SATTLER:

Australians are increasingly saying they’re fed up with bring treated like mushrooms by our mainstream politicians, that’s kept in the dark and fed on cow droppings and that’s why a party like Pauline Hanson’s One Nation seems to be attracting so much support. I guess it could have been anyone who offered to do the will of the people that would have got their votes. So are the leaders of the Liberal, Labor and National parties likely to take any notice of the disgruntled electorate, and that’s what they’ve got, to reflect the communities’ aspirations and keep us informed of their activities. One of the first opportunities to do this will be through the proposed reforms of the tax system. It’s vital to us all. So far all the running on the issue seems be have been made by the critics of change, the Government either hasn’t made the major decisions on its package or it’s playing political games to get the best advantage of the election. Well we are joined now by the man who can tell us all, Treasurer Peter Costello and he’s in our Canberra studios with our sister station 2UE over there. Are you there Treasurer?

Hello Howard how are you this morning?

Thanks for joining us. Do you think we are mushrooms?

Of course not.

You’ve treated us like that, politicians over the years, haven’t they?

Well let me come to tax, I think people know pretty well what I want to do with the tax system. I want a broad based indirect tax and I want to reduce income tax rates and I want to improve the interaction of the income tax system and the social security system. You mentioned before about One Nation, what’s its tax policy?

I don’t think it matters.

Well you know that’s, you may be right about that, but I don’t think you could say that it was a party that put out policies. In fact the only economic policy that I’ve heard it put out in the last week or so is a policy to print money which…

I know that and that was ridiculous but …

Well it was ridiculous and that’s the only economic policy it’s put out so….

But isn’t it an indictment of the major parties that they have kept us in the dark, that Pauline Hanson’s One Nation party has attracted so much apparent support, isn’t that, doesn’t that say to you ‘you people haven’t been telling us exactly what you are going to do for us or you’re breaking your promises, we just don’t trust you’.

The only point I was making there was that whatever her attractions are one of them is not that she explains clear policies because that don’t have any policy and the one that they made, which was to print money was patently absurd and would destroy the Australian economy and peoples’ savings. So the only point I make is this, whatever their appeal it’s not based on policy. Now I actually do think policy is very important and we have pursued very directed policies over the last couple of years. One of which was to get the Budget back into the black and that’s something that hasn’t been done in this country for a decade.

Yeah but that’s fine but where’s the social dividend from that?

Well the social dividend is that people are now paying the lowest mortgage interest rates in 30 years. The average Australian family is now paying about $3,000-$4,000 less on their mortgage than they were two years ago, that’s great news for families. You’ve got families that now are paying less in mortgage interest rates, you’ve got young couples that can buy homes that couldn’t buy homes two or three years ago. You’ve put money back into peoples’ pockets because, instead of paying interest rates at 10, 10 , 10 per cent, as they were two years ago, you can now get a mortgage interest rate at 6 per cent.

Okay but therefore why are 1 in 8 people proposing to vote for One Nation, they should be voting for you?

Oh…

If what you say has attracted them.

Well if One Nation was, well put it the other way, why are 7 in 8 not voting for One Nation? That’s because those people….

(inaudible)

No, no, no, hang on, those people do recognise the value of good economic policy. Now look, we are living through a very difficult world period at the moment. Asia is worse than it has ever been in your or my life time. Asia was always a growth area of the world and now it’s in recession. That will have an effect on the Australian economy but we determined to do two things two years ago. One is, we were going to get the Commonwealth Government out of the red and into the black, that is we weren’t going to keep on running up debts for future tax payers and we turned the situation around $10 billion, $10,000 million. The…

So why is your support only in the 30’s (inaudible)?

The second thing that we decided to do was that if we got the government out of the business of borrowing and into repaying debts, we could get business interest rates and home mortgage rates down and put value and money back into the pockets of people. That’s a great thing I think.

All right, let’s talk about pockets, you can tell us now if you wanted to, I suspect, what is in the tax package, you do know don’t you?

I’ll tell you what’s in it, broad based…

….release it okay.

No, no, I’ll tell you what’s in it. We are going to reform the indirect tax system, which currently has rates of 12, 22, 32, 37, 41 and 45 per cent.

Okay, can I tie you then you are going to scrap the wholesale sale tax and

Absolutely scrap it.

So there’ll be no wholesale sales tax.

