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Interview with John Laws, Radio 2UE, 3 October 1996: transcript [Topics: Costello, Downer, Health insurance, Gareth Evans and tax]

EOE - PROOF ONLY

BEAZLEY: G'day. How are you? It's Kim here, John.

LAWS: G'day. Kim Beazley. Good to talk to you.

BEAZLEY: Yeah. How are you going?

LAWS: Pretty good. Surprise call. I suppose you want to talk about Peter Costello?

BEAZLEY: Well, I think everybody else is.

LAWS: They sure are. Well, that's right. Why shouldn't you. I've just had a look at some of the papers again. They're still running it in The Australian, Financial Review, Sydney Morning Herald. And from what I hear, too, in overseas papers it's being run in the LA Times and, I think, in Washington.

BEAZLEY: Well, it's got to be said, that whatever else Peter Costello has achieved, he's certainly been the only Australian Treasurer in history to give the bond markets of the United States and Europe a big shake. I mean, he can walk away with that achievement before he hands in his resignation.

LAWS: I doubt he'll hand in his resignation.

BEAZLEY: He seems to be in a state of total denial on this one which I think is an interesting indication of how serious it is. He's got this tape running, which we've all heard, on radio and on television, which says quite clearly the things that the newspaper yesterday claimed he had said. But he says he didn't say them. I mean, so bad is this as an error for a Treasurer to commit with a bit of arrogant name dropping around the place, that the only thing for a Treasurer to do in these circumstances is to simply say he didn't say it. And, of course, that's against all the evidence. But it is an interesting indication of the dimensions of the stupidity of his action.

LAWS:Yet, I must say I was very surprised that he lied. And really, he did, he said, I think he said, to quote him, 'I never quote on other countries' interest rates. That's fanciful if it suggests to the contrary'. But it certainly did suggest to the contrary.

BEAZLEY: It didn't suggest it. I mean it was just open and shut. Exactly the words that appeared in the story that was run in the newspaper are the words that he used on the tape. And it was manifestly that. And everybody in the bourses in Europe and the United States understood exactly what he was saying.

LAWS: Do you think it came about because of political naivety?

BEAZLEY: Well, there is always that element. I think it came about because of arrogance. I mean, this guy is not a patch on Paul Keating as a Treasurer. But in his parliamentary style, in the way that he trips the light fantastic, in that his dancing up on Kerri-Anne Kennerley's show and all the rest of it, he is desperately attempting to achieve what a bloke, about 20 points more Australian and about 20 IQ points more intelligent, was able to achieve. One of the reasons why his predecessor was able to do a few things was that he knew when to open his mouth and when to shut it on things as sensitive a interest rates. And I'm afraid Peter Costello, who is full of hubris, has come unstuck dramatically.

LAWS: What is the worst aspect of it now? The fact that he did tell a fib? Or that fact that he made the statement?

BEAZLEY: Well, the fact that he's telling a fib about it, compounds it. But also it points to the seriousness of the statement which, I think, ought not to be lost on people in this discussion. I mean, generally speaking, politicians who are caught out on the odd issue of the day find some other way of explaining it without saying, you know, black is white, which is what he is attempting to do here. But this is so serious in terms of a Treasurer's responsibility, both in terms of the maintenance of contact on their fellow Treasurers, or in terms of his own public presentation, Costello prefers to go into personal denial. The consequence of it on his own psychology is so horrific. Now, in terms of Australia's standing in world affairs, we just look like a bunch of hicks. That's what we look like when they do things like this. People like Mr Greenspan would, on a daily basis, conduct discussions with European counterparts and the like and, every now and then, when an Australian Treasurer goes over there, he is happy to see them and talk very frankly about the direction of the Australian economy. I've never had that sort of consultation with him but I know, from talking to people like Ralph Willis and Paul Keating, that was just routine for them when they went to the United States. That was enormously helpful in our own intelligence back here to get an idea of a fellow who has such a major impact on international markets. Well, we can see how much impact he has as Mr Costello went out as his proxy, unheralded and unasked, and gave his views, and his views absolutely reverberated through the international financial community. So, I don't think that this, certainly this fellow won't trust a Treasurer in this Government again. What we'll get is an anodyne discussion about the sun, the sea, and the sand whenever we turn up in the US from now. But, in the meantime, a lot of ... people have made money and lost money out of this stupidity.

