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Andrew Olle and Paul Lyneham. Day 2

ANDREW OLLE: And joining me on line now from Canberra, Paul Lyneham. Paul Lyneham, good morning to you. Just yesterday, I think it was, we were discussing Bernie Fraser's little trip to Japan, along with Nick Greiner and a few others, and he was telling the Japanese Reserve Bank Governor that we were having a gradual recovery down under. Well, we're getting a rather different and less flattering story from another bank board member, aren't we?

PAUL LYNEHAM: We are. This is Professor Bob Gregory from the ANU. He is a member of the Reserve Bank Board and a prominent economist. A couple of weeks back, he gave a private address to the Caucus Economic and Industrial Relations Committee at which he suggested that the unemployment rate was likely to remain above 10 per cent for the next two to three years. This was leaked to the Opposition, which tabled the minutes of the Committee's meeting in Federal Parliament, yesterday. This is very bad news for not just the economy and the unemployed, it's also very bad news for the Government's morale; and if it's true, very bad news for the Government's electoral prospects, because above 10 per cent at election time sounds to me like electoral kamikaze.

ANDREW OLLE: Absolutely. And of course, there are some other figures coming out too, which tend to back it all up, aren't there, saying that the unemployed family man is very much on the rise - alarmingly, in fact?

PAUL LYNEHAM: Unemployed men with families rose by 69 per cent in the 12 months to June. Most of the women in such households were also unemployed.

ANDREW OLLE: So no breadwinners?

PAUL LYNEHAM: That's right. The Bureau of Stats figures show that the number of one parent families - 87 per cent of which are headed by women - also increased, and now make up 9 per cent of the families of Australia; 48 per cent of the nation's four and half million families had two or more members employed, in June, but in 23 per cent of families - that's nearly one quarter of our families - no members were working. And one other thing that Professor Gregory said to the Caucus Committee was that middle income workers were suffering worst from the change in income distribution under the Hawke Administration. Wages at the top and bottom of the scale had been growing, but wages in the middle were disappearing. Now this is right up Dr Hewson's...

ANDREW OLLE: Absolutely, they're targeting them remorselessly, aren't they?

PAUL LYNEHAM: They're targeting exactly that group and saying that they're the forgotten Australians, and it's going to give them a lot more ammo.

ANDREW OLLE: Yes, it is, indeed. They'll being doing their best to play that down and play up the trade figures which have just come out. Our trade performance really has improved markedly, hasn't it?

PAUL LYNEHAM: Yes, it has. We had the September quarter current accounts. This is consolidation for the three months, to September. They show that for the third consecutive quarter - we're talking, there, nine months in a row - we've had a trade surplus. That's both goods and services. We have quite genuinely paid our way. The deficit fell by 276 million in the September quarter - a 26 per cent improvement on a year ago. Seasonally adjusted export volumes were up 5.5 per cent in the September quarter. That's on the quarter before, but compared with the quarter 12 months before, they were up 17.2 per cent. Import volumes up 3 per cent in the September quarter, but down 0.7 per cent on the September quarter before, so that's good news too. Of course, this all to do with the economy being in a coma. The question remains: when we wake up, when sleeping beauty gets that economic kiss from the prince of economic revival and demand, what will she do? Will she rush out and give the plastic a thrashing, and will be back to the same old problem?

ANDREW OLLE: Absolutely. And these good figures, too, are despite the fact that Australia is importing Australian wild flowers from Europe, which is a story I'll be looking at shortly. The banks should be a lot better too, if the Martin reforms are adopted though, shouldn't they?

PAUL LYNEHAM: Yes, I suppose bank customers will be a little unsettled to hear Alan Cullen of the Bankers' Association calling Steve Martin's report thoughtful and substantive and constructive, but nevertheless, it's not all sweet music to the banks' ears. We're talking about making banks a lot more accountable to their customers - for example, let customers have a bottom line that tells you not just what interest rate they're advertising, but what the real rate would be if you add in all those bank charges for which you usually need a telescope to read them on the bottom in one-point type. Let's not have, says Martin, any more of those glossy brochures advertising finance company funds where you see the big bank logo on the front of the brochure, giving you the impression that the bank's right behind this product, when on the back of the brochure they say we're not really guaranteeing this at all. Let's get rid of those accounts where you think you're getting a terrific interest but it's really on the lowest monthly balance.

A lot more Reserve Bank supervision. Martin said deregulation wasn't to blame for the madness of the eighties. What happened was, when all the banks limbered up and rushed out onto the level playing field for a good battle to win market share, the umpire was still in the dressing room polishing his whistle. The umpire, of course, was the Reserve, and Mr Cohen wants a great deal more activity from the Reserve, with on-site random checking of banks' loan books; making sure they're not over-valuing their assets; just keeping a much closer eye on them than has ever been the case in the past.