No wholesale sales tax, just so people know, at the moment most of the goods that go into manufacture, most of the goods that they buy, bears a tax. The tax can be 12 or 22 or 32, there are other wholesale sales tax rates, some go as high as 45 per cent. And what we’ve said is you should have one rate in the indirect tax system.

A consumption tax?

Well you can call, it’s called, some people call it a value added tax, some people call it a broad based indirect tax, in some countries they call it a GST.

Well what are you going to call it?

Well I don’t mind, the point is it is on a broad base and it’s a lower rate than the current goods tax.

It’s to be paid at the retail outlet.

No it is embedded in the price, just as happens at the moment in Europe or New Zealand, and just as a goods tax is embedded in the price. At the moment we have goods tax. What happens in Australia at the moment is you have huge classification manuals to decide whether you should have 12 or 22 or 32 or 37 or 41 or 45 per cent.

Well that’s going to be handy.

Now that’s all history, you just have one rate. The second thing that…

No, no, no what’s the rate?

Well we haven’t announced the particular sums at the moment but that’s the tax policy.

But you know what the rate is.

Well.

Why don’t you tell us?

Well Howard we’ll be releasing…

(inaudible)

No there’s nothing to hide.

It’s all tactics isn’t it?

No, no, no but you know if I sort of told you rates and everything today what news story would there be tomorrow.

Well that would be it.

That would be it and you’d have me on the news tomorrow and you’d say what have you got to announce tomorrow.

Well who cares?

Well you’d care Howard, you’d want the news story tomorrow.

We’d then have the ability to consume it ourselves, to take it in and to discuss it.

Well what I want you to take in now is the general…..

(inaudible)

No, no, no what I want you to take in now is the general architecture, is it better to have one rate or seven rates?

You don’t have to convince me.

Okay, now the second thing that we’ve got to do is reform the income tax system in this country. Let me tell you what the problem with the income tax system in the country is.

There’s no incentive, that’s what the problem is.

Well I agree with that, you’re right, there is no incentive and people on average wages at the moment, if they earn extra overtime, they can be paying 44 cents in tax.

If they’re lucky, it might be more.

And pretty shortly after the year 2000 you will be paying 48 cents.

Okay what are you going to replace that with?

Well what you have to do is you’ve got to make sure that those high marginal income tax rates don’t cut in on average earners.

Well at what level should they cut in?

Well high marginal income tax rates should cut in on people who are above average earnings, not on average earnings which is what’s happening at the moment. Let me give you one example, I think it’s a pertinent example because pretty soon after the turn of the century people who were on average incomes, and I’m not talking about high incomes I’m talking about the average income in Australia, will go onto the top marginal tax rate which is 48 per cent in this country. That means if you earn a dollar you pay 48 cents in tax.

And so, with respect, we know this, right …

Well no, no, I don’t think people do know that.

Oh I think they do.

Do they?

Yes. What we want to know is what rate is it going to come in at.

But, let me just put this in historical context. I mean if people really knew that Howard why would they oppose tax reform?

Because they think all they’re going to get is a new tax. They don’t know what you’re going to replace.

No. What they think is they think that the tax that will come in won’t be compensated by income taxes which are cut, because they don’t know they’re paying income tax …

No, because you haven’t sold it …

No, No. Because … well there’s a point there because we haven’t explained to them, do your listeners know that without tax reform the average earner, if they go and work overtime, pretty shortly, after the next, the turn of the century, the year 2000, pretty shortly, are going to be paying 48 and a half cents in the dollar in tax and if they don’t support tax reform they’re going to be losing half of every additional dollar they earn in tax. Do they know that?

I’ll tell you what they want …

Now let me put that in perspective, I just want to give a historical perspective.

… that’s what they want, more money in their pockets.

Well that’s part of it. But, and I competely agree with that. More, they want to take home more of what they earn so that they get the choice in relation to the tax system. Now I just want to put this in historical perspective because there are people, and Labor’s one, they say we don’t need to reform the income tax system. But to go on to the top marginal income tax rates back in the 1950s you had to earn 18 or 19 times the average income. You had to earn about, in today’s dollars, about 800,000.

Now it’s one and a half times.

That’s right. And shortly going to go to one for the average income earner. Now …

So what’s it, I want to know what it’s going to be. Is it going to be three, four or back to 19. It’s not going to be back to 19.

