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Keating's last chance

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5 January 1992


If Paul Keating thought he could look forward to a honeymoon period as new Prime Minister he should think again.

He has only one chance left to repair the damage he inflicted on the Australian people during his time as Treasurer. This week's Cabinet meeting, called to begin the process of reviewing Keating's failed economic policy program, will be the Prime Minister's last chance to get it right. The Australian people want meaningful economic reform n ow.

If Paul Keating is serious about his commitment to tell the Australian people the truth he should start with giving an honest assessment of Australia's economic problems.

He should admit that Australia is suffering the deepest and most protracted recession in 60 years caused by his policies as Treasurer.

He should be honest enough to admit publicly that on current indications there will be little; if any growth in economic activity in 1991/92 - compared to a forecast growth of 1.5 per cent in the Budget.

And despite this slower growth in the domestic economy, the balance of payments deficit remains stuck at unacceptably high levels - still most probably above 4 per cent of GDP compared to estimates at the time of the last Budget of 3.5 per cent.

One consequence of this slower growth and the modest pump priming efforts of the former Prime Minister in the November jobs

statement is that the Commonwealth Budget deficit is blowing out sharply and may come in at $6 to $8 billion in the current

financial year. In other words, the Budget deficit could be nearly double the Budget forecast of $4.7 billion - even before any major additional fiscal easing Mr Keating may be

contemplating as part of his February economic statement.

Although Mr Keating spent six months on the backbench, he spent all his time plotting against Mr Hawke. Clearly he spent no time on developing an alternative economic policy. Consequently, by the time he announces his package in late February or early March, Mr Keating will have lost yet another 3 months.

2 .

Presumably, it is starting to dawn on Mr Keating that time is not on his side and that he is not as well equipped personally or with the policies and the personnel that he always thought he would be. As a result, Mr Keating's personal confidence has

obviously been eroded.

The harsh reality for Mr Keating is that many of the solutions to Australia's economic problems are obvious. The real issue is leadership - the capacity to deliver the reforms. The list of essential reforms has grown longer under the Hawke/Keating governments of the 1980s. Mr Keating's test is to secure, within the next 12 months, progress on all of the matters on the list, which for convenience, is repeated below in summary form.

. Implementation of genuine enterprise-based wage agreements - to achieve more productive workplaces and to create more jobs.

. A lower and fairer tax regime including:

- big reductions in income tax;

- the abolition of wholesale sales tax and its

replacement with a goods and services tax;

- reductions in capital gains tax;

- the abolition of superannuation lump sum taxes;

- the abolition of payroll tax;

- the abolition of petroleum products excise; and

- the reduction in tax on businesses, including for

import competing business and on exports.

. Genuine reforms to superannuation including replacing compulsory employer-funded superannuation with a fairer non-compulsory system directed at providing genuine incentives for middle Australia to save for their


. Incentives for shorter-term savings through the Coalition's proposed new Tax Free Savings (TFS) Scheme.

. Reductions in government waste, the elimination of

duplication of functions between Commonwealth and State governments, improvements in efficiency and greater contracting out of government functions.

3 .

. More effective anti-dumping measures.

. Meaningful infrastructure reforms to match best

international practice in land transport, the waterfront, telecommunications, aviation and utilities.

. A realistic depreciation regime for Australian industry.

. Faster approval procedures for development projects, starting with the immediate reversal of the Coronation Hill decision.

. A more realistic immigration policy.

. A commitment to repair the damage inflicted on Australia's education system by John Dawkins.

If Paul Keating really wants to display leadership he should embrace the reforms set out in the Coalition's Fightback program.

Business confidence can only be restored by decisive action -Australia cannot afford policy tinkering.

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