Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Prime Minister comments on community reaction to the Budget and Opposition policies on the car industry

RICHARD PALFREYMAN: On a day when one of our leading newspapers, the Financial Review, has suggested that the tide is turning towards the inevitability of a Coalition victory, we'll be talking in Canberra to the Prime Minister, Paul Keating. Since the Budget, presented just over a week ago, the Government is seen by many commentators as having failed to achieve the necessary momentum it needs to ward off defeat in the coming Federal election. In the past week, the Government has sustained a double setback, a distracting and unnecessary debate about taxation and a falling currency. Despite reservations within the business community about the impact of many of the Coalition's policies, there is a growing sense that Labor has simply run out of steam.

The Prime Minister has joined us, now, and to talk with him, the World Today's John Shovelan.

JOHN SHOVELAN: Prime Minister, thanks for coming on the World Today. Despite the Budget, the Government is continuing to get a lot of bad press. Indeed as we just heard, the Financial Review today is talking about the tide turning in favour of the conservatives. What's gone wrong? Do you think people out there aren't believing you any more?

PAUL KEATING: Well, I think that's just a bit of press gallery navel gazing. These introspective pieces come and go. Frankly, they don't matter that much. I mean, if you look at some of the objective evidence, in the last week, the Government has in fact narrowed in that poll. I think the Newspoll - the Government has actually narrowed the lead with the Opposition.

JOHN SHOVELAN: But overall in terms of polls, you're still about the same distance behind the conservatives as what you were twelve or eighteen months ago.

PAUL KEATING: We're still within shooting distance of a victory - in difficult circumstances within shooting distance of a victory.

JOHN SHOVELAN: There has been a bit of a mood swing around the place, though. I mean, only last week in the Parliament you had the Opposition members telling you to sit down. That's the sort of thing that would never have happened twelve months ago, two years ago, three years ago.

PAUL KEATING: No, no, that always happens whenever people are on points of order. It's happened - I used to do it with Malcolm Fraser, other people are doing it today.

JOHN SHOVELAN: Yes, but they usen't to dare to do it to you.

PAUL KEATING: Yes, they have. I've had people doing it all last year and early this year. When one doesn't sit quickly on a point of order they'll try and claim their rights. I don't think that's got anything to do - if you're trying to read into that some sort of thing .... Look, I was at the Best Practice Program where we were handing out Best Practice Awards on Monday in Melbourne for the major companies, BHP, the likes of Du Ponts, Toyota, and they were sitting up there at their tables with their employees from the unions, and the chief executives were coming up to us and saying: Look, Australia is now really on the verge of cracking it in terms of productivity, of making all the sort of '80s changes come good, of seeing it all come to fruition. And, you know, the people who are not onto that sort of play are the people who don't attend those sort of functions.

JOHN SHOVELAN: Is that the sort of reaction, do you think, that people are giving to the Budget?

PAUL KEATING: I think the Budget reaction was pretty good. It was about jobs; it was about making Medicare stronger; fringe benefits for pensioners; 150 per cent for RD. I mean, that got the big splash in the newspapers, the TV that night, the next day. I mean, having a sort of sub-debate in the Canberra columns about taxation doesn't have the impact, I don't think, in the public debate as the big presentations have.

JOHN SHOVELAN: Isn't there a big view out there in business, and just generally in the community, that the momentum that you hoped that was going to be there in the Budget hasn't eventuated at all, and that those things have obviously impeded that?

PAUL KEATING: I don't think the community and business are looking for big momentums for Budgets. The average person who picks up the Daily Telegraph in Sydney on the train going to work, or the Sydney Morning Herald, who wants to wrestle with a broadsheet, reads the Budget front page news, the big broad stuff, see it that night on television, and then it basically has a very short shelf-life and flips into history. I mean, I've done more of these than anyone in Australian politics, so I know more about Budget reactions and what one can expect from them politically. And we got as much as we could get.

JOHN SHOVELAN: What about the money markets? I mean, the money markets have been particularly skittish. They seem to have - they certainly don't like the idea of the size of the deficit and possibly the effect that that's having on our overall debt levels.

