tax free, yet a part time worker receiving the same amount hc^s to pay $8.25 tax, and as well his ernplo'j>>r pays workers compensation, super arnuation guarantee levy, and may be pay roll tax and training levy. Why does your

Government discourage would be entrants to the work force and their employers this way? Signed Jim Burling, from Burringbar, NSW,

Keating: No one on full time work wciild receive an Income that low, and I am not sire how much tax would be paid, because there is a tax free threshold.

Laws: Well he Is saying, part time worker, receiving the same amount, pays $8 .25.

Keating: Well I don't know whether that is right, the tax free threshold is $5,400. Which Is over $108.00 a week, so I don't kr;c .w that anybody down there would be paying $8.00 a week.

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Laws: He Is saying the adult dole p•a.yment is a little over $140.00 a week tax free, yet a part time worker receiving St 40.00 a week, and that would be over the threshold, $140,00 a week, would be paying $8.25.

Keating: Yes, could be paying a little bit of tax.

Laws: COK, well if that is the case the point the fellow makes is pretty good, his employer pays workers compensation, superannuation guarantee levy, not to mention the traning levy and may be payroll tax, he is pretty right.

Keating: Well let me say the superannuation guarantee levy at that income, if he is a pal time worker, would be just literally pennies. That wouldn't be a burden: But the thing Is about the part time fellow he would have to have some other income, John, I mean, he wculdn't be Just simply living on that income C-tnd the likelihood is that he would have other

income. So, you have got to make judgements about all these things, at what level benefits should be. Now if you an asking someone to live on $148.00 a week, they are not going to be making whoopee out -there ,and I clon't think there are anyone who Is going to say, well look I prefer to be unemployed :.rd take in $148.00 to have the opportunity of work. That is the point.

Laws: Yeah, but the point is very realistic, I mean if it is true, said all the whether it is, or whether.. Keating: Well I would need to check ti a numbers. The point that is trying to be made here, that the level of unemployment oene!its are a discouragement for people to join the workforce, I don't believe that is true. Laws: No, but what he is also saying if somebody is prepared to take that same amount of money, but go o work, not be on the list of the unemployed, not take money from the taxpayer, he then is taxed $8.25, his en-ployer is paying some superannuation guarantee, plus workers compensation, wh'ch might be pennies, but if he is employing alo: of fellows at $148.00 ceases to be pennies. I mean it is worth having a look at, isn't it?K'3ating: Let me have the fax because I will just check the numbers out. The keypoint, that is that unemployment benefits at tiese levels are a discouragement to people who join the workforce. I don't believe they are. In fact, what we announced a couple of weeks ago we will actually let unemployed people earn some more income and still keepthe unemployment benefits to encourage there to take part time work.Laws: But that doesn't encourage Y.em to come off the dole queue.Keating: But it will encourage them to get wont experience, John, that is the point.Once these people start to continue to get work experience and get their confidence levels ua, one of biggest problems about u nemptovme.nt is people losing confidence, and they lose their self esteem.Laws: OK, well you follow that up, but if that is fact, I mean it is an anomaly, itseers crazy that you can get $148.00 a week, or whatever it is,.for not going to work but it

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you take the time to go to work you are going :o be taxed $8.25 for bothering to go to work doesn't seem right does it?

Keating: I don't think anyone is going to try and live on a part time income of that level, what is he saying, slightly more than the dole?

Laws: Yeah, about the same.

Keating: I will check it.

Laws: C)k. This one comes from Jaak9 Andrews, Kiama. You are on record as saying that if you lose the election Labor will not cppose the GST in the Senate.

Keating: Well the convention is that, and the Labor Party has always observed the co,iventions, that is that we don't oppose the money bills of the Government. If in Opposition we don't oppose the money bills cf the Government in the upper house, that is, a Senate. The Senate was designed as a States house to protect the interests of smaller States and the way they were protei:ted was to make the representation of each

State the same. So NSW, which has got a ,,%vag of seats in the House of Representatives, compared to say Tasmania, have the same number of Senators. It was there originally as a check upon the power of the big States in the House of Representatives. It is not there to knock off money bills.

Laws: Ok, Prime Minister, I don't want to cut you short, but we have got a mass of telephone calls, but is that correct, you will not oppose the GST in the Senate?

Keating: We believe if a Government: has a mandate for election policies that their money bills, and of course the GST is over .iaif the income tax, it is $24 billion.

Laws: Ok, but you won't block it in ':r.e Senate?

.eating: No. That is, if it came in as a money bill we would pass it

Laws: Labor will not oppose the GST in the Senate. You have made no such pledge on the industrial relations package, :L:st that mean Labor would block it in the Si3nate?

Keating: Well John Howard won't show us the bills. Tricky little John Howard has the legislation in his pocket and he says he Nvon`t show us the bill until two days before the election. Why would we in Opposition, and let ire make the point I don't expect to be in Opposition, these are hypotheticals, but why would we in Opposition pass their legislation to tip people back into the 19th century on (;omnon law contracts for legislation we have never seen? They can't claim a mandate for that, that's the point I am making.

Laws: All right, well let's get right to the point, you will not oppose the GST because it is a money bill, you have made no such pledge on the industrial relations package, does that rnear; Labor would block it in the Senate?

Keating: Probably yes.

L.aw3: Probably or yes?

Keating: Well we would have to see what it is, but again that Is thing they are keeping it hidden.

