Australian Broadcasting CorporationThe
former Prime Minister, Paul Keating, speaks with Tony Jones about the
political climate in the lead-up to the federal election.
Broadcast: 07/06/2007
Reporter: Tony Jones
Transcript
TONY JONES: Now to our interview with the former prime minister, Paul Keating.
And
with the Government returning to its election-mode warnings that Labor
can't be trusted with the economy, what is Mr Keating's advice to Labor
on how to counter the Liberal Party mantra?
Well, Mr Keating joins me now.
Thank you for being here.
PAUL KEATING, FORMER AUSTRALIAN PRIME MINISTER: Thank you Tony.
TONY
JONES: Based on the slogan that took Bill Clinton’s stint into the
White House "it's the economy, stupid", Labor has its work cut out for
it, hasn't it?
PAUL KEATING: It has and it hasn't. I think the
public are quite wise about the economy and governments now and they
know that the structural changes of the '80s and '90s are working.
The
real question today with the economy growing so rapidly and
unemployment so low is why doesn't the tinder box go off? That is, why
don't we get the big bang? The big bang in inflation and in wages back
into the old dismal cycle? The answer is because of the structural
changes. Nothing to do with Mr Costello's economic management. All to
do with, let me explain.
When the Asian crisis came along in
'97, when our national income was cut, the dollar went from 79 cents to
48. That made the "A" dollar proceeds of our exports higher and it made
imports dearer. It took the shock in other words. So interest rates
remain low at about 6 per cent for housing et cetera.
Now this
time with this great birth of income, the dollar is doing its usual
shock absorber job and going right up to take the income surge out of
the economy. In other words, like getting these terms of trade is like
a vodka shot, the old body jumps and the economy jumps. So to stop the
jump the dollar has gone up to lower the "A" dollar proceeds. Now
that's nothing to do with Peter Costello and everything to do with
Labor's structural changes from the '80s.
TONY JONES: You do
have some support for this rear view vision version of events, if you
like, from Ian Macfarlane, former Reserve Bank governor who actually
says the floating of the dollar was the big economic reform of the
1980s.
PAUL KEATING: It was, but it cost so much. Because when
we'd been inflating it for 15 years above most other countries, we
couldn't exchange $1 for an American dollar, we had to have a real
depreciation of the exchange rate. That meant cutting it out of wages.
So to get a floating exchange rate, ordinary working men and women in
the '80s suffered real wage reductions to get that competitiveness.
That's what's sticking to the economy today.
Just take tariffs.
Bob Hawke and I wiped the tariff wall out. That means the doors are
open to Australia so this wave of deflation from China, lower prices
for everything, consumer goods, whitegoods, durables, computers, you
name it, motor vehicles. So that means you've got that low inflation
sweeping into Australia, cause there's nothing now to stop it. In the
old days when you had the tariff the old goods had to jump the tariff
wall and they would mostly go up 50 per cent or double in price.
Now
the higher wages which are in the inefficient sector of Australia like
infrastructure, transport et cetera, these are being subsidised. That
inflation rate which is running at about 4 per cent is being subsidised
by zero per cent coming across the wards. If you've got half the
economy doing four and half doing zero, the inflation rate is two.
That's where Mr Costello gets his 2 per cent from, nothing clever from
him.
TONY JONES: You say that, of course,
PAUL KEATING: It's undeniable, it's a matter of record.
TONY
JONES: It's also a matter of record that they've been in government for
11 years and look at what we've got. Strong growth, low inflation,
record low unemployment, high dollar, booming stock market, record
profits, steady interest rates. Do these really sound to you like the
sort of conditions that would have people clamouring for a change of
government?
PAUL KEATING: Much of that existed in 1996. Five per
cent growth to the year, inflation 2.5, 3 per cent. These were the
conditions. I think when the economy gets, when things are good in the
economy people think they can be a little more footloose in changing
governments without getting hurt in the crossfire and I do think that
is in the mind of the community now.
