/ Â«0,300000048! P. 2 (e% j  FROM A U S m U A N  Uii M U  ' l i i i / i i U h i  -  i-u O R S  (WED) 1 0 . 2 3 ’ S I I l l : i i

Ã¢ÂÂ¢ i  i  1

Ã¢ÂÂ   % ' C  , Â·

"  NEWS CONFERENCE

;  JOHN KERIN, FEDERAL TREASURER

l  AT AUSTRALIAN CONSULATE-GENERAL, NEW YORK

f  TUESDAY, 22ND OCTOBER 1991

|  Thank you very much ladies and gentlemen.

]  The first thing I would like to say is that these days with

j  the contemporary financial institutions, Australia, like  j  other countries, can’t escape the judgment of the markets !  but we can certainly provide and exchange information, and i  that is why I have been in New York for the last two or

I  three days. I've met with Morgan Stanley, Goldman Sachs, JP

Morgan, First Boston, Merrill Lynch the New York Federal  Reserve, Citibank and Chase and representatives from a range  of other financial institutions and I also made a  presentation to the Asia Society.

If I could just sum up/ first of all very much on the short  term, the United States is obviously going through the same  sort of debate on the economy as Australians are. It goes  without saying, of course, the US is a far broader, bigger

and different economy to Australia. There are quite a few  different analyses around. There is a general concern about  the level of debt and, again, similarly to Australia, debate  about whether or not there is a credit crunch - whether it  is demand side or supply side, in a wry sort of a way I

guess its heartening that not everyone is agreed about the  key variables. Evidence, including statistical evidence, is  that a recovery is underway in the United States, but it is

a weak recovery. Business remains doubtful. Businesses  mainly depending on year to year analysis, whereas banks,  investment institutions and financial institutions are  looking at quarter to quarter and see different pictures.

But for Australia, the US recovery means that there won't be  a big pull from this US recovery. That means, no vast  ripples around the world and that is consistent with  Australian Budget expectations. There is not a widely held

view that the US economy will double dip and recovery will  fade.

There is a concern by financial institutions about  "Washington doing something". That could equal pouring  petrol on the fire and in financial markets bond yields  would then rise. There would be more debts for the kids to

pay off and higher interest rates down the track.

*  Because the financial institutions I talked to know that the  Australian Government is concerned about our levels of debt,

; '  ÃÂ*" *  . Â· Â· ' Ã¢ÂÂ   “  ; * Â· Â· ' Â« Ã¢ÂÂ   . - v - r -Ã¢ÂÂ   -  ' Ã¢ÂÂ   -  :  ‘  '  Ã¢ÂÂ

COMMONWEALTH  PARLIAMENTARY LI DRARY  MICAH

/ NU,'dUU000U481 P, 3 FROM AUSTRALIAN CG NYC l‘JiÂ£ A b U n Y  - P M i N  (WED) iu, Ld'91 11: IB

- 2 -

and the restrictions on options that are available to us and  that we are adopting corrective policies, the US financial  institutions and others we spoke to, have confidence in us, ;  There is a genuine appreciation of what the Australian

Government has done and is doing.

1  Other perceptions by the people we talked to about

I  Australia, "Australia Watchers", if I can call them that, ÃÂ  are aware of all the adjustment in Australia, Because

|  Australia hasn't been a major bond issuer in the US market,

|  either Government or firms, really detailed analyses are not |  being carried out at present by some firms, but "Australia

)  Watchers" are waiting to see a permanent reduction in

1> inflation. In this context they see wage outcomes as being

i  crucial.

i  Australia’s corporate cowboys are still a perception problem  {  in the United States, but it is well understood that US .

|  institutions also provided firewater to the cowboys. j  !  Finally, the upgrading of BHP to Pi, the highest grading for

\  short term debt and the successful Coca-Cola Amatil float |  have been seen as very positive gains and that quality

i Australian firms will be participating in equity and bond

i  markets here in the future.

! i  If I could just briefly turn to the long term before I take

i questions. Quite consistently by quite a few people we

;  talked to, there is concern by the US financial institutions

'  regarding US low savings, the underclass, infrastructure, ;  industrial management and low education. (Interjector - in Ã¢ÂÂ   Australia?)  No, in the United States. The population

,  remains, according to the people we spoke to, the US

!  population remains sceptical about the US Government's :  capacity to effectively and efficiently provide the services ;  or policies inherent in those matters that they are

;  concerned about. And they are long term matters, and _

therefore they are even more concerned that nothing much is  I  being done. At the same time, the financial institutions

I  clearly see a role for Government but they want to see

:  systems developed to deliver new services and infrastructure and its quite interesting to see them focusing on that,  i Being concerned about bureaucratisation in the delivery of :  services, but still not seeing ways and means that the

private sector can do it alone and that again, parallels  some of the debate in Australia at present, I

I would be very happy to take questions now.