Laws: If it was similar to Victoria's would you block it?

Keating: Yes, I think we would, we would do our best. but again, if we are the Government the House of Representatives will never see such legislation.

Laws: But as you said these are hyDotheticais. One would assume that the Democrats would be on your side to block that kind of industrial relations package if it were the same, but none of us know. But if it were the same, you would block it?

Keating: The Liberals policy has two prongs to it, John, higher taxes and lower wages. The IA legislation from Howard an I-lewson will be about cutting peoples wages and doing it in a very nasty, way. So, the answer is yes, particularly how they have kept all of the details of it secret, vie would not supi:ort that. -

Laws: OK, well that is the answer o your questrDn, Jake Andrews, Kiama. The Labor Party would not oppose the GST Ser ate, however they would oppose the Industrial relations package and I trust that is a satisfactory answer, the kind of direct one we want, and the reason I appear to be rushing you is because I am rushing you.

KM3ating: Well lets go, go for your life.

Laws: *There are a whole heap of l' ?s, I mean there is about 200 of them outside apart from the ones we have got here, a lot of telephone calls so we will hesitate for a moment and take a couple of calls.

LAWS: The John Laws Show all round Australia, wherever you may be in Australia, your opportunity is available to you now to talk to the Prime Minister who's my guest for this first hour. You can call if you happen to be in the Sydney area,.

but the rest of Australia.. and we'll take a call. Hello.

CALLER: Good morning.

LAWS: Okay, go for it.

CALLER: A few years back, Mr Keating, you stated that any dummy could jack up interest rates, comatise (sic) the economy and throw the country into depression and cause low inflation. Well, you did a good job of it, didn't you? You couldn't, you didn't also say that..... LAWS: Hey, listen, hang on - are you ringing to ask a

question or give a lecture? You can give a lecture any day of the week - today is 'ask question days'.

CALLER: .. question. Do you really think that the

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Opposition is so stupid and crazy that they would bring in a policy which will not only destroy the nation but ruin their next election chances. And are business groups such as the Small Business Association, the BCA, the National Farmers

Federation, and likewise, so insane that they're actually supporting a GST policy which will ultimately destroy them? If what you claim is true, Mr Keating, is there nothing positive about the GST? And any second question..

LAWS: Hang on, we'll handle the first one first.

KEATING: Well, let's handle the first one first. Look, the simple point is, you're obviously not a fan, so let me just make that point. And the second point I'd like to make to you 's that, whatever criticisms you might have of my management of

.hings, you might say ditto for the United States, ditto for Britain, ditto for Japan, ditto for Western Europe, because the same problem beset everybody. And that was too much growth, unsustainable growth, unsustainable credit growth, unsustainable lending, a boom that was unsustainable and a bust

in the business cycle. That's largely what's happened. Now, can I just say this about the GST. The GST is a flat tax, therefore it's unfair. It never assesses one's capacity to pay like the income tax does. The income tax, if you earn more money, you pay more tax - if you earn less, you pay less tax. The GST will, I think - and the whole range of the Coalition's policies, that is, putting people off on to individual wage contracts, cutting wages, destroying Medicare, having generally a sort of 'survival of the fittest' policy, a sort of

throwing a crust into the circle and letting everybody scramble for it. That sort of policy is a divisive one. If you watch :levision of a night, you'll see film from Europe and Africa, of countries heavily into crisis. Why would we want to take the risk in this country of upsetting that sense of harmony and tolerance and dignity of Australian life by a sort of a scramble which is induced by wrong-headed economic policy. I mean, we've got a co-operative culture in Australia. CALLER: Can you answer the question? Is there anything positive about the GST? Nothing at all? All these groups (inaudible) KEATING: Well, the thing is, just take Professor Head - one of the leading experts on taxation policy in Australia, said: why bother with a social and economic upheaval for at best trivial long-term gains? They're trivial long-term gains, that's the point. I mean, the macro-economic risk, the large economic risk is too great. The risk to the inflation rate - about four to five percentage points addition, to inflation after we spent 20 years breaking its back to less than one percent. The four or five percentage points which will then go into interest rates. ,

LAWS:

Okay, can we just hang on here a minute, because we're not going to have a full-speed conversation - you've had four minutes already. CALLER: (inaudible) LAW

S: But.. but

You've asked the Prime about it, and are all Minister has cited you why he didn't think it

is saying it is right.

hang on, let me finish what I'm saying. Minister is there not anything positive those other people right. •The Prime an example of somebody who gave. reasons was right. So, I suppose not everybody Next question.CALLER: Okay, this is it and this also reflects what ou've said - you've said it's unfair. Well, I don't think it's unfair because the more you spend, the more you pay. ' If you buy a Rolls Royce you pay $20,000 tax. If you buy a Ford Falcon, you pay $2,000 tax. But, besides that, at the moment, I think you'll admit, there's the ac commodation, car hire, plane fares, hotel symphony, is that correct? phony, operas and clothing are taxKEATING: They're exempt, that's right. And they'd be taxable under a GST.CALLER: That's right.KEATING: Let me just make this point. The service sector of the Australian economy which is 65% of our national production - that's all those services you mentioned - are untaxed. They would be taxed to 15% by the GST, and that's why raises $24 thousand million.CALLER: That's right, but who in this community flies in planes and stays in nice hotels and hires cars and..KEATING: Yes, but, hang on, hang on. Let me ust point up. Don't try and come on with this, don't try pic this point about - that it's a choice for you of what For most people their spending is a necessity. Their income and their expenditure are one and the same. Any family basically under about $45,000 - what they earn is what they spend. They don't save. Their earnings and their expenditure are one and the same.CALLER: And we're told they're going to be compensated?KEATING: Well, they're not going to be compensated, that's the point. They don't get any co mpensation. They pay s75 a week under Dr Hewson's GST - that's what it collects - then they've got to take a punt that he'll give them more, $75 back just to keep them square, and a bigger punt that they'll give,.

them more than $75 back to put them in front.

