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Airline dispute, unemployment figures, youth training wage, interest rate cuts, Paul Keating



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Leader of the Opposition

9 July 1992 REF: TRANSCR\NM\S0106

TRANSCRIPT OF DR JOHN HEWSON HP MEDIA CONFERENCE 70 PHILLIP STREET, SYDNEY

E & 0 E - PROOF COPY ONLY

SUBJECTS: Airline Dispute, Unemployment Figures, Youth Training Wage, Interest Rate Cuts, Paul Keating

Hewson:

Let me begin with a short statement. I'm sorry that I had to delay this press conference by half an hour but I'm late because of the air strike, I had to charter a plane to get in from Adelaide. It's the same bloody-minded attitude under the centralised industrial relations system that's running this country into the ground. And clearly if you want any evidence that we've got a national crisis in Australia, it's today's unemployment data.

Anyone who sees the magnitude of the problem that's inherent in that data can be nothing short of alarmed. Alarmed by the magnitude of the problem and alarmed by the extent to which this Government is allowing this problem to drift. And just

to give you some sense of perspective there is 963,500 Australians who are unemployed - that's equivalent to the entire population of Tasmania, the Northern Territory, Townsville and Toowoomba put together.

In this situation we need a complete re-think and a completely different approach. Clearly the policies of the past haven't worked and there's something fundamentally wrong with our attitudes and our values in this country.

We've put out an integrated strategy for dealing with the problem, both to create jobs, to deal particularly with the youth unemployment problem and to deal with the human dimension of the problem and we'll be having quite a lot more

to say about that in the course of the next couple of weeks as I foreshadowed at our jobs forum last weekend.

I am fascinated at the reaction we've got to the youth wage proposal. I'm encouraged at the support that it's received, as it should, but if you hear what the union movement and the Government has had to say about it, you get to understand the

full extent to which you've got to change this place. You see fat cat union leaders like Halfpenny sitting up in their plush

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offices saying they're not going to let kids work for a reasonable wage above the unemployment rate, you've got to wonder what direction this country is headed in.

Some of the other attacks from union leaders and Government spokesmen show just how far out of touch they are with the problem.

Also, I've been interested that while a lot of young kids have been prepared to say they would love to get a job and they would be happy to start somewhere near or above the minimum youth training wage we've proposed, there are some others that

are saying they'd rather stay in bed. Well, it's a pretty real choice for the kids of Australia - do they want to be couch potatoes or do they want to get on and start a career?

There is nothing exploitative in the proposal we've put down. For kids who live at home, the proposal for 15 to 17 year olds is significantly above the unemployment benefit. It offers them a very real chance to get out and to begin a career, to get a start in life and to get some on-the-job training and to start a career.

I think that those types of proposals have got to be given a fair hearing in the context of what is the most alarming employment crisis since the Great Depression.

I was also pleased with some of the reaction that we've seen from some of the employers in relation to the youth wage proposal. I think McDonald's said they'd take on about 3,000 more kids, Bob Jane T-Mart said they'd take on another 100.

I've seen comments by Foodlink, the Doughnut King and of course there was a very impressive interview with a jeweller last night on a television program showing how they thought it would work.

And just to give some sense of perspective on it - if one third of the small businesses in Australia, just one third of the small businesses in Australia, put on one young person we'd solve the problem - youth unemployment would disappear as

a problem.

I think that the youth unemployment problem can be dealt with. It's not the biggest and the most disturbing feature of the unemployment problem, however, that is clearly the longer term unemployed, particularly the older long term unemployed, those

above 35 or 40 who are finding it very difficult to get a job again, in many cases not even in the same industry, they have to change industries and change locations. And that's where we've got to have a particular focus of Government policy in

terms of re-training them and giving them a chance to get back into the workforce. And we'll be saying quite a lot more about that in a major statement on unemployment within the

next two weeks.

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Any questions?

Jrnlsts

Dr Hewson, would should that other section of the unemployed, the majority of the unemployed in this country, vote for a Coalition Government when part of your policy is to throw them off their only support after nine months?

