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Transcript of Interview Dr John Hewson, Leader of the opposition ABC Radio Far North

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Leader of the Opposition

i ; · .

21 May 1991



Subjects: Shadow Cabinet, Broad Based Goods and Services tax, economy, reform, national service, taxation, national savings scheme, Tully Millstream

Judith Langridge:

I am talking to Dr John Hewson, the Federal Leader of the

Opposition, and the Federal Shadow Cabinet is meeting in Cairns today, only the second time it has met outside Canberra since the last election. There will also be a rally at the Civic centre tonight which will involve senior Shadow Cabinet members. Joining in me the studio now as I said, the Coalition Leader, John Hewson.

Good morning and welcome to the program.


Good morning Judith, how are you?


I am well thank you, are you pleased to be in Cairns?


Very much so.


Why was Cairns chosen as the venue for this, only the second Shadow Cabinet meeting that has been held outside Canberra.


Well, we wanted to come to somewhere in the North, to Queensland, and Cairns has a number of issues right now that are of interest to us, that have Federal implications as well as having been affected, I guess, by the pilots dispute and the recession. So, we are interested in tourism, which is an industry that has enormous potential for Australia, which has taken a bit of a

beating in recent times because of the pilot’s dispute, because of the Gulf War, because of the recession.

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We are also Interested in a number of other issues in relation to this part of Australia, some to do with the wet tropics,

Ravenshoe, the Tully Millstream and a number of others.

And it is an opportunity really, to get first hand information from people in the area about issues that are of importance to them. We are getting around Australia, with three or four such meetings per year, in an attempt to see first hand some of these problems and give people a chance to put their views to us.


It has been claimed that the inflation rate and the unemployment figures, even though they are at record levels at the moment, actually understate the case. What is your assessment of that?


Well, unemployment, if you look at the official data it says there are 9.9 per cent of the workforce that is unemployed, about 844,000 Australians, but we know of by other data that there are over 1 million Australians looking for work, registered with the Commonwealth Employment Service and there are some 800,000 odd other Australians that work less than 15 hours per week and of course there are a number of others that have been pushed onto other benefits, sickness benefits, training schemes and so on.

So, it is not hard to find a couple of million Australians that are working less than 15 hours or looking for a Job.


We do have a call now, Scott from the Tablelands, you have a

question for Dr Hewson.


Good morning Dr Hewson.


Good morning Scott, how are you?


Quite well thanks. Coalition's policy of goods and services tax, said to be 15 per cent ..(inaudible)., on everything we buy and pay for, for example, electricity accounts.

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It hasn't had a real good run with the economic journalists, but you have promised relief for pensioners, I am concerned about workers in general but superannuants in particular, well, they are on a fixed and a generally reducing income. Now, have you

any way of protecting them, well, is the tax set in concrete? How much will the workers suffer and in particular, on



We are committed to introducing a broad based goods and services tax as part as a tax reform program, firstly. Secondly, we

haven't yet announced what level that will be but you can be assured that it will be as broadly based as possible to be

effective, it should have a broad base.


Will that be on electricity accounts and telephone accounts..


In principle, until we announce the detail, it will be on

everything. Thirdly, however, recognise that it is important to compensate those who are disadvantaged by the tax. So, when you raise revenue from a tax like that you use it to replace the

wholesale sales tax, which will reduce the price of a lot of the things that people already consume and of course, you use

additional revenue to compensate those on fixed incomes and well in fact, right through the income stream for all the effects of the tax.

And it is possible to fully compensate people with the revenue . that is generated by the tax, as well as replacing the wholesale sales tax. So, that the idea is to give people money back in

their pockets and then they determine how much tax they pay by what they consume.

The final point you raised about superannuants, yes, a

particularly difficult group because there are so many different types of superannuants, some who are on Government pensions, they are easy to compensate in terms of increasing their pension. Others who rely on interest income, well they will have to be compensated through the tax system. But in general, the attempt

is made to compensate all those adversely affected by the tax, except of course those who presently don't pay tax. Like those, the black economy, who will start paying tax for the first time which is one of the major reasons why you will do it.

But, in simple terms, it is to restore incentive, to create the circumstances where people will save, rather than spend and to leave that decision to them based on the way they spend.