CALLER: Can I just ask you this last question? So, who

are the people who..

LAWS: Hey listen, listen. I'm sorry, I've got to call

it a day, cause you've had five and a half minutes.

KEATING: You've had your go, but let me just finalise this point - that is this phoney claim that people can decide what

they spend - are they going to decide not to buy bread, not to eat, not to go and buy take-aways, not to have their hair cut, not to use the telephone, not to use the water, not to use the gas, not to use the power? Of course they're not going to

ecide that. They're going to be taxed and they're not taxed on it now.

LAWS: Hello.

CALLER: Mr Keating, on Friday you spoke with Mr Laws on the GST being charged on tollways and not on parking stations, after Mr Reith's phone call. And you made the point that there should be no discrimination on private enterprise companies and that. Talking about fairness, what about the Government charges on bank accounts debits tax? Why is the ACT exempt and all the other States have to pay?

KEATING: Well, Madam, I'm not sure that that is true. But the bank account..

^ALLER: Well, it is true..

KEATING: Well, the bank accounts debits tax is now a tax which the Commonwealth handed across to the States. The States levy it, not the Commonwealth. And I'm not sure whether the ACT administration wishes to levy it. But you understand that State taxes vary from State to State - some have higher petrol

taxes, some have lower petrol taxes. Some have property taxes, and land taxes, others don't. They vary across the States, there's nothing uniform about State taxation.

CALLER: Okay. Well, also, number two. Why are the

politicians accepting a pay rise of 1.4% two days before the election? Shouldn't they be showing some sort of restraint at the moment.

KEATING: Well, over the last 10 years all public sector salaries have generally moved less than the private sector. And it's certainly true of the Parliamentarians and Ministers. We now have an arrangement where Parliamentarians get no more

or no less than the public service in general, and they're tied to the public service. So, when the public service receives a

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wage increase so, too, do the Parlia mentarians. Where before they were considered as a group and looked at as a group - that preference no longer exists. And when the whole of the service moves, they move - and if the service doesn't move, they don't move.

CALLER:

Well, fir Hewson has announced a re duction for his government of 10% if he comes into office. Wha.t are you prepared to do in this regard?

KEATING:

Well, it's a gimmick. What he's not a nnouncing is a major reduction in wages for Au stralians. point of his Industrial Relations policy - ofhpushin the eople off under the master and se rv ant provisions of the 19th Century common law. Abolishing minimum rates of a the other provisions - holiday holida p a ► abolishing all other benefits which will be all Y^u sick leave - all of the common law contracts, where an individual for has to negotiatetwith the employer. This is the thing Mr Howard is keeping secret, is the "'legislation which he won't show us - the thin Mr Laws asked me a bout a few moments ago taking a red herring across the path Now, I think it's cut Ministers' s alaries back by 1 0%. That's n, apolo

for gia efo saying I'm going to r eally hop into ordina ry Australians wages. See, John Hewson has r a simple policy to lift tax and cut wages, lift tax with a GST and cut incomes. CALLER: Well, the GST doesn't worry me, Mr Keating?

KEATING: Well, it should.

CALLER:

No, my husband was retrenched four years ago and his income has been reduced by 13% because of his refund on his investments, the interest payments on it.

KEATING: Yes.

CALLER:

Now, I think it's wrong that anybody should be takin days before the election, g pay rises two

KEATING:

These are things which are timed a year ago, these are just cases which come up, but I make this point though about your husband's claim. LAWS: We'll have to be quick.

KEATING:

You realise when a GST comes in - the day it comes in everyone's

savings, particularly the aged, fall by about 10% because the purchasing power of

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those savings just simply falls as a GST cost rises in the economy. So, whatever nest egg you've accumulated over your life, particularly if you're a self-funded retiree, that nest egg drops by about 10% in value on day one.

LAWS: We'll have to call it a day.

CALLER: Well, I'm not worried about GST anyway because I believe it's going to come whichever Government gets in.

KEATING: No, you'll never see it under Labor.

CALLER: I don't believe that, sorry.

KEATING: We don't need one, it's regressive and it's unfair.

CALLER: I can't believe that Mr Keating, because you were in favour of it in-1985.

KEATING: But I didn't introduce it, that's the point.

CALLER: And you would have put it in.

KEATING: That's not true. I had seven years after that to put it in and I just didn't do it.

CALLER: No, I'm sorry, I can't believe you.

KEATING: No, well you're probably a Tory madam then, good on you. Go and grab that blue and white ticket and vote your heart out on it, but I'm just telling you this: Never will I introduce a goods and services tax. I didn't in the past, I've had seven years after 1985 to do it and I made very strong speeches against the thing in the intervening years.

