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Economy, protection, GST, competition, policy reform, crisis of confidence,wool crisis, primary industry, structural reform, enterprise bargaining, trades hall council, australia's international competitiveness, reduction in national debt, best international practice, opposition leadership

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Leader of the Opposition

29 April 1991 TRANSCR/NM/0004S



Subjectss Economy, Protection, GST, Competition, Policy Reform, Crisis of Confidence, Wool Crisis, Primary Industry, structural Reform, Enterprise Bargaining, Trades Hall Council, Australia's International Competitiveness, Reduction in National Debt, Best

International Practice, Opposition Leadership

McDonald :

And now to Dr Hewson who's in the studio with me. Political debate since he assumed leadership from Andrew Peacock just over a year ago has largely centred on economic issues. So

what can an Opposition do which both tests the Government and its policies and yet doesn't contribute to the nation's lack of confidence during a recession. This will again be a test as microeconomic reform and particularly reform of the labour market captures the media's headlines following the national

wage decision. So good morning to Dr Hewson.


Good morning Ranald, how are you.


I'm well. 1 hope you are, since your trip to New Zealand. I wonder, can you assist in any move for a more competitive, efficient and confident economy from the Opposition benches.


Yes, well you raise a very important point, and that is how to conduct ourselves in what is the worst circumstances we've seen, I think, since the 1930s. My approach has been to try and be constructive and to set the agenda - and a good example

of that is, for example, we made a firm commitment let's say, on protection - that we would reduce protection as part of a policy package to zero by the year 2000. Now that put us well out in front of the Government, but what it allowed the

Government to do is come in behind us in the March 12 Industry Statement and move pretty much in the same direction. And I believe as a result of that sort of leadership from our side, in Opposition, making it somewhat easier for the Government to do what is required.

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Parliam ent House, C an b erra, A.C.T, 2600 Phone 77 4022 C O M M O N W E A L T H PARLIAMENTARY LIBRARY M IC A H


We've put behind us an issue which has bedevilled this country for the last 90 or 100 years at least and we are finally going to see substantial progress down that path. Now that's the sort of constructive role I believe we can play so it's why we've gone on and made other policy recommendations, or

adopted as formal policy things like a broad based Goods and Services Tax, which is politically a very difficult thing to do because from Opposition you're selling a difficult policy change, but it's one we feel that is important as part of the package. Similarly, in telecommunications we've tried to move

the frontiers out on the Government again. We've said we should have full-blooded competition in telecommunications, not just a second competitor that is constrained by having to pick up Aussat, but full competition. So my approach is really to be as constructive as I can as an Opposition in these circumstances. «

But equally what I'm doing is building a case for the sort of policy change I think has to be made. In simple terms I'd like to go to the next election really, without any flowery election promises, but simply a statement of the sort of

policies we will put in place as a matter of urgency. We'll have those policies - where they require legislation - available in draft form and just seek a mandate - say to people we are going to move protection this way; we are going

to clean up the waterfront in the following way; we are going to introduce a broad based Goods and Services Tax; or lower personal tax; or deal with savings or whatever in these particular ways. There's our policy agenda. Please give us a mandate in both Houses to implement those policies, even those

some of them may be difficult.

I'm very concerned that we are, as I say, in the worst

circumstances in 60 years. We have to make more significant policy change than we've contemplated at any time over the last 30 or 40 years at least, and we have to do it as a matter

of urgency, and in that sense I think we have to go for the mandate that I've described.

McDonald: v

I suppose what runs against that though, is whether various figures come out on unemployment or the national balance sheet - various figures that indicate the amount we' debit for the last month and that sort of thing. So, the Treasurer comes out and he says - this is the good side; these are very good figures and these are in line with my policies...


Beautiful numbers...




Then the Opposition, your Shadow Treasurer comes out and says these are much worse; the situation's bad? there's no recovery? the signs are really just as bad as they have been for the last three months, six months, nine months. That doesn't really help that debate does it?

