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Transcript of Dr John Hewson, MP Press Conference Parliament House, Canberra

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Leader of the Opposition

15 May 1991 REF: TRANSCR\0178\BQ



SUBJECTS: CPI, unemployment, price stability, changes to Reserve Bank Act, Aboriginal reconciliation, GST.


The sharp fall in inflation revealed in today's CPI numbers-is most welcome, but its an outcome that's been bought at an unnecessarily high cost. We've seen a rise in unemployment of 350,000, record personal bankruptcies and business failures

and unfortunately there's more to come. And it's something of course that the Treasurer said wouldn't happen. If you go back to his 90/91 Budget speech he said that it could be achieved - lower inflation could be achieved without the misery and suffering of high unemployment and a savage

recession. So his miscalculation was tragic. But I put it to you it would be even more tragic if the Government now does a policy U-turn and doesn't make substantial progress on the basis of what has happened.

So I believe it's time that we formally commit as a nation to the goal of price stability. The Opposition is certainly prepared to do that and we would urge the Government to do that. To be specific I think an objective in the range of 0 to 2% could be achieved in the life of the Parliament, or in the next few years, with the appropriate structural policies.

Now from our point of view there are two things that we believe need to be done to ensure that that medium term objective of price stability has a reasonable chance of being achieved. The first is a comprehensive program of structural reform - labour market reform based on genuine enterprise bargaining, land transport, waterfront, shipping, privatisation, tax reform including a broad based goods and

services tax, and so on. And secondly, changes to the Reserve Bank Act to ensure that it has a specific mandate and the

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necessary autonomy to play its part in bringing inflation under control. Peter Reith, the Shadow Treasurer is currently drafting legislation which we believe would be appropriate to that purpose. If the Government doesn't move in that direction, we will introduce that legislation ourselves.

Mr Keating has clearly demonstrated the disadvantage of relying on one instrument, a blunt instrument, like monetary policy, and relying on it excessively. It's been the principle cause of the recession. It also emphasises the need

for a package, an effective package to deal with the issue of inflation and that package has got, in our view, to have those two key elements - the structural reform element and the increased independence of the Reserve Bank.

As far as we're concerned, that re-draft of the Reserve Bank Act will be part of the legislative package that we will put in place in the early days of Government along with the other necessary legislative changes that are part of the structural

reform program, and will form part of the package that we'll push through the Parliament in the terms that we've been describing in recent days.

I'll take questions.


Just in terms of the changes to the Reserve Bank Act, could you give us a broad indication as to what sort of change you envisage, and in particular whether that change would identify inflation as the primary objective of the bank in setting policy.


Well, in principle, the answer to the last part of the question is yes. I think that New Zealand, to take one example, has shown how you can effectively do that. We're not following their model, but you need to specify the importance of inflation as the principle objective of the bank's policy, but you don't downplay, in saying that, the significance of the current account. The current account, however, is

importantly disadvantaged by uncontrolled inflation. So, they are importantly linked but yes, the principle objective should be inflation.


...inaudible... Could you give some indication ...inaudible... those objectives?



You'll have to wait to see the legislation, but it will give the emphasis that Paul referred to and that is of greater emphasis on inflation.


But would it still, do you think, ...inaudible...


Well, don't hold me to the words - you'll just have to wait and see the legislation. But, the idea is to raise the profile, if you like, of the Reserve Bank in the pursuit of the price stability objective and to ensure that it has the autonomy, the independence to actually pursue that objective. But you must recognise, and it's an important qualification, that you can't leave the bank to do it all itself. A lot of our cost disadvantages, and therefore inflation disadvantages

are structural - price and cost impediments. And they flow from the inefficiencies in areas like land transport, telecommunications, the waterfront and so on. The reason why those structural reform policies are so important in those areas is it's a basis on which, it's the only way in which you can lower the prices or the cost disadvantages that are presently there. So, the principle objective of structural reform is not just boosting productivity but distributing that productivity gain to workers, to employers or investors, and of course to consumers in the form of lower prices. And that's the element that is very important when you look at the role of the Reserve Bank in the context of an overall policy package.