LAWS: Here is a question that comes from Vincent Developments, it's signed by Cath Vincent, Hunters Hill. Will you give an assurance - the reason I dig this fax out now is in light of the last question - will you give an assurance that your Party will not introduce death duties or any form of inheritance tax if re-elected on

March 13?

KEATING: Absolutely. Ask the same of Dr Hewson. I don't think anyone's asked him about that. I mean, the GST is bad enough but I don't know if he has any other things in mind - we don't - in fact we want to reduce taxes. We're the ones seeking to reduce the company tax rate to 33% and to reduce the middle rate of income from 38 cents in the dollar to 30 cents, in tax cuts which we legislated before Christmas.

LAWS: So you will give us a guarantee - this is the usual John Laws Mandatory Guarantee - that your Party will not introduce a) death duties?

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KEATING: Yes.

LAWS: And b) any form of inheritance tax?

KEATING: Yes.

LAWS: Okay, would somebody ring Dr Hewson's office and see if we can get the same assurance there - just out of interest - while you're hear. There you are Cath Vincent of Hunters Hill, the Prime Minister has told you no death duties and no form of inheritance tax, and that's a guarantee. We'll take another quick call, hello.

CALLER: Good morning, Mr Laws. Mr Keating, I'd just like to ask you, in the first debate I believed you stated that there was $130 billion worth of private sector investments ready to go. In the Australian last week I read, that that is less than $1.3 billion. Is that correct? KEATING: Well, we introduced an investment allowance in the One Nation• package a year ago. What was different about that is, normally when these investment allowances are introduced. That is, investment allowance for those that don't understand them means, instead of being able to write off 100% of the value of your equipment you can write off 110%. Now this time we've said, you've actually got to apply for it, it's not just freely available, you've actually got to apply. And we set up a Commissioner to administer. The Commissioner has received $130 million in applications, $130 billion. What I said at the Press Club three weeks ago was, we now need a charge to move those investments faster. So we've introduced now the proposal for a second investment allowance of 10%, making it 20% for those projects, provided they are brought on a year earlier. In other words, it's a huge stock of projects there which, we believe, a lower company tax rate of 33% from 39%, and a further 10% investment allowance will trigger. Now, can I say by the same token, Dr

Hewson wants to put the company tax rate up from 39% to 42%, and make 836,000 businesses collect at $24,000 million GST. That has to be bad for business and has to be bad for investment.

LAWS:

Does that answer your question satisfactorily, because there's another question relating to it I'd like to ask the Prime Minister? Are you okay there?

CALLER: Yes, I'm very fine thank you. LAW S: Dear Mr Laws, could you please ask Mr Keating how many projects have registered and are ready to go, and how much in finance they equal? Actual numbers please, not could be's. Thank you. Signed, P. Clune. So, how many projects have you got registered and ready to go? And how much in finance do they equal - actual numbers, not possibilities?

KEATING: Well, the applications didn't close until December, John - December of 1992. So, in other words, it's two and a half months. And the Commissioner is now moving through the list. Now, I was at Bundaberg Sugar last week, they have a project of $264 million for a sugar refining plant and they're saying to me, will it get the tick in the next few weeks. Well, the answer is, it probably will. I was in Bendigo a

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few days earlier where it was announced that an aluminium refinery for Bendigo had got the tick from the Commissioner. In other words, we're in the process now of processing them and they're coming along very quickly.

LAW S: But you can't give us actual numbers?

KEATING: I can't give you actual numbers. I think already about $1 billion worth have been approved, but they're now being approved virtually every day.

LA WS: So $1 billion dollars approved would not be an understatement?

KEATING: I don't think so, no. And I think what you will see very rapidly, that billion will become two and three, and rise rapidly as these projects - they're all projects over $50 million, so of course, you don't need to be approving many to see them role up by hundreds of millions.

LA WS: So there you are P. Clune, that's ...

KEATING: Could I make this point, John. The fact is, to get a stock of investments of $130 billion applied, applications applied for under the investment allowance is evidence I think there's a lot ready to happen out there. And provided we get the conditions right, that is, we keep low inflation, we keep the cooperation in the

economy, we keep the competitives we have, and we give capital a tax break rather than a tax burden ...

LAWS: Okay, but back to the point for P. Clune, no address, but it's a 38 number so it's a local one. And we have just had a call from Dr Hewson's office, no death duties, and no inheritance tax, is the word from Dr Hewson's office, in light of the fax that we had from Cath Vincent of Hunter's Hill. Quickly, another fax. Dear Mr

Keating, aren't you ashamed that your Government has allowed people to come to Australia when Australians are out of work and go on the dole as soon as they can. The newspapers are saying 60% of Vietnamese, 82% of Lebanese, 97% of Turkish immigrants are on the dole, some for more than 6 months. It's your Government, how can you justify it, you can't blame this on the GST, sincerely, the famous Charles

Moynihan of Gordon, p.s. I'm not a member of the Liberal Party. Well, last time you wrote to us Mr Moynihan I think you told us you were. Anyway, Charles Moynihan.

KEATING: Probably, too far on the right of the Liberal Party, Mr Moynihan, so they probably won't take you.

LAW S: Well, how do you handle that? I mean, what he's saying is right KEATING: Well, let me just say this. The migration program is a long term thing. We've had it since the late 40s, early 50s. We've had it 40 odd years now. It's changed Australia for the better, it's made us stronger, it's made us a more interesting country. And the result of all that is, that it rises when demand rises and generally falls when demand for labour falls. That's what has happened how. We were bringing

140,000 people in a year, 3 years ago, were bringing now about 80,000.

