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Leader of the Opposition

4 December 1991


E & Ο E - Proof Copy Only

Subjects: Fightback; Syntec; Morgan Poll; Labor Ad ban.


... (inaudible) Syntec?


Syntec have made an embarrasing professional error, they have failed to recognise that we would ease monetary policy to the extent required during that year as there is a one off impact on the price level. What Syntec have done is tried to argue

that that wouldn't be the case firstly and secondly they've added that to the scenarios that are attached in an Access paper, which not forecasts. What Syntec should have done is do their own forecasts of what would happen in the course of

the 1990's under this sort of policy change. We have a model, in our package, there are no forecasts as to what will happen and Syntec have therefore made a very embarassing professional error.

So they are wrong as well when they predict inflation at 10%?

We don't believe inflation will get to 10%, although as I say we haven't done a firm forecast. What we have done is very carefully estimate that the package itself will add 4.4% to inflation. That is, we believe a very conservative estimate.

It has been done with the most sophisticated modelling availabe, looking at the impact of the abolition of payroll tax, petrol excise and sales tax along with the imposition of the 15% goods and services tax. The overall inflation

measures, something like the GDP deflator, will only go up a bit over 2%. We have used the best the information available and people ought to refer say to the Canadian experience where there was a lot of speculation that they wouldn't achieve



Parliament House, Canberra, A.C.T. 2600 Phone 277 4022

1 their inflation objective and they came in under that objective. I think they, from memory, had about a 7% goods and services tax and they predicted about 1.5, I think, as the inflation effect and it came in under that. The international evidence is overwhelming that there doesn't need to be any permanent impact on inflation from the introduction of a goods and services tax. You have seen it in a recent IMF study which is the most authoratative piece done. Ex-treasury officers like David Morgan, who now works for Westpac, have

similarly written that there won't be any permanent inflation effect. The reason being that we have not only abolished a lot of other taxes but we very carefully targeted the

compensation in the package to ensure that there is no basis for an increase in wages over and above what is already there.


Can you guarantee that interest rates won't sky rocket?


Look I don't give guarantees one way or the other, I am not in the business of misleading people. We don't think interest rates will sky rocket, indeed, the whole package is designed

to rely less on interest rates. The Government used interest rates as their only instrument, they therefore put them up, almost doubled them, in the course of trying to deal with the speculative boom they created in the late 1980's. They did nothing else. We do a lot of other things - we tighten fiscal

policy quite significantly, we eliminate a lot of the cost disadvantages that impact on industry through the

infrastructure of the Australian economy. Those two things alone, our industrial relations policy is the third thing, all take weight off interest rates - so we will be using interest rates and monetary policy less. Now this is an argument that the Government has been trying to scare people with, that

inflation is going to go through the roof and interest rates are going to go through the roof - that is a Labor Party

strategy, that is not our policy. In fact, our policy is carefully crafted to ensure that that doesn’t happen.


The Flinders Centre for Economic Studies indicates that there is still another 2 to 2.5% to come down in interest rates, do you think that is true?


Well we haven't again made any short term predictions about interest rates either. The thing that disturbs us most about interest rates is the level of real interest rates in

Australia, which is after you allow for inflation and they are very high relative to our trading partners, that is what you have got get down in Australia and the only way you get that down is with a package like this "Fightback” package which


v . really does go after the cost disadvantages of Australian industries compared to other countries, compared to our trading partners. It is possible that there will be further short term falls in interest rates if inflation continues on a downward path. The Government is busily stimulating economic

activity, they have had a phenomenal turn around in fiscal policy, a lot of increases in spending have been unfunded. If the economy takes off we will have a repeat of what they have done in the past, which is another boom followed by another bust. What we have got to make sure is that this time that doesn't happen. You really need a package like this

"Fightback" package to ensure that the boom/bust cycle isn't resumed in Australia.


Do you think it is true that people don't really care who they vote for now or what they vote as long as it is a change?


No, I don't think that is right. I believe that the

electorate is quite sophisticated and very discriminatory and I think that they really do believe that there has got to be change made in Australia. They won't vote for us unless they believe that we have got the right policies and that we will take the country in the right direction.

The message I get now from polling and from talking to people and so on is that they want genuine debate about alternative strategies for Australia and I think that is where the Government has got it wrong. They have gone after the detail

and they've tried to scare people, the electorate won't be scared, they've got plenty of time, time to make up their mind and they want a thorough going debate on alternative

strategies and policies and directions and that is really the challenge we keep putting to the Prime Minister to put down his alternative and let's have a full blown debate over the next 18 months. .


Do you think the Hawke Government is stagnant at the moment?


Oh, they're paralysed, the Prime Minister obviously can't move he has done so many deals over the years that he has got no policy scope left. You see it, he's just so totally negative on this package, he is not prepared to try and go forward,

he's not prepared to try and put up an alternative, he's just carping, whingeing and totally dishonest.

. <.... ;



How do interpret the meeting yesterday of senior government officials?