/ NO, 3000000481 P, 4 FROM AUSTRALIAN UG H i C 'hmAbuni - i hv;d (WED) 10,23'91 11:18

-3-

Michael Connolly - The Melbourne Age: Mr Kerin, there was some concern expressed yesterday after your luncheon address  by one of the questioners who felt that you didn't  adequately answer his concerns about the targets for  Australia reducing external debt, and I just wondered if you  might be able to specify a little more about those targets.

Mr Kerin: No I can't, because not all the debt is Government debt and a clear direction of policy is that we  will continue to address debt, we will get the current  account deficit into better and better balance. We now have

positive current account on goods and services, but the  progress made by private firms as they themselves meet that  debt, is something we can't predict.  The target is that we

have for quite some period to produce more than we demand.   And I wasn't trying to be vague about it I just think there  is no sense in saying we can set a target and meet it. The  world changes, there is a lot of things beyond our control,

but as I said in my opening remarks, the US institutions  that we talked to are relatively relaxed because we are  addressing this in what they see is the proper way. And I  again would say we will get this under control.

Tim Dodd - Australian Financial Review: Mr Keating had made a speech in Canberra yesterday, and criticised the process  of new federalism and the fact that the Federal Government  had planned on handing acting powers and some spending  powers over to the States. In particular he thought that it  would reduce the ability of the Commonwealth to manage the

economy, what is your reaction to that?

Mr Kerin: Well, I haven't seen Mr Keating's speech. I  briefly got a glimpse of some of his answers to questions  and the content of that seemed to indicate that there wasn't  enough debate about this and I think that it is good that

this matter is debated and Keating is quite free, of course,  to make these comments. But I wont go beyond that because  that is a domestic issue, and I think while I'm overseas  it's best not to address these matters.

George Bayliss - AP Dow Jones: Does the Government see any projection for the Australian dollar as it effects  Australian exports and you commented about you wanted to  expand Australian exports.  Is there a particular level the  Australian Government wants to see the dollar to float those

exports?

Mr Kerin: No, we just take the view that we floated the dollar a long time ago, it has been floating, and the market  sets the price. The views about the US dollar have been of

ÃÂª ÃÂ ÃÂ ÃÂ¿ ÃÂ½ ÃÂ· ÃÂ  - ÃÂ¡ HUKN (WED) ÃÂÃÂ, 2 ÃÂ¿ ;91 11:19 / ÃÂÃÂ.3ÃÂÃÂ0ÃÂ00481 ÃÂ¡, 5 :  FROM AUSTRALIAN UG NYC

-4-

interest to us here because it, of course, affects the level  l  of the Australian dollar, but I wont go beyond that.

;  Laura Tingle - The Australian: You've made several remarks

| both in your statement and your opening remarks about the

j  role of government and the debate that's going on about

l  that. You also mentioned it at the IMF conference last

: j  week. It is relevant to what happens in the federalism

j  debate. I was just wondering if you would elaborate on how

I  you see the debate going in Australia at the moment about

I  the role of government. Do you think there's a fairly

j  significant challenge to current thinking about government  \  and the need for Australians to change their perceptions of

j  the role of government?

I  Mr Kerin: I will only talk about it in general terms. Yes,

I  there is always a debate about the role of Government.

I ,  We've gone through the 80s with a lot of emphasis on

\  '  privatisation, deregulation, corporatisation and I think  ]  over any period of time there will always be a re-evaluation

I  of that. In public administration terms,  I think we can see

I  all the time there is a constant evaluation of what are the

|  gains and various expressions will be made by people

:  democratically at various levels and one of the things that

j was pointed out to us was that recently Toronto has gone

back to a more Government oriented approach to the provision  of services and town infrastructure and all the rest of it  and municipal services. And this was pointed to as a  significant test case. So I think that debate will always  be with us what ever democracy we're in. Australia has had  more Government involvement in many ar^as than the US has,

but I think there is a concern when you see empty opulent  skyscrapers and rusting bridges. And this is what some of  the people here are focusing on, that there really has to be  a better way, that democratically in this society people

seem to think the Government can't do it and therefore  nothing much is being done. It is a sort of a problem.

