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Transcript of interview with Kate Wall, ABC AM

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WALL: Mr Hawke, your Finance Minister, Peter Walsh, said last night that he's disappointed the Government can't offer the Australian people any drop in inflation and the current account deficit for some time. Does that disappoint you too?

PM: Obviously if you lived in the ideal political world you'd like to be able to get up and say in all honesty to the people of Australia yes the inflation rate is going to be down dramatically in a very short time. Same with

interest rates and same with the current account. But the hallmark of this Government since March of 1983 is that we've told the Australian people the story as it is. May I say through your program that one of the reasons why we've

been able to be so successful in the conduct of economic policy, why for instance we've been able to do almost a world record job in creating one and a half million new jobs, four times faster than our predecessors and twice as

fast as the rest of the world, is that as we've been honest with the Australian people so they have responded, in my judgement, magnificently to that honesty. I now say to the Australian people I'm not giving you a funny story, I'm not

telling you these things are going to be transformed overnight. I'm telling you as it is as I've told you, with Paul, we've told you the story over this period of six and a half years. I think they will respond as they have over

that period. That is they will continue to exercise restraint but they will see that as well as being a Budget which is about economic responsibility, as it is, the achievement of a $9 billion surplus which has been necessary

to help us bring down the level of demand. As they see that we're doing that job, I'm sure that the Australian people will respond, that they will continue to exercise a cautious restraint knowing, however, that their standards in this

period are basically being maintained through a combination of wage rises not in excess of inflation, but accompanied by significant tax cuts and by signficant increases in welfare

payments to those most in need.

WALL: And will improve next year?

PM: Well, how we're able to effect an improvement will depend upon the outcome of the year. We're not promising great improvements. We're saying that as a result of what

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we've already negotiated with the trade union movement we should have a wages outcome of the order of seven per cent which will be in line with inflation. We're saying that that in combination with the significant tax cuts that we've made, and by the continued growth in employment will mean,

as the Budget figures show, a significant increase in real disposable income.

WALL: On the question of inflation though, even the ACTU President, Simon Crean, has criticised this Budget for not containing anti-inflationary measures. What's your response to that?

PM: I noticed what Simon had to say and let me say that overall his comments were, I think, very supportive of the Budget and the Budget strategy. Let me make this point to Simon and through the courtesy of this program to your

listeners that I think essentially Simon doesn't, hasn't appreciated that in fact there is a significant strategy there which is directed towards bringing down inflation. Let me say that this is a year when particularly you need to

look, if I can use a technical term, not just on the average of this year compared to the average of last year but you also need to be looking at what's going to be happening through the year. If in fact you do that you will find that

in our judgement by the end of the year you will in fact have the inflation rate at a lower level than the average for the year. The reasons why we think in fact that as we go through the year and come towards the end of the year we will have the inflation rate coming down really reflects

three factors. One, obviously the easing of demand pressure which is associated with the whole Budget strategy. Secondly, just taking a particular factor we will have a return to more normal pricing of fresh vegetables. As you

know they've gone up in the recent period as a result of the floods. Thirdly there will be a decline in house prices. Also as we go through to the end of the financial year we believe a decline in house prices and mortgage interest

rates. So if you take those factors together I think you will find that the strategy of the Budget together with those factors which are beyond anyone's control, that is vegetable prices and floods and so on, you take the strategy

of the Budget, the reduction of demand pressures and the decline as I say that I think you'll see in house prices and later on in interest rates, that those factors which are part strategy and part the operation of natural factors will mean a decline in the rate of inflation as you go through

the year.

WALL: The Opposition is saying that the Government's early election strategy is confirmed by this Budget. After the April Statement you ruled out an election this year. Is that still the case?

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PM: Yes. I 've been constant about this. The only lack of constancy has come from a totally dishevelled, leaderless, policyless Opposition.

WALL: But the Government stakes are looking very good at the moment, they've improved significantly over the past few months haven't they?

PM: Sure. On that, let me say that I have been the one who has consistently said to my Party, to the Opposition and to the Australian people you've got to get your time scales right when you're talking about politics. Let's be specific about this question. When in the April Statement I announced on behalf of the Government the very significant

tax cuts that were going to come into operation on the first of July, what was the response of who, the then leader of the Opposition, Mr Howard? He was staggered by our capacity to fund these massive tax cuts and by, may I say, the excellence of the strategy which involved significant tax

cuts for lower wage outcomes. What was his analysis of that? All he could say is oh well, Hawke's done this to have an early election. We were going to have an election straight after the announcement of the tax cuts coming in on July 1. It was never the case, I'd promised them the year before. So what do we have now? We have the situation where the best that this replacement of Mr Howard can do is

to repeat the same parrot cry of his predecessor. Oh, it's an election, it's a hand-out Budget. But they can't even get their act right. This is Peacock saying it's a handout Budget, we've handed out too much. But what are the Shadow Ministers saying? Connolly, the Shadow Minister for Social Security and whoever their Minister is in the health area,

they are coming out with their statements and saying we haven't given enough. Now where do you go with these people? I'll tell you where they go - down the gurgler.

WALL: Could the Government win an election with interest rates as high as they are at the moment?

PM: Well, it is totally hypothetical because I have said we're not having an election. I have said I'm the one, look, I've said all along, no election, no early election.

WALL; But what if interest rates were at their current level next year?

PM: Well, by the time we go to the election interest rates won't be at the level they are now. Obviously it is the political fact, I don't seek to avoid it, that the electorate doesn't like high interest rates. But let me say

two things about that. The first I've already said. That is that as a result of the strategy of this Government, the responsible strategy of this Government which has said quite straightforwardly to the Australian people, you've got to have high interest rates if you're going to have a

sustainable growth into the future. We've been solid, consistent about that and we're going to keep them there as long as is necessary to get that outcome.

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WALL: Well then why -PM: Now if I could just make the second point. I believe that there is a growing realisation on the part of the electorate of the propriety, the correctness of that strategy. Now, all that's hypothetical because Hawke has

said consistently no early election. Now I'm making the point by the time we do go to the election into next year, then in fact, in my judgement, interest rates will have come down.