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Transcript of interview with Fran Kelly: 'AM' Program, ABC; 6 September 1993; Reserve Bank



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6 September 1993 REF: TRANSCR\WH\DT\040

TRANSCRIPT OF RADIO INTERVIEW JOHN HEWSON MP 'AM' PROGRAM, WITH FRAN KELLY

E & 0 E - PROOF COPY ONLY

SUBJECTS: Reserve bank

Palfreyman:

Well after being accused of responsibility for the falling dollar, this morning John Hewson took the opportunity to respond to the Prime Minister. The Opposition ' Leader spoke to Fran Kelly.

Kelly: 1 ’

Dr Hewson are you guilty of rogue behaviour?

Hewson:

No absolutely not, I mean I see my role as giving voice to those thousands if not millions of Australians, their anger their sense of betrayal by this government and I think the Prime Minister has put himself above the people. He treats them with contempt, he figures he can say or do anything to get elected and then ignore that,

in the months after the election of course the people of Australia won't accept that. So simply I'm standing up for the interests of the people of Australia.

Kelly:

But the Reserve Bank Governor, Bernie Fraser agrees with Paul Keating. Twice in two weeks now he said its concern over whether the Budget will be passed that is worrying the markets not the Budget itself.

Hewson:

Look I think the reason that the markets have reacted the way they have is that they've recognised and that's investors here and investors overseas have recognised that

Parliament House. Canberra. A.C'.T. 2600 Phone 277 4022 COMMONWEALTH PARLIAMENTARY LIBRARY MICAH

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we're a country without an effective Government. I mean this Government has been directionless since the election. It has had one fiasco after another; pay tv, the Budget, it doesn't matter what it is, Mabo; they've made a mess of everything and I think that perception has permeated through financial markets.

Kelly:

But Bernie Fraser said the financial markets accepted the Budget initially?

Hewson:

The initial reaction of most Budgets is usually one of acceptance but as people scrutinise the Budget and see what it's trying to do and look in more detail at the figures and so on, there's quite often a secondary reaction and in these circumstances I think that the key issue is that the Government has no mandate for what it's done firstly. I mean it promised people they could have tax cuts without tax increases,

without new taxes, and secondly the Budget does not and I don't care what anybody says, it does not address our fundamental economic problems. Unemployment doesn't improve, inflation gets worse, the balance of payments gets worse and debt gets worse.

Kelly:

So you dont care what anyone says not even the Governor of the Reserve Bank?

Hewson:

Well look it's an amazing coincidence since Bernie's out there again, but as far as I'm concerned the markets are looking at this document for a number of reasons and one of them is that they see that as I say that we no effective Government, two - the Government is not addressing our economic problems in this document. This document is not an economic Budget. It is a political document to try and minimise

the political damage they did to themselves by lying through and after the last election about tax cuts. That's all this Budget is about. It's not an economic document but it does have economic effects and some of those are starting to flow through.

Kelly:

But Bernie Fraser, the Reserve Bank governor is out there, he's out there buying the oversold dollar right now. He should know shouldn't he, how the markets are accepting it or not.

Hewson:

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Look Bernie's making a judgment and I'm making a judgment. As I say I think that the markets have come to the view that we do not have an effective government in

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Australia and the ball is back in Mr Keating's court to demonstrate that that is not the case.

Kelly:

Well the international credit rating agency - Standard and Poor's, also thinks the Budget strategy is basically right and credible. Do you disagree with them too?

Hewson:

Now look they've reconfirmed a double A credit rating, you know big deal, we used to be a triple A credit rating and that's where we ought to be and we ought to be putting policies in place not to just confirm the fact that we've slipped down to double A, but to turn it around and go back to triple A.

Kelly:

But in confirming that they've said they think the Government's Budget strategy is right and their deficit reduction strategy is on track.

Hewson:

Well I mean I think in time you will see the deficit reduction strategy is not intact and in fact the first year of this strategy we go up rather than down in terms of the size of the deficit and the future years are based on optimistic growth forecasts which will not be validated. Amazingly strong forecasts for both growth and particularly employment growth which we don't believe will come true. And I don't think there is a deficit

reduction strategy of any substance. I think it's basically a myth that they've put forward to try and make people feel better about it and the fact is they've got no policies in place to actually bring that result about.

Kelly:

So you think Standard and Poor's have been conned?

Hewson:

No I'm not saying that I'm just saying that I have a completely different judgment and I am concerned not to just validate double A, I want to see us get back to triple A and I'm sure most Australians who we give voice to would want exactly that. They can't understand why a country as wealthy and as well placed as Australia should have a double A rather then a triple A credit rating, should have $200 billion worth of debt, should have unemployment locked in at 10 to 11% and perhaps worse, should have inflation again on the increase, should have the balance of payments looking down the gun barrel of another deficit of about $18 billion this year. I mean people cannot accept that.

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Kelly:

In an interview coming up on 'AM', Standard and Poor's say the dollar will pick up again when the market refocusses on that key issue the deficit reduction strategy. You obviously don't share their confidence?

Hewson:

Well I'm not going to predict what will happen to the dollar. All I'll say is that the financial markets will remain uncertain until Paul Keating provides some leadership. I mean for years Paul Keating hid behind Bob Hawke. He talked tough about leadership, he talked tough about reform, he used to blame Bob when things didn't go right. Well now he cant do that, Bob's not there anymore and the shoe's on his foot. He's got to lead, he's -got to provide the reform and until he does that, the financial markets will continue to conclude that we do not have effective government

in Australia.

Kelly:

But Dr Hewson, do you accept that there's a bit of a spoiler in your actions. Everyone else, the Democrats, Standard and Poor's, the Reserve Bank, even the markets initially think the Budget strategy is all right?

Hewson:

Absolutely not, go out and talk to those thousands, if not millions of Australians who I represent. People who feel cheated, people who feel angry, people who feel betrayed. This Government lied all the way through the election campaign and after it that they would deliver the tax cuts without tax increases, without new taxes, and they've just betrayed the people of Australia and they've got to be held to account for that and that's our role. Our role is to give voice to those people who otherwise do

not have a voice in this country............

Kelly:

For the sake of economic stability now though is it time for you to pass a legitimate government's Budget as Paul Keating says?

Hewson:

Look we're a long way from seeing any of that legislation passed, I mean the taxation deficit reduction bill where they've lumped together all the tax measures is probably unconstitutional. I mean they've been too smart by half in bringing forth the legislation in that form. That will need to be determined as a first step. Now that's entirely their doing and it's yet to be determined whether that bill is or not constitutional, we need to find that out as a matter of urgency. But as far as I'm concerned I said we will

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oppose four tax increases for which they have no mandate, and it doesn't matter what bully tactics he uses, what names he calls me, the fact is we're going to stand firm on behalf of the people of Australia.

Kelly:

Dr Hewson, thankyou.