Listen: John Faine, The Conversation Hour, ABC: 774
7 November, 2011
54 Minutes

After Words: The post-Prime Ministerial Speeches (2012), By Paul Keating

Partial transcript:

The ideas are what matters. The book is fundamentally a collection of ideas.
2:55
The strategic section is about the vacuum at the end of the Cold War. The fact that the American cried “Victory” and walked off the field and left the world un-run from then until now; The two Clinton terms; The two George W. Bush terms were really lost in terms of the kind of world we could have had at the end of the Cold War.
4:02
In ’97, I said, three years before the Euro started, Don’t let the peripheral countries into the Euro. Build the Euro around France and Germany and the Benelux countries - Luxemburg and Holland. Don’t let Club Med in: Italy, Greece, Spain, Portugal. In fact, I wrote to the governors of the Bundisbank and Bank de France at the time, saying Don’t let them in! Don’t let them in! And they wrote me very nice letters back saying, yes we agree with you, but our masters will let them in.
4:44
You really didn’t have to have a crystal ball to know what would happen in a one-size-fits-all monetary policy - no more depreciations. They all used to depreciate, of course, and get their competitiveness back. They lost that. And, the reason why people worry about the Greek government defaulting on its debt is, of course, it can’t print drachmas anymore. If you’ve got a printing press, then you can print out more currency, well, of course, your never going to default. Mind you the currency mightn’t be worth anything but you can dig yourself out of a hole. In the Euro, of course the Greeks can’t produce drachmas anymore,
and ECB won’t print more money.

John Fain: And at the core of the Greek problem is the fact that wealthy Greeks don’t pay tax.
5:35

Paul Keating: Cheating is a national sport over there.
6:30
Keating: Fundamentals work their way up. In the end, what do they get out of it?
Italy, Spain, Greece, Portugal, by joining the Euro they got German interest rates. They got the old Deutschmark interest rate of 4.5 to 5%. So, for 8 years they’ve had cheap interest rates. But now they have neither cheap interest rates nor the flexibility they had with the old exchange rates and the ability to print their own currency. So they’re jammed.

Fain.
You are involved with one of the big international banking organisations.

Keating: It’s an advisory business. I’m Chairman of a business called Lazar, which is an old fashioned – operates in the old fashioned manner of giving pure advice to companies. ... Big city banks lent against the balance sheet. We don’t lend any money. We just give advice. ... Broker mergers and acquisitions. The company is paid a fee, but doesn’t bet its
capital. Doesn’t do proprietary trading.

Fain:
What does Paul Keating think of Occupy Wall St and Occupy Melb. Sydney, and so on?
8:20
Keating: I’m surprised it hasn’t happened earlier. You look at what’s happened in America since the advent of movement conservatism, which happened in the Reagan years. The American prosperity compact was torn up. This is a compact that began with Roosevelt, supported by Truman, and adopted by Eisenhower, the new Republican President in 1950/1. Then you had Kennedy and Johnson, and Nixon, who was a Republican, all subscribed to it. And what was it?
8:53
Basically, that you shared the productivity between wages and profits. This all stopped with Reagan, with the rise of Conservatism. And it got into full modality with George W. Bush’s administration. The end result is that Americans have had no increase in real wages since 1990. Where as, in Australia, under the policies of the government I led, and Bob Hawk led, and since, of course, in the meantime with Howard, the wages system I established, Enterprise Bargaining, Australians have has a 36% real increase in wages since 1991. The Americans have had zero. People are 1/3 wealthier here, after inflation. Whereas all of the productivity in America – big surge in the late 90s and the early noughties, say ‘97 to ‘04, massive, like 9% a year, all of it went to profits. None of it went to wages. So, you just wonder why American working people, and working poor would take this.
Occupy Wall St. is finally people saying, hang on this is shocking! We’ve had enough of this. Is it any wonder the top 1% have had a huge increase, a massive increase in wealth? Philanthropy is one of the things in America now. You know, you give away the money. But a much better idea is that you don’t get the money in the first place. It goes to ordinary working people.

