Transcript No. 99/37

Hon Peter Costello MP

Radio 6PR with Howard Sattler

Wednesday, 12 May 1999

10.35 am

SUBJECTS: Budget, tax reform

SATTLER:

field day with today, and he would expect that. Hes being depicted as anything from a crazy looking king counting his money, dancing through the parks with a small bespectacled colleague, who would that be, throwing out notes like theres no tomorrow, Federal Treasurer Peter Costello, who last night brought down his fourth Budget. Its a Budget thats received a mostly positive response, especially from the business sector, the health insurance industry, medical researchers, certainly theyve received a boost, rather, and the Catholic private school sector. So its good morning to the most sought after man in Australia at the moment, Peter Costello. How are you going?

Good morning. Im not doing too badly Howard, thanks.

What time did you get to bed last night?

A bit after midnight. And you know we started again at 6.00am this morning.

Well youve got to do it this time of the year, havent you?

Its a, you know, a bit of a regular thing. It doesnt get any easier though.

Alright, well you know that I talk rather directly, if thats OK with you. I want to cut through the pollie-speak, the slick sales talk thats always associated with the Budget and ask you this: is it a Claytons Budget, one that were having when we cant even guarantee its basic cornerstones, like the tax package and the sale of Telstra. Because you must admit no-one can be, know for sure its going to get through the Senate.

Well this is a Budget for 1999/2000, for the financial year starting on 1 July. And the new tax system doesnt come in till the year after, 1 July 2000. So the year that were budgeting for is not affected by those things. But

So it doesnt matter whether they get through the Senate or not?

Theyre not part of this years budgeting but they are obviously a very big part of the year after that and thats what people are focusing on but it doesnt affect this year.

Yeah I know that but so many of the programs you announced last night were four year programs

Yep.

and some were six year programs.

Yep.

Now they are largely dependent then on the tax package, particularly, and the sale of Telstra getting through.

Well, in the sense that a government can only implement things if the legislation is passed. Now Beazley could try and block the whole Budget. You know, I doubt that hell try and do that, I think hes obviously being very negative on tax and its a question of how negative he goes. But I wouldnt expect him to try and block the Budget, hell just try and block most of the things associated with it.

Alright, now to get the package, the tax package and the Telstra sale, through the Senate, you do need to win, we just know the numbers game shows that youve got to win Senators Harradine and Colston to your side. Senator Harradines immediate and overnight response was pretty negative.

Well you see, lets just sort of separate the two issues. Theres the Budget, and I expect the Budget to go through and I think this is a good Budget and I think it will set Australia up for the 21^st Century. We can go into the 21^st Century with our Budget in surplus, with good growth, with low inflation, with low mortgage interest rates and we can be a world leader. Looking out, if we really want to take hold of all of our opportunities in Australia, we need a new tax system for the 21^st Century. You are quite right, if Labor and the Democrats are negative and blocking then the only way you can pass decent reform in this country is with the support of the Independents. Now, what Senator Harradine was commenting on last night was some of the Budget measures, it wasnt the tax measures that were up last night. I think what we did last night was actually very sensible.

Yeah but you and I both know that the political game means that youve got to win him over to your side and the Budget was going to be a large part of that.

No. Theyre two separate issues and he was commenting last night on a Budget measure and the Budget measure was simply this, that we said wed extend family benefits to families where the kids were 19 and 20 years of age. And thats a new addition. I mean I think Senator Harradine was saying oh well, he wants more. But I make this point

Well no sorry Treasurer he actually said, and I quote, nothing is happening in this Budget for families, thats what he said.

Well, yes, well I just told you what did happen in the Budget for families.

You dont have to convince me, its him.

