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Keating statement

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Leader of the Opposition

27 February 1992 REF: TRANSCR\NM\0061



SUBJECTS: Keating Statement


The gloves are off, and whether they tell you formally or not, the election campaign is on for the Federal Government - more than a year out from the official time when it's likely to be held. But I wonder whether or not it ought to be held now, given that the Opposition and the Government have declared themselves.

We talked to Paul Keating before 9.00am this morning. On the line now we've got his direct opponent - a man who he had a nice old brawl with in Parliament yesterday - Dr John Hews on, the Leader of the Opposition.

G'day John. How are you?

H e w s o n :

G'day Howard. How are you? I'm very good thanks.


A liar and a cheat. Did you call him that?


Well, he's got a pretty established track record, hasn't he. Yesterday's example of misusing this academic research - I mean, the academic has come out and said Keating was wrong.


This is Dr Chris Murphy?



Parliament House. Canberra, A CT. 2600 Phone 2774022

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Yes. He said he was wrong. And the Prime Minister hasn't got the strength of character to admit that he was wrong. He won't apologise. He won't say he was wrong, and he's blatantly wrong.


But that sort of language is not the sort of thing we'd expect from your side - maybe the former Treasurer.


Oh no. It's not a question of language. I think it is important that he be held accountable for the fact that...he's trying to build credibility for this package that he brought down last night, and my issue was why would you believe him when he's made so many claims in the past that have been wrong? And here was an instance on the very day that he stood up in Parliament - the

first day this week - where he deliberately and knowingly

misrepresented this guy's work.

He'll do anything or say anything, or deal with anybody to get himself re-elected.


Well, when I talked to him before 9.00 this morning, he simply said you are a sensitive, brittle petal.


Well, he says those sort of things. If establishing the fact that he's lying makes me a "sensitive brittle petal", well OK, I'm a sensitive brittle petal. But I'm going to keep exposing the fact that he doesn't tell the truth.

I mean, why should we believe what he said last night, and what he's now saying today, when he has never really lived up to his rhetoric in the past. Think of the Budgets that were going to "bring home the bacon"; "we're in the golden age"; "Australia is winning" - all that sort of stuff. Australia is in desperate

economic circumstances as a result of him.


You've bagged the package, but apart from the consumption tax, what's the difference between his and yours?


Oh, an enormous amount. We've got, for example, major tax

reform. We abolish payroll tax. We abolish petrol excise. We abolish sales tax - $20 billion worth of tax off the business


community. We've got a national savings scheme for short term savings and for superannuation. Major structural reform in the labour market, in ports, in transport, in telecommunications, in

aviation, in electricity generation, cuts in immigration. You name it, our package goes right across the board. It's a very big package - about a $50-odd billion package. Major reform in the education system, major reform in the health system - none

of that in his package.


But all of those things - you just said - $50 billion worth - how are you going to pay for yours? Aren't you goxng to rip the guts out of middle income and lower income Australia through your consumption tax?


No, because we demonstrated that we can do that, and keep the fiscal accounts and run a surplus as a result of that, and lower debt, and get interest rates down. It can be done.


Yes, but hypothetically you say you can do it.


No no. We've taken very very conservative assessments. Look, the amazing thing is that everybody who's had a look at it and tried to tear that assessment apart since we announced Fightback late last year, hasn't been able to. They accept it as a pretty

conservative assessment of what can be done.

And a lot of the figures, I should say, are not ours. I mean,

we can get a $50 or $60 billion improvement in national product, estimated by the Industry Commission, by making those

infrastructure reforms. We can get a 25% boost in productivity, estimated by the Business Council of Australia if we do our labour market enterprise bargaining. Now, they're numbers we use, but they're not our numbers.


His income tax cuts seem to be more modest than yours.


Well, yes. What he's tried to do is a very cynical political exercise. He saw our tax reform package as something that people want, and he tried to take what he thought was the politically most appealing element of it, and that is a 30 cent tax rate for

some people - and he only does it for some people - and he's

built that into his package.



Well, doesn't he do it for the people who need it most?


Well he does it for middle income Australia, but so do we, and we give them a lot more than that. And we give them tax-free

savings. We give them much lower tax rates right up the scale. The cut off point for the 30 cent rate is much higher. It's

because we do genuine reform - not just try and make a cosmetic change to win an election.


