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Transcript of interview with Paul Kelly, Allan Wood & David Cock, AM Club



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PRIME MINISTER

TRANSCRIPT OF INTERVIEW WITH PAUL KELLY, ALLAN WOOD & DAVID KOCH, AM CLUB - 21 AUGUST 1991

E & Ο E - PROOF ONLY

KELLY: I'd like to ask Mr Hawke a question. Given the depressing outlook for jobs and investment, what is the prospect for further interest rate cuts now?

PM: I said after the CPI figures came out Paul, that I will want to see how they bedded down and what the reaction to the Budget was. I've got no reason to change what I said then. We're going to watch what the reaction is and in that context we'll examine whether it's appropriate to move any

further in this regard. I've said that before and that remains my position.

WOOD: Allan Wood, Prime Minister. Following up from Paul's question, what sort of time frame then do you have in mind for reviewing policy? At what point will you have a look and decide whether you need to change?

PM: Allan, that's a fair question but I hope as I acknowledge to you, it's a fair question. You will acknowledge it's fair on my part if I don't say whether it will be next week or 8 days from now because if I were to

say something like that then by definition that has its impact on the markets. I mean I musn't say what the timetable is and I'm not going to. But I can only fairly put that what I said the other day was accurate - that I

wanted to see how the inflation figures settle down, the reaction to that and I also want to see the reaction to the Budget. It would be unfair of me to say in x number of days time w e 're going to do something. ...

KOCH: Prime Minister, David Koch from 2GB. What sort of factors do you look for in making that judgement? What are the opinions that you look at most?

PM: Well I must say as I listen to the reactions last night and I've read the papers this morning, there are some reactions which I regard as more sensible and intelligent, perspicacious than others. I suppose the answer is I'll

look at the intelligent, rational, perspicacious ones.

KELLY: On the question of the superannuation levy Prime Minister, do you accept that while the levy has it's merits, it runs the risk of increasing the level of unemployment or at least delaying the recovery from recession? _

COMMONWEALTH PARLIAMENTARY LIBRARY MICAH

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PM: No, I don't accept that for a number of reasons Paul. It's a fair question. Firstly, you've got to understand that there are very, very many employers in the country who are already meeting the standards that are going to be required under the legislation next year. Secondly, it doesn't come into effect until next year and the recovery, I think, will be well underway. Third, you've got to understand that the ACTU have accepted in the agreement that

I hammered out with them, that what happens in superannuation it will have to be taken into account in wage negotiations. In other words this is not some impost unrealistically imposed upon what would in any case have been a given wages outcome. And thirdly, to the extent that you can look at the figures that we've put down and talked

about inflationary outcomes for the period ahead of us, we're going to have fairly low inflationary outcomes. We're going to have a situation where there is a pretty low wages outcome in the year. It's about a 4%% figure, year on year. And if it were to be above that it would only be because

there were greater productivity negotiations and wage increases coming out of those which would be paying for themself, as it were. So for all those reasons, no I don't accept the pessimistic reaction of some people on this

issue. The fact is that there is no time at which sections of the business community have ever said there is room for wage increases or superannuation improvements. I believe that from the middle of next year sensibly brought in the way we're talking about, it will not have the adverse

effects that you're talking about.

WOOD: Allan Wood again, Prime Minister. How firm is your wages deal with the ACTU? Looking at your statement last night there's clearly an element of uncertainty. What does that reflect? Are you having trouble tying them down?

PM: Not at all, Allan. It reflects the facts that we don't have the same certainty of apparatus now following the last decision of the Industrial Relations Commission as we had before. You know that before this decision what tended to happen was that we sat down with the ACTU, we hammered out a

deal, there was some discussion with the employers - not to the same extent - but there was. We went along to the Commission and they said yes, we think that's sensible and well cooperate and be involved in that. As a result of that decision this year by the Industrial Relations Commission we haven't got that same certainty of implementation with the

cooperation of the Commission. Now what we have said with the ACTU is that we want a commitment from them that their approach towards wage fixation is still going to have

basically the same elements as it had before Allan. That is that they'll commit themselves to a national aggregate wages outcome. They have done that and we believe that they will deliver, as they have every year up until now. It's simply because we are now getting into a position of more devolved enterprise-based productivity bargaining that you can't have quite the same degree of certainty. But let's be quite clear. We've put into the Budget 4^%, they talk with us

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about an outcome of the order of 5%. In the circumstances that is a perfectly appropriate way of handling it. We had to have a figure, a point figure, in the Budget. We thought the 4.5 figure was a reasonable point figure to have in those circumstances.