Well, in the Budget we made an announcement that wed extend family benefits to 19 and 20 year olds. But I make this point, we have to bring down a Budget for 18 million Australians. We have to make sure that we can secure a future for all of our people. Were a Government that has to operate in a national interest. This idea that you bring down a Budget for one person and ignore 17,999,000 others, thats not right and I dont think Senator Harradine would expect it to be right. And when we sat down and we looked at the Australian economy, were living in a very uncertain world, Asias been in recession, and we thought we had to do something to strengthen our economy. Now weve got us on a good path, a path we can withstand the Asian recession, we can grow faster than the United States and France and Germany and Britain. We can keep our inflation and our mortgage interest rates low and its done by keeping good policy going and thats what we directed the Budget to

Yeah I know, but with respect, this is the sales talk and I expect that, but at the end of the day are you going to have to produce another Budget if all that you put before the Senate at the moment gets knocked back.

No, because this Budget is for 1999/2000 and

So there wont be another till next May, is that what youre saying?

No, no its not affected by any of those matters, unless Beazley tries to block this Budget, and I dont think he will.

Alright, now you talk about not doing things for just one sector at the exclusion of another, but what about education. You put in I think $553 million into the private Catholic education system. But I can tell you, and you know this already because you would have heard from your minders that the people representing the State school system are spewing. Theyre saying thats $220 for each private Catholic student, compared with just $10 for each public pupil. How do you respond to that?

Well, overall in the Budget this year were spending $4.8 billion on education and the way in which the Government funds education is they fund 100 per cent of the cost, between the two, the State and the Federal Government, they fund 100 per cent of the cost of each student in a government school. In relation to non-government schools they only fund a proportion. And we found that the money that was going for that percentage to kids in non-government schools was not being properly distributed. You had rules which meant that the more money the school raised the less it got from the Government. So schools had an incentive not to raise their own private funds through fetes and fund-raising drives and so on. So we announced a new system where the grants go to the school based on the needs of the parents and if the schools raise money themselves it doesnt disqualify them from grants and its a much fairer system and its a new system of funding those non-government schools. But we dont fund anything like 100 per cent. If its a rich school its a very small per cent. I think its something like 13 per cent. And if its a poor school, its a bit more. But the government sector is funded 100 per cent.

So why do you think that people involved in the State school system, the teachers at least, are spewing this morning?

Oh well, you quite often find teachers, you know particularly the teacher unions, that they dont like the non-government sector. And, you know, the Government, as far as were concerned, is weve got to have both a government and a non-government system. The government system will be funded 100 per cent and the non-government system, if you happen to be a wealthy school, a tiny per cent. And if you happen to be a more needy school, a bit more. But certainly not 100 per cent.

Alright its 18 to nine here in Perth, could you stay there for a moment, Ive got to get a brief traffic report and then pay some bills. You know what thats all about.

Thanks very much Howard.

Stay there, dont go away.

My special guest this morning is the special man of the moment, Peter Costello, the Federal Treasurer. Have you seen the caricatures in the papers this morning?

I havent seen them all Howard.

The king throwing out money all over the place.

Well look, the Budget is in surplus and the Budget should be in surplus at a time like this. The worlds a very uncertain economy and if we dont try and pay off some of our debt

Its getting better isnt it? Getting better.

And run our Budget in surplus we wont at this stage be protecting ourselves against world developments in the future.

OK, now we wonder what youre going to do with this $5.4 billion. I know you say that it will be mainly used to pay off debt and you hope in about three years we wont have any debt. But are you also keeping it sort of in reserve in case you have to sweeten up the tax package with more compensation?

No, what the surplus will go to is repaying some of Labors debt. In the last five years of the Labor Government debt increased by $80 billion. Now, we can pay off $5 billion of that. And if we paid off $5 billion in a year, which is just to get the economy back to where we were before the last five Keating/Beazley budgets, it would take us sixteen years. We can actually repay it all with the privatisation of Telstra. So we put $5 billion to pay $5 billion off. The privatisation could clear the debt, the Commonwealth could be debt free. Our aim is to enter the 21^st Century with no Commonwealth Government debt, and what that means is no interest bill for taxpayers.

