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Transcrip of Dr John Hewson MP interview with Eric Walters

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Leader of the Opposition



16 December 1991 REF: TRANSCR\NM\S0047



SUBJECTS: Government leadership crisis, effect on $A, Coalition Fightback package, recession, labour market reform, mini-Budget, GST


Our next guest this morning, the Leader of the Opposition, John Hewson who must, at the moment, be feeling as though he's got all his Christmases at once. It must be interesting down there at the moment from your point of view, to see the

Government fighting an internecine leadership battle, Dr Hewson.


Good morning Eric. Yes, well it's interesting, but

disturbing, because this has now been going on for a little over a year. Actually, on Saturday night, I spoke to the Press Club dinner, which a year ago was the occasion where Paul Keating announced his candidacy. So this has been a

debilitating process over a year for the Government.


You mentioned at that speech to the Press Club the problems with our dollar because of this leadership wrangle - that it could affect it.


Our concern is that when there's no clear sense of direction from the Government, that confidence gets shaken, and we've seen recently business and consumer confidence dive down again in Australia. And the big thing now is whether foreigners, who've got large exposures in Australia, continue to be as

confident. And our concern is that unless there's a clear cut sense of direction from the Government, they may start to move their funds out of Australia or put less funds into Australia. Of course, that then does affect the currency.

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



So we ’ve called on the Prime Minister, or the Government this week really, to bring forward the statement - the economic statement - that they've foreshadowed for January - to have it this week. The Parliament is being recalled for a day. It's

a unique opportunity for the Government to state a sense of direction.


But you must be feeling a little like the old story of

watching your mother-in-law drive over the cliff in your brand new Jag. It's mixed feelings, isn't it Dr Hewson?


From our point of view, we had that problem over most of the 1980's - deep seated division between alternative leaders.


It's not a pleasant experience is it?


No, it's very bad, in fact. We put it behind us, and one of the things I've had to do since I've become Leader is to make sure that we build a unified team. I have no doubt that we lost the last two elections principally because there was disunity in the ranks. When there wasn't a big choice for the electorate between the Government and ourselves, they preferred the devil they knew, because the other one was divided.

I think Bob Hawke put it correctly actually, in the last election campaign - if you can't govern yourselves, you can't govern the country. We were proving that.


He's living to regret that.


He's now living to regret it because he has to demonstrate, very quickly, that he's in control of the ship - to use your analogy - and in that sense, he needs to make sure that he not only puts the leadership issue behind him, but that he does

present an alternative to our Fightback package, so that the electorate is given a clear choice.


OK. If you were in his position at the moment, what would you do?



I've been very careful not to advise Bob Hawke what to do. I've simply urged him to settle the matter as fast as he can. Now it is very difficult, when the Party is as poisonously divided as it is, and where so many people now have spoken out and staked a case on a particular position.

But it must be brought to a head. I think he's doing what he believes to be right, and that is that he doesn't think the Party should go to Keating. And he seems, indeed, obsessed with ensuring that Keating doesn't take over. He feels that

that would crystallise an even bigger electoral loss, and we agree with that. We think it would.


Wouldn't it be to your advantage if Keating takes over?


We have consistently argued an apolitical case since I became Leader. We are very concerned about where the country is. It is in the worst recession in 60 years. People are getting jarred week by week now, with worse sets of data, despite the

fact that it's been said we're in recovery. We then see unemployment hit ten and a half. We see a $1.7 billion

current account deficit - they're the last two numbers. National accounts again - another negative number.

And in that sense, we really do have a national crisis, and we should put these issues behind us. And so we urge the

Government - and we will stand with the Government - to solve the problems, if they can put their own difficulties behind them.


There seems to be a dichotomy as to just what is wrong with the economy at the moment, Mr Hawke and Mr Keating, and Mr Kerin until he lost the job, and now Mr Willis are all saying "Steady as she goes. It's going to get better. It's really a cyclical thing." Whereas I've heard manufacturers and large

businessmen saying "No, it's a structural problem." what's your attitude?


Well, as we say in Fightback, it is a structural problem, and it's a problem that's grown for years under Governments of both persuasions. And it's not just that we're in recession. Sure, we're in recession, but we weren't put in recession this

time by a drought, or by a collapse of the world economy. We put ourselves in a recession, and that recession is now being


compounded by the fact that we are just uncompetitive - that our waterfront is inefficient; our labour market is

inefficient; our transportation system is inefficiency. And that's the message you're hearing from the business leaders - that these structural problems have been allowed to grow.