LAWS: Well, what happened was that the US bond rates dropped and then, apparently, a US bond trader said that calls were coming in from around the world asking 'who the hell is this Costello bloke?' But has any foreign government, including the American Government, been critical of Peter Costello?

BEAZLEY: Well, I wouldn't think they would be. I mean, I think anything that they'd do on this would be sotto voce. I mean, you know, it's just one of those occasions when the bureaucrats in the Federal Treasury and the economic advisers in Clinton's office sort of just put their head on the desk and their hands over their ears and say, you know, 'in a week's time, this pooh will pass'. There's not much else they can do.

LAWS: Would people have lost and made out of that statement?

BEAZLEY: Oh, almost invariably. I mean, people make and lose money when people finally make a decision. You know, when the US Fed says 'OK, we're not going to change interest rates', or 'OK, we are going to put them up or put them down'. But usually they're allowed the courtesy of their own presentation of it, if you like. So, this is sort of an accident. Somebody who has got halfway into the process and come and trumped out an authoritative, apparently authoritative, statement on it all and so, such fine lines do they operate on on these international financial markets, people will respond to anything on an authoritative signal, they'll respond to it massively. So, there'll be a lot of people around that made or lost money on this, no doubt about it.

LAWS: What should John Howard do?

BEAZLEY: Sack him. Well, I think this Government limps through its international presentation and limps through its handling of the Australian economy. We're having, at the moment, a mini downturn, courtesy of their mistaken Budget strategy, and they way they've jawboned the Australian economy, oddly I think, in response. Poor old Costello's been trying to talk up the Australian economy since the Budget, which is what he should have been doing from the day he got elected. Since the Budget, he's been trying to do this. So, in a sense, he's a victim of his own trap. Having taken the wrong stance the moment they got elected, he's desperately trying to find mechanisms to take the right stance now. And it's like a tar baby, when he's been whacking his hands on the tar baby of the Australian economy ever since he got the job. And he's taken one wrong tack after another. And the corrective to the tack overcompensates. And this is what we have now as a result of it.

LAWS: Do you believe the Prime Minister will sack him?

BEAZLEY: Oh no, I don't think so. I mean Alexander Downer

survived.

LAWS:I still think they've got other plans for Alexander.

BEAZLEY: Well, they might have. Alexander was an open and shut

case, I think. And I would have thought that this is probably an open and shut case as well, but I doubt very much whether he'll do it. I mean, certainly he should be urged to do it. This is unprecedented. No Australian Treasurer has been this silly.

LAWS: The Prime Minister has just agreed to some health insurance premium rises of up to 10% despite his public calls to health funds to exercise restraint. What's going on there?

BEAZLEY: Well, look, I think that the reality is that this particular tax rebate was never intended for the people at all. What it was intended to do was to allow the health funds to raise their premiums and then start at the bottom end of the process, slipping around a bit, if you like, on this issue of community rating to improve their health fund participation by being able to offer singles and others interesting benefits. I think that was their long term scheme and then, when they got all that in place, start to shift off the universal health care system into a private health funded arrangement. I think that's what the overall intention was. But they got again trapped by their own rhetoric. They went around telling people this wasn't a benefit for the health insurance funds, it was a benefit for them. And now, they're trapped with their own logic. They're sitting down there in a piecemeal basis approving health fund rises.

LAWS: Did you think that they were dishonest with all of that? They knew that the health funds were going to increase their fees?

BEAZLEY: Well, I think they absolutely knew that. And I think that they knew it before the election.

LAWS:I know they did.

BEAZLEY: There's no question at all because it's been admitted to, and I don't make this as critical of the health funds themselves or their lobbyists or secretariats, they take their chances where they may. It's up to the politicians to make the decisions. But the health fund people devised the policy for them before the election. They didn't devise the policy just in anticipation that all the benefit was going to go to health fund participants. They devised it in anticipation that the benefit would come to them. But the Government, the now Government, then Liberal Party, chose to present it in a different way. So, they have this dishonest presentation and again they've been trapped by the consequences of that. People now know, I mean if people weren't cynical about politicians before, which of course they were, they've now had added doses of cynicism attached to their view of all of us as a result of their experience with this particular episode. And this will compound, this is not the last of those rises. You know, London to a brick, that restraint that he asked them, at least to devolve themselves in, or conduct or show before his committee reports on it early next year, it's just going to be honoured more in the breach than the observance.