But this maintaining low
inflation now is all about these structural things. Let me go back to
enterprise bargaining. I removed the centralised wage fixing system in
1993. One hundred years of industrial practice gone. Nothing to do with
the Liberal Party, nothing to do with the Business Council, everything
to do with the Government I led and the ACTU and the leadership of Bill
Keelty. The end result is that we double trend productivity so that
real wages grew through the '90s at 2 per cent a year, 10 years of 2
per cent is 20. You hear Mr Costello talking about 20 per cent in real
wages.
But since 2000 real wages have been going down, so the 20
per cent increase came out of the Labor Party and the Labor Party's
policies. It's nothing to do with WorkChoices. Individual workplace
agreements go to 3 per cent of the working community. The rest of the
community are working on enterprise bargains.
So there's the
exchange rate taking the shocks, there's tariffs letting the deflation
in and there's enterprise bargaining giving within sector flexibility
keeping inflation low.
TONY JONES: But, of course, since you've
mentioned industrial relations what the Government is clearly saying is
that their industrial relations reforms now are one of the key
underpinning new economic reforms, and that that's being put at risk by
the possibility of a Labor Government coming to power?
PAUL
KEATING: Well, they're not economic reforms at all they're actually
anti productive. I've made this point before, but I'll make it again.
If
you go to 200 or 300 people in a factory or 200 or 300 people in a
workplace and come to a three or four year bargain to the improve
productivity and share it between wages and profits you've got a good
chance of getting productivity from the whole enterprise. But if you
just take one person at a time, bring them into the boss' office and
cut their wages there's no chance of getting any productivity. That's
why trend productivity is now rapidly on the way down. It was 3 per
cent under me. It's now under 1 per cent. So how are we going to keep
inflation low with, at the moment wages are running at about 4 per
cent, productivity is under 1. This is consistent with an inflation
rate of 3 per cent, or higher. The Reserve Bank knows that. That's why
they've got the rates on hold.
The great lie of the Howard
Government in respect of workplace changes, they are simply a set of
arrangements to keep unions out of workplaces. They've got nothing to
do with productivity and the quicker we move away from that kind of
discriminatory structure to a truly trust based co operative sharing of
work and workloads, then we get back to reasonable levels of
productivity and again, reasonable rates of growth in real wages. It's
no accident as you saw in today's front page of The Sydney Morning Herald
and other places that the wage share in the economy has gone down, and
the profit share in the last four years has gone up because wages are
now in real terms, are declining.
TONY JONES: I'll come back to
the industrial relations question in a moment, but I want to get back
to the question that I asked you before and that is with the Liberal
Party mantra you can't trust Labor, or this current crop of Labor
politicians with the economy, because they don't have the experience to
run the economy, how does Kevin Rudd and Wayne Swan counter that in
your opinion?
PAUL KEATING: A huge market, the fourth biggest in
the world in foreign exchange the size of the exchange rate every day,
there are no tariff walls anymore to stop the tariff wall helping us
with deflation. That has nothing to do with anyone in public life. The
Reserve Bank is looking after the monetary lever.
All the
Government really has to do is make sure it doesn't blow the budget.
That's the final primary responsibility of the Government, and Kevin
Rudd has made that as clear as day where he stands on that. As clear as
day. He'll run, in fact, a more conservative fiscal policy than will Mr
Costello. What's Costello really done? He's taken the money, spent most
of it to leave the surplus on empty. That's what he's done. Outlays are
pinned at about 24 per cent of GDP. If revenue to GDP is 26 or 27, ipso
facto you run a surplus of 2-3 per cent of GDP. That's all he's done.
The idea quite frankly we need those characters, what structural change
has he done? The only one he claims is the GST, but it does not change
behaviour. I'm not going to eat any less, you're not going to eat any
less because our food is GST taxed or our hair is going to stop
growing. The GST changes nothing. It's not a behavioural structural
changer.
TONY JONES: It changes the amount of revenue the Government is pulling in and that goes to the states?
PAUL KEATING: That's all it is, just a revenue, before it was financial assistant grants, now it's...
TONY JONES: Any future Labour Government will keep the GST, so you're not suggesting they should not do that?
PAUL
KEATING: No, no. But I'm just saying in terms of structural changes Mr
Costello's changes are inconsequential. He fixed up the national
accounts yesterday, can't believe his luck because all the natural
structural stabilisers Bob Hawke and I put into place are still
working. They're like a set of knew pneumatic rams, they adjust each
week to economic conditions. All the Government's got to do is not blow
the budget.
