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Transcript of doorstop with Peter Reith MP



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Deputy Leader of the Opposition

E&OE

TRANSCRIPT OF DOORSTOP WITH PETER REITH HP, DEPUTY LEADER OF THE OPPOSITION AND SHADOW TREASURER, CANBERRA, THURSDAY 29 OCTOBER 1992

Well, I've called this doorstop press conference for the gravjffst of reasons and that is to call for the resignation of the Treasurer. The fact is that he's been involved in a

monumental cover-up and a massive blow-out of over $1.2 billion. The correspondence which he released last night between himself and the Victorian government make it quite clear that he has known of the situation of the Victorian government and their finances back certainly to 17 June, if not earlier. The reality is that he sat tight for political reasons for the convenience of both himself and the Victorian government when he himself knew that firm action was required to be taken by the Victorian government to meet this breach of the Loan Council global borrowing limits.

The fact is that in 1988 when there was a public debate about compliance with the global borrowing limits and the threat of a State government - in that case a National Party government exceeding or not complying with those limits - the Federal government in fact legislated to ensure that they had the power to require compliance by a State government on that occasion. So you have a very soft treatment of a Victorian Labor government in clear breach of the Loan Council borrowing

limits and very harsh treatment back in 1988 when there was the threat of a government acting outside of the global borrowing limits.

The documents also reveal a very clear statement from Mr Dawkins about the gravity of this matter as he says in his letter of 7 August that the maintenance of global borrowing limits were at the heart of government policy to bring about a

recovery of the Australian1 economy. And he's been urging for months for the Victorians to in fact get their act together and we only find this information revealed as a result of the

discussions between the Treasurer and Mr Stockdale and it was only in fact Mr Stockdale who set off some public awareness of what's been going on behind the scenes between the Federal government and the Victorian Treasury and Treasurer.

So it is very clear under these circumstances that the Treasurer should resign. There should be a full and independent inquiry, presumably to be conducted by the Loans Council in agreement with the participants of the Loan Council so that the public can have a proper appreciation of the extent of the problems and so that there can be a firm

footing upon which the global borrowing limits will be administered into the future.

Parliam ent House, Canberra, ^ .C .T . 2600 t

COMMONWEALTH PARLIAMENTARY LIBRARY MICAH

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Given the extent of Victoria's problems at the time, you give no weight to any need for discretion in terms of trying to handle this problem?

Well, the reality is that in 1988 there was no talk of private discretion in dealing with the threat of a State government whose finances were in good shape. There was no" suggestion that there should be some behind the scenes manoeuvring. The Federal government publicly legislated to give themselves the power to deal with a prospective situation which never in fact developed. And even if you accept the Dawkins line - you know, that this is a matter that should have been

dealt with privately - he himself said only yesterday that he was awaiting upon the Victorian government's budget to see whether or not they would make some attempt to deal with the debt problem, only to find when he analysed that budget that, rather than

attempting to grapple with the issues, the Victorian government had exacerbated the debt situation with a big and further prospective build-up in debt. So I don't think that argument washes. The fact is this

has been dragging on for months and months and months - four months at the least. And the reality is that he was confronted with a situation where his obligation as Chairman of the Loan Council and as the

Federal Treasurer was to put some public pressure on the Victorian government to deal with these problems but it was not politically convenient for him to do so and he simply sat tight and kept his mouth shut. And

that's quite wrong and for that reason he ought to resign.

He misled the House in his budget speech?

He certainly did and he had information from the Victorian government formally provided to him in response to a request by the Federal government for information which they told the Victorians would be

included in the Federal budget papers. And the Victorian note which appears to have been sort of inserted late in the piece, if you read the document as it was handed out last night, because there's been

a panic in the Treasurer's office today with the release of an amended paragraph on that point. But the fact is that he got the information from the Victorians. It contained a very clear footnote that revealed the existence of the $1.2 billion and that

figure - that footnote, that qualification - was deliberately kept out of the Federal budget which was delivered about a week after the Victorian budget.

The critical difference with 1988 is that Mike Ahern stood up at the Loans Council meeting and publicly announced that he was going to go over the top of the borrowing limit.

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A And the reality is that in the Queensland situation you were dealing with a State government whose finances were in a lot better shape. But so concerned were the Federal government that they actually

legislated to make sure that they could deal with the situation, whereas in this case he has himself revealed that he's had on-going negotiations with the State government and expressed concerns about the state of their finances, right to the extent of actually saying to them how they ought to be cutting back. He refers to the Grants Commission, noting that

service levels in Victoria were higher than in other States and pointed to that as an area where the Victorian government could act. So he has simply found the Victorians stone-walling, attempting to cover up their financial mismanagement and he has participated in that when he himself has said that it goes to the heart of economic management for the recovery for which he is responsible.

Q Does that 1988 legislation apply to the Victorian situation?

A No, because the 1988 legislation had related to the State grants legislation put through the Parliament in that year. In the following year they did not repeat the exercise but they made it very clear in a public statement that if ever there was any suggestion of a State going beyond the global borrowing limits that the Commonwealth would act, and act legislatively, to ensure compliance with those regulations. And so that's the position and Mr Keating was very strong on

it. He said that he was essentially not going to have a State government take financial advantage to the disadvantage of economic management at the Federal level and that he'd act accordingly if required.

Q But Mr Reith the definition of a cover up must clearly be that at no point is it made public prior to the election whereas in fact as a result of Mr Dawkins' urgence this was made public on September 23.

No. Well, I've read the Nicholls report and I think that quite frankly is just a blind. What the Nicholls report says is that there were negotiations on-going. The reality is that the Federal Treasury and the Treasurer were apptraised of the situation and realised that it needed to be addressed and fixed. It was not a matter of negotiations. They were clearly in breach and that breach had to be addressed. And yet the Victorians were doing all they could to go quiet on it

and failed to grapple with the issues in their budget in August. And that quite frankly is being generous to them because they should have moved earlier and everybody knows that the Victorian government was not prepared to take the sort of action on the fiscal side that was necessary to redress the problem.

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If you become Treasurer and the Government does what the Kirner government did in respect of borrowings, you will dump on them mercilessly and publicly, whatever their political complexion. Is that right?

That is the position. And furthermore in 1988 we supported the insertion of that clause in the States grants legislation. So we have a quite consistent position. The global borrowing limits are a matter of

agreement in the Loan Council and we would support that agreement entered into by the parties.

So in the interests of fairness should we now penalise Victoria by more than $1 billion for the increased borrowings which they now have the benefit of?

Well, you have a new Victorian government which is prepared to grapple with the issues. They are inheriting the mess of the Labor administration and I think, you know, a sensible, constructive approach is are going to need to be adopted in relation to this. The other States obviously have a particular interest

in the way in which this matter will now be dealt with but Victoria is in very dire financial straits. The Victorians have taken an important first step yesterday towards meeting that and I would have

thought the other participants in the Loan Council would take all of those things into account.

But they've got $1.5 billion the other States haven't been allowed to get?

Well, they certainly have and that's a very sharp criticism of the funny money deals the Victorian government's being running and a reflection on the fact that the Treasurer was not prepared to act earlier and to put pressure on the Government to deal with their problems back in the middle of the year, if

not earlier, when he was appraised of the facts. And that raises the question. He simply sat on this because it was to his political convenience. As Treasurer, he himself has said in his correspondence

that this goes to the heart of the economic management for the economy as a whole and he sat there absolutely mute, looking after his mates in Victoria, to the cost of all Australians.

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