Hewson:

No, that's wrong! That is what Paul Keating says is our policy, but that is not our policy. Our policy is that if you are genuinely looking for work you will be looked after.

Jrnlst:

But what are the safety nets there for those people who genuinely can't find work?

Hewson:

Training schemes, we've got a range of training schemes, we advocate a complete new focus to the whole approach to training and re-employment, a community based focus built around community employment boards. An enhanced role for Skillshare as a spin off from those boards, an enhanced role

for voluntary agencies, we have a work for the benefit scheme or a work for the dole scheme, we have Austrain and a lot of those opportunities are very realistic.

Jrnlst:

A lot of those schemes are already in existence or partly in existence at the moment, training schemes, work schemes ....

Hewson:

Well there are a lot of training schemes but a lot of them are pretty mickey mouse job creation schemes into which the Government tips money for no net benefit, little or no net benefit. That's why we've designed the type of approach we have.

One of the principal reasons for going to the community level or the local level is that if you can set up a community

employment board where you have just one representative from a Government Department like DSS. But you have local employers and the Skillshare representative and the Local Council and the local Voluntary Agencies, they tend to have a pretty good

idea of where the vacancies are or who can take people on, what the training opportunities are, what the needs of the kids or the older, longer term unemployed are in that area or whatever.

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They have a much closer, first hand knowledge of the problem, they are the ones that are best placed to make the decisions about which training schemes they ought to go into and which training schemes actually ought to die on the vine because they don't work, . they don't get assessed on a regular basis under the sort of centralised structure we've got. And in that focus I think you'd see a much bigger role for voluntary

agencies, a much bigger role for Skillshare as part of that process.

Jrnlst:

Dr Hews on, do you expect opponents to your $3 wage to be silenced by today's figures, there's been some pretty vocal opposition?

Hewson:

Well I think they should stop and think. There's an

entrenched view, a set of vested interests in Australia, the reaction of the union movement to the proposal is staggering. They are quite happy to see a fat cat union leader like

Halfpenny on TV in his plush office, looking down and saying well I'm not going to let kids work on this sort of wage. What does he want? Does he want to leave them on the scrap heap for the rest of their lives?

The union movement has got no sense of proportion on any of these issues. Just today they're calling for another generalised wage increase. Quite frankly, the union leadership has got to be out of it's tree to be advocating a

general wage increase in the midst of the worst recession in 60 years and a labour market like we've got.

A large part of the recent increase in unemployment has been the fact that we've had a substantial increase in real wages since this recession began, a very significant percentage increase, something like 4 or 5% increase in real wages. That has dramatically compounded the unemployment problem and these guys go on, well let's have one more round, let's see if we can throw one more echelon of the Australian work force out onto the scrap heap - that's the attitude of the union

movement.

It obviously hasn't worked and obviously is never going to work and it's about time that they recognised that their attitudes as well as cheir policies are wrong, that we have a major structural problem in Australia with unemployment, it's

becoming entrenched. The prospect, as we heard the other day, of 500,000 Australians being long term unemployed by the middle of this decade ought to even cause John Halfpenny to stop and think.

Jrnlst:

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... (inaudible) ...

Hewson:

Wages are an element of the problem. The recession is the principal determinant of the increase in unemployment. But wages and wage relativities are an essential part of it.

Jrnlst:

... (inaudible) . . .

Hewson:

Well, I'm not having a wage freeze, but there would be no more national wage cases, no more general across-the-board wage increases and as far as I am concerned the only wage increases that should take place from now on are those that are at the workplace level related to performance and to productivity.

Jrnlst:

Under Fightback! and the youth wages scheme how much can you bring unemployment down and over how long?

Hewson:

I just gave you an example - if one third of the small

businesses, forget all the large employers, just the small businesses, if just one third of the small businesses in Australia took one person the youth unemployment problem would disappear.

Jrnlst:

... (inaudible) ...