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But workers will bear the greatest brunt, won't they, because most of their income goes on purchasing household goods on which that tax will apply particularly heavily.


But, see it is possible to fully compensate the worker through a combination of direct Government payments and tax cuts and the sums that we have done at various levels of the tax, suggest that it is possible to fully compensate people so that nobody, no

workers, in your terms, are worse off. There will be some people who are worse off, as I say, those in the black economy. But in general, workers have nothing to fear from this tax. Clearly, we think it is something that is fundamentally important to

improving our economy in the midst of the worst recession in 60 years, we have got to be prepared to take some of these tough decision.


Okay, thanks very much Dr Hewson.


Thanks for your call Scott, we do have another call waiting. You are through to Dr Hewson.


The political climate, the way it is at present. I don't think it matters much which Party is in power, it is out of the frying pan and into the fire..


No, I wouldn't agree with that.


No, well, I would like to see a big sign erected all over

Australia and it might help, and all that it would read was "wake up Australia, your country needs you".


I agree with that. That one of the most important things that has to be done is to change attitudes in Australia and in that sense, yes, wake up Australia and recognise the magnitude of the problems, lets all pitch in and solve them because they are solvable if we work together.

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And Government, it is true, plays a limited role in that, we have to put in place the policies that create the circumstances in which people can wake up, encourage them to wake. I agree that none of those policies are really going to work very well if

people's attitudes don't shift and they aren't prepared to recognise we have got problems and pitch in.

But there is a difference between the Government and ourselves as to how we go about that, but that change of attitudes is



There is one Labor slogan that I think would help, that is, you know what they say, "united we stand - divided we fall".


Yes, well I don't particularly like slogans but the sentiment is alright, in the sense that we really do need to pull together. You see, Australia is a very wealthy country and has large

natural resources and a great climate, well educated population, we have every opportunity really to make the best of that. We have fallen off the pace because we have let those opportunities slide by and if we do pull together, as you suggest, I think we

can climb out of these difficult circumstances and build the sort of country and economy that most of us aspire to.


Okay. I hope we can keep it for Australians, anyhow.


Well, that is part of it. We run down our economic performance, we put our economic sovereignty at risk and that is why we have to lift our game as a matter of urgency, really.


Thanks for your call Alan, we do have other calls waiting. You are through to Dr Hewson, Andrew from Gordonvale.


Good morning Dr Hewson, how are you?


Good morning Andrew, how are you?

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I am very well thanks.




I have a perception about the system that we have got In

Australia at the moment, that It is tantalising industry and rewarding idleness. Would you like to comment on that?


Well, there a number of aspects of our system that would

substantiate your case. People don't feel, for example, that they get a fair return for their effort, that the tax levels are overall too high, that they don't keep a reasonable percentage of what they earn, they don't get an equitable distribution of

the total value of what they produce and they therefore suffer a lack of incentive or a lack of industry and I agree with that.

That is why we have got to change the tax system and restore

incentive, it is why we have got to move industrial relations back to the workplace level, so that we can get a reasonable degree of co-operation and understanding between employers and employees about how to improve performance and how to distribute

the gains from that improved performance between them and of course, to consumers by way of lower prices.

It is also important that when we look at individuals trying to go into business, that we don't have too many impediments to that sort of industry either. And of course, things like the capital gains tax, which really impose a very significant penalty on people going into business and putting their money at risk. Others, extent of Government regulation or over regulation, makes

it very difficult to establish a business, high interest rates, uncompetitive exchange rates. So again, the system has been stacked against those who might want to put their savings at risk and develop a small business. So, whether as a worker or as a

small business person, the system does have elements that are stacked against us.

And of course, the final element, I guess, that I draw attention to, is that there is feeling around that welfare expenditure, social security and welfare isn't as effectively targeted as it should be.

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So, that some people draw, for example, long term unemployment benefits when in fact they could actually get back into the workforce and therefore, you need to have a system of

unemployment benefits and provides people with an incentive to go to work, rather than to develop a lifestyle dependant on unemployment.

When others are pulling their weight, it is reasonable to expect those that can, also pull theirs and that therefore assistance to the unemployed are those who are genuinely unemployable and who need to be retrained or re-educated to be brought back into

the workforce but not to develop a lifestyle, as we have seen in some cases in recent years. I think our average length of

unemployment in Australia is four or five times what it is in the United States because our system encourages people to go on the benefit and stay there and of course it is possible, technically,

to leave school, go on the unemployment benefit and stay there until you are old enough to qualify for the aged pension.

