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Australian Stock Exchange, Wednesday, 20 August 1997, 11.30 am: transcript of doorstop interview [RBA report; economic growth; inflation; Wallis]


JOURNALIST: Treasurer do you have any response to the RBA report yesterday. It seems to paint a fairly glowing picture.

TREASURER: Well the RBA's assessment is very close to our own of course that growth is strengthening, certainly picking up through the course of 1997, that the housing cycle is trending upwards as the excess supply starts to unwind that we've got historically good outcomes in relation to inflation, we've had 5 interest rate cuts. So it's a very positive environment and what that means is strong, sustainable growth. The Government's not fixated on the boom bust cycle any more. What we're looking for is long sustainable growth, the kind of growth to keep us going through the rest of the decade and beyond.

JOURNALIST- : Is inflation dead?

TREASURER: You never pronounce something dead because it has a certain finality to it, but let me put it this way it's looking terribly sick.

JOURNALIST: So it's under control?

TREASURER: Look inflation is now in underlying terms 1.7%. That's the best outcome we've had for decades and provided we run wages in a sensible way, we link wages to productivity improvements, we can keep it there. And if we keep it there then one of the barriers to sustained growth in this country is under control. Two things have held back Australian growth, one was inflation, the other was every time we got strong growth we got a current account deficit blow-out. Now we can beat the current account if we can boost savings. The Government's well on the way to its savings targets. We'll be in surplus by next year. But we have to keep working on that problem to make sure that we can get growth up and sustain it up.

JOURNALIST: What did you think about what the Reserve Bank report said about the effect of fiscal consolidation on what's been happening in the wider economy?

TREASURER: Well I think the Bank's probably been amongst the most passionate people calling for fiscal consolidation. I think the Bank probably, like us, believes that fiscal consolidation should have been done 3 or 4 years ago. But we are well on the way now to getting the Budget back in balance. The Budget should not have been $10 billion in deficit in 1995/96. It should not have been there, but the fact that Labor had failed meant that we had to attend to fiscal consolidation. As I said before, we're well on our way. On current estimates we will halve the debt the GDP ratio by the year 2000/2001. Halve the debt to GDP ratio. The wonderful thing about that is once you get your debt under control you don't have this debt servicing problem. We are out there at the moment trying to service debts that shouldn't have been run up. Once we get that debt problem under control then we are in a much better position.

JOURNALIST: What do you see as the main inflationary, potentially inflationary hot spots in the economy?

TREASURER: Well it's important that we keep our eye on the wages, as I said before and we make sure wages are harnessed to productivity. And it's important that you keep your eye on the supply side of the economy. We can't let up. In this country we can't let up on removing the barriers that are imposing unnecessary costs on business. We've got to keep reforming the economy on the supply side. And one of the major parts of that is modernising the financial system. And shortly we will be bringing down a response to the Wallis Inquiry which has some very strong sensible recommendations on how to improve the Australian financial system.

JOURNALIST: Is growth strong enough to solve unemployment?

TREASURER: Well look to make sustainable inroads into unemployment we need strong sustained growth, we need improvements in our industrial relations system and we need to get the interplay between work and welfare right. The Government is creating the conditions for growth to be strong and sustainable, we are reforming the labour market, we are also attending to the interaction between the work and the welfare system. One of the important initiatives which will be up and running pretty shortly is the work for the dole scheme, which is one of those changes which is very necessary in a structural sense.

JOURNALIST: Inaudible...

TREASURER: Well you'll have to read the RBA report to see what it means....

JOURNALIST: What does it mean for you?

TREASURER: Oh well whatever it means to me I'm not in the business of disclosing it today.

JOURNALIST: When will you be announcing the replacements for Mr Lew and Mrs Holmes a Court on the Reserve Bank Board?

TREASURER: Well I put out a statement yesterday I think saying that the Government would consider further nominees and we'll announce them after they've been fully considered I expect it won't be all that long.