Hewson:

You've got about 175,000 or thereabouts, 170,000 odd young people looking for work full and part time. And you've got about 500,000 to 600,000 small businesses. So if just one in three of them took one on and you've got people like Bob Jane he's got 91 outlets, he'll take one per outlet and you're

seeing innumerable numbers now of anecdotes emerging of people that would. So I believe that people will take young people on.

You go back to the problem - why is it that the youth

unemployment rate is about 35.8 - over three times the adult unemployment rate? It's fundamentally related to the relativities in the wages that are paid to young people compared to the wages that are paid to adults, and the fact

that the system discriminates against young people. Now if

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you eliminate that discrimination, it's reasonable to believe that you'll get a very fast employment of young people, and that's really what it's about.

J m l s t :

When you launched Fightback! you conceded there'd be a marginal increase in unemployment at the moment that a GST was introduced, because of relocation of workers. ...inaudible... wait for an increase in unemployment?

Hewson:

No hang on. I mean, you can start the youth wage today.

Mr Keating, if he had any guts, could go into the Industrial Relations Commission and argue for a variation of all awards to include the youth wage along the lines that we've

identified.

Under his centralised system he can do it, and he can do it today, and he can start the process. It is a solution that can be embarked on quickly.

There are a lot of other elements of Fightback! that can be implemented pretty much straight away. The cuts in

immigration can be accelerated. The abolition of payroll tax - we've just had a Premiers' Conference. Why didn't they agree to abolish payroll tax? Why did the Government push ahead in the last few weeks with the superannuation guarantee

levy, which is costing - at the most conservative estimate - another 80,000 jobs. These are options that are there right now.

Jrnlst:

Dr Hewson, are lower wages for everybody a solution to this problem?

Hewson:

No, lower wages for everyone aren't what we're advocating. People are running off...

Jrnlst:

But if you're not advocating any wage rises...

Hewson:

No look, people are running off at the mouth saying that if you have a lower wage for young people, you're going to erode the whole structure. Well, I don't see any evidence of that. In fact, the anecdotal evidence is the opposite.

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Peter Ritchie from McDonalds, when he said that he has 30,000 people and he'd take on another 3,000, would take them on in the context of his existing wage structure. But it gives him the chance to take on more kids, train them up and give them the chance to earn the same sort of wage as the other 30,000 are earning.

That's really what it's about. It's a chance for kids to get a start, and they get training. They get training from the day they walk in the door of an employer, because they learn basic work habits. They learn punctuality. They have basic, on-the-job training. And it provides a floor against which they can go off to a TAPE training program or anything else that will give them formal training outside the workplace, as well as continued training in the workplace. And as you get more training - it's been the history of labour markets all

around the world that the better-trained, better-experienced, more skilled, more able tend to be able to improve their standing...

Jrnlst:

You say you don't believe in dead-end jobs, but is that the extent of training that these young people can expect . . . inaudible. . . trained how to make hamburgers and turn up on time?

Hewson:

No, don't be ridiculous. Don't be ridiculous. I mean, you guys mock it, but we have very detailed proposals in relation to the expansion and improvement of the school system, the education system, the university system, the TAPE system, and we will be saying even more about that in the course of the

next two weeks.

Now, all those avenues are there, but why not give a kid the base of a job from which to access some of that training. Look, I'm not saying everyone should work in McDonalds or Bob Jane T-Marts or whatever, but for a lot of kids the chance to

get a job in one of those places would be welcome.

Go through the upper echelons of Australian management today and see how many of them started out on the shop floor with the most basic of tasks working their way up through the system. Whatever happened to the career path? Look at the phenomenal increase in part-time employment for young people

in recent years, and the fact of the destruction of the available full-time jobs for young people as a result of what's happened with the wage structure over that period.

And you notice Bob Gregory gave a paper at the ANU yesterday looking at male employment and the collapse of the available full-time jobs for males - roughly twice as big a collapse as

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their was in the Great Depression. You've got to ask

yourself, are we on the right track in this country, and the answer is no, we're a long way off it.

Jrnlst ϊ

...inaudible... under the Coalition GST base plan, the

underclass would be worse off.