We've talked about the waterfront for 20-odd years. We've talked about the transportation system for at least as long. That's really the problem.


You came under some criticism last week, and I'm not sure who it was - whether it was Bob Hawke or Ralph Willis - who

criticised you for mentioning those problems, or was it somebody on the waterfront, saying that you are talking down our image.


It's always difficult in Opposition. I've tried to be clear and say that what I'm interested in is that we face reality - not that we're talking down the economy. I don't like to create the impression that we are talking down the economy. We're not, but we don't have a realistic assessment of where we are.

For a year now, we've been told that the country's coming out of recession, yet successive pieces of data tell you we're not. We're still in a rolling recession. It will carry through most of 1992. The problems are deep-seated. They are

structural and they are going to have to be dealt with by - as we've argued - massive change, not just tinkering any more. It's massive change. And in that sense, if the Government isn't prepared to admit to the reality of the circumstances,

they're not even going to get to first base in terms of making change.

We see today, for example, evidence that in this leadership wrangle, Paul Keating is prepared to start to say, “Well, I'll back down on the $2.50 Medicare charge." Now, that is

ludicrous. Medicare is a major problem. We supported the Government in making what is politically a very difficult thing to do, and that's a decision to impose a charge. We backed the Government, so it wasn't a political issue. And

then the Caucus rolled the Government to change their position. Now Mr Keating is going undo what is really a minor change, but an essential step towards getting some sort of

rationality in our health system.

That just says that there's no sense of reality. There's no sense of direction for this country. I think that's rather a sad commentary, when we've given bipartisan support for a difficult political decision. We could have, in the


traditional sense, gone out and scored a whole host of political points and tried to frighten people about this, but we haven't. We've actually - in our package - gone much further and said "Look, this is a major problem. The

country's got to deal with it."


Well, you're certainly showing a remarkable amount of self-control this morning in not taking the boot to the Government - because you're in a position to do so. It's at least 12 to 18 months away from an election, so really there's not much value for you, apart from trying to get our economy

fixed. What would your suggestion be? How are we going to do it?


Well, we set out in the document - the Fightback document - a very detailed 20 point plan for turning the circumstances around. It includes some very difficult decisions - not just the tax changes, which people focus on.


But really, the Goods and Services tax is just a part of it.


It's just a part of it, that's right. But the real issue is the labour market, for example - getting a sensible situation where people are paid on the basis of their performance; that we don't go into a situation which has been foreshadowed again

last week, by both union leaders and by the Prime Minister, of another across the board wage increase without any improvement in productivity. Because all that will do is put more people on the unemployment rolls.

Indeed, we've had, since the end of 1989, about a five or more per cent wage increase - a significant increase in real wages. It's just adding to unemployment. So the first simple step in the wage issue would be to say no more national wage

increases, unless...


So your wages increases...


Our negotiations will be in each workplace around Australia, based on the position of each workplace, and principally on the performance of the workforce.



You'd prefer the Labor Government to take some o f those policies you put forward and run with them.


Yes. We expect that they will, in a political sense, steal the policies, or some of them. But we don't think that

matters. As long as they actually get on and make a

substantive change...


They haven't laid a glove on you yet, have they?


No. In fact, it's interesting that all the figuring has stood the entire test. The only difference of opinion relates to a different assumption, in one case. And we stand by our assumptions. They're very conservative.

The message we get back from the electorate everywhere I go is that they accept that the figures have been produced by the best people in Australia. They're tight. They'd like to see the Government get on and actually present an alternative, rather than debate the minutia. They're trying to muddy the waters, if you like. Whereas what people want is - they say

"OK, we know Hewson's vision. We know what he wants to do. Now what are you going to do? What's your alternative?" That's really where the debate ought to be between now and the next election.


That's what you're pushing at the moment?




You want a mini-Budget - some sort of economic statement from the Prime Minister?


Well, they've foreshadowed that they will make an economic statement because their forecasts are out of line already. The Budget is blowing out beyond what they said back in August, and now there's real concern that where they've been

saying we were coming out of recession, we are not.


