I’m joined now by the man of the moment. His dial and his voice have been seen and heard by more Australians than other personality during the past twenty four hours. He’s not a pop star. He’s the Treasurer, Peter Costello who delivered his third budget overnight. And in which he predicated a $2.7M profit and that he said would rise to $14.6 billion. It sounds like monopoly doesn’t it, in three years. But the question that I’m asking this morning is where is the social dividend for the average punter here in Australia, people who I think are entitled to have their hands out for a share of the action today. Good morning Treasurer.

Good morning Howard. How are you?

Okay. My hands out, what are you going to put in it?

Well look if you run the Australian economy well, and if you start getting the country back into the black, that is not running up debts, what that gives us is the opportunity to lower interest rates. And for the average home buyer, they’re now paying $4,000 a year less than they were two years ago. That’s a very immediate, direct help to homebuyers, to young families for getting houses. And it can only be done on good economic policy.

So are you suggesting that what you’ve done will lower interest rates even further?

Well I’m saying that when we set out and we said we were going to get inflation down and we were going to make the Government pay its way, it gave us the opportunity to bring interest rates down. The proofs there. They’ve come down from 10.5% to 6.5%. And today, the average Australian is paying $4,000 less on their mortgage than they were two years ago. It’s not an accident. If we had said, we’ll keep the Government in the red, we’d keep it where Beazley had put it, if we had said that we’d spend money that we didn’t have, we wouldn’t have been able to keep inflation low and you wouldn’t have been able to keep interest rates low.

Okay but what do you actually do? Tell the average person, what do you do with this profit? I mean where does it go?

It goes on Labor debt.

So it’s actually not a profit is it? You’re actually paying somebody who we owe money to?

When Labor left office, each year we were losing 10,000 million. But that’s just what we were losing in a year. They had run up debts of $80,000 million. Now if we get into the black, that means we’re not going to run up future debt this year but we can start paying back some of Beazley and Keating’s $80 billion. And as we start to pay down the Keating/Beazley Labor debt, what that means is that our interest bill for the country will start to get less (inaudible) lower and our services will be better.

This sounds like an election campaign speech. You’re beating up on Labor at every chance.

Well look I wish it had been otherwise Howard.

(Laughter) Oh come on.

I wish when we came into office that Beazley didn’t have us $10,000 million in deficit. I wish we didn’t have $80 billion of debt. But we didn’t create it. But we were elected to fix things.

But you’re going to keep reminding this, us of this all the way to the election aren’t you?

Well $80 billion is what Keating and Beazley gave future Australians.

Okay let’s think about it…

…get out of that. But we actually have a plan. And the plan we have can get us out of that situation by the year 2001/2002. We were elected to fix it. We got the first leg of the journey last night. The first leg of the journey was to make sure we didn’t go backwards this year, that we got out of the red and back into the black. The second leg of the journey is now to start getting down Labor’s debt. And the third leg of the journey, is once we’ve got that debt back under control, people can have lower tax and they can have better services.

Okay now what’s your message then? I mean we’re talking about this journey. The people who are on the waiting list for elective surgery. You’ve short changed the States $2.6 billion on what they wanted for hospital funding. What are you going to say to the people, 15,000 here, who are on the waiting list today?

There’s $4 million available this week to reduce waiting lists.

That won’t do much to Australia’s waiting lists will it? $4 million?

Yes it will. Queensland is already accessing it. The ACT is already accessing it. Any state that wants to can access it.

But I mean they wanted to $2.6 billion more than you’re prepared to give.

Well they say “oh well look you know we’d rather quibble about the figures”, when there is money available today to reduce waiting lists.

So what is your message to our Health Minister then?

Well you know the money is available and the Health Minister can agree to take it and he can reduce waiting lists. And I would.

There ain’t going to be no more. That’s what you’re saying.

Well look overall health funding and we’ve made this clear all along. There is no point in sort of posturing on this. Health funding is going to be increased by $2.9 billion to $30.2 billion, $30,000 million. Now that’s been the situation for weeks. And money is available to reduce waiting lists now. Now you can have a political argument and say well we won’t take the money to reduce the waiting lists. But if I were really worried about waiting lists and I am, I’d be taking the money.

Treasurer the Australian dollar as I speak, is worth 63.3 of the American dollar and they have an unemployment rate of 4.5%. Why don’t we?

Well there’s a couple of reasons. One is we have an arthritic industrial relations system which they don’t have in the United States. Secondly, we need to improve our tax system which our Government wants to do. Because at the moment and people know this Howard, look if you go and get a job not only do you pay tax but you start losing your welfare benefits. And people know if that if they go out in the workforce and they lose the job search allowance; their childcare allowances; their Austudy allowances; their family allowances. For some people, you can lose 80 or 90 cents in the dollar for every dollar you earn. Now until you change the tax system and the social security system, you’re going to have strong disincentives to work.

So it’s not worthwhile for a lot of Australians to go to work, so they don’t want to go to work. Is that what you’re saying?