And that maybe what you had in mind, that is why we believe that changes are, to that unemployment benefit system, ought to be made to ensure that the genuinely unemployable get the benefit or those who are temporarily out of the workforce get the

benefit, but it shouldn't be the basis for supporting a new lifestyle.


Yes, that is correct, I agree with what you said there whole heartedly. Do you think you have the policies and the ability to change the system because it is a fundamental change in

thinking that has to happen, to get Australia back on the road.


Well, I do. I believe, as I said to before, we have got the

policies that we can put in place and we are absolutely dedicated to doing that as a matter of urgency. Indeed, going into next election campaign, where will be simply seeking a mandate from the electorate to put in place a range of policies which we think

are important to turn our country around. But, over and above that as I said before with a previous caller, we must have a

change of attitudes and a lot of what we have to do is to

condition people to expect a significant amount of change and to expect it very quickly.

Our circumstances are as bad as they have been for 60 years and the magnitude of the change that we have to make in Australia is bigger than we have contemplated at anytime in the post war period.

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I am not sure the electorate yet focuses on that and they get confusing signals when the Government keeps telling them that the recession is over and that the recovery is just around the

corner, you have got nothing to worry about, just be happy. And the fact is, we have got real problems and it is better to

realistic about those and get on and solve them.


Yes, we have got real problems and we need the lead from the

Government. I mean, it is the system in which we work, in which we run our businesses that affects how successful we are and we are becoming unsuccessful because, I believe because of the system we have, that everyone is being dragged down to the lowest level of productivity, rather, than being encouraged to strive to

increase productivity.


That is right, it does go across all areas, at the workplace, in industrial relations and wages determination, we have go to back to the workplace. We have got to reduce our dependence on

Government, we have go to free the system from red tape, green tape and black tape in order to create the opportunities that people can pursue, or allow them to take advantage of

opportunities they perceive.

In education we have got to back to putting some emphasis on excellence rather, as you correctly say, pushing people towards the lowest common denominator. Right across the board, the way to summarise it, we ought to aim to match best international

practice in every thing we do. The best education system in the world, the best waterfront in the world, the industrial relations and wage determination system in the world. We do it in sport, we like to see Greg Norman number one golfer, we love to have the

top cricket team in the world, although we slipped off the pace there in the last attempt in the West Indies, but the point

stands, we should aim at the very least to match the best

international practice in everything we do.


That is right. .


Andrew, we are going to have to leave it there, we do have other callers waiting, we have only five minutes left, so thanks for your call.


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Okay, thank you very much.


Thanks Andrew.


Joanne, you are through.


Good morning.


Good morning Joanne.


I have got three questions. First, are you a Fabian, as Mr Hawke is?




Do you subscribe to one world Government?




How many members of your Shadow Cabinet are Fabians?




Right, thank you very much.

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her call waiting, you are through to Dr Hewson, are thur. ssarily mean

i Arthur, how are you?

r John, welcome to Cairns.

ovely place. Love to be able to stay here.

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tal service, people have

a fairly simple one, national service.

's and I have got millions, there are millions of similar to me around Australia that were in national he mid to late 50' s and we look back on it now as not iat we thought we were going to enjoy, but we got

now are very grateful for the discipline etc. that Can we reintroduce national service?

't honestly believe there is a need to do so. Of

imes of war, in direct threat to Australia, you would But I don't believe that we should contemplate doing it circumstances. Although, if I was to talk to my he would say exactly what you have said, it would a a lot of good to have that sort of discipline and >ple do think that way but I believe that in current as it is not on. Although, there is a sentiment

: you correctly expressed, to Impose a bit of

jack into our youth and so on and to some extent that ion of what has happened to our education system over that you have referred to. Where there has been a isis on discipline, but I don't think national service

o handle it. Although, as I say, in times of extreme a, of a direct threat to Australia, you would

it in those circumstances.

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I would like your response on a suggestion that has been put forward but neither major Party seems to be too interested in looking at it and that is a tax free area in home savings

accounts, up to say a figures, a hypothetical figure of $10,000. Would that not give people incentive to have that rainy day account and also infuse the money lending institutions?