So in that sense, the electorate needs statement. Foreign investors need statement. They need to see that the

Government not only has a realistic understanding of where we are, but that they're prepared to make major policy change.

As I say, it's not tinkering. Tinkering will not do it any more. It just makes the problem worse.


I wonder if I could take advantage of you being here this morning. I know that you have got a very, very busy schedule. But would you mind taking any open line at all?


No, that's fine.


Well, if you'd like to put the headphones on - if you'd like to talk to the Leader of the Opposition - John Hewson, about anything we've talked about this morning, and about the leadership wrangle, feel free to call. 269 0669. We'll take a break, Dr Hewson and return in a moment.



Good morning. This is Eric Walters on 2GB, Newstalk 873. Our open line number 269 0669. If you'd like to talk to the

Leader of the Opposition, Dr John Hewson.

Good morning to Peter.


Good morning Eric. Look, I'd just like to ask Dr Hewson a quick question, if I may. It's just in reference to where the goods and services tax will be levied. Will it be levied at the retail point, or will it be levied at the wholesale point, where the wholesale tax applies at the moment?


Good morning Peter. It's actually levied at each stage of the production process. But the next stage gets a refund on any tax paid on the stage before. So, if you're a manufacturer and you buy your inputs on which there's a goods and services

tax charge, you can claim a refund on that, and you then add it to your output. Finally of course, the impact of the tax is at the final level. It really only taxes value added at each stage of the production process.


But from the point of view of business, they will generally get a refund on any of the tax paid on the inputs, and that's why it's such an attractive change from the point of view of the business community.


Sure. On the sales tax paid at the moment Doctor - I would pay the tax. Would I quote an exemption number, or would I just pay the tax and then claim the money back?


There'll be a different system. The sales tax system has a number of disadvantages for you of course. When you pay sales tax on your inputs you can't get it refunded, and you then have to build that into the price of your output.

Secondly, you would probably pay sales tax pretty regularly. I think it's about every 24 days. We would have, for smaller to medium-sized businesses, a requirement that they file less often. So you'll get a cashflow advantage. If you're a retailer, for example, where something might sit on the shelf

for a while, you can get the refund on the tax on the input before you sell the output. So you get the advantage of that as well.


We've got a lot of calls on the line, Dr Hewson, so let's say hello to Matthew, also on the GST. Good morning Matthew.


Good morning Dr Hewson, Good morning Eric.


Good morning Matthew. How are you?


Not too bad. I've got a bit of advice for you on the GST.




A bit of advice?



Listen. Instead of imposing a tax on people, why don't we cut foreign debt by 70% - get the major national Australian companies to borrow amongst themselves in Australia and create work for the million unemployed. You could have semi-skilled

and skilled workers and trainee workers in the production of a city. When that city is built, sell it off to the people from overseas, or rent it out, or lease it to them.


OK Matthew. We'll have to keep these quick. There's a lot of people on the line.


Well Matthew, our package - just two quick questions - one, while we impose a goods and services tax, we abolish seven other major taxes and reduce a number of other taxes,

including personal tax.

Secondly, the whole package is designed to start to get our debt under control and bring it down by creating jobs. They way you do that is to remove the cost disadvantages under which business operates so they can get on and create jobs. After all, it's the business community - it ought to be the principle employer and the principle generator of wealth.


I'm not talking about imposing a tax on anybody. I'm talking about using our own credit and our own resources in Australia to get things moving.


Well, that's really what I'm talking about. I don't think we can do it by the route you foreshadow, because the foreign investors wouldn't believe we were on the right track. The only way they'll see us on the right track is to start to

re-build our business community, and that's what we are concentrating on.


OK, thanks Dr Hewson. Here's another call from Tom, also on the labour market. Good morning Tom.


Good morning gentlemen. Just a very quick one, Dr Hewson.



Good morning Tom.


One of your predecessors - I think you remember him - he's even taller than you - Malcolm Fraser - was going to

restructure the labour market back in '75. Let's be quite truthful - I don't think in the wildest dreams you can expect to have a majority as big as what he had at that time.


It would be nice.


No, I don't think it would be nice. It would make you



No it wouldn't.


He was going to everything, but nothing ever eventuated. So why should I trust you? Tell me that.


