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Hawke should keep an eye on his deputy

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John Hewson Leader of the Opposition M e d i a R e l e a s e

81/91 10 April 1991


The Prime Minister should keep a keen eye on his Deputy; and an even keener eye on his economic assessments.

Mr Keating is trying to shore up sagging morale on his Backbench, and, at the same time, press his leadership claims by saying the economic cycle will turn for the Government just in time for a late 1992 or early 1993 election.

But surveys released over the last two days suggest he has little basis for his claims.

Yesterday, the National Bank quarterly survey of 750 Australian companies showed all industries reporting lower profits and weakened trading in the March Quarter with as bad, or worse, expected in the June Quarter.

Today, the State Bank/ACM survey of job losses in the

manufacturing sector shows further large job losses are expected in the year to March 1992.

Forty-two thousand jobs could be lost in manufacturing and 113,000 jobs overall.

On that basis, unemployment would breach the 10 per cent mark.

Even the most perennially optimistic of market forecasters, such as Don Stammer (in the latest "Business Week"), are starting to forecast 10 per cent unemployment.

Of course, various devices, including the spread of four day weeks may ameliorate the measured levels of unemployment.

And it's also important to recognise that unemployment is now significantly understated relative to the early 1980's because the 'social wage' and other Government initiatives have "hidden" many formerly classified as unemployed under either sickness and

invalid benefits or training allowances.

But there will be no mistaking the pain inflicted on Australian households.

As has become his practice of late, Mr Keating is trying to

denigrate such surveys by grabbing at other indicators. His latest fetish is to suggest the All Ords and Chicago Futures Market are better indicators of the future outlook - somewhat ironic in view of his previous public disdain for "spivs" and

"phone jockeys" in the market.



But he should know that this is a risky business. While many acknowledge that falling inflation here and overseas and lower nominal interest rates may lead to a spurt in world equity and commodities markets in coming months, it would be foolhardy to assume that this post-war enthusiasm will necessarily be

translated into strong growth given the emerging trend to recession in Japan and Germany and the parlous state of the economies of the USSR and Eastern Block countries and the

precariousness of the banking system in many countries which is imposing a second round "credit crunch".

Better people than Paul Keating have been given red faces by relying on short-term equity and futures market trends to extrapolate the medium-term outlook.

Those who doubt this might recall that from 1949 to 1960, the Dow tripled while earnings of the 30 stocks that make up the index were just about flat. From 1961 to 1974, stocks stagnated while earnings tripled and from 1975 to 1986, the Dow tripled again while earnings registered only modest growth.

The real test will be whether any near term recovery in

confidence and enthusiasm, especially in the US, can be sustained and translated into improved business spending (as opposed to a short-term pick-up in consumer spending) as we move into 1992.

So instead of ducking and weaving and predicting recovery on the basis of extrapolations of the equity and futures markets, Mr Keating would be better advised telling Australians the full extent of the nation's problems and outlining the necessary policy responses.

For a start, he should be trying to do something about wages and the labour market. It is ludicrous that he has supported a deal forged before the last election for across-the-board wage rises and associated boosts to superannuation payments by employers

just when large sections of our industry are facing extinction and unemployment may be on the way to 10 per cent.

And what of his "two faced" policy on enterprise agreements - one minute he is supportive and the next minute (when he is trying to claim the virtues of the centralised Accord dealing with Bill Kelty) he is against?

And what of his attitude to fiscal policy? One day he is saying that cutting public spending in a recession was not appropriate and the next day he is assuring the financial press that he will take whatever action is necessary to stop the Commonwealth Budget

slipping into deficit. What deceit !

And what of his pathetic attempts to patch up the wholesale sales tax rather than facing up to the goods and services tax widely supported by industry. Not because he has any conviction at all in what he has done but because he mistakenly sees a potential political advantage. And the man professes leadership qualities!

And what of his deliberate efforts to encourage the Left Wing to his camp by playing politics on uranium? Is this the action of a man concerned to tackle Australia's economic problems?

Paul Keating is a desperate man seeing his last chance of gaining leadership of his Party slipping away.

He is prepared to do anything to undermine Bob Hawke.

He is prepared to buy support from his Party factions by

compromising the purported economic rationalist position he has flaunted to the community.

He is prepared to deny concern about rising unemployment by grabbing at futures markets trying to imply a return to

prosperity rather than explaining the full extent of our economic problems.

And most despicably of all, he is now pretending that he is the champion of workers' interests from his Eastern suburbs, antique- filled residence. What humbug from the man on track to lift unemployment to the highest level since the 1930s.

Twenty-twenty vision will be essential for our Prime Minister !