Are you actually talking about just a change to the Charter or are you talking about a change to the structure of the Board and its relationship with the Government?


Well, I foreshadowed a number of areas beyond the Charter as you refer to it that we would look at, and we are. Some of those may involve changes in relation to the structure of the Board. Some specific examples that I've put on the record in the past have been that I don't believe a Secretary to the

Treasury should be a member of the Reserve Bank Board. Secondly, it may be desirable to have some non-executive director appointments. But that would very much depend on the


nature of the relationship you specify, or the link, if you like, between the Governor and the Government and the responsibilities that you place on the Governor under that act.

In New Zealand, they've stated that example. They have a formal contractual arrangement between the Governor of the Reserve Bank and the Government. It's signed with Richardson as Finance Minister and the Governor of the New Zealand Reserve Bank, and that clearly commits him to achieve the objective of price stability in the context of overall Government policy, and specifies tolerance, if you like, due to external shocks that might come along and impact on his ability to do that, like a sudden pick-up in the terms of trade.

So there's an understanding as to the objective. There's an understanding as to his responsibility in pursuing that objective. There's an understanding about the nature of his

accountability. He obviously has to report on a regular basis to the Parliament, and in that report he has to specify how the price objective will be achieved and as shocks come from between the courts, if you like, he updates that report and explains what they've been doing to achieve the objective.

So it's important that the Reserve Bank is independent, that it has the capacity for consistent and sustainable policy. It has to be medium-term, and of course has to be very transparent. They have to be publicly accountable.

So part of the changes we would make in relation to the Reserve Bank relate to the structure of the Board and the nature of the link between the Governor and/or the Board and

the Government, and the transparency of what the Reserve Bank does or increase the accountability on the part of the Reserve Bank.


Could you tell us whether in fact you believe that the New Zealand model, with this contractual arrangement that you just talked about, which has been established in New Zealand - would you like to see that particular model, or at least a

form of that applied here. And secondly, you mentioned a target of between 0 and 2%. Now, would that target be specified in such a contractual relationship, or would in fact the target simply be identified by the Government as part of the policy?



Well, on the first part of the question, we're not committing to a contractual arrangement, but I certainly think it is worth thinking about and reviewing carefully. Because it has a number of other advantages apart from the division of

responsibility, if you like, between the Government and the Bank. It has a very important advantage in terms of influencing public expectations about inflation and that is a very important element of bringing inflation down and building an anti-inflation psychology, so that is important.

In the New Zealand case their objective is specified in the contract. And for the circumstances under which there is tolerance for missing the objective as specified in the contract. And apart from that then, of course, the Governor

is accountable for achieving the outcome.

It does put a lot of pressure back on the Government, obviously, to ensure that the structural policies proceed at an appropriate pace. And the Reserve Bank Governor is of course then in a position to emphasise that as he makes his regular reports to the Parliament. So it's a two-way process,

if you like, in terms of pressure, but the objective of price stability is formally specified in their contract. I'm not at this stage convinced as to the merits overall of a contractual arrangement, although it's certainly worth investigating in the Australian context. I think elements of it are probably worth adopting.


Dr Hewson, are you saying without these changes, low inflation can't be guaranteed as a permanent feature of Australian way of life?


Well, you've only got to look at our history in the last 20 years. I mean, we haven't really enjoyed a sustained period of low inflation, when other countries in the world of course have. Our exchange rate has reflected that, I guess, is the bottom line of our loss of competitiveness. I think it is

time that we have a shift and make a permanent change in our approach to national policy which elevates inflation and which puts in place the institutional structures to the extent that they're necessary to achieve price stability. To me, we have to change a lot of things. Most importantly, we probably have to change our attitude as a country to inflation and that's why the focus on price stability...elevating it...getting

people to focus on it in all aspects - contracts, labour market negotiations, pressure on Government policy, whatever - is fundamental to achieving the outcome.