LAWS: Listen, if John Howard and Peter Costello aren't doing the job well, and you don't believe that they are doing the job well, how do you explain the lead they have in opinion polls?

BEAZLEY: People were sick of us, John. We had been 13 years in Government. We did all the things that governments usually do. We hectored and cajoled people. We presided over enormous changes in the Australian economy. A lot of people were hurt by those changes. Some of those changes had nothing to do, of course, with government policy and everything to do with technological change.

LAWS:So you believe that they're still just sick of Labor?

BEAZLEY: Oh, that will last for, nobody sits around after 13 years of voting one way, and having changed their mind and saying after 6 months, 'gee, I was wrong'. They give a new government a lot of ice to skate on. They'll give this Government, I mean, they must be putting question marks up. And there is some suggestion of a bit of movement out there on the behaviour of Ministers and on the direction of policy. There are two stages in the process. One is agreeing that the question mark that you put up there is enough to actually call your vote into question, and there is the second process 'will I vote for the other bunch'. And it takes ages for people to make up their minds on those things.

LAWS: John Howard has had a smile all over his face for a while now Peter Costello probably wiped it off with the gaffe and John Howard hasn't made, to my knowledge, any comment about Peter Costello. He's gone to ground on it, I think.

BEAZLEY: He would try and keep away from it as much, he's an ex Treasurer. He at least managed to survive 4 or 5 years in the Treasury without revealing his conversations on interest rates with the head of American Reserve in his first meeting ...

LAWS: Yes, well one of the reasons he's been smiling is because of what Gareth Evans said about tax increases. He's certainly made the most of that. But wasn't Gareth Evans telling the truth?

BEAZLEY: Well, Gareth Evans, one of the things that might be pointed out to John Howard is that in his Budget there are $7 1/2 billion worth, over 4 years, of new revenue raising measures. He wanders around the place saying that he's not imposing taxes on people. His total tax take, John Howard's total tax take, is already 1/2 percentage point of GDP higher than the average under Labor. I mean that's, for somebody who's not raising taxes and who went into the election campaign and said, he promised not to raise any, it looks pretty wet. Now, from Gareth Evans' position, I think that Australians, and Gareth would agree, that the average Australian, the average person that you talk to every morning, and you've got better communication with them than we have, that the average Australian that you talk to is sufficiently taxed, and doesn't need to have imposed upon them an additional tax burden.

LAWS: Well, what did Gareth mean?

BEAZLEY:... people in this country that aren't carrying enough and are avoiding it. And that ought to be dealt with.

LAWS: And is that what Gareth Evans meant?

BEAZLEY: Well, I think that that's certainly what we all mean and I suspect that's the direction in which Gareth's remarks went, if you look at those remarks in totality.

LAWS: Do you wish he hadn't said it?

BEAZLEY:Well, I think that you cannot be a Shadow Treasurer and not talk about taxation issues. I mean, the simple fact of the matter is it's one half of the Budget. One side of the Budget. And you're going to, from time to time, have to say one or two things about it. And there are things in these taxation arrangements which need to change. That business of collection from upper income earners is a very serious one. The Taxation Commissioner has pointed it out and pointed out that at least a billion dollars is floating as a result of it. Now, that's a lot of money even in our Budget. On top of that, Peter Costello himself has said that they ought to sit down and take a look at tax deductibility issues and whether that's the most efficient way of delivering benefits and he said that he wants to go down the road of taking a look at that, fine. We're happy enough to see that and take a look at it. But the average Australian does pay enough in taxes and Gareth believes that and so do 1.

LAWS: OK, thanks for the call, Kim. It was good to talk to you about that. You're very firm on what John Howard should do with Peter Costello, aren't you?

BEAZLEY: Yes. And Alexander Downer and, I suppose, he's probably worried about whether or not he's going to have a Government at all at the end of the day.

LAWS: Thanks for your time.

BEAZLEY: OK.