Hewson i

Well it's difficult, because it's easy for us to be portrayed as negative. Even though Peter Keith or myself might make a comment about how the figures were worse than expected, we usually in fact, always I believe, go on and say: This should convey a greater sense of urgency. This should require us to move quicker. This can be turned around if you do the

following things and so on. The positive quite often doesn't get covered. The negative gets covered. Now we don't want to appear negative. We don't want to talk the country down, but to be fair, you must have a sense of realism about where we are. And where you've had a treasurer deliberately misleading people, saying for the best part of 18 months there will not

be a recession, unemployment will not go to 9 or 10% -

whatever the argument has been - only to find out that it does, that in economic terms compounds our problem.

There's a large part of what's happened in Australia is of course, we have a crisis of confidence, a crisis of

expectations. People have been consistently told that things will be better than they are, and of course in many cases they've acted on that basis. Many companies have gone ahead and invested. Many individuals have incurred personal

commitments in relation to mortgages and other things. Then they find out that that isn't the case and so they're forced to scale down. Their wealth is actually cut quite

dramatically, as house prices fall, as many of them lose their jobs. That compounds your problem, so it plummets the economy further down and takes you longer to turn it around and there's so much more that's got to be done to re-instil confidence in peoples

I think the Government's got a very strong responsibility to actually state the way things are as honestly as they can - to bring everybody into that process, take them into their confidence if you like, and then you've got to change

attitudes in this country. That's the first step. To get those attitudes changed you've got to bring people into your confidence. You've got to say, look, this is how tough it is. This is what we've got to do. Some of it will be good for

you, some of it will be painful. Ultimately we'll all be better off, but we must make the change. As long as the

Government goes on playing games and misleading people, they'll never get people to come on side and it delays the process.

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Can I ask you about your reaction to the crisis in the wool industry, and primary industry as a whole. You went out to the meeting at Hamilton, I think with Malcolm Fraser as Chair. Do you see it, though, as not being a role of Opposition to represent the disadvantaged groups, and pressurise on their behalf, or do you see it as taking a responsible role as you would as if you were in Government?


Well, I saw it as essential that we took a responsible role. I'm very concerned about the wool industry and the plight of the rural sector. There's no doubt about that, and I think I convey that whenever I talk to people# We understand the magnitude of the problem. But I also understand that the last

thing that I should do is simply advocate giving them

temporary relief, which I know will not do them any good - which I know in the medium term will undo the good that should be there. It's the industries like wool and wheat which are super-efficient by world standards. They are industries which

in the past have matched best international practice. The last thing you can do is give them a dose of inefficiency by giving them another subsidy which is unjustified.

Now the approach we've taken is that the wool industry needed to be restructured. There was a principal responsibility in there not for Government - in fact Government should get out of it, it's an industry responsibility - they should work out how they're going to unload the stockpile and service the debt. But the Government's role is to keep an eye on that - to provide the framework in which it can happen. Clearly if the circumstances were to develop where say, the wool price collapsed and the levy that the growers had to pay was just untenable, then the Government would come in and look at

assistance but not until the industry had done its job and adjusted to the reality of that industry - much of which was self-inflicted because they tried to sustain a price which was unsustainable. So 'it's a responsible approach. It's the

constructive way to deal with the industry, even though in the short term it leaves me open to attacks by people like Malcolm Fraser and others that you're not representing the interests of the wool growers and so on. I am, and I believe that as

long as we are consistent about this when we treat wool, when we treat wheat, when we treat the automobile industry in Geelong, or whatever it is. As long as we maintain a

consistent approach to get the problem solved and to turn the country around, everyone will be better off. If I start taking cheap political shots, taking short term positions to

buy votes all over the place, I do irreparable harm, I

believe, to all those people, and it's not what Government's about these days. The days of scoring points and just putting

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the Government at a disadvantage and not going on to be constructive and provide solutions are gone, in my view. People are sick of it.