But the Bank would only have one instrument, won't it? And that'll be monetary policy...inaudible...?


Yes, and that's what you're trying to avoid - is the excessive use of an instrument like monetary policy.




No, if the Reserve Bank is working to a medium-term objective of price stability, and it's using its instrument - monetary policy - in that regard, and it's free from political manipulation which pushes rates down early and then pushes them up far too high and keeps them there far too long in terms of a desperate attempt to pull the situation back as " we've observed in the last several years in Australia. And of course, it's very hard for it to pursue that medium-term objective and you've seen the outcome. The only reason that we are now in a situation where inflation has inched below 5%

is, two reasons. One of them is of course the movement of petrol prices post-Gulf War. And the second one is the depth of the recession - the deepest in 60 years. Now, some people might say that even with that deep a recession we haven't made

the sort of inroads into inflation which you might have expected us to have made.


Dr Hewson, isn't this the scorched earth, without any political consequences?


No, not at all. It's to avoid the scorched earth. What you've got is the scorched earth. The way you avoid that is to boost national production and national productivity and that's why the structural reform package is essential, and of

course an essential part of achieving that boost in national productivity is to bring inflation under control. So, we're not just pushing the problem off the Reserve Bank and saying go to it. You are, as I said before, establishing a two-way

link which is very important which will ensure that the Government does its part and the Reserve Bank does its part and the electorate will hold both accountable for what their parts have been identified.



It can only get rid of the Governor not the Board of the Reserve Bank ...inaudible...

Hews on:

It depends on the nature of the relationship. See, if you take the New Zealand example, he has a contract for a fixed period and they can choose not to renew that contract if he fails in his task. That's why it is worth thinking about that element of the proposal.


Dr Hewson, is there much community support, do you think that there is, for this sort of low inflation objective. You're talking about zero to two percent. I mean, presumably this is only going to work if there is sufficient community support

for it eventually.


Well, hopefully there's a lot, Paul. But if there isn't that community support we have to create it. We have to educate the electorate, if they don't want to wear a low inflation environment, then we'll have to educate them to the advantages of doing that. But I think there is, to be frank, a fairly widespread community understanding that the impact of

inflation has had. And the most visible manifestation of that has been the complaints you hear about the lack of incentive to save.

Now, while there are some problems with out tax system in relation to saving, there are some very important disadvantages from having put people in a very inflationary environment in recent years and expected them to save. So I think that people do understand the impact of inflation. They certainly also understand it on a week to week basis in their weekly shopping and I think people will accept a lower

inflation world, the counterpart of which is a bigger cake, a much more productive economy with more jobs and more employment, and more growth which is to the benefit of all. So to the extent that they don't think that way, and maybe

there are some in the trade union movement that we've observed in recent days, don't think that way, well, we'll have to educate them.


If the Reserve Bank had more independence, is there a danger that the Bank and the Government might be pulling in different directions and, for example..



Not under us because we'd have the shared objective of price stability. See, I embrace the objective of price stability which for present purposes in a reasonable way, I've defined as about zero to two per cent. And as I've said in the past,

I believe that we should aim to eradicate inflation. To give that some specific basis in the course of the next few years, I think zero to two per cent as an objective for price stability is reasonable and certainly its achievable if you put the structural policies in place.


How will it cope with the impact of the goods and services tax. Would your quarantine that from the CPI.


Well to the extent that the goods and services tax adds to inflation, its a one-off affect. You obviously need to ensure that that doesn't flow on. You identify it as such and make sure that it doesn't flow on and the compensation package that you would put in place if you had that CPI effect should ensure that that's the case. Now you fully compensate wage earners and others on fixed incomes and other benefits and so on, for the increase in the CPI because of the one-off change that 's associated with the introduction of a broad-based

goods and services tax then you should be able to contain it at that, and people will recognise that it's a one-off effect and they will look for the period beyond that twelve months where inflation then drops down to the pre-GST level.