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LAWS: But are you going to reduce it further?

KEATING: No, because you ...

LAWS: That's a bit crazy - 97% of the Turkish people who come here after 6 months go on the dole. Perhaps ...

KEATING: That's not right. Don't believe that, that's not true. The fact is some of the great ...

LAWS: I think it is true.

KEATING: John, just go down that Business Council list and look at the list of people who've made huge contributions to Australian business.

LAWS: No doubt of that.

KEATING: People like Frank Lowy at Westfield.

LAWS: There's a stack of them. I mean, the number we talk to everyday. But the point that this man is making, who ever this man might be, 97% of Turkish immigrants are on the dole as soon as they possibly can be, 60% of Vietnamese, 82% of Lebanese. Now, wouldn't it better then to bring people who weren't going to go on the dole? Should we not be more selective in our immigration?

KEATING: We have a family reunion policy, and also, we have english language training as a second language, a program Dr Hewson wants to cut. He would see people virtually ...

LAWS: Prime Minister, we're digressing. This fellow wants to know, aren't you ashamed, first question?

KEATING: No, absolutely no.

LAWS: You're not ashamed that 60% of Vietnamese are on the

KEATING: Those figures wouldn't be right, John. The simple thing is this. You can't have a migration program and not have one. We either decide that we want a higher critical mass to our population and keep it there. I mean, it's a very interesting thing, we've got queues of people at migration offices all around the world wanting to come to Australia, and why do they want to come to Australia - harmony, tolerance, dignity.

LAWS: Exactly, best place in the world. But why are we letting people come here and ...

KEATING: The very things that Mr Moynihan's supporters are wanting to put at risk. The very thing that is attracting the rest of the world to Australia, that is, a sense of social harmony, and decency, a good social wage, the Liberal Party are

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campaigning in this election to rip up.

LAWS: So, you're not going to make alterations about the way we select people to come to Australia?

KEATING: The focus has been on skills and demand and business migration. But LAWS: Well, if 97% aren't working, they can't display skills.

KEATING: But can I just say, that as unemployment has risen in the economy we've turned the numbers down. The bulk of them, there's still a very large category of family reunion. And that's as I think it should be. I think families are entitled to be reunited, if we take people on - that's the immediate family not extended families.

LAW S: Well, there's a question about that later on too. We'll take a call.- Hello. CALLER: Hello, Mr Keating.

KEATING: Yes, hello.

CALLER: First of all, you've got my vote.

KEATING: That's good, you're the first one I think.

CALLER: Yes, what I want to find out, what are you going to do for small businesses? KEATING: Look, small business by and large, lives off the body of the economy. The best thing we can do for small business is to get the economy growing again.That we've managed to do. For 5 consecutive quarters now we've had positive ratesof growth. The Statistician, 2 weeks ago announced in the course of the electioncampaign, that he's revised the growth figures for the year to 2.4%. That puts us outwith the leading countries in the world in terms of growth. We are one of the firstcountries out of the recession world wide, and back to growth. This will mean more tosmall business than any other thing. The other thing that we're doing for smallbusiness, by producing low inflation we produce lower interest rates. And those lowerinterest rates give them an opportunity to expand their business and to developthemselves. For those that are incorporated, we're going to cut the company tax ratefrom 39% to 33%. Whereas, the Liberal's are going to put it up to 42%. And for thosethat are not incorporated, we are cutting the middle rate from 39% to 30%. Now, bycontrast, what Dr Hewson's doing for small business. Can I just make this point toyou? There are 836,000 businesses in this country, large and small.CALLER: I'm one of them.KEATING: Only 90,000 get payroll tax relief. So, 740,000 businesses will carrythe cost of the GST, will have it charged on their goods and services. They will have0

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to collect it and collate it and put in tax returns every month to deal with it. And they'll get no relief whatsoever under Or Hewson's proposals. The GST is absolutely poison for small business.

CALLER: Yes, I know about the GST, I came from a country that had GST. know all about the mumbo jumbo about that. But what I'm saying is, for small businesses it's hard to get finances first of all. There is a Small Business Development Association in Sydney, but they can't help you much.

LAWS: Why don't you encourage, if re-elected, why don't you encourage banks to lend on turnover rather than capital.

CALLER: That's right.

KEATING: Well, one of the things I did announce two and a half weeks ago in the Economic Statement is that we are going to enhance the capacity of the Commonwealth Development Bank, which is a lender to small business. We're going to enhance it's capacity to lend. In other words, it lends in areas where some of the commercial banks won't lend in areas of small business. And it can be a very important source of small business finance. So, I think that will make a difference. think also, the banks themselves are starting to change their attitude having not lent for about two and half years.

LAWS: Is it possible, if you're re-elected, to encourage the banks to lend on turnover rather than on assets, capital?

KEATING: Well, the other thing we've done, we've asked the Reserve Bank to set up a Small Business Consultative Group to advise the Reserve Bank on the lending experiences of typical small businesses so that the Reserve Bank can go to the major banks and say, look, these are our experiences, this is what we've been told. Let me take this case, and that case, why didn't you lend here, why did you refuse here, what are you doing, to keep some pressure on the banking system we've given the Reserve Bank this capacity.

LAWS: We'll have to call it a day there. Are you satisfied with that answer.