But I can see the game here. You are really putting the acid on Labor and the Democrats now to pass a full Telstra sale and to pass the tax package arent you? Isnt that what youre saying at the moment?

Well the point I make about this is if Labor defeats the sale of Telstra their debts will never be paid off. I mean it was one thing for them to run the debts up but for them to engage in a strategy now of preventing anybody fixing it would really just be so much against the national interest. I mean is Beazley saying I ran up the debts and whats more Im not going to let anybody else fix them. I mean we could be a debt free nation in the early part of the 21^st Century, as we were at the beginning.

But Treasurer this is all sort of above the heads of most people. If you pay off the debt, what does that mean to Mr and Mrs Average. Whats it actually physically, financially mean to them?

It means lower taxes and better services. Thats what it means. Its like, its like this, Howard. If you pay off your home mortgage then your income doesnt go on your interest payments. You can spend your income on a holiday, or a car, or food, or whatever. If you pay off the Governments debt, the Government isnt taxing you more to try and pay its interest bills. It can have lower taxes and you can have better services for the taxes you pay. And whats more, the country just takes a giant leap forward. We begin to lead the world again, as Australia did at the beginning of this century. We can again at the beginning of the next century.

Okay, but when did a Government ever lower taxes? Ive got the figures here. In 1970-78 the Government reaped a 136, I think, billion dollars in taxes. In 1988/89 it was 153, and projected 1999/2000 162. Now, theres no evidence there that Governments are actually lowering the tax take.

Yeah, and if you looked at the tax take this year and compared with what were proposing next year, youll see that the tax take lowers.

What it comes down from 162 does it?

Yes it does. Actually in the projections it comes down to 150.

What about the

You know the reason for that? I mean the reason for that is we actually have legislation in the Senate at the moment to lower everybodys income tax. And if that goes through, the overall tax take by the Government, State and Federal, will drop $5 billion.

Okay.

Thats the legislation which the Labor Partys opposing at the moment. This is the first time in my experience where a Government has tried to lower taxes and an Oppositions tried to prevent it.

Okay, but how can we believe you when you say that? Because you just look at petrol for a start. Now I recall you saying that moves youd made in the past year or so were going to reduce petrol prices. I can tell you at the moment, I dont know what about the rest of Australia, but theyve gone through the roof here at the moment. We are paying on average about 76 cents a litre for unleaded fuel. Its unbelievable.

Look, Howard. The Howard Government has not raised petrol excise.

Well who has?

In four Budgets we havent increased an income tax or a wholesale sales tax. In relation to petrol prices I think youll find if prices have gone up its most probably related to the world price of oil.

Dont blame you?

Well, we havent moved tax at all, and whats more under our tax-reform proposals weve got a proposal which will actually cut petrol prices by 10 per cent for business use. Thats again up in the Senate, thats another thing that Labors blocking.

All right. Now your incentives to join private health funds. I know you think thats a real good one out of the hat, and as early as possible too, you want to encourage people to get in as young as possible. Theyve been welcomed by the sector but Ive got to tell you, early reaction in Perth today, and Ive interviewed some kids around the place, I say kids, 21, 22, 23-year-old kids. And theyve all said nothing of what theyve heard overnight is going to encourage them to join private health funds.

Well, if young people join a private health fund theyll get a lower premium for life. And thats all right. If the kids dont join by the time theyre 30 and they want to come in, and they will want to come in when theyre 40 or 60, theyll have to pay higher premiums. I think when kids think about it theyll realise its a good decision now. People do want to come in later in life. What you find out is people want to come in at the time when theyre having children, thats one big entry point. And youve got a situation at the moment, some people come in when theyre about to have children and then go out again after their children are born. The second period of entry is generally when you reach your fifties or sixties, and you think that youre more likely to need medical treatment and people come in then. Youll still be able to do that but all were saying is if you want to take the decision to come in later in life, youre not going to get this lifetime discount. If you want the lifetime discount come in under 30, youll get a lifetime discount and whats more, dont forget since 1 January of this year, the Governments been paying 30% of the premium. Youll get 30% of the premium back.