So, its obviously an important issue to be addressed, but there is a lot of scare mongering on that issue by the Treasurer and some union leaders which is misplaced. It ignores the compensation package, which, if its an effective

compensation package, and it certainly can be, you can fully compensate people and there's no need for it to flow beyond that point.


Dr Hewson, would you still have community representatives on the Board of the Bank, for example, the ACTU Secretary and business representatives.


That's an issue that's being addressed.



Has it been finalised ..


No. I haven't finalised the position.


When did Shadow Cabinet actually decide to endorse this idea.


Well, its been out policy before the last election. It's just that we've decided to now put it in the form of legislation.


...not sure, but that's a fairly fundamental change, isn't it, if you've actually decided.


No, we foreshadowed legislation before the last election too. I mean, there was quite a lot of discussion in many circumstances about the changes that I thought were required. I said that I'd always taken the view that we could get away without legislative change, that there was a degree of

independence under the existing Reserve Bank Act which provided the Governor with the independence if he chose to exercise it. It has not ever been exercised under the procedures of the Act, and so I'd increasingly taken the view, particularly under this Government-where political

interference was much more pronounced and sustained, that it really should involve an amendment to the Reserve Bank Act.

And it's on that basis, really, that we came to the view that we should amend the Act and incorporate some of these changes, so that there's no doubt in people's mind as to the objectives that the Reserve Bank pursues and there is no doubt in

people's mind about the way they will achieve that objective and whether there are any structural changes required in the Board or the link between the Bank and the Government that flow from that, well, they'd have to be addressed in that

legislation. Now that's been our position.

REF: TRANSCR\0178\BQ 10.


Isn't this an admission, though, that you wouldn't be any more trustworthy than you claim Mr Keating hasn't been. I mean, isn't that just saying that, you know, you can't trust us either, we've got to have Reserve Bank do these...


No, not at all. I just think it's an important structural change that will transcend beyond my period of honesty in Government. I mean, I don't know how long I'll be Prime Minister and we won't meddle, but...

J m l s t :

Isn't it an admission that you couldn't be trusted.


No. It's trying to deal with an important structural impediment in the economy. It shouldn't be trivialised. It's an important structural change. It's one that is fundamental to this economy. Now look, I have no better authority for this than the Reserve Bank itself which is quoted in the release you have in front of you that points out the difficulties of the restructuring process if you don't bring

inflation under control.

Restructuring is much more difficult, even impossible, in a high inflation environment which destroys competitiveness and discourages savings. Altering this situation must have a top priority. That advice has been given to this Government, not

just by the Reserve Bank but by a host of people and it hasn't been taken. And see, what I don't want to happen is that I don't want this very welcome fall in the rate of inflation to stop there.

It's an opportunity, it's a unique opportunity to change our system and deal with a problem that we haven't dealt with for twenty years. It seems like a very reasonable time to embrace

formally now, the objective of price stability and to the extent that it requires an acceleration in structural change or a change in the nature of the role of the Reserve Bank, we

should do it. And that's why I advocate, I'm trying to be constructive. And certainly if the Government does it they'll have our support. You know, we were talking yesterday about the wasted five years, that Paul Keating's greatest moment

five years ago was that he shifted the debate, he focussed the

REF: TRANSCR\0178\BQ 11.

minds of the electorate and his colleagues on the magnitude of our problem and the need for massive change. And then it was lost. It was lost. So, here's another opportunity specifically in relation to inflation, we ought to grab it and score a try for once.


... could the Bank had done differently in the last little time if it had been more independent and if it had been...


Well, it probably wouldn't as on their own admission, I think, eased monetary policy in early '87 to cite one example. They would have started tightening monetary policy and calling for a package of measures, of other measures, perhaps earlier in

1988, I think they've also said that as well. There's two specific examples. The late '84 easing of policy, which was then suddenly reversed.