Well, people have put that argument. As we have looked at it, it doesn't necessarily increase savings. The Government by giving a tax break to individuals to save, reduces its savings to the extent of the tax break and gives it to individuals who don't necessarily save. So, that national savings which is our key, one of our key priorities, boosting national savings, won't necessarily improve. Now, in saying that, I don't want to down play the significance of this point you make in general, which

is that we have to boost national savings. The reason we borrow so much from other people, is we borrow their savings rather than generating our own.


Don't you feel the cliche that has been bantering around for a couple of generations now is that, money in the bank is no good to you, get out and spend it and then we have a downturn like we have at the moment and the people have nothing to fall back on. Because they have been more or less educated to spend it, that

money is no good to them, that they have got to buy property or invest in something or other.


Well, there has been a lot of distortions in the savings system. Inflation distorts the decision to save and in fact with our tax system combined with inflation, there is a very strong

disincentive to save, except to put your money in your own home. Now, that hasn't necessarily been as productive as other forms of personal or national savings and we need therefore to bring inflation under control, change the tax system so that it doesn't

discourage saving and create the circumstances in which, as people get jobs and earn more money, they are encouraged to save, rather than encouraged to spend as has been the case in recent


And that is really what they basic thrust of our policies is at the present time.

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I do believe the system, I am not quite sure on this, you pick me up, but it was introduced into Japan successfully, in South Africa and I believe England is either looking at it or have introduced it?


Yes, well Japan has had a scheme, a savings scheme and so has the United Kingdom to a limited extent. Now, I am not saying that you shouldn't look at the tax treatment of savings but the

particular proposal you raised, which was Just giving a break on bank accounts, isn't necessarily the way to go but in saying that, as I say, I emphasise the point that we do need to boost national savings and we do need to think about the impact of the taxes o n ...


I Just feel that money that would be saved obviously is going into money lending institutions who are in turn are having more money in their coffers for housing, ..(inaudible)., and other things.


Well, it would be nice to see the money go into the traded good sector as we say. That is into areas which will boost our export potential so we can service our debt and ultimately pay back our debt.


We are going to have to halt it there, thanks for your call.

One quick question from me, if you wouldn't mind, before you leave. One of the major issues here, in the Far North of course, is the Tully Millstream and the debate that is going on about it. The conservationists saying we don't need it, the people of the Tablelands saying we do need it. What is your policy on that particular issue.


Well, we haven't needed to formulate a policy at this stage, although I am very interested in the issue. One of the reasons I am here is to get first hand knowledge about the issue.

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It seems to me a very broad issue which needs to be set in

context. If there is a need for additional electricity

generation capacity or additional power, lets say, there is of course, the issue is to whether it is better to bring it from a hydro scheme or from some alternative. And I imagine the State Government has done that assessment but I haven't seen that. Then secondly of course, there is the world heritage dimension of the problem, if you were to go ahead with the hydro scheme and

it seems to me that they again made a fundamental mistake here. There is no Commonwealth/State understanding or agreement associated with that world heritage listing in the wet tropics and by sharp comparison we have the situation in Western

Australia now with Shark Bay where there is an agreement which, identifies certain key industries and doesn't forbid them or block in any sense as part of that listing operation.

If there had have been a Commonwealth/State agreement, I think a lot of the current unrest about this issue could have been avoided and now we are left with this very awkward situation where the State Government seems attracted to the idea, Ros Kelly

is apparently looking at the report, Federally, to see what the Federal Government's attitude is. I fear they will make this the next environmental football, if you like, political football, where we desperately need a rational consideration of the issue.

So, we are here and Fred Chaney and my relevant Shadow, Tim

Fischer, the development Shadow and myself are very keen to get a first hand briefing on Tully Millstream today to find out the direction in which people think it should go.

The report the State Government got seemed to favour it and seemed to say that the environmental impact, while negative, wouldn't be significant in the context of need for additional power in this state by the year 2000.


1 am sure you will be hearing more about it ..(inaudible)..


I imagine we will hear a fair bit, yes. Thanks Judith.


John Hewson, thanks very much for your time this morning.


For further information:

David McLachlan Ph: (018) 627 374