Transcript No. 44

Hon Peter Moore MP

Channel 7 News and Today Tonight interview with Glenn Milne (Pre-recorded)

Thursday, 13 August 1998

E&OE

MILNE:

Treasurer, an election winner?

It’s a good package for Australia, particularly for families. It’ll help

people in the bush, it’ll be good for business and help create jobs in Australia. So

I think it’s going to do a lot for our country and particularly give tax relief to

people who are currently facing income tax rates that are too high.

What’s fair about a tax system, though, where the cuts actually give higher income

earners like politicians more money in their pockets than average families?

Well they don’t, you see. The top marginal rate is currently 47 and it stays at

47. But for the average income earner who’s on 43, it’s cut to 30. 81 per cent

of Australians now have an income tax rate of 30 per cent or less and the biggest income

tax cut goes to the average earner, the person that’s on $38,000 a year. And in

addition, if they happen to be families, additional income tax cuts to cope with the cost

of rearing children. So for families this is a great winner. It gives them more income to

take home and more to look after their families.

A big GST, everybody wins – business, the bush, families. What’s to stop the

average punter saying this is a smoke and mirrors trick.? It has to be.

No, because we introduce a broad based GST and the revenue goes to State governments.

That locks in the rate. To increase the rate you’ll have to get the agreement of six

State Premiers, two Chief Ministers, the House of Representatives and the Australian

Senate – which is a great mechanism for locking in the rate. I don’t think

it’ll be possible to increase the rate and from the Commonwealth Government’s

point of view there’s no motivation to increase the rate because the money goes to

the States. So you’ll lock that rate in once and for all. Now that enables us to

abolish the wholesale sales tax, it gets the Commonwealth and the States out of yearly

fights for funds and it gives us the opportunity of reducing income taxes. So you get more

take home money to spend in the way you choose and that’s better for the economy.

Kim Beazley says there’s nothing to stop any Commonwealth government in the future

simply changing the Act that seeks to lock in the GST rate.

Well there’s nothing to stop an increase in the wholesale sales tax, Labor’s

tax, which you will recall it increased every item 2 per cent back in 1994. There is no

mechanism to stop that. But there is a mechanism to stop an increase in the GST rate. You

need six State Premiers, two Chief Ministers, the House of Representatives and the

Australian Senate all agreeing. Now that is a real powerful mechanism to stop the rate

from increasing.

What do you say to an average wage earner who thinks look, all the Government’s

doing here is taking money out of one pocket and putting it in another for me.

What the Government’s doing is letting you take home more income. You choose how

to spend it with a broad based GST cracking down on the cash economy and people that are

cheating their taxes, measures to stop people using trusts, there’s undue tax

shelters and distributing the proceeds back to average income earners and families.

That’s the kind of thing governments should be doing. Look, this is a historic

change, this. This is the biggest revamp of the Australian taxation system since it was

introduced in the 1930s and it’s a new tax system for a new century. If we don’t

do it now, then our job opportunities in the next century will be so much the less. If we

get these reforms through, a new tax system, a new century, better outcomes for families

and for middle income earners and a better business environment as well – that means

jobs and investment.

You mentioned a new tax system and of course a new system in Commonwealth-State

relations as well. But what’s to stop hard pressed States in the future falling back

on taxes like death duties, property taxes, if they feel they can’t convince other

States, for example, to approach the Commonwealth about an increase in the GST rate?

Well we’ve said that a condition of introducing this system and giving all the

revenue of the GST to the States is that the State taxes that have to be abolished, the

BAD tax, the FID tax, stamp duty …

They’re the banking taxes.

They can’t be re-introduced. And that’s the mechanism to make sure that they

won’t be.

You’ve also introduced a 30 per cent tax rebate for private health insurance.

Isn’t that a concession that the rebates you introduced in the last Budget have

failed?

It’s a more generous rebate. What it means is if you’re taking out a private

health insurance policy, say, of $1800 – you get $600 back. Everybody gets it. Everybody

is entitled to that 30 per cent rebate. Particularly of advantage for older Australians

who’ve kept up their private health insurance and it is a bigger incentive to take

out private health insurance. Taking out private health insurance is actually good for the

public hospital system because you get more people into the private system, you create

less demand in the public system, that means more hospital beds for the public generally

and that’s a good thing for everybody.