They're instances of political influence which, if the Bank was publicly held accountable for its role in relation to price stability, you would have had a completely different

reaction by the Bank, you would have had completely different, indeed you would have had a range of public statements by the Bank saying what they were doing and why they were doing it, and so on. See that's why the transparency and the accountability is so important, that they actually do stand up and are held accountable for what they do, but equally they

are telling people what they are doing and why they are doing it and how they're going to achieve that objective. And that is a completely different public posture for the Reserve Bank. And sure, I mean, at times they may criticise the Government,

and if we deserve it that would be a good thing.


On the question of your accountability, Dr Hewson. I mean, to be clear about this, you say you're attracted to this contractual arrangement with inflationary targets built in, but you say you're not committed to it. Is that right.


That's right, yes.


Why's that.



Well, we're just investigating how it can be done effectively in the Australian context, and I think that, you know, I think it has a lot of merit, as I've tried to convey the impression that I believe it has a lot of merit, but whether it's easily established or necessary in our case has yet to be decided.

But you need a way, well, you need a way of explaining the nature of the link, if you like, and the degree of responsibility, of the Governor and the Government. Now, under the present Act there is an alternative way and that is

if the Reserve Bank and the Government disagree, then the Reserve Bank can be instructed by the Government to do what the Government wants, but the Reserve Bank can report to the Parliament within twenty-eight days and declare why it opposed what the Government made it do. Now that hasn't worked.

And that is one of the key failings of the present Act. So when you move away from that, you still need to explain the nature of the Reserve Bank's role and what responsibility you're giving it and what accountability you're giving it and

that's where the other changes come. Now, one way is to do it in terms of a contract. It may be sufficient to simply specify the nature of the price stability objective in the Act

and state in the Act how they will set out to achieve it and ensure that the public accountability of the Reserve Bank is enough to do that.

The contract just elevated the issue in New Zealand and gave people a clear understanding, and if you read the contract, I think it's quite instructive in the sense of the weight they give price stability, and it's the over-riding objective in New Zealand and they specify the circumstances under which a deviation from that objective within the agree period will be


And the Bank then is also held accountable for how it adjusts to the shocks, so, if, it say, set an objective of zero to two percent and there's a sudden jump in our terms of trade, it draws that to the attention of people and announces the consequences for inflation and announces what it's going to do

in response to that.

Equally, the Government presumably would do the same thing. Although, if you go back to our position in '86, '87, '88, we had a very sudden and very strong pick up in the terms of trade from the December quarter of 1986. Now that wasn't

recognised by the Government. There was little public discussion of it for some time, but it compounded the problem.

REF: TRANSCR\0178\BQ 13.

The Government eased monetary policy, if you like, for political reasons, on top of an enormous stimulus coming through from the external sector and the improvement in the

terms of trade. Now, that would have been a matter of public debate very early on, I would suggest, in 1987 and some of, if you remember back some of the increases in some of those

commodity prices were quite pronounced. I mean, wool was one that rocketed up by over 300 per cent, if I remember correctly. So it would have raised that issue quickly, the Government would have run a different macro policy, the Reserve Bank would have run a different monetary policy, and

the Government may have moved in the context of the Banana Republic speech, the Government much actually have embraced the structural change they said had to take place. Whereas,

in fact by the end of '87 they'd forgotten about the issue of structural change and they've done nothing since.


So Dr Hewson, if I can clarify it, you are planning to introduce this legislation in the current Parliament?


I didn't say the current Parliament. I said we would introduce it in due course but we will give the Government an opportunity to pick up the idea ....


You won't necessarily wait until you are in office yourself?


No, oh no, I am happy to put it in, we want to specify precisely what we think should be done and the best way to do that in this case is to give you a Bill that we think does it and in that sense we would introduce into the Parliament. Now

it is the same procedure we have adopted in the past in relation to our Industrial Relations Bills, if you want to understand our Industrial Relations Policy you can actually see the key elements of it embodied in legislation introduced

in the last Parliament.