KOCH: Prime Minister, business planned on the fact that there wasn't going to be a recession because they were told that a couple of years ago. They were then told it was going to be a soft recession. It ended up a hard one. This Budget they were looking for leadership. Do you think they

got it through this Budget and in what areas?

PM: They certainly got it. I hope - let me be quite hard and blunt and frank about this - I hope that the business community and leaders in business have got a little bit more sense than some of the reactions last night and this morning which seem to indicate that they might have. In these days of economic management you don't have just one night or day of the year in which economic decisions are taken. This decision, this set of decisions in the Budget announced by

John Kerin yesterday, is really the third instalment of major economic decision making this year. We had the March 12 statement which made massive changes in terms of future planning, including particularly of course, the very

significant changes in our tariff regime. We've also had the next instalment of the very, very historic changes in the Special Premiers' Conference process which involved absolutely historic changes in regard to business regulation, land transport reform covering roads and rail, and electricity generation. And now we have this Budget. There has never been a year, I would suggest, in which you've had such a range of decisions which are important for the future welfare of the Australian business community. And so this is part three of a series of instalments in 1991

to ensure greater confidence, a better micro-economic reform structure within which the Australian business community can operate.

KELLY: Paul Kelly, Prime Minister. How do you maintain low inflation once the recovery comes?

PM: Well firstly, you ensure that you have a wages outcome which is consistent with the maintenance of that. We've talked, as you know, about a year on year wages outcome of 4%% increase. That is certainly consistent with a maintenance of a very low inflation figure. To the extent

Paul, that there were to be any increase in the wages outcome beyond that figure it would reflect a greater extension of productivity bargaining outcomes than we've anticipated and by definition such productivity-based

increases would themselves pay for that larger than 4% increase. Now that's in the area of wages policy. We will maintain appropriate monetary and fiscal rigidity and well, let me say, rather than rigidity, appropriate stances in monetary policy. The three things together, wages policy, monetary policy and fiscal policy will ensure that Australia

now, as it's got under this Government, will continue to

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have it, for the first time in a generation, inflation rates comparable with our major trading partners.

WOOD: Allan Wood, Prime Minister. You've complained in the latter part of the 80's that you delivered lower wage costs and a higher profit share to business. You didn't really get the return for that because business tended to put it though in inflation rather than into lower costs and prices. Now what if the same thing starts to happen as we come out of this recession? You see business taking the opportunity

to do the marking up again. Does that mean you're prepared to put up interest rates fairly quickly in the cycle?

PM: Well thanks for that question Allan. I think it's a very important one. I don't regard the Australian business community as uneducatable. They did some silly things during the latter part of the 1980's. But I think that

individually and in terms of their shareholders, they have learned some of the errors of their ways. That's point one. Point two, in a lower inflationary environment which provides us for the first time, as I say, in a generation a more competitive position with our major trading partners, I

think the opportunity as well as the challenge is going to be there and I expect them to behave more sensibly. So we've got some very considerable business leaders in this

country and I don't mean just among the big boys. I'm always - I'm travelling around this country, I'm seeing the smaller operators, I'm seeing some of their achievements. I still think Allan, that one of the most assuring statistics that we ought to be looking at at this time as we see what's happened in the last year, what are the prospects for next year is the fact that last year we had a 25% increase in manufactured exports. That is a reflection of the fact that we do have the people capable of going out there in tough,

competitive situations and winning. And I have no reason to believe that w e 're not going to be able to continue to do that. I think the business community and may I say also Allan, the financial community were operating for the first

time in a totally deregulated environment. It's quite clear the banks weren't totally ready for accepting the challenges that were involved in that environment. They've been burnt, they've been hurt and so have a number of businesses. I believe that leaders of our banking industry, the leaders of

industry generally, as I say, are educatable. I think they will have learnt from their experiences.

KOCH: Prime Minister, we'll leave it there. We thank you very much for your time this morning on a very busy day, the first stop for you on the hustings after the Budget. We very much appreciate it. Ladies and gentlemen, would you

thank the Prime Minister.

PM: Thank you.