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Transcript of Dr John Hewson MP on Howard Sattler program 6PR radio, Perth

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Leader of the Opposition

16 May 1991 REF: TRANSCR\0186\BQ



SUBJECTS: CPI, inflation, unemployment, recession, economy, enterprise bargaining, wage increases, pensions.


Well away from football now, although it is the hottest topic around in Perth, back to the economy and on the line now I have Opposition Leader, John Hewson. Morning John.


Morning Howard, how are you?


Good, but I have today looked at the inflation figures and

(inaudible) ... beyond them and realised that it is a giant con - we have got 4.9% inflation, sounds good, a negative growth factor in the last three months but it is all because of falling petrol prices and falling interest rates. The truth of the matter seems

to be that the essential items like food, vegetables, fruit and indeed pharmaceuticals, essential items, have gone through the roof.


Yes well you are right but there are a couple of particular

factors that have mac^e the number look better than it is and the real challenge for the future is, of course, to keep going trying to get inf lation/down rather than claiming victory as Paul Keating did yesterday. We are a long way from having achieved victory over inflation and I would not want him to do that by continuing to push us further into recession, but actually put

in place some of the other policies that will reduce our costs in this country. -

Parliament House, Canberra, A.C.T. 2600 Phone 77 4022





Well I have to say he has lost touch with this State because he now refuses to appear on this radio program for unknown reasons, but do you think that he has lost touch with reality as well by claiming this is some sort of a major victory and a major

turnaround in the economy? '


Well yes he has just, look 6 months ago he was saying that there wasn't a constituency to control inflation in Australia and he has attacked us for suggesting that we should aim to achieve price stability, in effect get rid of inflation in the course of

the next few years. I think he has lost touch with reality and in particular when you've created 10% unemployment like he has and get inflation only down to about 5% that, as you said, has got special factors in it, but 10% unemployment to get inflation down there, how high is he going to push unemployment before he achieves price stability? He has no other alternative policy and that is what we are always challenging him to do, let's get in and clean up the waterfront and reduce the costs there, get into

land transport and fix the cost disadvantages there, labour market - the very day he is claiming victory on inflation they are negotiating a public sector wage increase that the country can't afford.


You on your side have said that you reckon that you can go for a zero inflation rate. Now, there has got to be some sort of

cost to that, what is it?


We have said 0-2 is a definition of price stability and look the way you achieve that is not by driving the economy into

recession, you achieve it by boosting productivity and reducing our costs.


... (inaudible) ... John, but how do you do it?


One essential thing you have got to change is the labour market. It is ludicrous now for the Government to be negotiating wage increases that the country can't afford, you have got to have


enterprise bargaining where each work place around Australia, whether it is in the public or private sector, does its own

negotiating, employers sit down with employees, they know what they can afford and there are a lot of cases around Australia where they can't afford a wage increase - it is ludicrous ...


Does the Government recognise that there has got to be enterprise bargaining?


They say, they use the words, they are very good in political terms of course at picking up the words without the substance. Their idea of enterprise bargaining is big unions going around picking off weak employers and they call that, it is a form of

industrial thuggery, it will achieve big wage increases and no productivity improvements and of course nobody gains from that it is just further inflation which claws back the wage increase. Genuine enterprise bargaining is making sure that the employers and the employees are on an equal footing and can negotiate on that basis in a competitive environment. So the key thing is that you want voluntary unionism for example, so that workers can have a say as to whether they want to negotiate on their own

behalf or they want a union to negotiate for them and you want the discipline of the market, if you like, on the company. The thing that will stop wages going through the roof unrelated to

productivity in a market situation is competition, so it is very important that we continue to improve our markets and develop competition in Australia.


But doesn't that also mean that it will be the employees working for the companies making the biggest profits, the ones that can afford it, who will get the pay rises, if you are working for a struggling company you will have to go without?


Yes, to some extent, or lift your performance and if you can improve the operation of the company, and this is a good example we saw recently with SPC cannery down in Shepparton, the workers there were faced with the prospect that the company would close

unless they changed their wage demands and in fact they settled for getting rid of rostered days off and extra overtime and various other things, leave loadings and so on in order to save their jobs. Not only did they save their jobs but they boosted productivity by about 40-50% and now the company is moving back


into profitability, they are going to not only get better wages down the track because of that productivity growth but they are also going to get a share of the profits and save the company and the company is a major exporter so they are starting to

contribute positively to Australia. Now that can happen, that example can spread right throughout Australia. When you boost productivity ...


... the battlers for a moment too, the pensioners, the

unemployed, the people on low incomes, particularly the

pensioners, their pensions have been locked into rises in the CPI level and I made the point and I think you agree with it, the CPI level is a distortion because the essential items have gone up substantially, it is things like petrol reductions, prices there, mortgages coming back that have distorted the figure. Do you

think for the future that we should continue to have pensioners increases locked into the CPI level when really the items which they are more interested in are going through the roof?

Hewson: "

Well we have supported that policy but I don't deny the point you are making which is that when you get a CPI movement like we have just had, which has been brought down by petrol and mortgages which a lot of pensioners don't have, their costs have gone up much m o r e . Their cost of living, their supermarket bills, their

food bills and so on have gone up much more than 4.9% over the last year and therefore their standard of living has gone down. You do have to keep an eye on the appropriate assistance that is given in the form of pensions. One of the arguments that I have put for some time in the whole social security area is that you need to target it effectively so that those who are in genuine need can get what is reasonable ...


There may be a basket of ways ...


I think you have got to keep an eye on the extent to which

pensioners standard of living is being eroded and in saying that I am not wanting to raise the spectre of an increase in pensions but I think it is"important that you don't just focus on the CPI that you do look at whether in fact they haven't been

disadvantaged in that way, or in some other way, as a part of your annual budget really.




Thanks for joining us John.


Thanks Howard good to talk to you.

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For further information 06 - 277 4022.