ANDREW OLLE: And, just coincidentally, with the release of the Martin Report comes a report from the New South Wales Agricultural Department, showing that they say banks are giving misleading information to farmers and unnecessarily forcing them off their land. So I guess the criticisms will still continue. I guess, here in the city, that most interest will centre on the credit card charges though, won't it?

PAUL LYNEHAM: I think that's going to be a big talking point, and it does look as though an annual fee for the credit card is probably on the way. The Martin Report says that the Prices Surveillance Authority should have a close look at just how profitable the credit card business is. If it's not really all that profitable, then there should be a move towards deregulating the credit card system. Well, that will mean, at the very least, an annual fee - $20 to $30 is being talked about - plus perhaps a transaction fee, but the banks say, along with that, there would be lower interest rates. Well, that's just as well, because at the moment, they are at 20 to 24 per cent a year.

ANDREW OLLE: Yes, indeed.

PAUL LYNEHAM: An extraordinary .... The problem is, Andrew, that naughty people like you, who pay off your credit card within the credit period, are of course being subsidised by battlers like me, who are constantly having a battle trying to keep the card below its upper limit.

ANDREW OLLE: Yes, you do a good battler, Paul, a real good battler.

PAUL LYNEHAM: Okay.

ANDREW OLLE: Well, let's turn to that serious issue on our doorstep at the moment, with East Timor. And I think, today an Indonesian inquiry gets under way, and there's going to be a lot hinging on this, isn't there, in terms of our ongoing relations with Indonesia, because I think Canberra's more or less backed itself into a corner over this now.

PAUL LYNEHAM: Well, I'm not aware that it's getting under way today, but you're certainly right that a lot hinges on it, because what's happened now with the statement that went through Caucus the other day, and comments by the Prime Minister, yesterday, it's now clear that our relations with Indonesia and our policy towards them is now effectively in the hands of the Indonesians conducting the inquiry into the Dili massacre. If they produce some sort of whitewash, then, given that Caucus resolution, the Government has no alternative but to make a very fundamental review of our relations with Indonesia. And that is why I think we've seen an awful lot of pressure in the last 48 hours, again from the Prime Minister, calling on the Indonesians to `for God's sake make sure this is dinkum'. And we're going to see it, too, from the ACTU; they're going to be pressuring for an independent UN investigation of the massacre. They're not going to swing in behind the Victorian Trades Hall Council, which is calling for sanctions and boycotts, withdrawal of landing rights against Garuda and so on. The ACTU wants to try to keep the door open as well.

Meanwhile, keeping doors open, the Indonesians appear to have shut the door that was supposed to be open so that foreign observers could keep an eye on this inquiry. That will now not happen.

ANDREW OLLE: Yes. They don't show signs of responding to the pressure well.

PAUL LYNEHAM: Well, I think, having boxed themselves into this corner, that Bob Hawke and Gareth Evans would be a little worried. I mean, they're saying that at least 75 people were killed in that massacre. The Indonesians are still saying it was only 19. And General Try Sutrisno has produced photographs now, which he claims show the demonstrators - some of them were armed - and waving these around, he said loudly, in English: `Peaceful demonstration - bullshit'.

ANDREW OLLE: Yes, that's made his point, I think. So they're his English words, are they?

PAUL LYNEHAM: ... I don't know what bullshit is in Indonesian, actually.

ANDREW OLLE: Okay. He just wanted to make sure we understood what he was saying, I suppose.

Dr Hewson is now promising to meet his petrol price cut promise, isn't he; but what does that mean, about who's going to pay for the roads?

PAUL LYNEHAM: Well, that's the big question. The dilemma that Dr Hewson seemed to be in was that he was going to give us the 19 cents off the litre of petrol which was going to help to bring inflation down, which was going to make his compensation package work. If he was, however, also going to hang in there and follow through the micro-economic reform of user pays charges for cars and trucks on the roads, then his petrol drop was obviously going to have to be a lot less. He now says that, yes, they will go along with a form of user pays, but not for ordinary motorists - no extra Commonwealth fuel-based road user charges for ordinary motorists. There would be charges for commercial vehicles and heavy trucks, but this would not take the form of a fuel tax. Now that leaves him with higher registration charges or some sort of charge based on a hub metre which would tell you how long .. how far the truck's travelled and it's load. So it's sort of kilometre mass-type formula.

This, nevertheless, is a charge that's going to have to be levied in some way. And we've got the further complication that Ron Boswell, in the Senate, only on Tuesday, was making much noise about the fact that the Opposition would not support any system of road user charges levied through registration fees. The Government, through John Kerin, says that Dr Hewson has fallen at the first hurdle of micro-economic reform and caved in to the National Party. He must now say who will pay, how they will pay, and how much they will pay.