Fain: Do you think the rich are greedy?
10:46

Keating: They are super greedy. They are pig-rich. ... The wealth here has never
accumulated like that. See, we offer – this is the point about the compact I tried to put together with the ACTU. That is, an Open Market economy, flexible exchange rates, flexible wage system, zero tariffs, etc. but grafted on to a kindly social wage. Full universal health protection with Medicare. A retirement income with Superannuation. Access and equity in education.

When I began in ‘83, 3 kids in 10 completed year twelve. When I finished in ‘96, it was 9 in 10. So we trebled year 12 retention rates. And then, of course, 40% of kids left year 12 and went to university. That meant if we had 3 x as many kids finishing yr 12, we had to treble university places. So we took university places from 250 thousand to 750 thousand.
These big social wage things are what makes Australia a better place than the United States. And why the Labor government —the model of the Labor government, what Tony Blair, 15 years later called “The Third Way” —I said to tell Tony, in a couple of conversations, it was the only way. That’s why the excesses of wealth were never really created here. This economy grows about 3 and a half to 4% a year. And anything that does that means there is a lot of wealth spinning off.

12:30
Fain: Sure, but if “the rich are pig-rich”- to quote you back to you, what do you do about it?

Keating: You hop into them!

Fain: How?
Keating: Well, lifting the tax rates on them. This is what the Republicans are now trying to stop. They’ve reduced the Capital Gains tax. Peter Costello did the same here. I had CG fully taxed at full marginal rates, and Costello reduced it to 22.5%. Well, this encourages people straight away —all the clever fellows are out there trying to turn income into capital.

Fain: Speculating.

Keating: Yeah. Whereas in my system, if you made income you got an imputation credit when you took your dividends home for the company tax paid. In other words, I was trying to encourage the dynamic production of income. Costello was rewarding the static production through capital profits. Now, in the United States, they‘ve done an even bigger change in capital gains. They’ve made an even greater reduction in the tax rates. And, of course, in the G.W.Bush personal tax cuts, he made an enormous cut at the top.
13:41

Fain: Reading a book, Treasure Islands [2011, Nicholas Shaxson], about tax avoidance networks. How basically around the world now, the super rich don’t pay tax. And it is sufficiently worthwhile for them to arrange their affairs - and easily accommodated to arrange their affairs so that they are immune from the tax laws of any jurisdiction—any territory. That is a threat to the whole world not just to any one individual jurisdiction.

13:55
Keating: There is no doubt about that. I introduced a thing, which was the white and black list, in other words, if you were an OECD country and you’d already paid your tax, you could bring your dividends home to Australia. But if you were not in a white-listed country, like Britain, Germany, US, etc. and you were anywhere else, you were taxed on an accumulation basis. That still exists, of course. It’s in our tax laws. But, in the end, cheating is cheating. Companies will always cheat. Some companies will cheat. Some individual private companies will cheat.
14:40

Fain: When you were PM and Treasure, you were constantly then lobbied in the way, for instance, the mining billionaires are lobbying successfully at the moment. What would your reaction have been?

12:48
Keating: Well, my reaction was, when I was lobbied similarly on the petroleum Resource Rent tax, which you‘ve got to remember goes back to the early 80s, not long after the big OPEC price increases in oil. So, your pulling oil out here in Australia —at a dollar a barrel, 90c a barrel— and it was bringing then $25. a barrel, so to pick up Economic Rent I built the petroleum Resource Rent tax, the PRRT, which is the oil equivalent of the current one, the MRRT. At that time, you know, the world was gonna end, there’ll be no more oil exploration, you know, they were going to kill all the oil and gas projects. You’ve just got to stare these monkeys down. And of course, the PRRT now brings a ton of money and we’ll never see a larger expansion phase than the current one. In the Nth West shelf of Australia, in the Carnarvon Basin, you’ve got LNG projects everywhere [Liquid Natural Gas].

Fain: Off the Dampier Peninsula they are about to do more. You’ve got Gina Reinhardt, Twiggy Forest and others on a flatbed truck in the back of Perth whipping up a frenzy. …

Keating: Well they should be on stage in Comedy

Fain: And yet, it worked.