It's twenty to nine on 774 3L0 and I'm talking to the Leader of the Opposition - the Federal Leader of the Opposition, Dr John Hewson. We welcome your calls on 670 9044, or

008 331182. We'd particularly like to concentrate on matters concerned with the role of the Opposition and also the current debate about the Accord Mark VI and the Industrial Relations Commission decision.

If I can turn to that, I read the article, the interview with John Howard, your Shadow Industrial Relations, but I wondered, can you explain first of all, very simply, your approach to enterprise bargaining? Is it company by company and do you believe there should be any group of people can operate either

as a union voluntarily or not as a union, as the case may be? In other words, do you see the whole thing devolve right down to a state of being a company by company operation, debate?

Hewson $

The best basis is the workplace. In most cases that is a company, but some company may have a number of plants in a number of related activities, and it may choose of course, to negotiate somewhat differently at each plant. But it's the workplace that should be the focus and that's the big

difference between the Government and ourselves. They are still centralised. They prefer of course to just have a decision made between Paul Keating and Bill Kelty - 6% across the board or whatever, and everybody to get it. Their

compromise is to try and bring that to an industry-type level. But the real issue is to go all the way down to the workplace, because at that level - it doesn't matter what industry it is, it doesn't matter it's in the public or the private sector -

you have an idea about the capacity of that company or that workplace to pay the wages. You understand performance. You understand productivity. And you can agree on an equitable distribution of the gains from the effort. And that's really

what's got to be achieved. You've got to get a link there between the incentive to work, in terms of wages and the productivity of the workers, and that productivity gain must be shared. It must be shared between the workers, the

employer and indeed the consumer.

See, if we go down this process of structural reform, the objective is to become internationally competitive. That means we really, in many cases, have to reduce our costs and boost our productivity. Workers should share in the boost of

productivity, but so should the employer because they've got to make investments to expand the capacity of their plant, and

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equally the consumer must gain in terms of lower prices. It's that distribution which is important and one of the things that has worried me looking at the events of the last week is, to the extent that they have talked about productivity, it's

as if the workers should get it all. That won't give us any boost to our international competitiveness and indeed we'll go backwards rather than forwards.

So there are some basic principles there - workplace first; secondly at that level employees could, in my view, negotiate individually or collectively - if they want a union to represent them, that's fine. It's not an anti-union position, but it should be a choice, not a compulsion. And then the

negotiations should take place between the employer and the employee at that level on the basis that I've described. I believe that's the only effective way to change our system. Now that will require, I believe a quantum leap in thinking

from the old centralised approach. Employers got lazy because they got used to the Government and the ACTU making the decisions for them. Workers got lazy and they knew they'd get

5, 6, 7% a year. Why be more productive if you're going to get the wage increase anyway? Of course the system has produced the worst outcomes now where we have uncompetitive wage outcomes by comparison with our trading partners. The workers have lost because their real wages have fallen in each

of the last five years. And there's been a very unfortunate institutional shift where people like Bill Kelty have become de facto cabinet ministers which has allowed them to block reform, so we don't have genuine waterfront reform because they're looking after mates in the Waterside Workers' Federation. We don't have telecommunications reform because they're looking after mates in the Telecom union. You don't have other transport reform or tax reform. Look at it now - you won't have a goods and services tax because the ACTU will

oppose it. This blocking of reform is a massive cost which has been inflicted on all Australian workers. What I think we are observing, and you see a similar pressure in countries like New Zealand, is that the rank and file have had enough. They are prepared to negotiate themselves. They are prepared

to go and do a wage* deal to save their jobs. You've seen it in Victoria with SPC? What a wonderful example of how the workers said, we've got to do our part to save this company. They not only saved the company and saved their jobs, but

they're boosting their income because the company's making profits. They're sharing in those profits. And it's great for the country because it's an export industry, and they're expanding our exports as well. That is a good example of precisely the pressures that are there in many workplaces

around Australia.