TONY JONES: I just make this point. You and Bob Hawke are barely mentioned by the current Labor leadership, why is that?
PAUL
KEATING: Well, they don't like the fact that we had, the Liberals
attacked us about interest rates in 1988/89 in the last election. They,
in my view, foolishly failed to counter it. All they had to say was
John Howard had the highest cash rate since the Second World War 21.4
per cent in 1982 and that whole campaign would have gone. But they
wouldn't say it. So they now not only used the K-word they don't use
the H-word.
Hawke and I have been put out to grass because we
had interest rates up in 1989. That's 20 years ago in two years from
now. Bear in mind this Tony, Bob and I won the '90 election with
interest rates, cash rates at around 16 per cent, housing rates about
16 per cent. I won in '93 when interest rates were not an issue. They
were not an issue in 1996. So how come they became an issue in 2004, or
in any way an issue now? The answer is because the Labor Party's
inability to get across the argument and put it.
TONY JONES:
Which they still according to you aren't able to do. Here's the point.
Kim Beazley seemed to have a deliberate policy of turning his back on
the Hawke Keating years. His advisers now or the key advisers like
Epstein are now key advisers to Kevin Rudd, is that a problem?
PAUL
KEATING: They'll do him no good. Because in the end those kind of
conservative tea-leaf-reading focus group driven polling types who I
think led Kim into nothingness, he's got his life to repent in leisure
now at what they did to him. They're back, they're back. Gary Gray lost
the '96 election with me and then lost '98. He's been given Kim
Beazley's best seat in Western Australia.
The Labor Party is
not going to profit from having these proven unsuccessful people around
who are frightened of their own shadow and won't get out of bed in the
morning unless they've had a focus group report to tell them which side
of bed to get out.
TONY JONES: Well you were talking about David Epstein as well.
PAUL KEATING: Well he's the same chief-of-staff now, same.
TONY JONES: This is a problem for Kevin Rudd?
PAUL
KEATING: These are in my opinion no value people. Wouldn't fight, don't
know how to fight, much less fighting the Liberal Party.
TONY JONES: But why? You must have some idea, why has he taken them on?
PAUL
KEATING: They don't have the structure or the creativity or the passion
or the belief to go and grab the prize. They don't understand a
victory.
I used to call Gary Mr Two Step. He was always going
to win in two steps. I said to Kim, you will win in 'the eight Kim, a
Labor leader's election on the first one is always the best one, but
you got to look like you want the job and you've got to get that lazy
Federal organisation to get out there and help you. He would have won.
He got 52 per cent of the vote and lost. The reason was Gray 's Federal
office.
TONY JONES: You think it's happening again?
PAUL
KEATING: I know it's happening again, but the current Federal secretary
is the author of "don't fight them on interest rates" at the last
election. You wouldn't put much faith in him, would you?
TONY
JONES: The other key reform that we've talked about is the Government's
industrial relations reforms. It's been countered immediately by a new
set of industrial relations reforms from Julia Gillard. How do you
think she's gone?
PAUL KEATING: Not very well. Not very well.
This was a very simple change. She had to put a simple thing across.
Basically what she should have said was this, "We'll register all
agreements with two provisos…
TONY JONES: You mean AWAs included?
PAUL KEATING: Whatever you want to call them. Single enterprise workplace agreements. We'll register them all with two provisos.
We
will introduce a national minimum wage with conditions for annual
leave, sick leave et cetera, no agreement will be registered which
denigrates from that award. And the second condition is there'll be no
positive discrimination against collective bargaining or the ability of
a union to represent people. There might not be either positive
discrimination for a union, but there won't be one against a union. Now
once you've said that you've said the lot.
TONY JONES: I want to
explore how on earth you would do that in a moment, but first of all
you don't think they should have scrapped AWAs, that's a pretty
critical issue?
PAUL KEATING: AWAs as they are now have to be
scrapped because they have a bias against the right of an individual to
talk to another individual about their wages. I mean, show me any
democracy worth having Tony and I'll show you one where people can meet
freely and talk about conditions at work and be represented by a union.
That's the poison in the AWA. That's the only point of the AWA. It's
got to go.