PAUL KEATING: That's what you say, John. I don't think anyone in the markets would say the reason there's been, as you put it, skittishness in markets is about the Budget deficit. It's about terms of trade; it's about the US dollar taking a battering; it's about the Bundesbank playing the mindless game of breaking European prosperity in the sort of quest for sort of German low inflation. That's what it's about.

JOHN SHOVELAN: Aren't they, though, undermining your attempts to try and get the economy going in the Budget to create jobs by tightening monetary policy? PAUL KEATING: We've got the things in place. Monetary policy is not tightening. It's not tightening.

JOHN SHOVELAN: But interest rates are rising.

PAUL KEATING: No, they're not. It's not tightening. Look, we've got in place now the One Nation spending coming through. We just ordered 3 million tonnes of rail steel, a million concrete sleepers, $2 billion road program - $400 million more than last year. That's coming through; you've got the Budget spending coming through; you've got the labour market programs. We are setting the economy up on a growth path and we will grow as fast as our trading partners in the coming year - that's around 3 per cent, and as you know also in the public debate a lot of people think that's conservative. So that's what we're about. We're about growth and jobs and we're getting it.

JOHN SHOVELAN: But haven't we seen over the past three or four days interest rates slowly rising out there in the market place?

PAUL KEATING: In the long term bond rates, on the long yields, not the short yields.

JOHN SHOVELAN: Well, is there any chance or any danger that they might just flow over into the housing market?

PAUL KEATING: They go up and down. They were nearly 10 per cent three months ago. They dropped down into low eights; they're now sort of high eights. I mean, they shift around, but the short stuff hasn't shifted around.

JOHN SHOVELAN: So there's no danger in terms of your economic policy that what the markets are doing out there is undermining your economic policy at all?

PAUL KEATING: No, no. Look, a budget deficit of 3.3 per cent of GDP, with Government debt to GDP one of the lowest in the OECD, the market would regard that as very acceptable.

JOHN SHOVELAN: Have interest rates hit the bottom of their cycle as far as ....

PAUL KEATING: That's a matter for judgment. But, basically I've come on the program to talk about the Liberal's car policy.

JOHN SHOVELAN: But I couldn't let you come on straightaway and talk about that though, could I?

PAUL KEATING: Well, you could have if you got onto the topic of the day rather than navel gazing down the corridor here. The fact of the matter is, what we saw today was a revelation for Australians.

JOHN SHOVELAN: Hang on, what you're talking about is the Opposition's policy to have zero to 5 per cent tariffs by the end of the decade. Now, they're telling us that that means a thousand dollars less per car for Australians.

PAUL KEATING: It says this: 'Libs tell car firms revamp or perish', front page of The Australian. It says this, that Mr McLachlan says - he got a question: 'Do you honestly believe those companies can exist under those circumstances? It's a matter for them to decide what changes they will need to make to exist'. In other words: We don't care; we're not saying - this is the Coalition, the Liberal Party - we're not saying we want a car industry and we'll keep it as Labor is saying.

What he is saying is, basically they can either survive or perish, it's up to them. We're just going to bring the imports in, we're going to drop the barriers. I mean, that statement should send shivers through the city of Adelaide; it should send shivers through the city of Geelong; it should send shivers through the city of Melbourne. Here is the sort of - what you're seeing here is the sort of primitive capitalist ideal, that is, just rip all the barriers down and let them go to town.

And on the very same page - on the very same page as his question and answer is a story, 'Ford formalises exports to Japan', where Mr Nasser has just announced another 70,000 engine blocks going from Ford Australia to Japan, and where McLachlan himself is talking about the success of the Labor Government's policies in Holden sending engines to Germany, Ford selling Capris to the United States and the Verada Wagons which are about to follow. In other words, the policies which are working are ours, but in the sort of naive, primitive view of Hewson and McLachlan, they'll just take this industry and rip it to shreds.

JOHN SHOVELAN: But he is offering things like abolition of payroll tax, et cetera, which he says will add up to something like a cut in costs of around about a thousand dollars per car. Isn't his big mistake that he hasn't sold - some people would say hasn't sold the need for some kind of revolutionary change?