Well, you don't have a $313 million easter egg like him for the people on Family Allowances, do you? I mean, isn't that going to win him a lot of votes, particularly in the seat of Wills?


Well, where there's a "Wills" there is a way, I guess. And

that's what's motivated this very cynical exercise. But people know that governments can't just turn up and take money out of their pocket and give it to them. It's got to be paid for from somewhere.

On Family Allowances, as part of our package, funded - we give doubling of Family Allowances on low to middle income families, which is a lot more. But we do it in a very responsible way.

He's delivering it, and it's unfunded.


He says he wants people to spend that $125 to $250 maybe in one hit. That'll give a nice old kickstart to the economy.


Well, the evidence is mixed on that. A lot of people who are

very concerned about their job and who are worried about their job security may save it. And he might not get the kickstart. I mean, it'll be interesting to see what people do with it. It's not a lot of money in terms of kicking the economy along. In a sense, he's dressing it up as an economically responsible thing to do. It's not. It's a blatant vote-buying exercise.


He says he's going to produce 800,000 new jobs in the next four years. You say two million more jobs this decade. It's really pie in the sky stuff, isn't it? You don't really know you're going to create that many jobs, and neither does he.



Well, we've demonstrated that it is reasonable to aim to create two million jobs, and it can be done with the sort of changes that we m ake. To give you one example, he uses the tourist

industry as an example of where you can create a couple of

hundred thousand jobs. He says we could have six and a half

million tourists by the end of the decade. We think you can have 10 million foreign tourists by the end of the decade. So

therefore, in that one industry alone, we'll create many more jobs.

He's used the same sort of numbers we've used, but he's taken a much lower estimate of the potential of that industry, and that's because he doesn't put the structural reform in place that will allow us the labour market changes - the scope to get rid of

penalty rates and leave loadings, the more open aviation policy internationally, the full privatisation of Qantas - all these other changes that are fundamental to achieving that sort of objective.


You reckon he's going to send Australia broke with this package - is that right?


Well, by broke - if you mean by broke as I do - getting to debt

levels that are unsustainable, yes.


Well, to the state where the international banks would move in on u s .


Well, the international banking community - if you take Moodys and Standard & Poors as rating agencies have already downscaled us twice.


Yes, but what does it all mean?


Well, our debt is unsustainable. Look, as individuals, if we had the sort of debt position that the country's got, our bankers would have been into us. And that's because we've built up debt to an unsustainable level in Australia. People forget - when he came to office, debt was back around the $20-$30 billion mark.

It's now $160-odd billion. This package will add more debt.



But hang on. He says that you were the ones who left him with

a debt. You in fact were one of the advisers to the Government who left him with a debt.


That's nonsense. I mean, I was certainly an adviser to the

Fraser Government, but the debt came from the phenomenal fiscal blowout that they put in place in their early years. The fact that they just added to debt and forced the private sector, in

a sense, in the policies they ran into debt - created an

environment where the private sector went into debt.

It's easy to create jobs if you just put it on the Bankcard and don't worry about how you're going to pay for it. You and I

could have the biggest houses in the street if we didn't worry about the overdraft - just keep adding to it. But it's not real life. It's not sustainable and we've got our debt level now to a level which is unsustainable. We're going to be borrowing money to pay the interest on the debt. We're very close to being

in a debt trap in the sense that our current account deficit every year is predominantly interest on foreign debt. In fact, I think for this year it's probably going to be more than equal to the interest on our foreign debt.


But what are you promising - more pain before the gain, and a long way down the track?


No, adjustment. I don't deny that we're promising radical and major reform. But there is no alternative. You've got to bite the bullet and face those issues. That's really what it's all about. You've got to be prepared to take the tough decisions.

Now, we can do it fairly quickly. We can put our policies in

place pretty much straight away. One of the reasons we announced Fightback 18 months before the election is so that we can get the legislation ready and a lot of it will be released in the next few months. You'll see our industrial relations legislation.

The tax work is being done now. We've got a full time office

working on the goods and services tax and the other tax reform elements. We want to be able to go into government and put the policies in place almost from day one.


Who's paying for all of that - this policy unit, and all that sort of thing?