But the Liberals in their stupidity not taking and
annealing the enormous change I introduced in 1993. That is, I was the
guy who had to get the ACTU in a headlock and pull its teeth out with a
pair of pliers. But it was like administering, pulling a set of rotten
teeth out. This is comparative ways justice which couldn't last.
Fortunately
they had a great leader in Keelty who understood that. But having got
enterprise bargaining up, having got away from centralised wage fixing,
haven't had 20 per cent real growth in real incomes, 2 per cent in low
inflation, why on earth would you touch it? Why would you go now and
try and wreck that consensus to have the Labor Party come back with
something that will take them further back than the legislation I put
in place in '93? If that happens, business has got John Howard to blame
for breaking that consensus.
TONY JONES: You believe Julia Gillard's reforms will take Labor further back?
PAUL KEATING: Let me make this clear, the Liberals decided that they wouldn't use the conciliation and arbitration power.
Under
that power of the constitution you always needed a commission who
tested capacity to pay and comparative wage justice. They've now used
the corporations power and the High Court for the first time as
validated its use. That means a Federal Government can now legislate
the wage and the conditions.
TONY JONES: You're talking about a
Federal Labor Government using the corporations power to create what, a
minimum wage and conditions?
PAUL KEATING: Make a minimum
national award by legislation. Now it can have a group which recommends
it. You can call it some commission of some kind to give you
recommendation. But effectively the Treasurer or the minister for Labor
could carry as an act of Parliament the national minimum award. Now
once that's done what are we worried about with AWAs?
The people
getting them in the mining industry are on $150 and $200,000 a year.
They aren't down on a $30 or $40, 000. If you get your national award
into place and get enterprise bargaining and the right of people to do
collective bargaining you're home and hosed?
TONY JONES: Let me make this straight, you're advising a future Federal Labour Government to actually legislate for wages?
PAUL
KEATING: Yeah sure. For minimum wages, including annual leave, sick
leave, the six, say, minimum conditions. And if these, and to reserve
the right of people to collectively bargain. Once you do that, who
cares about the AWAs?
TONY JONES: You know what's going to
happen here. You're going to be called a centralised wage fixer. You're
going, people are going to say this is a Marxist idea going back to the
central government setting wages?
PAUL KEATING: No, no, no.
There's always been under my policy which was the enterprise bargaining
model there was always a safety net. The enterprise bargaining for
those who could get one and for women and kids in retail that couldn't
get it, a woman working part time in Woolies she got it under the
safety net.
The safety nets now are the National Wage Case and
the National Wage Case has gone because the commission has gone. But
the Government can have Mr Harper and the Fair Pay Commission, but it's
got no commission power it's really the Commonwealth Government. That's
the point I'm making. It's not me saying it, it's the High Court saying
it.
TONY JONES: Essentially you're saying you don't need an arbitration commission to be brought back at all?
PAUL
KEATING: No, you don't need it. It's finished, gone. Howard destroyed
that. Capacity to pay gone, enterprise bargaining upset.
Thank you Mr Howard. Business will rue the day they ever heard of WorkChoices. Rue the day.
TONY JONES: Do you think a Federal Labor Government would ever have the courage to do what you're talking about?
PAUL
KEATING: You've got to protect people on the bottom rung of the ladder
so you do it by setting up an authority, Julia Gillard's given it a
name. They make a recommendation and that becomes a new national
minimum wage.
TONY JONES: But how would you change it from year to year with inflation and so on? Would you create new legislation each year?
PAUL
KEATING: No, you'd hear the economic case, what you can afford to pay,
what the productivity was, the usual stuff you would have heard before
the commission.
The difference is Tony, under the arbitration
power, the conciliation and arbitration power under the Constitution
written in 1900, you need it under the Act that commission, now you
don't. Howard put the match under the commission. That's gone. That
structure's finished.
TONY JONES: One of the startling political
things you're saying here is that the deputy leader of the Labor Party,
the spokesman for industrial relations has got it all wrong?
PAUL
KEATING: She hasn't got it all wrong but she doesn't quite understand I
don't think the difference between the centralised system I inherited,
the old rigid system of compulsory arbitration and comparative wage,
the leapfrogging which always gave us system and the enterprise
bargaining system of 1993. Such a revolutionary change.