PAUL KEATING: John, use your brains. Use your brains. Look, you take off payroll tax and go to basically a zero tariff on cars. With the world with a glut of car production around the world where they can sell them at marginal cost into Australia, it will just wipe the floor with the Australian motor vehicle industry. Dr Hewson has attacked big business all this week and last week. He says that big business - he accuses them of having an incestuous relationship with the Government dependent on handouts.

You see, his view is that he hates big business because he doesn't see them as self-made. He sees himself as self-made. Therefore, they're to be opposed. Now he's saying to BHP, who were at the Best Practice Awards the other day; he's saying to Toyota who's about to build a $400 million state of the art plant in Australia; he's saying to Ford which is now producing the top selling car: I know better than you. Like I'm the sort of - a refugee from the financial market but I know better than you. And the great success Labor has had in revamping and renovating and remodelling these industries, basically - look, we'll throw it open to imports and frankly if you survive that's really up to you. We couldn't care less.

JOHN SHOVELAN: Are you sure that the Jack Nassers of this world are going to say at the next election that they think you and you government should be re-elected?

PAUL KEATING: Well look, what they've said - let me just quote some people. Mr Johnson from Toyota said if he had known fully what the Coalition policy was, his company may not have committed itself to a $420 million investment. I'm going to Japan in a few weeks time. I'm seeing the Chairman of the Toyota company, Mr Toyota. What do I say to him - that the alternative government of Australia would basically wreck his investment? Do I repeat what John Hewson says when he goes abroad, that he's ashamed of Australia and Australians?

That's what he says. I mean he is just grossly disloyal wherever he goes. He says: I'm ashamed of Australia, its lack of productivity, the attitude of Australians, I'm ashamed of them. I mean do I say that? Or do I say to him: Look, we've got a policy which has taken motor vehicle protection from 150 per cent to 15; we think that you can live with that level, but if it goes to zero you get wiped out and the alternative government is going to wipe you out. I mean what do we say?

See what McLachlan says today on the front page of The Australian, he says 'You are all too motor industry oriented'. The fact is the motor industry is the base industry of Australian manufacturing. He says we have no interest in it. If it can survive against a flood of imports dumped from the excess production of the northern hemisphere at marginal prices, well go for it fellas. If you can stay there, great, but we're not going to make the claim that we want you there as Labor says. Labor says, I say, we want a car industry. Hewson and McLachlan say we don't care.

JOHN SHOVELAN: Just one quick one before you go, Mr Keating. What's happened to your proposal to take to Cabinet about the flag? Is that finished, is that buried?

PAUL KEATING: Well, I mean, everything in its turn and you know, at some point I will. But again, I'm not going to be operated by someone else's agenda. I mean we are at the stage now, in this country where we've got low inflation, low interest rates, where we're now very competitive; where we've got a revolution going on in the labour market; where all those Best Practice companies are turning out with international benchmarks; where we're now exporting our heads off; where we're shipping car engines around the world, fully built-up vehicles like the Capri to the United States.

This is unheard of, unheard of, and yet these mindless zealots who for seven years in office, with Dr Hewson adviser, sat there and did nothing about it. They're now saying: Look, you don't know best; the country is on the verge of blossoming in the '9Os as a low inflation productive environment as it never has before, but we know better; we'll rip the lot down; there'll be no support for industry whatsoever and basically we'll let the northern hemisphere car makers and manufacturers rip the guts out of Australia.

I mean, if you live in Adelaide you ought to be scared stiff by this thing. I mean, Mr McLachlan is a South Australian member. He's going to basically decimate his own state and Dr Hewson, from the sort of lofty vantage point of Bellevue Hill, Sydney, is going to wipe out the city of Geelong and Broadmeadows and half of Melbourne in a sort of mindless quest for sort of, you know, primitive capitalism, a sort of naive view that he has despite the fact that the whole world has a different view.

JOHN SHOVELAN: Prime Minister, we must leave it there. Thanks for speaking to the World Today.

PAUL KEATING: Thank you John.

RICHARD PALFREYMAN: And Paul Keating was talking there to John Shovelan.