Laura Tingle: Do you think there is a general swing back in  the US as well as internationally towards the belief that  there can be more government intervention in the 90s when  there was not in the 80s

Mr Kerin: I wouldn't, just on the sample I've spoken to, I wouldn't say that that is a strong view but the stronger  view is that Government should pay, but somehow it has to  be, and that is why I used the word new systems, that new  ways must be found to involve the private sector in

infrastructure and services but with a component of  Government underpinning.

jt i  v i Um- I i avan Â« 1 0 , 2 d ’yl 11:20 /  N O , 3 0 0 0 0 0 0 4 8 1  P, 6

-5-

Richard Hubbard - Reuters: W e ’ve had the chance to hear both Gareth Evans and Mr Richardson ... on free trade and in  Bangkok, I think you said that in the last 10 years that  you1ve been a Minister more countries have gone the  protectionist route than less. When is Australia going to  change its attitude?

Mr Kerin: Well I'd like to make one point. By lowering tariffs by pursuing the path we have as a small trading  nation, with an economy that has always been exposed to  international forces, by acting unilaterally we have been  reducing costs through our exporting industries and the  economics of that are fundamentally sound and so there is no  reason, its a naive assumption to think we are trying to  demonstrate something to the world.  That has been in our  own interests and by making our economy more efficient and  continuing on that path we are better able to cope. But in  international forums pushing the multi-lateral barrow quite  obviously it is in our interest and it does make abundant  economic sense for the world to engage in freer trade in  those areas where we are not so engaged at present and I  would particularly point that out to Japan and Europe.

Richard Hubbard: My point is the world's going the other way?

Mr Kerin: Well, it hasn't been in manufactures and I really  do have some optimism that the world might be staring to do  the right thing in the other areas where we've seen some  lock-ins.

John Dury: The Australian: How confident would you be that there'll be some solutions to the Uruguay Round this year?

Mr Kerin: Well, I said in other places, better than 50%.

John Dury: On what do you base that? I mean, is there any dramatic change in the European attitude?

Mr Kerin: Yes, Germany has changed and basically the views being expressed by Arthur Dunkel particularly, the Secretary  of GATT, compared to this time last year, and what my own  officials tell me, Trade Officials, DFAT Officials in

Canberra.

John Dury: Do you see any change in the French attitude?

Mr Kerin: No, but the French, by definition, become more  isolated once the Germans change their mind because the

! Â· Ã¢ÂÂ  E ; -

b - '.

! ' i  :  ! . Â·  .  '

l Â· '

/  N O , 3 0 0 0 0 0 0 4 8 1  P, 7 FROM A U S I R A L I A in  V u  j MVC 1 ÃÂ¯ÃÂ ÃÂ¯,ÃÂ ÃÂ¿ ÃÂ½ ÃÂ· ÃÂ¯ _  lÂ· n U n i'i (WED) 1U, A o ’ 91 l l i R i i

i

original Treaty of Rome was set up very much with German and  French interests in mind.

Sheila Mullan - Knight Ridder: Just curious to understand  there was a report that unemployment could go up to 11 per  cent. Do you have any thoughts on whether or not that is  credible, or what are your thoughts on the unemployment

situation in Australia and also inflation (unaudible).

Mr Kerin: I won't go beyond estimates; I don't know what status that paper had and it is really very dangerous to  comment on matters when you are out of the country because  you are going on other reports which are based on

superstition built on hypothesis. The Budget estimate was  10 3/4 per cent, unemployment peaking towards the end of  this year and that is still the view, we were thinking that  it might be a little bit less, but I can't go beyond that. On the inflation we believe that the December quarter will  be quite low, annualised rate is probably getting down  between 2 and 3. I would again just refer you to the Budget

estimate which is 3 for this year and probably the range of  between 3 and 4 next year.

Tony Thomas - The Economist: Do you think of what you have seen of the weakness of the American economy, will feedback  to Australia in the sense that unemployment will go a little  higher?

Mr Kerin: I what I am really saying there is that the US economy recovers to a growth rate of 3 to 3 1/2, where as  other recessions they have come out or with a growth rate of  6 to 7 typically. It was put to me, for example, that this

recession is a bit like 70/71 which came after an even  longer period of steady growth but slow recovery, and that  was the last slow recovery, all the others have come out at  6 or 7 per cent. If it did that again that would give a

boost to commodity prices and that would be very significant  to Australia. So that is the relationship I was talking  about.

Jo McKenna - News Limited: There's been concern on Wall Street about where Australia's going on interest rates. I  know you've been a bit circumspect about it ...

Mr Kerin: Very

Jo McKenna: A lot of Aussie watchers say to me that they're ’ concerned that there will be another cut and are urging the  Government to be very cautious about that. Is that the  message you've been getting from Wall Street and if so, how

FROM AUSTRALI AN CG NYC TrinhdURY -  r  riORN ( W E D ) 1 0 , 2 3 ’ 9 !  1 1 : 2 1 /  N O , 3 0 0 0 0 0 0 4 8 1  P, 8

-7-

do you see that in terms of dealing with your domestic  situation?

