Doorstop

Higgins Electorate Office

Melbourne

Sunday, 6 March 2005

11.45 am

 

SUBJECTS: GST, State Taxes, Interest Rates, Leadership, Scoresby Freeway, Grand Prix

JOURNALIST:

The States say that in fact their revenues are static; there has been no GST

windfall?

TREASURER:

When the GST was introduced the agreement was that the States would abolish

indirect taxes. Taxes like stamp duty on mortgages, on leases, on commercial

conveyances. The GST will provide a windfall to the States over the next four

years of $10 billion. That is $10 billion they now have to go and honour that

pledge to abolish those indirect taxes. If you abolished all of them tomorrow,

over the next four years it would cost $15 billion, but the States have a $10

billion windfall. They now have the capacity to abolish two-thirds of those

taxes, and in the interest of consumers, and in the interest of small business,

they ought to honour the agreement, and get on with the abolition.

JOURNALIST:

Are you telling the States what to do, or are they not honouring an agreement

they had. You are not getting back to the system of tied grants?

TREASURER:

No. This is an agreement which was signed in 1999, and the agreement says

that as the GST revenues grow, it will be used to reduce and abolish taxes.

The GST revenues are growing, over the next four years there will be a $10 billion

windfall, and that is why the States have to honour the agreement and abolish

taxes like the bank account debits tax, like stamp duties on mortgages, like

stamp duties on leases, like stamp duties on commercial conveyances.

JOURNALIST:

So what has happened then? Have they become greedy?

TREASURER:

Well what has happened is that they are now getting a windfall, but they are

getting reluctant to deliver on their side of the bargain. The windfall is to

reduce other state taxes, it is a two-way street this, the States get the GST;

the other State taxes are reduced or abolished.

JOURNALIST:

What if they don’t reduce those taxes, what will you do?

TREASURER:

I am going to hold them to the agreement. This is the agreement that they

have entered into. The GST was introduced so that people would have other taxes

taken off. I am holding them to the agreement. The Commonwealth wants to see

it honoured.

JOURNALIST:

Does that mean you can withhold any of the GST money?

TREASURER:

I do not think this should be an argument. They have agreed to do it. They

should have great pleasure in doing it. Reducing taxes with the increased GST

revenue should be something that would be good for their State, for their businesses,

for their consumers, it should not be an argument about this, it has been agreed,

all we need is to implement the agreement.

JOURNALIST:

But do you have the authority under the agreement to withhold any of the GST

money if they don’t honour the agreement?

TREASURER:

Well I do not want to see any State breaking the agreement. As far as we are

concerned, the agreement is there, and the agreement gives the State their obligations.

They are getting increased GST revenue, now is the time to reduce taxes for

the consumers and their businesses.

JOURNALIST:

On interest rates, do you agree with the Prime Minister that the Reserve Bank

should not have any further increases?

TREASURER:

I am not talking about further movements in interest rate policy. The Reserve

Bank is independent. It makes its decisions. It has looked at the evidence,

and it made an announcement last week. What happens in the future will depend

primarily on where inflation goes. If we keep inflation low, we can keep interest

rates low.

JOURNALIST:

Well, do you see any further need for an increase?

TREASURER:

Well I have said that the national accounts show that inflation is very much

within our band, at two to three per cent, and provided we can keep it there,

that is consistent with low interest rates.

JOURNALIST:

That being the case, was it a pre-emptive strike should they have not done

it?

TREASURER:

Well look, they looked at the evidence and they made their decision, but as

far as I am concerned the important thing is to keep inflation low.

JOURNALIST:

Is it a breach of the election pledge not to have high interest rates under

a Liberal Government?

TREASURER:

Well our election rate pledge is that interest rates will always be lower

under a Coalition Government than under a Labor Party, and they are.

JOURNALIST:

So, irrespective of who would have been in power now, you say that interest

rates would have gone up?

TREASURER:

Well hang on, interest rates under this Government have varied between six

and eight per cent. Under the Labor Party they varied between 10.5 and 17 per

cent. That proves that interest rates are lower, even at 7.3 per cent, than

they were under the Labor Party, and substantially lower. When the Government

was elected the interest rate was 10.5 per cent. Today it is 7.3. It is more

than 3 per cent less. What that proves to you is that interest rates are lower,

and that the Government is delivering on its programme.

JOURNALIST:

Just back on the tax issue, how do you think the Victorian Government in particular

is performing? John Thwaites said this morning your stand on this is a diversion

from your bad economic news this week?

TREASURER:

Well hang on, the Victorian Government has signed an agreement in 1999. I

thought I heard Mr Bracks saying he wants it observed. Observing that agreement

means abolishing stamp duties on mortgages, stamp duties on commercial conveyances,

and stamp duties on leases.

JOURNALIST:

Have they been better or worse than any other State?

TREASURER:

Well the Victorian Government is now enjoying a very large windfall of GST;

$285 million this year, and rising, and so, they have got the opportunity to

reduce taxes and to hold other ones, but the increase in land tax in the State

of Victoria has been monumental. So they have got an increase in GST, when they

should be abolishing other taxes, they are also increasing land taxes, as well.

There are a lot of Victorian businesses that are bleeding over the land taxes

in the State of Victoria.

JOURNALIST:

The Sunday Herald Sun has speculated about the leadership again, saying that

you are preparing your Budget, and would you like this to be your final Budget

as Treasurer?

TREASURER:

Well look, I am working hard on the Budget, and I will be bringing it down

in May, and all will be revealed then.

JOURNALIST:

Do you expect Mr Howard to announce his decision to retire next year, in January

next year?

TREASURER:

He has made his position clear on these matters, and I have made mine.

JOURNALIST:

Can I just clarify something? There have been several reports saying that

Robert Doyle’s plan to renegotiate the Mitcham-Frankston contract followed,

and was inspired by a conversation with you. Do you support his proposal to

renegotiate that contract?

TREASURER:

Well, look I have many conversations with Robert Doyle, but I do not write

his policies. Robert Doyle is in control of his policies, and I am always willing

to speak to him about Scoresby, and I will tell you why. I have got $545 million

of Commonwealth money that can go into the Scoresby Freeway, but if the people

of Victoria are paying tolls, then the tolls will pay for it, not the taxpayer

and Commonwealth contributions. So, I would like to see a freeway, that is what

Mr Bracks promised, that is what the Commonwealth promised, that is what we

are ready to fund, let us get on and build it. What is wrong with having a freeway?

JOURNALIST:

A bit late now though isn’t it?

TREASURER:

There is $545 million – for a freeway – of Commonwealth money.

JOURNALIST:

You are off this afternoon to watch the race, but there was a risk yesterday

that Victoria and indeed Australia may have lost the race, have you got any

reaction to that?

TREASURER:

Well I think the Grand Prix is a fantastic event. It is fantastic for Australia

and fantastic for Melbourne and I want to see it stay in Melbourne. I want to

see it be the best Grand Prix, and I congratulate the Major Events Corporation,

the Grand Prix Corporation for getting it and keeping it, and I wish them every

success to make sure it continues for a long time.