We are going to continue that process so that by the next election the key legislative elements of our package will be in draft form so that we can send them around to the relevant constituencies, but refer people to the precise nature of the change that we want to bring about.


Now not all change in structural change involves legislation, but to the extent it does, that package will be put together and this Reserve Bank Act would be part of that package which would ultimately be put into the Parliament in the early months of Government, probably along with a Budget, which would give you the essential elements of our package for the

first 3 years.


What you are saying is that you'll introduce this Bill fairly soon?


The answer is yes.


The non-executive directors, you have said before you were going to change them ... ?


Well one idea we'd had was to look at the possibility of having some executive directors but I have raised those as alternative proposals but it may ...


... (inaudible) ....


But you may change the whole nature of the Board or you may reduce the significance of the Board. One of the things that New Zealand has done in effect is reduce the significance of the Board by making a contractual relationship between the

Governor and the Minister for Finance. Now that is why I before didn't specify the detail of how that link will be established because there are a number of options, one of them is to give the Board power and make it accountable, another option is to just tie the Governors ... they are issues that ought to be debated, I believe, we were quite happy to put down our view in the legislation.


..(inaudible)., it seems to me that you are suggesting that the Reserve Bank is going to have certain responsibilities, but it won't have the authority to achieve those things, so in other words ..(inaudible).. What are you suggesting here that

to try and achieve its goals it will then argue publicly with the Government...

REF: TRANSCR\0178\BQ 15.


If its principle objective is price stability and the control of inflation, it will of course assess events and circumstances from the point of view of that objective and it will therefore comment when there are changes which take place which are counter productive to that objection. If, for

example, there are massive increases in Government charges which were adding to the consumer price index and that wasn't part of their contractual arrangement, they might draw particular attention to it. Alternatively, that may have been

specified as one of the shocks, they would necessarily in either case, state the significance of the change from the point of the view of their objective.

I think that it is more them making objective comment on the progress of economic events from the point of view of their role and their qbjective. Ultimate responsibility clearly still rests with the Government, as it always will but it is a way of ensuring that their particular objective and their

particular responsibility is specified so that there is no doubt in the mind of anyone else out there, that:

a) you think price stability is very important; b) there are going to play the substantial role in achieving it, or a substantial role in achieving; and c) the Government has got to its part to make sure that

objective is achieved.

In our case, we are quite different to New Zealand, we still have a great bulk of the structural cost disadvantages that have to be removed. They have made much greater reform of the transport system, the labour market, the waterfront, than we have but still, the point stands as a matter of principle.


. . (inaudible) ...


Well, I am not sure what Peter is doing in that regard. I mean, I don't know, we have no disposition not to but I think there is always an advantage in talking people through your ideas and I don't know whether that will involve Bernie or it

won't .


..(inaudible)., another body, as it were, to take the blame for nasty but necessary decisions?

REF: TRANSCR\0178\BQ 16.


No. Look, as I say, to be quite clear, the ultimate responsibility would stay with us, the blame would stay with us but it is a way of making the system work better for us when we know we are carrying that blame. Right now, Paul

Keating doesn't take responsibility for anything, he didn't cause the recession, he didn't cause the severity of the recession, he blames the banks and others for doing that. It was the recession we had to have but everyone else is to blame.


He admits the interest rate structure?


Yes, he takes credit for it as it is coming down, he was reluctant to tell you what was happening when it was going up.

Jrnlst: '

Do you think Paul Keating can get away with the idea of selling low inflation to the 90% of people who still have jobs, at the expense of the 10% who don't?


No, the only reason Paul Keating has embraced the inflation number in recent days and it wasn't that long ago that he bucketed us for suggesting that we could eradicate inflation, or should eradicate inflation, the only reason he embraced that is that it is the one forecast that he is likely to achieve this year. And what I am saying is that isn't good enough, he ought to go beyond that and formally commit to price stability, which will be an essential element of the other ten per cent of people ultimately getting a job and keeping a job in a sustainable way. And to the extent that he doesn't embrace the importance of

the price stability objective, he sacrifices their chance to return to the job market.