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Well, the Goods and Services Tax Planning and Co-ordination Office is run with a Board on top headed by Sir William Cole

who's not being paid. But the Office itself is being staffed by representatives of the accounting firms, and the accounting community, and they are paying for that.


So, they've thrown their lot in with you?


Well, they've thrown their lot into getting that Bill right and listening to t h e ...we've called for submissions - people who want to make comments or ask questions to that committee. It's a way of giving people a chance to be heard and to understand the

nature of the tax that we've proposed and to facilitate the drafting of legislation. It's something that hasn't been tried by an Opposition but it's something I believe that's got to be done so we can move quickly and make the changes that we've

talked about.


The Prime Minister, speaking to us earlier, has flagged

immigration cuts in the April review. Do you agree with that?


We've called for substantial cuts in immigration, yes. We've said that...


It's pretty popular at the moment, that sort of policy, isn't it?


Well, it's not meant to be popular. It's a decision that we took out of a very careful assessment of our capacity to absorb

migrants in the worst recession in 60 years and recognising the reality that a lot fewer migrants want to come here. Our

immigration policy has been a shambles for a number of years, and we certainly have to sort that out and get the emphasis back on skilled migration, which is another part of our package.


Is there anything you like about his package?



Yes. We've welcomed a lot of the changes. In themselves there's some very attractive decisions, like the accelerated

depreciation, which is in Fightback. A lot of the policy changes that he's got are actually in our package. Some of the aviation changes - although he doesn't go as far - are in our package. They're good changes, but you've got to pay for it. It is

unfunded. The only way you can do that is major reform that'll give you the money to make the sort of changes you need. ยป


In other words, again we'll pay for it through the consumption tax?


No no. We cut government expenditure by $10 billion. We really do go in and create the scope for genuine tax reform by trimming back the size of government. He's building a bigger government and a more intrusive government. We're reducing government, reducing the extent to which it can get involved in the system,

and cutting $10 billion out of it.


So you've given up all hope of winning votes in Canberra, have you? The public servants will rebel against you.


We have designed the package on the basis of simply saying, as I said to all my Shadows - let's decide what is the right thing to do - not worry about the politics of it. Sure, worry about how you explain it down the track, but let's just set the right policies in place. I didn't come into this business to be

popular. I came in to make the change that we feel is essential in this country to turn this country around. Look, if we have to be unpopular to do that, fine. But you can't be driven by


Last night was driven by an attempt to be popular by the least popular politician trying to buy popularity, buy electoral support, but not dealing with the problems in this country. People will not be fooled by that.


Well, the consumption tax, to a large degree, is the cornerstone of your policy. It's a big revenue raiser, but you must have read with some alarm the high court ruling that exempts

government authorities from sales tax. Now that could well be applied to the goods and services tax. I understand you want to


put your 15% tax on a range of services provided by government, such as railways and communications. Is this decision going to throw your whole economic package up in the air?


Look, I haven't seen the detail of that decision, so I can't really comment.


Well, you should have a look at it.


I certainly will have a look at it, and we will be taking legal advice, of course, about those sorts of issues. They're some of the issues that we are looking at in detail now. But the

consumption tax is not the most important part of our package. It's only one part of the tax reform package.


It's a pretty important revenue raiser.


Well, it raises revenue. But we abolish payroll tax and we

abolish petrol excise and we abolish sales tax, and we cut

personal tax by a third. They are major tax changes. We reduce the overall tax burden.


But if you can't charge it on government services, isn't that going to cost you multi-millions of dollars?


We have zero-rated some of the government services. For example, local government rates do not attract the goods and services t ax. I've just got to look at the decision. It's not fair to comment on it without having read the decision.


I asked the Prime Minister this morning whether or not he should not have an election right now - there's a double negative for you. But whether he should have an election now. Both the major parties' policies are out in the open. The public in the next

few weeks will be able to make their decisions about which one they want to support. Would you be in an election now?

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I'd be delighted. I think that he should. Look, you could be very cynical and say because this package of his has got a very limited shelf-life, he might have had in mind testing it - seeing how popular it w a s , and if it gets a favourable reaction, perhaps

going to an early election. Now, we'd welcome that. I think the time is right. I think people ought to be given a clear-cut

choice. If this is the best he can do, well let's go to an

election. Let's fight the election on the issues.

