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Transcript of doorstop interview: 19 January 1992: Parliamentary standards; Reserve Bank and tariffs

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Leader of the Opposition

19 January 1993 REF: TRANSCR\tmc.01



SUBJECTS: Parliamentary Standards, Reserve Bank and Tariffs


In view of what you said yesterday about question time, was today's choice of venue anyway symbolic?


No, there's no relation at all. But I think it is important that we clean up the Parliament and that we do it in a way where people are happy to say or to in fact to look up to the Parliament. I think one of the things that happened with the televising of Parliament is that people have come to question whether it does what it's supposed to do. It's supposed to provide a forum for genuine debate about the issues of the day. Its supposed to provide a forum whereby government can be more efficient and effective and perhaps most importantly, accountable.

So, we are looking at a range of changes, not only to things like question time and the procedures of the Parliament, but also in changing the committee system of the Parliament, to give the committees a greater influence, to make the government more

accountable. And I think that's in the best interest of the people of Australia.


Are you surprised by the Reserve Bank's decision on interest rates?



Parliament House, Canberra, A.CI 2600 Phone 277 4022




I am surprised in a sense that I don't quite really remember that before previous elections they've come out and made a similar sort of statement. And as I've looked at it, I think they're in a very difficult circumstance and I think the government has really backed itself right into a corner. Interest rates have been brought down, as you know, quite a number of times now over the last few years and everybody wanted that. But that's put pressure on the dollar and the Reserve Bank has now run our international

reserves down to a precariously low level. I saw a study done by a fella in the market from Schroders the other day, saying that the reserves are down to $7 or $8 billion. And so they've got their backs against the wall.

And really what they're is that if there is anymore pressure on the dollar, then interest rates will have to go up and I think they're trying to buy a bit of time by the statement that they made yesterday. So, we are very concerned that the situation has been allowed to develop, where they've run our international reserves down to such a precariously low level and indeed, it seems they've borrowed a fair bit of money, the net debt will, the international debt will probably go up by about $9 billion, according to the estimates I've seen.

But the real message is that if there's anymore pressure on the dollar, and the dollar, and the dollar is weak, then interest rates could go up, rather than down between now and the next election.


Has been the Reserve been irresponsible do you think?


I think the Reserve Bank has probably done what it could to stabilise our foreign exchange market. I am concerned though that they've gone as far as they have in support of the currency. I quite frankly think it's about time in Australia that we made the Reserve Bank totally accountable for the money they spend. I don't see why they

don't tell you every day how much money they spent the night before in stabilising the dollar. Or at least once a week they should make a formal report, so that the markets don't have to do this business of trying to second guess.

Clearly, they've run our reserves down to a very low effective level, and as I say, the estimate I saw, that in this week, in the market is down to about $7 or $8 billion, which is barely two months imports. It's at a time where there is concern about international commodity prices, where the world economy is slowing down and our export markets are shrinking. Where there are international concerns about the fact that the government hasn't put in place the right policies, that they've let the situation drift, that fiscal policy has just been allowed to be very lax and the whole thing has been

politically motivated, politically driven.



And in those circumstances, there is very significant downward pressure on our dollar and what I think the Reserve Bank is saying, is if there is any more pressure on the dollar, they'll have to put interest rates up to stop it falling.


So, you feel the bank shouldn't have been as active in its support of the dollar?

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Well, it's always a fine judgement. What we worry about is that the level of reserves has been allowed to go as far as it has and people haven't focused on it. Because it is a major issue. You know, you put your reserves away for a rainy day and what

they're really saying is you can't rain too much more, because were down, we've run those reserves down to a precariously low level. And any downward pressure on the currency now will probably see interest rates go up, as the only way of dealing with that problem..




..exactly the opposite of what you want. Being in a recession, you want to get interest rates down and we'd like to see them, in real terms, down lower and keep them down. But the government has now got itself in a real bind. And quite frankly, Mr Keating can't go out spending money to try and get himself into government any further than

he's done. He's already committed about $50 billion over four or five years of money he doesn't have. He's putting together some alternative package, he has no room to manoeuvre. He can't spend more because that will put pressure on the dollar and he cant promise anymore of which he can't deliver, because that will put pressure on the dollar. At a time, as I say, where our international reserves are run down to precariously low levels.


Do you expect the Bank's view might change once the election uncertainty is over?


Well, I'm not sure, I don't think what's happened has been driven by election uncertainty at all. I think it's been driven by a desire to stop the currency falling too far and I don't know why the government took that view or why the Reserve Bank took that view. I mean, their responsibility is to maintain all the markets, not to hold the

dollar at particular levels.



The markets really should determine the level of the dollar over time. And in those circumstances, you know, their motives are to be questioned.

I've begged the question all a long as to how political the whole operation has become. And clearly the government has wanted lower interest rates to get themselves re-elected and that's put strain on the currency and in order to minimise the strain, they've wasted billions and billions of dollars of our international reserves.

Now, somebody should be called to account for all of that, the government should explain what instructions it gave, the Reserve Bank should come out and tell us exactly what they've been doing and why they've been doing it.

And as I say, I think we should change the system. What we should do is have the Reserve Bank tell us every day exactly how much money they've spent in supporting the currency, one way or the other. So that people in financial markets know what's been going on and there's a constant accountability.

They must be much more accountable than they've been, both the government and the Reserve Bank.


Are you standing firm on your tariff policy?


Yes. Our tariff policy is to move to negligible levels of tariff protection by the Year 2000, but in the context of three other things. Very significant cuts in business costs and the abolition of payroll tax, and petrol tax, and sales tax as well as cheaper power and transport and so on, are all part of that.

Secondly, a very effective anti-dumping mechanism, which stops other countries disposing of their produce cheaply in to the Australian market and in many cases destroying our market.

And thirdly, an activist international trade policy, so that we can open up markets internationally and I've just been here at these beef sales at Camden and I hear the story of the impact of the voluntary restraints of the United States on our beef market. Now, that's where we've got to actually get very active in terms of opening up our market, opening up those markets to us. That's one of the reason's why we proposed the consideration of joining of NAFTA, the North American Free Trade Agreement, which would allow us to negotiate in time a lot of those restrictions away.

So, sure, it's negligible tariffs by the Year 2000, but with lower costs, effective anti-dumping and an active trade policy and we stand by that over the rest of the decade.




Okay, well just one final one, let's get back to your point. Is it not inevitable though that you're going to have Reserve Bank politicised to some degree by whatever colour government you're going to have there.


No, I don't believe so. And in fact our proposals are to give the Reserve Bank genuine independence. We would change the Act and part and parcel of that is that they become more publicly accountable. And they must be accountable for what they do. This business about trying to second guess what the Reserve Bank has been up to in the foreign exchange market and how much of our international reserves they've

spent. I mean, that should not be a matter of second guessing, that should be a matter of public accountability.

And if we are in these very difficult circumstances, as has been suggested by some people in financial markets, then it's the Reserve Bank and the Government that ought to be telling us about it. And in those circumstances, we do want a more independent institution and we will have one under a Hewson Government. But it will be more

publicly accountable, the Governor will have to come and testify for example, before Parliamentary Committees on a regular basis and we'd be looking for more regular and more detailed public accountability of their activities in all financial markets, as well as in other areas in relation to prudential supervision and so on.

They should be should be an open book, that people should know exactly what's going on.