Mr Kerins No one really wanted me, or was naive enough to  think that I was really going to comment about this or make  any commitments or give them any winks or nods and I found  that gratifying because, basically, I will follow due  process and The Treasury, the Government and the Reserve  Bank will conduct monetary policy and at any time we are  monitoring key economic variables and we'll take decisions

on the basis of accumulated and relevant evidence. And the  people I talked to accepted that approach.

Jo McKenna: There was a concern here that the last cut that , you made was a little bit eccentric, that they weren’t  expecting it in light of what you had said leading up to  that cut. Are you able to give any sort of reassurances to  Wall Street on this trip about your approach?

Mr Kerin: I think they understand it. Some people are interpreting it because I was trying to say nothing that  interest rates will never drop again and all I was trying to  do was say nothing. And I continue to follow that path.

John Dury: Mr Kerin, there has been a long running reluctance by the Federal Government to join with the rest  of the world in signing cooperation agreements with the  United States on sharing information on corporate  regulation, and in recent months we have had a number of  instances where worldwide corruption in financial markets  has been wide spread and it may be in Australia's interest  to try and meet the ... on signing such a cooperation. Tony  Hartnell, the head of the Australian Securities Council

recently urged Australia to do something about that. X  understand it there is reluctance at political level to do  so. I was just wondering the view you have, particularly in  light of your talks with Mr Corrigan?

Mr Kerin: That matter wasn't raised, and would be a matter for Michael Duffy to address.

John Duryi But I think you're in charge of the financial  markets aren't you?

Mr Kerin: But I ’m  not in charge of the Australian Securities Commission.

John Dury: Is there a concern at your level given the widespread corruption in Japan, England and in the US that  maybe similar things might happen in Australia.

Mr Kerini I ’m afraid I'm not across the issue, so I won't  comment.

George Bayliss: Will more foreign banks be allowed to come into Australia and will they be allowed to open their own  branches.

Mr Kerin: We will be assessing that when we receive the report by Steve Martin, which will be delivered to the  Government about November 28 and that will be the time to  give that matter consideration. And we have indicated that  we are prepared to consider this general matter and that is  the appropriate time.

George Bayliss: Who is Mr Martin?

Mr Kerins He is the member of the House of Representatives  who is chairing a committee looking at banking.

Network Sevens Although you said that you didn't hear  Keating's speech, I want to know if you will comment on his  criticism of the Federal Government decision to cut the  Medicare rebate?

Mr Kerin: No, X won't comment on domestic issues because other people may be making comments in Australia. It would  just get sloppy and i t 1s always dangerous to comment on  domestic issues when you are overseas.

The Australian Financial Reviews A feature of the Budget  this year has been that the Government is moving in a big  way into bond issuing again and also .... You've had  discussions about this in Tokyo and here.

Mr Kerin: We are acting to advantage Australia and we have taken decisions in keeping with a strategy that does best  Australia and we really wouldn't be tipping our hand to  people who would be very pleased to help us.

Michael Connolly: I would be interested to learn a little more about your discussions with the New York Federal  Reserve Bank and would be interested to see if you discussed  the relationship with them over the Australian dollar and

their sales and purchase of the Australian dollar or if you  have discussed with them the bad debts of the Australian  banks here?

Mr Kerin: No, that wasn't discussed, the discussion really centered more on what was happening in the US and, of  course, I wouldn't have raised that myself.

- s -

John Dury: From the discussions you’ve had with them and Wall Street firms, do you come away encouraged in terms of  the benefits Australia might get from the US economy over  the next year, or discouraged, or just how do you feel about  the US economy and what impact it might have on Australia?

Mr Kerin: Slow recovery and a more sustained recovery, the US have gone through the same experience, you know,  corporate debt, real estate property market depressed, but a  lot of the US economy is holding up very well and some of

the economists and analysts really think the American  economy will kick on a bit more strongly than the consensus  view and that would be good for Australia, but I really

can't go beyond that John. Everything is proceeding  according to roughly where we saw it at Budget time. If  there was a big kick along in the US economy, Australia  would also be advantaged more. But it looks roughly on

track,

Joe McKenna; Are you saying that the Australian economy has  now bottomed and is turning up?

Mr Kerin; Yes, we are saying that.

John Lyons - Sydney Morning Herald; On a general level, Mr  Kerin, has the job of Treasurer been more difficult than you  had anticipated it would have been and how have you coped  with it?

Mr Kerin; I haven't found it very difficult technically but  there seems to be a lot of background noise. It makes it a  bit more difficult than it otherwise would do.

John Lyons: Have you been a success so far?

Mr Kerin: I don't know. Other people will be the judge of that. Thank you,

PH51

X X X END OF DOCUMENT XXX