Keating: I don’t think it has worked. The government just said Thank you. We’ve heard your argument—and moved on. I don’t think it has worked.
16:17

Fain: What do you think of Ms Reinhardt accumulating a stake in media organisations?

Keating: I’ve seen many people try to buy influence in media organisations. It never really works. I mean, what they did, they did it for a few years. Invest money into Ch 10 or something. They get board with it and they sell out. The best thing is to take it off them through the tax system, somewhere along the way.
...
19:50
The Moguls:

Keating: I think Wayne Swan, has been, as Treasurer doing the minerals tax, and Martin Ferguson with him, I think they have been exceptionally good. Exceptionally good in sticking to their last, you know. Not getting bumped off course. I mean, look, if you take Fortesque Metals, Twiggy Forester’s business. I mean he has built a fantastic business. I give him full marks for this, you know. From a cold start, he takes on Rio, BHP, builds the railway lines, [the ports?] fantastic. True entrepreneurship. It’s about 9 years ago. Iron ore was about $20 a ton. It was $160 a ton recently and is now $130. So, is the public entitled to some of that extra value, or does it simply go to capital? And of course, the public are entitled to some of the value. That’s why the MRRT, the Minerals Resource Rent Tax is a completely just measure.
20:50
...
Keating: Some sections of the Murdoch Group, e.g. Sydney Daily Telegraph, are against Labor and the MRRT. The Australian newspaper is a better paper than the Sydney Morning Herald, which is a complete rag. Lost in space. The Age just kills it.
Keating: The ABC - I’ve always had faith in Aunty. That’s why I built this building. I built the Sydney building. I always wanted to keep the milieu there. Because I always thought the Liberal Party would attack it in office. And I thought if I bring the groupings together, there is a bit of a battlefront here. I think the ABC is a corner-stone player in the democratic fabric of Australia. News and current affairs, which owes no one anything. There’s no cash-for-comment. ...I think the ABC is friendly to truth. Transparency and truth.
...Btw, SBS News is the best world news. - way superior to ABC.
Not so in the commentary programs. 7:30 Report and Lateline are exemplary flagships, and, of course, ABC radio.

25:00
Fain: What has happened to ‘risk’ in political leadership today?
“Mr. Keating, You’ll never amount to anything unless you have a decent stock of enemies.” - Jack Land, former NSW premier.

Fain: the whole lot of political leaders are risk-averse, a pretty anodyne lot, the whole lot of them.

Keating: They not all risk-averse. The PM is taking on the Carbon Tax. She and the
Treasurer are taking on the minerals tax. The system is ‘systemically’ risk-averse. That is, the bigger ideas of Australia are not in evidence. The static rises. The static fills the void and the static is the perpetual commentary that goes on day-in-day-out. There are now so many people providing commentary in the press. The papers are full of commentary.
Commentary on commentary....
27:15

Keating: This happens when the bigger ideas are not in evidence.
They are there, and there may be subterranean currents.

Fain: there is an extraordinary vacuum of ideas and engagement at that level.
28:00
I had an idea, a fundamental idea after the internationalization of the economy, was to reorient Australia towards the region we live in. The seminal event of our age is the return of China to primacy in the international system. It will occupy the place it occupied before 1800, before the industrial revolution. —the country with the biggest population and the biggest economy by way of GDP. That’s what it had.

Fain: If they can keep a lid on it.

Keating: They’ve got to keep a lid on it. But in this new age, I always thought Australia had the capacity to be a great country. Not just a derivative society, but a great country. And to be a great country, its got to know who it is and what it is; what it wants to be; what its values are. That means we must engage the region psychologically. And that means wanting to be in it. I say in the book, often, —finding our security in Asia, not from Asia. This means we can’t go around with our Head Of State being the monarch of another country. A worn-down European monarchy. Waving our flag with the Union Jack in the corner. Here we are, the new Australian nation, and by the way, we have the flag of Great Britain in the corner.
...
30:21
We can’t present ourselves to the region...I often used to say, when they were handing out continents, not many people got one. But we got one - Twenty million of us. But there has got to be magnanimity about the place. We can’t go saying we’re locking the place up. We’re not going to let any one in.
When a conservative force is met by a more conservative force, the more conservative force wins.
31:54


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