CALLER: Yes, as long as when the Labor Party comes in they do something about it because we desperately need it.

KEATING: Can I just make the general point about John's point about cashflow lending. What we've always hoped for with a more free financial system, is instead of a bank lending against 60% of the value of a shop, or 60% of the value of a factory, or whatever proportion they decide, they actually lend against the earnings of the business.

CALLER: Yes, that's what we actually need, because ...

LAWS: We've got to call it a day.

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KEATING: The foreign banks are doing that, and that's why they're now putting some pressure onto our domestic banks. And our domestic banks are going to lift their game. I mean, the entry of the foreign banks' involvement in the economy now, think, will start to see some real positive benefits from it because they do have an experience at home of cashflow lending which the Australian banks don't have.

LAWS: A fax that comes to us from Kicora(?) NSW. That's north west of West Wyalong, I think, from Borambil, Mark Hoskingson. Question or P.M. - do you believe farming to be an important industry for Australia, first question?

KEATING: I do absolutely.

LAWS: Two, if yes, then why have your policies on high interest rates, high input costs - that is, fuel, chemicals, fertilisers, tax, wages, etc, led to droves of young farmers leaving the land for a more profitable secure future, leaving behind a generation of older farmers who are also heartbroken. We're losing the expertise and the manpower in this country to have a strong and viable farming future. I am 29,

married, 2 children, being screwed by you and the banks. I've had a gutful. If you win the election, why should I stay on the land? Don't blame foreign influences on this disaster because we could all withstand that without your high costing policy for the person on the land. Don't answer this vital question with 'pollie talk'. Give me and a thousand other young disillusioned farmers a straight answer if you know how. Mark

Hoskingson, Borambil, Kicora(?), New South Wales, west of West Wyalong.

KEATING: Well, Mark, I'll tell you this. I'll give you a straight answer. You can't go buying the neighbour's property at inflated prices, with low prices for commodities and hope to make it work. And if the bank was compliant in you making that decision to pay land prices which couldn't be sustained on the earnings of that land given that prices and commodities, that's your business decision. Now the fact is, like a lot of people, you think the Government owes you a living on the place because you've made a decision to own a property. Everybody who starts a business, be it on the land or otherwise, have got to make the number work. What's happened around the world is that commodity prices have fallen, and they fell for wheat, and for grains, and they fell particularly for wool, and particularly because we tried to sustain a price in wool that was unsustainable and we built up a stock of wool and the price collapsed.

It's now recovered somewhat since. As a result, incomes have been slashed. But the most important price in the economy for you is the exchange rate. And who has given you a flexible exchange rate mechanism. We were last this competitive on the exchange rate wages inflation about 25 or 30 years ago. So, in terms of competitive-

ness, you're dealing with now one of the most competitive environments we've ever had. Now, we are an efficient group of farmers in this country, we are efficient as farmers. You've got a most competitive environment on the exchange rate, wages and inflation. If it doesn't work there's something wrong with the calculation. And the calculation probably is, that you don't have enough equity, you paid too much for the land, but you're trying to sheet that business decision back to me. Well, that's one won't take. It's up to you. And I, or the Government, don't owe you a business for life that works. You've got to make it work. It is a fact of life that it is very hard to make life on the land work. Look, we have provided $3 billion contingencies to underpin wool. About $2 billion to cover sales of wheat to non commercial markets. We've

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done everything possible. We've got RAS to help people carry on - on farms - Rural Adjustment Assistance. I don't think you can say unfairly that the Government is the cause of your problems.

LAWS: Mark Hoskingston, Borambil, Kicora, is that how you say it. I know where it is, out north west of West Wyalong. Anyway Mark, there's your answer, you got one. V.Q. Auto Paints, Penrith, signed by James Gatt, I think, Manager. One -why is there 20% tax on automotive paint and not on house paint - good question?

KEATING: Well, I don't whether that's right, it may well be.

LAWS: It must be right.

KEATING: Well again, building materials are untaxed largely, untaxed. Cars and car parts are, and I presume paint is part of the car parts story.

LAWS: It does seem strange. I can understand his questioning it. Two -same sort of thing ..

KEATING: Of course you understand with Dr Hewson's policy, even the house paint will now be taxed at 15%, that's the point. Everything is going to be taxed.

LAWS: Why is there 20% tax on automotive fish oil and not on industrial fish oil? Answer as above, I presume.

KEATING: I think so, yes.

LAWS: And three - why is there tax on masking paper used in the automotive trade and the same paper sold as wrapping paper is not taxable? I mean, the answer is above again.

KEATING: Yes, he's making a point about anomalies, what he thinks are anomalies. But it's hardly a point to make to say we'll resolve this by taxing everything.. Because obviously, the people who buy those products are advantaged. They will now be disadvantaged by carrying a GST of 15% on the lot.

LAWS: Except the 20% will go.

KEATING: Yes, but the 20% is at the wholesale level. What happens with the GST, it's taxed at the retail level after the retailer puts his margin on which is often up to 50% or 100%. So, the GST actually taxes the retailers margin, whereas, 20% of wholesale is often less than 15% at retail.

LAWS: Without asking you to do the calculation just for the sake of this fellow, James Gatt, V.G. Auto Paints Penrith. Would you estimate that automotive paint will be dearer or cheaper if there was a GST?

