Interview with Barrie Cassidy

Insiders

Sunday, 26 February 2006

SUBJECTS: Citizenship, Tenth anniversary, GST, Tax Inquiry, AWB

CASSIDY:

Treasurer, good morning.

TREASURER:

Good morning, Barrie.

CASSIDY:

With a, what motivated you as a Treasurer to deliver that speech at the Sydney

Institute to stray into that area of citizenship?

TREASURER:

I think it’s important for Australia’s future. I think we can offer a tolerant

Australia which respects the rights and liberties of all as long as we’ve got

agreement on a few key points. One is a secular state. Secondly, the rule of

law – law laid down by democratically elected legislatures and a loyalty to

Australia. Now if we all subscribe to those views, we can have robust diversity

within those views, but if there are people that don’t subscribe to those views

that’s a problem. We need to re-emphasise to those people…

CASSIDY:

But are there? That’s the point. What have we’ve seen or hear or read about

to suggest that that is not the case.

TREASURER:

Well, as I said in my speech, the radical cleric Abu Bakar Benbrika put forward

the view that he thought that there were two laws in Australia, one was Australian

law and the other was Sharia law. I don’t want to say too much about him, but

he has followers who apparently believe there’s another source of law.

CASSIDY:

That’s one person in a country of 20 million.

TREASURER:

Well, it’s a clerical leader who is putting this doctrine forward to followers

and the point that I make is that if the followers believe that, then the rights

and liberties of other Australians are going to be adversely affected, believe

me. I also say in that speech that terrorists and terrorist supporters who don’t

respect the rights and liberties of other Australians are also outside the Australian

compact. They don’t deserve to have citizenship. We’ve got to be very clear

about this, Barrie. I must say, the thing that actually surprised me in reaction

was that this was thought to be controversial. I wouldn’t regard this as controversial

at all. The fact that people came out and said that this was controversial or

inflammatory…

CASSIDY:

Provocative was a term used a lot.

TREASURER:

…or provocative. Now, let’s just analyse that for a moment. Is it provocative

to say that citizens should be loyal to Australia, that they should abide by

the rule of law, that they should respect the rights and liberties of others?

Is that now provocative in Australia? Gee, things have got pretty bad if that’s

provocative.

CASSIDY:

It’s true that the talkback callers were overwhelmingly of that view. But one

other sentiment came through as well and that is this – talk’s cheap, they want

action. What are your proposals?

TREASURER:

The first thing I want to do is I want to make it entirely clear to those taking

out Australian citizenship that when we ask them to take a pledge we mean it.

And I have a suspicion that if you were to turn up at a citizenship ceremony,

and they’re going on all over Australia, you’d get the feeling that the pledge

is just a necessary formality. I want to say this pledge is a big flashing warning

sign that Australia expects people to subscribe to and to live by.

CASSIDY:

What happens if they ignore the warning signs?

TREASURER:

I also want to say that if you can’t live by that pledge and you are a citizen

of another country, then you’re not eligible for Australian citizenship.

CASSIDY:

How do you establish that?

TREASURER:

Well I think you establish it first of all by making your values clear and

asking people to subscribe to them. And I would like to get universal acceptance

of those pledges and of those values. I must say, Barrie –

CASSIDY:

How do you do that, though?

TREASURER:

If there’s ambiguity which is coming through in the media or from leaders in

some communities, as I think we saw this week, ambiguity that you’re not actually

obliged to do all these things, then you’re neutered from the start. That’s

why I would ask community leader, all community leaders in all communities,

themselves to unequivocally themselves express these values and to urge them

on their followers.

CASSIDY:

But you want universal acceptance of certain values. You saw the trouble the

country got into trying to come up with a preamble on a Republic. It will be

as tough, isn’t it, to agree on a set of values?

TREASURER:

I think we’re a long way there. We’ve already got four things in our pledge

that we’re asking of every citizen – loyalty to Australia, democratic beliefs,

acceptance of the rule of law and an undertaking to respect the rights and liberties

of others.