Well, no, obviously it’s not going to be back to 19 for obvious reasons. That is that people are expecting Government these days to do much more than they were doing in the 1950s. But you’ve got to get those average income earners out of the top income tax rate. So …

Simple question, what’s it going to be …

So let me say what the importance in relation to tax reform is. To broaden the indirect tax base; to reduce high taxes on average income earners. Now I’ll put a third point in there. You can’t reform the income tax system without also reforming the social security system in this country. And this is another important point that I want to stress. Because when you go into the income system and you start earning income, not only do you pay tax but you start losing benefits. As you start earning, let’s say you start paying tax but you lose your unemployment benefit. As you start earning you start paying tax, you might start losing your family allowance. As you start earning you’re not only paying tax, but you might start losing Austudy. And there are people who are earning between $20,000 and $30,000 a year who for every extra dollar they earn they can lose in some cases 80, 90 or the whole dollar either through paying tax or having their benefits taken away.

What are you going to do for them?

Well, this is my third point. You’ve got to change the interplay of the social security system and the income tax system so that they get more to keep out of the money they earn. Now this is a big point in relation to creating incentives to work too. And a lot of people will say well why should I work, if I go and work I will lose 80 or 90 per cent either in tax or benefits …

Alright they’re saying that.

… of what I actually earn. So improving work incentives is a third part. Now the fourth big part of tax reform is business tax. Business tax is really complicated. You know, if I showed you some of the legislation …

It certainly gives you no incentive for business to employ any more people.

That’s right. That’s right. It’s really complicated. It’s overlaying layers of complexity and the business tax has basically got to be simplified to give business incentives.

Alright now Treasurer you haven’t answered any of the questions about what you’re going to do, specifically, when are we going …

Oh Howard, Howard.

Specifically ….

Howard, what I’m going to do, let me answer them again, is broaden the indirect tax base and reduce rates. I’m going to kick average income earners out of top marginal rates. I’m going to help people who are on social security benefits by improving work incentives and I’m going to simplify business taxation. And that is a pretty detailed prescriptive. This will be, Howard, this will be the biggest tax reform this country has ever seen. But it will only happen …

Well when are we going to see it?

Well I’ll tell you when you see it. When our Government is re-elected and the Parliament enacts it.

No, but when are you going to give us the detail?

Now hang on. Let’s put this in absolute context Howard, the only way you can reform the tax system in this country is by legislation.

Yes I know that.

Hang on. The only way in which you can possibly legislate change is by getting it through the House of Representatives and the Senate. We figure …

But Treasurer, Treasurer …

Hang on, let me just finish, this is a very important point. We figure that the earliest date on which you could get a new tax system in this country if our Government is elected is the year 2000. That is the earliest …

… I’ve got something.

Well hang on, that was the earliest date that you could do it in the year 2000. But it will only then happen if, one, the Government which believes in tax reform is re-elected; two, …

We want to know what the details are, can you understand that?

Well, no, you know precisely what we intend to do.

No I don’t. I want to know what rate the GST ….

Two, if Mr Beazley is unsuccessful in defeating it.

OK, but when are we going to know the details?

And three, if we are then able to get support from minor parties in the Senate for the introduction in the year 2000.

Inaudible

Howard, no, hang on, you’re having a lend of me aren’t you.

The date, when are you going to …

Come on Howard, you didn’t expect me to come on today and you alone of every journalist to announce a complete tax package.

Why not?

Come on Howard you’re having a lend of me.

I know it’s only little Perth but …

No Howard, hang on Howard. You know, as we’ve said before, when this is announced it’s going to be …

… games you play.

No, Howard, you know when this is announced as we said before there’ll be a huge media press pack. You will have every radio station in the country. You’ll have every newspaper in the country. You know precisely well when I said that I’d come and talk to you about tax reforms I didn’t tell you that I was going to come and talk about particular …

Inaudible … no I didn’t expect you to tell me anything

You knew that Howard, come on you’re having a lend of me.

I did know it and the public knows it too Treasurer, they want an answer, OK.

Good.

Thanks for joining us on the program.

No, it’s great. You want to go over any other issues?

We’re out of time.

Are we? Oh well I must say it’s been a pleasure to speak to you.

… talk and talk.

No, no it’s been a pleasure to speak to you and look this is one of the most significant things that we can do and it is important that we all come together to try and get a better tax system for Australia and if we don’t do that …

Well please include us in that.

And if we don’t do that, the current tax system which we have will continue on and it won’t be good for business and it won’t be good for personal income and it won’t be good for Australia’s economic development generally.

OK, I’ll make a date with you. I’ll speak with you on the day, whenever it is.

I’d love to come back and talk about tax reform any time.

Good.

Thanks.