ANDREW OLLE: Yes. I guess it will all come out anyway in the great debate. That was something that Bob Hawke was never going to get involved in again, I thought, but he's been suckered in once more.

PAUL LYNEHAM: And never under estimate the prime ministerial ego under political pressure. Yes, the question from Dr Hewson: Was the Prime Minister ducking his challenge to a series of TV debates because he was frightened; or does it really show you are yesterday's man? Well, that's just the sort of framing designed to get Hawke right up on his toes.

ANDREW OLLE: Juicy bit of bait.

PAUL LYNEHAM: Yes. He said, in the run-up to the next election: `If the current Leader of the Opposition is still in his place, I will give him every opportunity to debate, if he wants'. Now, it appears that every opportunity means not a series of debates but one debate - a bit like the one, you know, before the last election in which you had that panel of journalists asking questions. So that's obviously not quite what Dr Hewson wants, but it will give him the forum, as alternative Prime Minister at a very crucial time, and I think, once again, Bob Hawke's been suckered in.

ANDREW OLLE: Well, Bob Hawke didn't have such an embarrassing day as his Deputy, yesterday - another bad one for Brian Howe.

PAUL LYNEHAM: Yes, it was a bad one. First of all, he had to back away from his comment about Margaret. He said that, you know, this was the result of strong feelings and passions about the issue; in the heat of the moment you may say things you regret; and I do regret what I've said there, yesterday. To some extent, that's been dealt with, but the Opposition still insists on giving him a lot of stick, every time he appears in the chamber, and every time he goes to the box. Also, of course, this question about Andrew Peacock's attack on him. Back in '83, Mr Howe did not, in his statement of pecuniary interest, declare the income of his wife, who's a university lecturer. His office says that he didn't put it in back then because he was unclear about the rules; he had later amended his statement to the Prime Minister on this, and had always included it subsequently. But this didn't stop Andrew Peacock suggesting this is the Deputy Prime Minister who worships both God and mammon, but not necessarily in that order.

ANDREW OLLE: It's a wonder he didn't leap to his feet and yell out `brangsec'. Do you know what that is, Paul?

PAUL LYNEHAM: What's that?

ANDREW OLLE: That's Indonesian for `bullshit'. We've just been advised by one of our listeners.

PAUL LYNEHAM: What an intelligent group of listeners we have.

ANDREW OLLE: Isn't it terrific. It's great to hear. Leaping Leo is still living to rue his performance the other day. The party's quite displeased with him.

PAUL LYNEHAM: Yes, Leo did not win any points. The debate around the corridors is the extent to which Leo was simply being incompetent and lost the plot, or the extent to which he was being knowingly mischievous. Of course, as a leading Keating supporter, there was no doubt by the look on the Prime Minister's face as he stared directly at Leo several times and threw his papers on the table, that he thought that Leo was falling far short of the mark of being a speaker, and the thunderous clouds around Prime Minister's head, I would have thought, suggested he probably had other suspicions as well. Leo did not do himself a touch of good the day before yesterday. Yesterday, he kicked off by suggesting that he wanted everybody to be good boys and girls in future and he was going to get tougher, but then Andrew Peacock basically defied him while he was speaking to the chamber and got away with it without any trouble at all, so I really can't say I see much signs of it.

ANDREW OLLE: No. More silliness with the AIDEX protests yesterday.

PAUL LYNEHAM: Yes, well, this is just getting absolutely out of control. We now have a police officer with chemical burns after being struck by a balloon filled with a highly corrosive substance. The injury toll with police now at 27, including nine police with fractured bones plus a long list of bites, bruises and abrasians. We've got demonstrators covering themselves with faeces just before they're to be picked up by the police, splashing police with urine, weapons including pine cones, rocks, metal knives, balloons filled with dye, avocados with nails embedded in them, barbed wire, and a stick with a fork strapped to the top. I think we agreed yesterday, it's just as well they're peaceniks or it could get a bit unpleasant.

ANDREW OLLE: Yes, indeed. Actually, I'll be talking, shortly, to a gentleman who's been taking part of some of these demos. I'm not saying he's been doing any of that, but it's a bit to be answered for, isn't it? It's crazy behaviour.

PAUL LYNEHAM: Looking at balloons, there's an interesting ad in the ANU Reporter, the magazine of the National University - a women called Katrina has advertised for a sperm donor. She'll pay the right man $1,000, but the applicant has to be healthy, above average height and intelligent.

ANDREW OLLE: Nothing about a full head of hair, Paul?

PAUL LYNEHAM: Nothing about poise either, Andrew.

ANDREW OLLE: Take care.

PAUL LYNEHAM: Bye, bye.

ANDREW OLLE: Paul Lyneham on the line there from Canberra.