We've got a Wills by-election coming up. Why not turn it into a Federal Election?


Yes, but you know what the public are like. They don't really want any more elections. They've had enough.


I think they'd like resolution of a sense of direction for this country. I think there would be a lot of public support to get this decision taken now. I'd be delighted if he goes to an



Have you had any luck in your attempts to have a public debate with him, because we've offered this radio program for it?


No. I think one of the interesting things is how little

confidence he has in his own ability and in his own package that he just refuses all opportunities for debate. No debates last night on any of the television programs. No debates this

morning on the radio programs. Each of us, I think, have gone to pretty much the same radio programs, but he won't debate me.

That shows an alarming insecurity. If he's not confident in his package, why should anybody else be?


Are you going to attempt to reply to his package in the

Parliament today? As far as I am aware, he's banned you from doing that for a week.


He's backed off now, and we'll be doing it at 7.30 tonight.

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I want to get your response to a quote. I was reading a book

about Paul Keating which has just been published - a book by Edna Carew, and I was reading it alongside the bed last night. I

think you probably thought I had nightmares after that, did you?


You couldn't sleep, hey?


"I like what I'm doing. I'm not acting any lie. I'm doing it

as I see it and I'm doing it without trying to overblow it. And I'm trying to do this as I think it ought to be done for

Australia". A quote from Paul Keating, which he's backed up today and said "Well, that says it all. That says why I produced this package last night." What's your response to it?


Look, I think Paul Keating has demonstrated that he has interest in only one job, and that's the Prime Ministership. He sees it as an end in itself. There's been a tremendous emphasis on him getting there. He's prepared to throw the country into turmoil, the government into turmoil to get there. People were amazed when he got there he had no policy direction. He had to cobble

something together in order to bring a response to Fightback, which he did last night. In that sense, I'd have to put a big

question mark over it.


You don't believe the statement?


I think he's trying to do a job, but he always does the job

putting himself first rather than the country first.


Anyway, Perth's going to get a new $20 million sewage plant.


Well, you're going to have a sewage plant-led recovery in Perth, by the sound of it. But it's got to be paid for.

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Indeed it does. I don't know what production is going to come out of that particular sewage plant, but hopefully a lot of good. Do you want his package to fail, because if it works, he's going to win the next election?


Look, if we can't win the next election on the basis of

advocating what is right, and showing how it can be done and paid for, then the country, I think, it's going to be very

interesting. . .1 have every confidence, quite frankly, that people will not be fooled by this package.

Now, it's not a question of the package failing. There's things in the package that we have to do and we want to do. But he

didn't put the whole thing in place. He hasn't paid for it. I don't think people will be very happy when they focus on the fact that they get a bit of money in their pocket for an increase in Family Allowances or whatever, and then it's clawed back by

higher interest rates or more inflation or more debt - mortgage the future of their kids or whatever. That's where I think the debate's going to be.

Now, I have every confidence that the people of Australia will see through his package. They'll see it as a very cynical

political vote-buying exercise, trying to make him popular and to save his political hide rather than deal with the problems. We'll be arguing the case for dealing with the problems.

I don't say it will be easy. I say there has to be a

generational change of attitudes and values as well as policies. We all have to change the way we do things and think about

things. We all probably have to work a bit harder - and I know a lot of people work very hard already - but as a nation, we have to lift our game. That's what the debate's going to be about between now and the next election.


Well, you've seen what the other fellow's g ot. You were 15% ahead in the polls prior to him releasing that package. If you can't win the next election, knowing what he's got now, will you quit?


I think in positions like mine you always are subject to the assessment of your colleagues. If we were to lose the election - which I make clear I don't think we will. I'm going to work

every day flat out to make sure we don't.

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But I would always let them make their choice. I don't have a mortgage on this, and I'm there to do a job. They put me there to do a job, and as long as I'm there, I'm going to give it my

best shot.


But if you were one of them, and John Hews on led the Liberals and the Nationals to a defeat at the next election, what would you think of him?


Well, they might want to get rid of me, yes. I mean, I don't

know. It's a hypothetical situation. All I can do is do the

very best I can.


Thanks for joining us.


Thanks Howard.