Hewson:

Who says this?

Jrnlst: . „

Bob Gregory's ...

Hewson:

Well poor old Bob. He's always been able to analyse the data very well, but some of his judgements have been bad. And I remember the "Gregory thesis" most visibly when he argued that we would have such mineral wealth in this country that we'd

turn ourselves from a balance of payments deficit country to a balance of payments surplus country, and every year our problem wouldn't be how we're going to pay for the deficit, but how we'd invest the surplus. And those years never

arrived.

And all I can say is that he's done some very good work

analysing the labour market, but I think his judgement in this particular case about youth unemployment and the underclass is wrong. I don't see any evidence, in the context of the Australian economy, to imagine that you'll get an underclass.

In fact, one part of his analysis is that there's been an averaging down. Now, that is classic Labor Party stuff. Equality of outcomes at the lowest common denominator - not equality of opportunities, and that is a fundamental difference between us and them.

We'll give you the opportunity and the equality of opportunity - which I think is important - for a country like Australia. We don't want a system of centralised and dominated and controlled and socialistic. I mean, socialism may be dead in

Eastern Europe, but it's alive and well in Canberra and other parts of Australia, particularly in the ACTU.

Jrnlst:

Do today's figures spell the end of the Keating Government?

Hewson:

Well, they spell the end of the Keating Government's tattered

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credibility. For the last - how long has it been since the last election - a bit over two years, approaching two and a half years, something like 450,000 people have been added to the unemployment rolls. At the time of the last election the Prime Minister argued there would be no recession, he wouldn't

let there be any recession.

And ever since then, you have had nothing but nonsense and tripe from this Government about where we are and where we're headed. They consistently mislead people about where the economy is. They consistently mislead people about the

strength of the recovery. What recovery? I mean, where are the jobs? Every time I go around Australia I ask somebody "Is your business picking up? Is employment picking up? Are you likely to employ any more people?" And the only area I have

seen any development is in the flagpole industry. The only pick-up in activity has been in flagpole production.

Jrnlst:

Where would you place us in that second dip of this double-dip recession? Where are we in it?

Hewson:

I've said consistently that I think we are still bouncing along the bottom of a recession. By that I've said that we'll have periods where the activity looks like it's picking up and then it goes down again, looks like it's picking up, going down again.

You can break that whole period up now well over two years, into two long periods if you like - the period of long

negative growth - in the last three quarters where we've had very very weak measured positive growth, and I think we're moving into a period now - June, September and so on as

quarters, where you'll see that growth weaker or indeed, it's not impossible that it's flat or negative.

So we are still going along like that. The reason is that this Government's done nothing. I mean, if you cut through all the noise and all the policy pronouncements and the appearances on Laurie Oakes with a big whizz-bang Pay TV and Qantas and everything else he's done for the last two years, what has he actually done to create a job in this country, and

the answer's nothing.

He has done nothing but run around making a lot of noise. He's been in the job as Prime Minister since the end of last year. What's he done? One Nation - we hear today John

Dawkins was telling us that he's now been put in charge to make sure that they actually spend the money the allocated in One Nation. Not even One Nation's got off the ground.

Nothing has happened. No jobs have been created and the

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situation is sliding away. i

Look, they've mocked me every day since the last election for the economic predictions we've made. They've attacked us for saying that unemployment would go over 11%, and we were being "irresponsible"; we were "talking down our country". Our only

fault was we were realistic. We were prepared to actually tell people the truth, just as all the way through I stake my reputation as a economist, and after politics I might have to earn a crust, so I worry about. I stake my reputation as an economist on making reliable statements. It was quite clear to anyone who followed the data that unemployment would go over 11% - that the urgency that should be there in this Government isn't there. .

They're in a flap now alright, but it's not about creating jobs. Their sense of urgency is whether they can do something to ensure their political survival. "What is it that can get us across the line? Can we prove once and for all that we can come from behind and win an election?" The Australian population couldn't care less. All they want to see them do

is actually come from behind and do something about

unemployment. We're so far behind, we're almost back to the 1930s. It's time they got started on the jobs crisis. All this talk and stuff isn't going to work.