So are you guaranteeing that private health insurance rates will rise now because they

haven’t under the previous system?

There’s now every incentive, more incentive than there’s ever been, to go and

take out private health insurance. You get back 30 per cent of your premium. If you

don’t take it out, you won’t get back anything.

Elderly people have been compensated $3000, up to $3000 for self-funded retirees and an

increase in pensions, but Labor says if you’d maintained your pledge on maintaining

pensions at 25 per cent of average weekly earnings they would have got that in any case.

Well we do maintain the pledge. It’s part of the law to maintain the 25 per cent

so that if earnings go in excess of prices, you’ll get the earnings measure. With the

pension, you’ll get whatever is the higher – a 4 per cent increase in pensions

or, if wages increase, 25 per cent of average weekly earnings if that’s more than 4

per cent. So you can’t be worse off. You’ve got a double safety mechanism there.

We’re not taking one away, we’re preserving both.

Now you’re relying somewhat on the surplus here to fund the $13 billion in tax

cuts. What if things do go bad in Asia, what if that surplus goes bad as well? What will

you do then?

I think it’s very conservative in the first full year of our $4 billion package.

In that year I think we’re projecting about an $8 billion surplus. Our debt repayment

schedule stays on track, our budget would be in surplus and we can afford to give out tax

relief. That’s the benefit for good economic management.

But we might manage our economy well, We might be hit by external forces is my point.

Well this was the Government that got Australia into surplus and the point I always

made is if we got into surplus, if we had a debt reduction programme on track, then the

opportunity was for tax relief. And this is the tax relief. And if we are in surplus and

our debt is under control, you should be looking at reducing taxes. That’s part of

good government.

You’ve streamlined the family payments system but there are some who would argue

that it actually encourages women in particular to stay home, that it’s not an even

handed [inaudible]. How do you respond to that?

I don’t think that’s right. There are increases in benefits for children.

Every family, every child qualifies for an extra $140 a year. But in relation to the

single income family where you’ve only got one wage earner, they’re given an

additional increase of $350 a year and that’s really to put them in the position

where they’re effectively getting the benefit of another tax free threshold which the

two income family gets. It effectively gives them that benefit in the single income family

as well.

We saw headlines this morning trumpeting the fact that provisional tax would be

abolished but really small business has still got to come up with quarterly tax payments.

Provisional tax is abolished. Nobody now has to pay tax in advance of their income

year. What happens is that at the end of the income year they pay their tax in arrears.

Three months, four months after the end of the income year. There is no more

provisional tax. Provisional tax is abolished.

Now how long will you leave this package out for public consideration before you go to

an election?

Well we want people to understand the changes. They’re big changes but

they’re good changes. We’re going to be trying to get as much information as we

can out to the public through advertising and leaflets and we want to make sure that

people have got a lot of time to understand it. Now it’s a new tax system for a new

century. It doesn’t start until July 2000. The health rebate starts earlier, that

starts in January. But the new tax system doesn’t start until July 2000 so people

have got plenty of time to look at it and come to grips with it.

The Democrats have said tonight that they won’t walk away from the table as a

result of this package. That must be encouraging news for you because it gives you a real

chance of getting it through the Senate, does it not?

Yes, I think that’s a very considered position. Why would you walk away from tax

reform? The Labor Party has because it won’t face up to tax reform but I don’t

think anyone should walk away from that. I think we should sit down and as Australians

work out how to get a better tax system. And this is the best chance we’ve ever had.

So I’d say to the Democrats and other parties in the Senate let’s stay at the

table. We can get a much better tax system if we talk, if we improve things and we have

the objective of helping families.

So will I take it from that the package is negotiable in the Senate?

Look, the package is an integrated whole. You can’t have bits of it. You reform

the indirect tax system which gives you the chance to drop income tax rates, help families

and improve business outcomes. Now what I’m saying is anybody who’s interested

in those sorts of things is going to give this package support and I welcome the fact that

the Australian Democrats are prepared to do that.

Treasurer, thanks for your time.

Thanks.