KEATING: . I think it would be dearer, because you're getting a retail level tax which includes the retailers mark-up. Whereas, there you're getting a tax paid at the

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wholesale level before the retailer puts a mark-up on it.

LAWS: So one would assume that the masking paper, and the paint, and the industrial fish oil, that isn't taxed at the moment, will go up, because it doesn't have a tax on it now?

KEATING: Well, all the things that are untaxed will go up, that's the point?

LAWS: Hello.

CALLER: Hello. . I'm ringing about self funded retirees. John Hewson is planning a threshold for self funded retirees equivalent to the one currently enjoyed by pensioners. What are your intentions on this matter, bearing in mind that a large number of people are made redundant or retired before the age of 60 for women or 65 for men?

KEATING: Well, for a start the Opposition wants to make the retiring age for, women 65, so I think you should take it on, that is in terms of the pension, that you won't be able to receive it until you're aged 65. You can now receive it at 60.

CALLER: But the sole point of the inquiry is before 60?

KEATING: Okay, but I'm just making that point by the way. The other thing that we decided a week or two ago for people who have been unemployed for a year and over 60, they can now take a provisional aged pension. But let me come to your point in substance. Retirees can continue to get some pension now until private income exceeds $18,000 for a single person or $30,000 for a couple, and that equates to about $300,000 of assets and about $180,000 of assets for a single person, about $300,000 for a couple and $30,000 of income. Now, in my election policy speech I announced we'd ease the assets test to take account of the fall in interest rates, because interest rates had fallen, self-funded retirees don't earn as much as they used to, so retirees will be able to receive the pension until their assets reach $218,000 for a single person and $335,000 for a married couple - excluding the family home. And I also announced we'd introduce a senior's health card for low income non-pensioners which will entitle them to concessional pharmaceuticals. So, we're extending the assets test, we're trying to make, if you like an offset to the fact that income has come down from interest rates - upon which many self-funded rely - and it will mean that you'll still be able to receive the pension until assets reach $218,000 for a single person and $335,000 for a married couple.

LAWS: Do you understand that, Ma'am? f

CALLER: Yes, I do but just one little thing. A lot of people are under 60, under the retiring age. Is there anything that we can expect, because we're self-funded but under the retirement age?

KEATING: We have preservation up to - from 1983 earnings onwards - up to age 55, and in there of course there is the huge tax concessions of superannuation. So anyone who has come out with superannuation benefits has got an enormous tax

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concession that every other wage and salary earner without it, does not have. So, a lot of people who go on the pension have never had the benefit of those tax concessions, whereas self-funded retirees do.

CALLER: No, but we've had to pay into that superannuation?

KEATING: I know. Up until 1983, there was only tax on 5% of the accumulation. So, if your tax rate was say, 30%, it was 30% of 5%. So it was about 1.5% tax on the accumulation and after 1983, again a concessional rate of tax. So there is a very big tax concession in those superannuation arrangements.

LAWS: I have to leave you, Ma'am. I hope that that answers the question satisfactorily. Just another quick fax, AGSM Executive Programs. Dear Mr Laws. Two questions for Mr Keating. Mr Keating proposes to bring forward the payment of company tax from 15 month to quarterly. The effect on cash flow management of business will be devastating, especially for businesses with sales at seasonal. How-does Mr Keating expect business to appreciate and fund the business with cash flow.

First question?

KEATING: Well, yes we are intending to bring them head to head by a quarter and quarterly, but they're still concessionary compared to an ordinary person who pays the week they earn their tax. But while we're doing that we're also reducing the company tax rate from 39% to 33% and providing the further investment allowance, on top of the huge acceleration and depreciation we introduced in One Nation, where 40-year assets can be written off in 15 years, 15-year assets in 7, 20-year assets in 7 and 7-year assets in 3 years - so there was a sharp acceleration there which is very expensive to the Budget. That's there, the investment allowance is there and there's the company rate.

LAWS: This is the second question. When tax is paid quarterly it's money being taken out of the business, this will deter businesses from making small investments which have a short pay-back period. How does Mr Keating propose to overcome these obvious problems? If he honestly believes and wants to stimulate small business, why is here going about doing the opposite. Regards, Chris Sheppard.KEATING: Well, again I'll just make the point. If you're incorporate you get thelow tax rate and you get the investment allowance, and you get the faster acceleration.If you're not incorporated, we're cutting that middle rate of income on income tax - thatis if you're unincorporated person in small business - we're cutting the rate from 38%to 30% but without a GST. See, John Hewson's cutting the rate form 38% to 30% butwith a 15% consumption tax on everything. Can I just make this point to you: theaverage rate of tax in this country, if you put all the top and bottom salaries together,the average rate of tax is 23.1 %. A 15% GST is of course a massive tax whencompared to that. You see, people think 15% out of 100%. It's 15% compared to23%, that's why the GST raises so much money.LAWS: We had a call the other day from somebody, or a letter, I can'tremember which - about two people discussing the abolition of payroll tax. And the

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fellow working in a Bank said to this other fellow in the Bank: I'm really pleased they're going to abolish payroll tax. And he said: well, what do you mean, that doesn't affect you - you're an employee not an employer? He said: yeah, no, it *affects me. He said: how can it affect you? He said: oh they take money out of my pay every week. Now, there are people out there who actually think that payroll tax is PAYE tax? And this bloke worked in a Bank.