I don't know the details of the meeting they're obviously : trying to work out how to handle it but they're only looking i at it from the point of view of the theatre of politics, the

? political point scoring. What they should do is step back and ; say there is a very real message here and the public wants a

. · genuine alternative and a genuine debate and the government ■ isn't capable of that. j I The Prime Minister has incessantly focussed on his own job and

I not worried about creating jobs for the other one million

! Australians unemployed.

: Jrnlst:

Do you think it is going to be a two pronged attack, the

j talking down and the pinching of bits?

^ Hewson:

! Yes I think that's right, I think it is disappointing that a ί negative carping, whingeing attack isn't going to work and ■ they're not going to find anything wrong with the package as . they have admitted. They are just going to try and undermine ; · it by making outlandish and quite dishonest claims and trying ί to frighten people on the one hand and on the other hand they ; will undoubtedly try and pinch pieces. It is a very large

: package and an integrated whole and it is very hard to steal : bits and I think if they are going to steal it they ought to

i steal the lot, put the whole lot in place and we'd back them all the way.

. · Jrnlst:

Is there any damage from the Syntec forecast for you?


No I don't think so. I think Syntec will be a bit embarassed about what they have done. The Access paper on which they have based their analysis on is not a set of forecasts and they have made an incorrect assumption about how monetary

policy would be conducted in the year that we introduce the tax package. I think there is a bit of professional

embarassment coming for Syntec there. As far as we are concerned those claims about inflation and interest rates are unfounded.

• ’ t , 4 '’. t v




Is there a danger you have made your run too early?


We get it from both sides, some people have been saying for months that we have left our run too late. We have a view that has been set since I became Leader that we have got a three year strategy until the next election, we picked this

period as the appropriate time roughly in the middle of the three year period, recognising some of the realities that in some circumstances they could have gone early, but the real issue for us has been to do the detailed work and get the

package right, for that we have used the best people in Australia, and the second thing is to ensure that we have left ourselves plenty of time to get the arguments across. You see letters in the newspaper today, to the editor, which show we

have got a long way to go in getting the message across in a way that people can understand, and on that basis we reached the view that we would need about 12 months, at minimum, and

that's what we have got and we have got a strategy that runs in a very detailed way to get our message out to people in a way that they can understand it. It is a very big package and we could debate an element of it a day every day between now

and the next election, even if that election was in the middle of June 1993. We need time, that is why we have left

ourselves that much.


How do you feel about the latest poll? Were you pleased?


You are always pleased when you do well in the polls but there is only one poll that matters and we aren't going to be

complacent about our position. We recognise that we have got a long way to go with a big task in explaining our package and getting people to vote for us on the basis of the package and the sort of change we want to bring in Australia. The polls will come and go for the next 12 or 18 months, we'll have some

good ones, we'll have some bad ones but the real issue is the final poll, that's the one we are working towards.


Dr Hewson what do you think about the political ad ban?


I think the political ad ban is just a total disgrace. It shows a government that is broke, and will do anything to stop us putting our case to the people of Australia. You have seen

some of the evidence in recent days of how much money they


have lost in some parts of Australia. They know that they can't raise money for this election campaign, no one will support them. They are prepared to basically tear down the fundamental rights and institutions in Australia for their own short term political ends. Here we have the issue of free speech, and they are prepared to block free speech because

they have done such a lousy job of managing this country and they don c want people to be reminded of that in the course of an election campaign. I think that is ludicrous, I think people ought to march in the streets against the government that wants to take away the right of free speech.


Dr Hewson do you think your latest popularity in the poll shows that the end of the era of charisma is over, are people looking for substance and quality?


I don't know. I've just done a long radio interview and I'm not sure whether charisma was there or not. Which traversed a whole range of subjects. What is charisma? Charisma is some unknown quantity which you can't quite grab. I think people

don't want theatrics, if that is what you mean by charisma.


Is it something that Bob Hawke has got?


Well they say he has got it but I am not sure what charisma is. I know they don't want theatrics, they want politicians to get on and do the job, call it the way it is, and be honest and open about what's got to be done. We've done that, I

think that's what has surprised them. We've been prepared to say there are no quick fixes, tell it the way it is, some pluses, some minuses, some winners, some losers, that's the way it is. When you make change that's always the case. I think people want honesty and full and open debate and in that

sense they don't want the theatrics, they don't want political games, and politics won't be a blood sport for the

entertainment of a few people in the gallery in Canberra.


Will this crest of a wave carry you all the way through?


We're not banking on that. The polls will come and go. We recognise that we have got a very big job between now and the next election to get our message across. We'll work at it every day. It's nice from our point of view to be able to be positive, to look forward, to provide alternatives. We spent


18 months basically being negative in the sense that we were unable to say where we'd go or what we'd do. Now we can tell you. You want jobs - you abolish payroll tax. You want

interest rates to stay down - you put our package in place. Very positive messages. All my colleagues are enthused by the prospect of working every day till the next election to put our message to every level of Australian society.

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