It is not worthwhile for a lot of Australians to work. That’s right. And a lot of them have figured it out. And that’s why we need tax reform in this country because what sort of a country would have a system where if you go into the workforce, you can lose 80 or 90 cents of tax and benefits when you’re earning?

Well these people are bludgers aren’t they? Aren’t they bludging on the system?

Well it’s a wrong system isn’t it if it gives all the incentives that way which is why our Government’s in favour of tax reform.

Which leads me to believe that when we get this tax reform package, which I think is going to be the real pre-election budget, there’s going to be a lot more in it than just tax reform. You’re obviously going to reform the social welfare system.

Reform of social welfare; reform of personal income tax; reform of company tax; reform of indirect tax; you know, reform of the current wholesale sales tax. I mean you say that it’s going to be pre-election. Look tax reform’s not, if it had been easy, Labor would have done it in 1985. Now we know that Labor’s going to campaign against tax reform again. But I just say to people and I say to the Labor party, you know it’s not in the best interests of Australia to keep the current tax system as bad as it is. We’ve got to change it.

Well when you say I say it’s pre-election, surely it has to be pre-election. How are we going to know what side to vote for if you don’t tell us what’s going to be in the package before the election?

Well we’ll be laying down a tax reform package and my point is, laying down a tax reform package because you want to improve the tax system, not because you use tax reform as a sweetener for votes.

We’ve got to know what you’re proposing before we vote for you, if we do.

And you’ve got to know what Mr Beazley’s proposing.

Well we know he’s proposing probably an anti-GST campaign.

Yes but you see that’s what he wants you to think Howard. But…

Well that’s what he’s told us.

When he says that, either wholesale sales tax, higher income tax rates, no changes to marginal tax rates, no changes to company taxes and no tax increases after the next election. You see he wants you to think that there’s only one part of his position. But his position in fact involves keeping the current discredit tax system and making it worse. You’ve got to look at the full thing.

There are a lot of similarities between you and Paul Keating. Have you ever been told that?

Well look some people say that which I take as a great insult by the way.

Well I mean here you are telling us what his proposing and telling us, please don’t vote for that. And that’s what Keating did when John Hewson proposed tax reform.

Well look it is on its days Keating and Beazley, by the way, supported tax reform. Didn’t they?

Yes but we want to know what you’re proposing.

Well I’ve told you what I’m proposing. I’m proposing to lower income tax rates for average earners; to improve the social security system; to broaden the indirect tax base and to lower it; and, to improve company tax arrangements.

So you will propose a consumption or GST. Can you tell us that now?

Yes I’m in favour of a broad based indirect tax, whether you call it a broad based indirect tax; whether you call it a value added tax; whether you call it GST; I am in favour of taxing goods and services on an equal basis. In Australia at the moment, we tax goods only. We tax them at rates, some rates of 22 and 32%. I am in favour of taxing goods evenly at a single rate.

Well ironically I’ve got Dr John Hewson in the studio later this morning. And this is exactly what he was saying which the electorate rejected.

Well that’s the point. You see the Labor party will say, oh we’re against broad based indirect tax.

So you’re going to give it another run? You will give it another run?

No but…

Yes or no?

But, if all you’re in favour of, if all you’re against is a broad indirect tax, what that means you are in favour of and this is their position, higher income tax rates; higher company tax rates; higher wholesale sales tax rates.

The great thing about last night’s budget is that there was no increase in the income tax; no increase in company tax; no increase in the wholesale sales tax; no increase in the petrol excise. This is a Government that didn’t introduce, it didn’t increase a tax for the third time in a row, for the whole life of the Parliament. Now there would hardly be a Commonwealth Government in history that could boast of that. In fact, last night, you know how provisional tax works?

Yes, do I ever.

They say we earned this much last year so we’ll assume you’ll earn that plus 10% again next year. We’ll make you pay tax on it. Last night we reduced the provisional tax factor to 5%.

Why don’t you get rid of it?

Which is half what it was under Labor.

Well you’ve got half to go.

Well it’s a pretty good start isn’t it?

Alright Dr Hewson, as I said, will be in later. So can I tell him you are going to introduce his goods and services tax?

Well it’s not his. What you can say is that I am in favour of broad indirect tax; value added tax; goods and services tax; whatever you call it, rather than the current goods tax which we have, the Labor tax, the wholesale sales tax at the moment.

All I can say is five years is like a light year in politics.

Well let’s look where we’ve come in those last five years.

Well you’ve come into office.

Well inflation down around 1 or 2% which wasn’t the case five years ago. Home interest rates, the lowest since 1969, $4,000 a year for average family better off. A budget which was then running around about $17,000 million in the red, now in the black. And a Labor Government which was then running up debts, having their debts paid off by a Coalition Government. A growth rate in Australia which is now, gee it’s been buffeted by Asia, but is now the strongest in the Asian region. I don’t think anybody, I don’t think anybody in Australia would ever have thought that we’d be able to say that Australia would have the strongest growth rate in the Asian region.

Alright Treasurer, when can I book you in for the talk about the tax package?

When I’m next over there or whenever you like. It’s always a great pleasure to speak to you.

Good on you Peter, see you. Peter Costello, the Treasurer.