Alright. Well, let's go on with some calls, and if you've got the headphones there we can start of with Ken. Ken:

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(Caller) Ken:

Yes, good morning Dr Hewson. A brief comment, and a brief question.


Good morning Ken.


First, I want to congratulate you on taking the positive approach that you're outlining and avoiding the cheap political shots which the present Government is just notorious for. I know it's very easy for a political leader and I

congratulate you on avoiding those. Secondly, my question is this - can you describe for us your thoughts and approach on how to integrate the philosophy you just described in sharing profits and sharing gains between employers and unions, and what you feel can be done to bring the Trades Hall Council to the party?


Well, it's very difficult to win the argument with Trades Hall Council, because they don't think of it in terms of economic efficiency, and they don't necessarily think about it in terns of improvement of the plight of workers. They really are playing power games. It's a question of power, and they

resist decentralisation because they see it as an erosion of their power. So you will always have, I believe, a force there opposed to change. Whereas from the workers' point of view, as I've been describing it, they've had enough. They know that they can work harder, as the SPC people said to me when I went there. I congratulated one worker on a 48%

increase in productivity, and he said "you ain't seen nothing yet". He said "we've a long way to go - a lot more we can

do". Now they know, and the workers are leaving the union leadership right now, and as you'd expect them to in the midst of the worst recession in 60 years. So, it is an education process - that change can be made, and we have seen some deregulated industries where the process has gone ahead on its own. When the financial sector was deregulated in the early

1980s there were a lot of employment contracts done. They were done by individual workers in many cases, with their employer. And they got an immediate and effective link with productivity, and the industry as a whole, and the nation



Well thanks Ken. Let's move - we've got a lot on the

switchboard. Geoff:

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(Caller) Geoff:

Dr Hewson, you talk about the need for an internationally competitive Australia. The one great thing which is missing is the presence of an even playing field. And I think it's now a very very significant point. I can't see how we can

possibly turn ...inaudible... around in the current

circumstances if we're locked out of all the world major trading blocks.


I take your point and it's a very important point. It's not one that should stop us from going after efficiency in our own house. We have to put our own house in order, but equally we have to take up your point that there's a lot we need to do in

an international sense. I was in New Zealand last week. I've investigated the extent to which we can accelerate the process of developing CER - a common market, if you like, between our two countries. There's a lot more we can do there which will be beneficial to both us and them. I was in Taiwan a few

weeks ago putting the case, within existing diplomatic constraints to their officials that they were discriminating against Australian wheat and Australian beef, Australian fruits, for example - that we should be given a better access on the basis of the trading relationship that exists and that

fact that we are moving to lower protection in Australia. And I believe we will see some headway in all three of those areas in the near term.

In other cases, sure, we need to negotiate better reciprocal access, whether with the United States putting our case on wheat and beef and so on; or in Japan. Finally of course, we shouldn't forget the international forums. The Government, to

its credit, has done a good job in keeping maximum pressure on the GATT to break down agricultural protectionism in Europe and I am more optimistic about that than a lot of people - not necessarily in GATT, but the pressures are there, where the pain that is existing now in Germany, being integrated - how

long are they going to continue to support the French farmer, subsidise the inefficient French farmer♦ The pressures are there for that to breefk down, so we should maintain maximum multi-lateral pressure there. And of course, regionally, we have groups like APEC in the Asia-Pacific region which the Government can use as a specific device to lower protection, to level the playing field, in your terms, within the Asia- Pacific region. Not to build a block - it shouldn't be an exclusive thing where we put up tariff walls against everybody else - but we can use it as a forum to lower protection, give

it specific objects and seek to regionally, if you like, move to a world of much lower protection.

I think the mood is there. I've spent now 3 or 4 trips in

Asia in the last year. Most of the countries in Asia are

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moving in that direction. The pressures will be on the bigger countries like Japan to participate, so we get our own house in order domestically and we maintain a maximum effort on a bilateral, on a regional and a multi-lateral basis to lower protection.