I came into politics after careers in other areas, to really make a change. I carried with me a lot of frustrations about the Liberal Party and the fact that it hadn't got on and done what it said it would do. I carried a lot of frustration

about the Labor Party that wasn't doing anything, and actually just letting our situation slide.

So I've just come in with an absolute personal commitment to make the change that I saw others not make in the past. And I've staked everything I've got on it. From my point of view, I've now built a team of people around me in the Shadow

Cabinet that are equally dedicated to making that change, and we're prepared to stake our electoral chances by telling you about all the details of that change before we get into Government, even though a lot of it is said to be politically


Because if we can't win a mandate by telling people the truth about what's got to be done in Australia, then we don't deserve to be in government anyway, and we won't be able to govern without that mandate. So, in a sense, we've decided to call it the way it is, and tell you honestly what's got to be


done to turn the circumstances around. And in that process, I think we've built a considerable amount of credibility - that we are going to do it when we get there.

We need the mandate. The point I made about 1975 Tom, was that if we had control of both houses, we could put our

legislation through in the first few months of government. That's really what we'd like to do.


OK. Well, we've got a lot of calls here Dr Hews o n . Here' s Kim on the line now. Good morning Kim.


Good morning Dr Hewson.


Good morning Kim. How are you.


Good thanks. I'm worried about the policies for women working. Bob Hawke's seems really determined that women have to work. I just feel if it was made able for women to say

home, we would have more people working, less people

unemployed. You would have children being looked after. You wouldn't need kindergartens. I just feel that there's a big opening there - that if home prices were reduced and a bigger tax deduction for women to stay at home, it would solve a lot

of our problems.


Thanks Kim. What we do, actually, is leave the choice to you, because we don't think Government ought to make that choice. But we do give different sorts of incentives. If people have to work, well of course, there'll be some allowances for child

care. But in your case, where perhaps the woman wants to stay home, well then there's an increase in the Dependent Spouse Rebate. There's an increase in Family Allowances - a doubling of family allowances on low to middle incomes. That money is paid, of course, to the principle carer - that is usually the wife. And there are other changes to the system which allow

families to make that choice more easily and if the wife chooses to stay home, there's assistance there that isn't available under the present Government.

So, we leave the choice to you, but we really do favour that option, in a sense, of increasing the Dependent Spouse Rebate, and the doubling of Family Allowances, which will be of benefit to the family that you've described.

REF: TRANSCR\NM\S0047 12 .


Dr Hewson, Annette has also got a question about jobs. Good morning Annette.


Good morning Eric. Good morning Dr Hewson.


Good morning Annette. How are you.


I'm very well thanks. I'm a bit sad of course. On the

5th December my employer, with whom I've been for 24 years and 6 months, informed us that at the end of January he will be closing down. Because, I suppose, I've got a few dollars in the bank, I understand now that if you become unemployed, you cannot collect the dole. You've got to spend all your savings etcetera etcetera. But the thing is, that doesn't give a true

record of the unemployed in this nation, and because of the present Government, making them more unpopular - and I think the true figure would be something like about 15% of people that are those like me that can't apply for the dole. Is

there not some way that you could have instituted where people who are really out of work can register their being out of work, so that we get a true feel of the numbers and show how bad Australia is going?


Yes. I couldn't agree more with that Annette. The official unemployment number is just a little over 900,000. But that's only people - anyone who's worked more than one hour, I think, in a week, gets classified as employed.

There are about five or six hundred thousand other people who are working much less than they want to work. They might have been pushed on to part-time work, or single shifts, or two or three day weeks, or whatever. That does get the number up

somewhere around 16% or 17% on the current numbers. I agree that there's been an enormous attempt under the Hawke Government to hide the magnitude of the unemployment...


That's what I'm trying to get at.



...not only in the two people you mentioned, but other people have been put onto sickness benefits. They're put onto other benefits rather than on the unemployment benefit, so they don't get counted. I think it is important that we declare

the full magnitude of the problem. Because when you're getting to nearly one in five Australians that are working less than they want to, or less than they can, then of course you've really got a very significant unemployment problem,

getting to the orders of magnitudes of the 1930s.


Well Dr Hews on, thanks very much indeed for spending the time this morning. I know you've got another appointment. We've held you much longer than expected, and I do appreciate you coming in and talking to us this morning.


Thanks Eric, and I wish you well with your program.