KEATING: Yes, well you know on some of the Liberal ads they have: and we reduce payroll tax and they have on the table, a pay packet - trying to imply that it's income tax - like payroll tax equals income tax on your pay.

LAWS: Well, listening to this fellow he thought it was.

KEATING: Well, let's clear it up John - it isn't. The GST is levied on top of the income tax.

LAWS: Hang on, I can't let you do this because I wouldn't let Dr Hewson do it, but just let's make the point. Payroll tax is not tax that's paid by employees but employers?

KEATING: A payroll tax is basically a tax levy by the States on larger companies - that's what it is. It's got nothing to do with income tax.

LAWS: And it's got nothing to do with the amount you're PAYE office takes out of your pay packet?

LAWS: So that clarifies that for the fellow who works in a Bank, and I'm glad don't Bank there. A quick look at a fax that comes from Dover Heights, Meredith Griffith. Without telling me what's bad about John Hewson and the GST, tell me what's good about you and what you're going to do if you are elected that's different, because what you have done didn't seem to work too well? John Hewson says GST means jobs, what do you say? Thank you, Meredith Griffith. Well, it's a bit convoluted. KEATING: Well, let me start with the last part first. The GST doesn't equal jobs and that's the problem John Hewson has had. There is no linkage between a GST and jobs, in fact in every country where they've introduced a GST, employment has

fallen. In New Zealand five years after they introduced a GST - they introduced it in 1986 - by 1991 employment had fallen by 6 percentage points. Over the same period in Australia, employment had increased by over 10%. Now that's true of Canada, it's been true of all the countries where a GST has been levied - that is, a GST basically lifts prices, makes things more expensive, cuts demand, cuts sales, cuts production, cuts employment. A GST is bad for jobs and the problem John Hewson has had is trying to make the linkage which he can't make.

LAWS: Back to the meat of the fax. Tell me what's good about you and what you're going to do if you're elected that's different, because what you've done didn't seem to work too well?

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KEATING: What were we trying to do? The answer was try and make Australia pay its way, to become an externally oriented country. And we had to change the way we export the things we make. John, I don't know whether people have noticed but in this election campaign, in the course of the campaign, we've had a number of Important things released by the Statistician. In the last Balance of Payments figures, we've seen exports again going gang-busters. We've been exporting our heads off right through the second half of the 80s, now right through the recession into the 90s. We've seen growth pick up and we've seen a 9% increase in investments - just released in the last couple of weeks - we've turned the corner in that respect. But the key point is this: Australian couldn't make it selling farm products and mining products. We had to produce services like tourism, education services, medical services, financial services and we had to produce innovative products, manufactures. We're doing it.

LAWS: Prime Minister, I'm sorry to rush you but I did want to take one more telephone call. If elected, what are you going to do that's different? Anything? Or is -it just going to be a continuation of what we've had? I think that's the question.

KEATING: What we're doing now is we've re-started Australian production and growth, this will produce employment. We've seen the job vacancies increase in the last announcements in the last week where job vacancies are up again. What you'll see in the 90s is Australia inter-locking itself with Asia under mechanisms this Government alone has established, of maintaining low inflation, of maintaining our competitiveness - we're more competitive now than we've been in 30 years. Of getting that $130 billion of investments moving and into the economy, and lifting our capacity to pay our way - and that's the only way - and dealing with all these other log-jams in the economy, which we've been dealing with - in te lecommunications, in wharfs, ports etc. LAWS: Okay, that's going to have to do you Meredith Griffiths. I'm sorry but because we'll run out of time we must take on more caller. Hello.

CALLER: I just want to ask Mr Keating a couple of quick questions.

LAWS: They'll have to be quick. We've got exactly two and a half minutes.

CALLER: Okay. Does he understand that the wages Accord does not make any difference between small business and big business? For example, when they give $8 a week wage rise, BHP that earns $1000 million pays the same rise that a small business earning $100,000 does.

KEATING: That used to be as it was, but under enterprise bargaining employees and employers can go away and decide to make the business more productive.

CALLER: But you can only negotiate with Unions?

KEATING: No, no. Last week BHP announced its report for the year. It's steel making productivity of its steel making division is up 22%

S f

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CALLER: But I'm talking about small business.

KEATING: But you're trying to say they're all treated the -same. Well, they're not. LAWS: Yes, but he's saying he's got to negotiate with a Union. If he wants to negotiate with the fellows who work for him, does he have to go through a Union or can he negotiate? That's the question he's asking you.

KEATING: It depends whether they're Unionised.

CALLER: They're not.

KEATING:

But if they are, you can have a workplace agreement, an enterprise agreement as BHP has had, which has seen a 22% - a phenomenal number - 22% increase in productivity in one year.

CALLER: Small business can't negotiate.

LAWS: Yes, that's the point the caller's making.

KEATING: That's not true. That is not true.

CALLER: I'll give you an example: our award says that a part-timer that works three days a week must be paid five days pay. Now we can not negotiate that crazy

rule out of our award and that's the difference between you and Mr Howard's policies.

KEATING: What award is that?

CALLER:

That's the Real Estate's Association Award in NSW. Look it up and get back to me if I'm wrong.

KEATING: Well, I will look it up, but the point is why don't you talk about improving the productivity of your industry. You can, you can talk to people as a group. But you'll never do any good ... them off by themselves trying to cut their wages and put their eyes down, and penalise them. You'll never get any cooperation that way.

ENDS