Thanks Geoff. Let's go to Jan.

(Caller) Jan:

Good morning, and thank you very much for your programme and for your comments Dr Hewson:

Good morning Jan. How are you.


I'm very well thank you. Now I have a suggestion to make. In this wonderful country of ours, we've had it good for so many years, and it's about time, as you say, we got into it and worked really hard. I suggest that we put in a sum of money

from each person in the country that can afford it to be used to reduce our national debt and for that purpose alone. And that will give us a start. We won't be having to pay so much

interest each year and with a will to get to it and do

something about it we could have ourselves on our feet again.


Well, let's move from Jan. How do we reduce our national debt - that's one approach.


Thank you Jan. Look, I could only agree with you that we have a wonderful country ;and we can turn it around in the space of this decade and put 1^. back to the status that it once enjoyed in terms of trade or credit standing or lifestyle. But I don't think putting a sum of money in, with respect, will

solve that problem. Indeed, I think a lot of people would feel that they'd put a lot in already, in terms of

contributions by way of taxes and other things, to the Government for little return. The way to deal with our debt is to recognise that we have to increase our productivity as a nation and we have to create the capacity to just not only

service that debt but reduce it by expanding our exports. So we need a completely new attitude. We need an export culture. We need, in technical terms, I think to switch nearly 4% of our production into exports in the next 5 years just to

stabilise our debt. And the way you do that is to, I believe,



in everything we do, try and match best international practice. We don't just want moderate reform on the

waterfront. We want the most efficient waterfront in the world. We don't just want a bit of a marginal improvement in rail transport or quality of our roads and road transport - we want the best in the world. We need to achieve the same in terms of our tax structure, or in terms of the running of business enterprises. If we match best international practice we can not only turn this country around, but we can see our

country improve significantly, relative to some of the more successful countries with which we compete in Asia. But the first thing is a change of attitude, and the second thing is then to put in place the policies that give us that

efficiency. . ψ *

Might I say one other thing is that it '

done it. We 've missed best international practice there. But, we are competitive in our attitudes in sport. We need to do the same in terms of exports, and you'll turn this country around.


Alright, thanks for that Jan. Sorry, we're not able to get to other callers. I think we've got a long list. But I just want to end up on one thing about the structure about the way you see your role as Leader. There was an attack of course,

by the Prime Minister Bob Hawke on John Howard's performance, your Shadow Minister for Industrial Relations. Where do you defer to your frontbenchers and how much of the cutting edge of the attack should be through you, and how much should be

devolved to Ministers?


Well, it's a team effort, Ranald. When I first became Leader I encouraged our Shadow Ministers, particularly the less experienced ones to keep their heads down and get on top of their jobs and get out and know their constituencies. So if

it was Ian McLachlan, get around the factory floors, talk to workers, talk to shop stewards, talk to management, preparing for our protection decision for example. In John Howard's case, you don't need to teach John Howard anything. He's a master tactician. He's a master politician. He's on top of

his subject - industrial relations - and so he's been running hard up front. we are a team. I provide overall leadership and direction and keep the policy cohesion going, if you like. But we work as a team. We co-ordinate as much as we can. I think you will find in the course of the next two years - and we are developing this over three years - that not only am I

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better known, but all our frontbench, all the key people on our frontbench will have established their own individual reputations in their own jobs.

Yes, it is a question of demonstrating our competence to do the job, so that when people know that, look when we go into Government that fellow Howard will do a great job in

Industrial Relations, or Robert Hill will be a fantastic Minister for Foreign Affairs, and they get to know those people in those jobs. And it is a question of developing expertise and demonstrating expertise in those jobs. So, it's

a team effort and I'm happy to share the limelight with them all.

McDonald. ~

Thanks for coming in and thanks for giving us so much of your time.


Thank you.