Quite frankly, you ask me is it the end of the Government, they can't deal with the problem. The fact is, despite all the noise, their mateship with the union movement, the fact

that their hands are tied by the union movement means that they can't be part of the solution, because they are an essential part of the problem. A large part of the problem is the union movement and the Government. It's the Government's policies that pushed us into recession. It's the union

movement's blocking of reform that denies us jobs. It's the union movement's wage push. And here we go today - another wage push. Let's just have one more round of unemployment before we get turfed out of Government, says Ferguson. Good

stuff.

Jrnlst:

Dr Hewson, what do you think of ...inaudible... further rate cuts, and also what do you think of the timing of yesterday's rate cut ...inaudible...

Hewson:

What we've said about rate cuts is that the authorities have to make the decisions about the timing of rate cuts on their best advice. But what they're really telling you - given that they only respond to economic circumstances - they're really

telling you that the economy is still flat as a tack, and if it stays flat sure, they'll probably cut interest rates more.

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The real issue is not just cutting those official interest rates. There are two other dimensions to the problem. One is how you get the market rates down - the rates that in

particular business pays on the money that they borrow - because that is a major constraint on investment right now, and of course the capacity of the banks to lower those rates is very constrained because they're carrying the legacy of the

loan failures of the latter half of the 1980s into this decade as we said they would. This decade will be dominated by high real interests. That's the first part of the problem.

The second one is how the Government really handles the ultimate balance of payments consequences of a sustained reduction in interest rates. The dollar's been held high by very high real interest rates in Australia relative to most

other parts of the world where people park their money in a financial sense. You're seeing an unease on the part of financial markets now, because they see the Government pushing interest rates down, but they don't see any other structural change taking place - no other policy shifts occurring. And

indeed, if they stopped and looked, and they recognised the magnitude of the blowout in fiscal policy, which is the biggest in our history, it is a phenomenal turnaround from a

$9 billion surplus a few years ago to the prospect of whatever - it's 9 deficit now and the start figure for next year is probably well above 12, and who knows where it will finish because it's still drifting and it's not just the Commonwealth - it's the States.

Jrnlst:

Do you think the RBA, when they met yesterday, had an idea or perhaps an indication of how bad today's blowout in

unemployment...

Hewson:

Look, I don't know. I don't know whether they get an advance notice or not. I think they suspected the numbers weren't good, because there've been a lot of partial indicators of the labour market that were pointing towards this sort of number. But there's plenty of other pieces of evidence around to tell them the economy is as flat as a tack. And any of the data that they might have looked at in recent days should have led them to that view.

I remember a few months ago, when they were panicking that the housing industry was about to overheat. What happened to that? That alone - that one fact alone - should have caused the monetary authorities who monitor the housing industry perhaps closer than most to show some concern.

Jrnlst:

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It was an odd cut - 75 basis points - which is quite unusual, and now John Dawkins is saying that there's scope for smaller cuts more often...

Hewson: .

Yeah, I think they're trying to get off the hurdle a bit. They're trying to move to a situation where they make smaller cuts more regularly, and I think you'll see a run of

adjustments of about half a point - about 50 basis points each time. I think that they're preparing the ground for that in yesterday's decision by just going three quarters and I think you'll see adjustments, and probably over time you'll see them

in both directions because they-foreshadowed that if there are signs that inflation is picking up they may start to move interest rates the other way, and I think they're building a bit more volatility into it because they've got themselves

locked into a situation where there's an expectation that builds up one way about a rate cut and then it' s ultimately validated by the authorities.

Jrnlst:

Are you surprise that Paul Keating hasn't said anything yet? He's actually declined to comment on the figures.

Hewson:

Well, he hasn't got anything to say. I mean, he's got no answers to this problem, and it's killing him politically and he's getting very nervous and he doesn't stick his head out of the bunker very often these days. When he does, he goes overseas and he's late.

Ends.