Why won't you be supporting the Government's process of reconciliation with Aboriginal Australians.



I think you misread the letter, didn't you. The letter says that we support reconciliation but we give reconciliation a particular meaning and that is the same position we took in my first letter to the Prime Minister. So, when Bob Hawke comes through the door and says look, I would like to be bipartisan about this difficult issue, you immediately say, well maybe he

is caught on a peg somewhere and he wants us to get him off it. And to a large extent that is the case in relation to his Government's appalling handling of the whole area of aboriginal affairs and in particular in terms of his views about treaties.

Now, we don't support a treaty, it has been a consistent policy for years, but we obviously do support reconciliation in two respects. One, that it is directed to the well being

of the aboriginal people and our great concern there is that we spend a lot of money on aboriginal assistance, yet we don't see visible improvements in housing, employment and health, literacy and education, so on. Now, they are the elements,

the key elements of well being and we think the council's role in relation to reconciliation should be really setting annual benchmarks or setting regular benchmarks by which the improvement in those key elements of well being can be monitored, that is the first sense in which we support the

reconciliation process and I think that is entirely reasonable and ATSIC has been unable to achieve that sort of benchmark assessment and accountability.

The other element is that we think that it shouldn't be a vague national concept of reconciliation. What we have seen and heard and read, it is a very vague concept. We thing the focus ought to be at the community level and there are a

number examples of very successful processes of reconciliation at the community level. So, they are the two qualifications, if you like, we put on our support for the reconciliation. If it really is just a device to get a treaty by the back door, then we won't support it. But, if they are genuine then they will have bipartisan support to improve the well being of the

aboriginal people and to facilitate a reconciliation process at the community level.



REFs TRANSCR\0178\BQ 18.


I am not going to be drawn into their specific recommendations and conclusions. All I say to you is that we feel very strongly that there is a need for a process of reconciliation but it better have some real meaning to the aboriginal people

and that is their well being and their self esteem.


Should that process include self-determination?


I am not going to comment at this stage.


Could I just clarify an earlier question in terms of the legislation concerning the Reserve Bank - the Opposition will introduce its legislation, when? This session, or the Budget session, or when?


We haven't decided when. It is when Peter finishes it but we will just, I mean, our answer is always the same of these things, at the time of our choosing. But, we are genuine about making this change, we hope that we can elevate the

debate on this and today is the best day that we could hope for in terms of focusing the Government's mind on the need for a formal commitment to price stability and they have mocked all we have said about the issue of independence of the central bank, yet most other countries, most responsible countries around the world have given that a very high priority in what they have done. We hope we can get them to change their mind on that issue, if they won't support the

ideas and do it themselves, well we will introduce the legislation to say what we think should be done in relation to price stability.


Similar, legislative exerrcise with GST in due course?


Well, GST would actually be introduced, I guess, in a budget context, where the broad principle of our GST proposal will be announced prior to the election, then it would just be embodied in a budget bill. So, in our first budget you would get the details and the precise timing of the introduction of

the GST. The important thing that you shouldn't forget and

REF: TRANSCR\0178\BQ 19.

again a genuine comment, from Opposition, you don't have the advantage of some of detailed advice that you can get from the departments. Now, I am aware the tax department has for some time worked on the possibility of a broad based goods and

services tax, certainly did some work on it back in 1978, they did some more work on it in 1985, to mention two particular cases and rumours to the effect that they have done more work on it recently.

Now, that may have shortened the lead time for the introduction of a broad based goods and services tax quite a lot from their initial position and that sort of precise advice as to precise timing is the sort of thing that we will look at. But, in principle, with the GST, you will know all you need to know about it in the form in which we announce the details, it would only be part of a legislation following from a budget change. So, I don't think there will be legislation drafted for that but in general, we will take that approach.