Andrew on talkback wants to ask you a question. Are you there Andrew?

Yes, good morning, good morning Mr Costello.

Hang on, Ive lost Peter Costello for a moment. Just a minute, well get him back. Whats the question you want to ask Andrew?

Look, just in regards to the Budget itself, Ive had a quick glance at it. I mean, its okay given the times. But one thing I really object to is giving money to private Catholic schools. Id rather my tax, I havent got any kids by the way, but Id rather any of my tax-paid money go to private, oh sorry, to government schools, because

Where are your kids?

I havent got any kids.

No kids, but where would you send them if you had any?

I would send them to a government school. I mean, and if I wanted to send them to a private school well I would expect to fund the full amount, rather than letting other taxpayers pay for it.

Well hes saying, and Im not his mouthpiece, but hes not back on the line, Im trying to get him on the line at the moment, he is saying that they are fully funding state schools already.

Why not additional funding, why give money to Catholic schools? I mean, its a religious school in the first place. I mean I could be Muslim, I mean, why should my taxpayers money go there? I mean it doesnt make sense. If people want to send their kids to a religious school, especially a private one, well why not fund it completely themselves?

All right, well take a break and get an answer from him. Thanks very much for your call.

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I did a dastardly deed I cut the Treasurer off. The question our caller wanted to ask you. He said you know, he objects to the fact that youre putting all this money into private schools. He hasnt got any kids but hed send them to state schools and he says what about them?

Well, the Government funds 100% of a place at a state school, both the Commonwealth and the State Governments combined. And actually the increase in funding over the four-year period for government schools is estimated to increase by about $980 million. So there are big increases in government schools and as I said, a change of the formula in relation to non-government schools to make the funding formula fairer.

Okay, this time Ill try not to cut you off.

Thanks.

Oh no, thats my pleasure. Good morning Caroline, you want to ask the Treasurer a question?

Yes I do. Can you hear me?

Yes.

You are sounding very, very faint. I want to ask about up-front university fees. Im amazed there havent been a queue of people wanting to know about what the Federal Government are now going to do with all this money theyre raving about, are going to do about up-front university fees.

Treasurer.

Well, we have a system in relation to university fees where people dont have to pay up-front fees. You can take an interest-free loan from the Government and the loan is only paid back when people get a decent income. So nobody has to pay an up-front fee for university with that free-loan scheme, and those that want to utilise it can do so.

Well I have enquired of two local universities to do further studies, and in both Ive been told I have to pay $800 per unit up-front.

No, no, theres a Higher Education Contribution Scheme which means that you dont have to pay fees, you can have an interest-free loan from the Government and you only get charged the repayment on the loan when you get in to the workforce and get a decent income.

Right, well Ill enquire further.

Yes, ask them about it, its called HECS.

Okay, thanks very much for your call.

Treasurer, its almost time to go. Very quickly, parts of the Budget were leaked on the Internet about 3 or 4 hours before you got up. And we believe it came from the Department of Family and Community Services. Will Jocelyn Newmans head roll?

Well shes ordered an inquiry to try and find out what happened. They say its the first cyberspace budget leak in Australian history.

Do we know how it happened?

Pardon?

Do you know how it happened?

Shes having an inquiry. I dont know what the answer to that is, but Jocelyn said shell have an inquiry and if somebodys done the wrong thing she said, heads will roll.

We did get a call about mid-afternoon yesterday from her Department. I dont know whether they were going to tell us it was on the Internet or what.

I doubt that they were going to tell you it was on the Internet. But apparently it was just some error in the Department and theyre trying to get to the bottom of it.

All right, when are you seeing Senator Harradine next?

Well, I maintain contact with him. I saw him last night, just passing by, and no doubt Ill see him during the course of the day.

Yes, take him to lunch, it might be a good idea.

We always have cordial relationships.

Thanks for your time.

Thanks very much, Howard.