Now I
think the Labor Party accepts the revolutionary change like it's old
homework. Instead of that she lets the Liberals target her saying she
wants to go back to the old centralised system which she does not want
to do. Basically a policy is ok providing that she makes clear that
things have to be subject to national minimums and that workplace
agreements, whatever you want to call them, can't bar unions on job
sites.
TONY JONES: Let me ask you this, because you mentioned
earlier that you actually had to put the ACTU in a headlock and pull
out their rotten teeth one by one. Are you saying essentially that
she's in the sway of the present ACTU and she's put this policy
together and this is a union inspired policy. You need to pull more
teeth now?
PAUL KEATING: One of the reasons why real wages are
falling, it's not simply because the Government is the kind of show it
is, it's because the unions are just not much good at what they do
these days.
The unions are just ineffective at getting real wage
increases for working people. They've gone to seed the unions. This
straw man thing, we'll have the union bosses. Try and find one. Try and
find one that can…
TONY JONES: They're all going to be in Parliament, aren't they?
PAUL
KEATING: No. I mean, the fact is there's been massive, when I started
work I started work in Australia which was in the industrial age. I was
one of the people that ushered into Australia the post industrial age.
In the post industrial age the age of the collective is less and the
natural role of unions is less. But as well as that may be they've also
got incompetent as well.
TONY JONES: You're saying essentially the union movement is dying on the vine?
PAUL KEATING: It's dying on the vine. It's dying out of lack of passion. Its reason for existence, and general incompetence.
TONY JONES: So why should the Labor Party link itself so directly to a union movement that you describe like that?
PAUL KEATING: I don't think they should.
TONY JONES: So what should they do?
PAUL
KEATING: Basically keep unions, look, any Labor Party that turns its
back on a collective group of people is no Labor Party at all.
But
that doesn't mean to say they have to become apologists for lolling
about. I mean you take the instance, the liquor allied entertainment
restaurants, entertainment industry in this country since the '80s.
It's been massive. Unionisation hasn't happened. There's some of it
there, basically hasn't happened. Why? Incompetence.
TONY JONES:
If you're right and if your vision is correct then you're talking about
a new Labor that doesn't have unions attached to it?
PAUL
KEATING: You have Labor with unions attached to it but not ones where
they're calling the shots anymore than they call the shots on me when I
introduced a 1993 labour market reforms to junk centralised wage
fixing.
TONY JONES: But that was my point before, you think they're calling the shots now?
PAUL
KEATING: No, they're not calling the shots now, that's only Costello
Howard talk. Silly what's his name, the "Shrek" whoever he was on the
television this morning. What's his name?
TONY JONES: Joe Hockey.
PAUL KEATING: Yes, Joe Hockey. That stuffs all palaver.
TONY JONES: Paul Keating, we are nearly out of time, but I mean, you realise you've set the cat among the pigeons, don't you?
PAUL KEATING: What cat amongst what pigeons?
TONY
JONES: There's quite a few, we haven't got time to go through them all
right now. I presume that you've made these points because you want to
see change.
PAUL KEATING: I tell you one thing Tony, the Labor
Party will do no good running away from the great structural reforms of
the '80s and '90s under Bob Hawke and me.
Our model is a model
Tony Blair tried to pinch and run calling it the third way. I noticed
Wayne Swan talking on the television tonight saying he'll form a Labor
Government. As if there were 30 of them. There's only two main ones, in
the recent period, that's Hawke and mine and we're the ones who did the
changes. Everything in those national accounts yesterday, everything,
that is the growth in the economy and the low unemployment, the reason
the system is not blowing, the tinder box has not taken off is because
of the float, because of the tariff changes and because of the IR
changes, structural changes. That's why they're there. Not because of
any superior management by Mr Costello. You know this pat line tonight
about you wouldn't put an L plater. God, he's the greatest L plater of
all time.
TONY JONES: Not anymore, he's been there for 11 years.
We'll
have to call a halt to this now Paul Keating. We could probably go for
the whole evening, but we can't. Thank you very much, it's been
fascinating to talk to you again.
PAUL KEATING: Thank you.
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