CASSIDY:

So what’s missing?

TREASURER:

Well actually, that’s a pretty long way. What’s missing, I think, is an unequivocal

message that these are our values and we expect them not just to be subscribed

to, but to be lived by.

CASSIDY:

The 10th anniversary falls on Thursday and looking back over those 10 years,

what do you think is John Howard’s secret? What has enabled him to be the only

leader other than Menzies to run up 10 years?

TREASURER:

I think economic strength has been a big part of what the Government has delivered

to Australians and what Australians have recognised in return. We are now –

this is an interesting point – we are now in a growth cycle longer than any

growth cycle under the Menzies government. In fact, longer than any previously

recorded in Australia. During that period 1.7 million new jobs have been created,

mortgage interest rates have fallen, business profitability has risen to record

levels, we’ve had eight surplus Budgets, we’ve nearly retired all Commonwealth

debt, if not already, and kids have got a much better future than they had.

And I think the public which concentrates on these bread-and-butter issues recognises

that.

CASSIDY:

That’s the team effort. What is it about John Howard, though, as an individual?

The public seems to forgive his foibles and just focus on the big picture.

TREASURER:

These are the things that are important to people. Will my kids get a job?

Can I afford my mortgage? Will the business that I’m employed by be profitable?

These are the things people really care about. There’s political issues and

they’re the issues of the day and they’re going on at the moment. But at the

end of the day what the Australian public wants to know is, can my kids get

an education? Will there be a hospital? Will I have a job? Can I afford my mortgage?

That’s what the Government concentrates on.

CASSIDY:

Have you ever seen a better practitioner of the art of the politics than John

Howard?

TREASURER:

He’s in a class of his own with four election victories here in Australia.

There are other people historically that have had as many, but here in Australia

– four – that puts you in a class of your own.

CASSIDY:

After 10 years, are you surprised that his enthusiasm hasn’t waned one little

bit?

TREASURER:

Serving the Australian people is a great honour. I’m sure there are days when,

Barrie, you think the press are a bit unfair on you and you guys make our lives

miserable, but outside of those days it’s a great honour and he knows that and

I know that.

CASSIDY:

Has it been hard for you, though, to maintain that enthusiasm for such a long

period?

TREASURER:

It’s great privilege. As I said, there are some days when you feel the media

is a bit unfair, but we know deep down you love us all.

CASSIDY:

You spoke about regrets, one of them to the ‘Australian’, you regret giving

the States too much GST money and describe it, if it’s an accurate quote, that

it’s “scarred you for life”.

TREASURER:

Well, giving the States too much money – the idea of giving the States the

GST was this, if you gave the States a revenue base and it was a growth revenue

base, you would have premiers who would step up to the plate and say, “Now

we have a revenue base, we will take responsibility for our health systems,

for our education system.” The old argument that I can’t do anything because

Canberra won’t give me enough money would be put to death.

CASSIDY:

You argue they haven’t kept that side of the bargain?

TREASURER:

They’ve taken the GST. Some of them have refused to even abolish the taxes

that it was designed to replace. But they haven’t changed the script. The script

that they’re reading from is still the script of 10 years ago.

CASSIDY:

But if that’s a loophole, it’s one that you left there for them to exploit.

TREASURER:

Well, it was a very generous offer and it hasn’t produced the responsibility

at the State level which we had hoped that it would.

CASSIDY:

Can you do anything about that now, or is it too late?

TREASURER:

I think we have to keep re-emphasising over and over again the script has changed.

You’ve got a $37 billion per annum revenue base here and it’s time for premiers

who can show leadership to step up to the plate, take responsibility, along

with the GST. They take the GST, take the responsibility that comes with it,

change the script and make sure that the services are up to scratch.

CASSIDY:

You’re announcing today a new inquiry into the taxation system, what are you

hoping to achieve by that?

TREASURER:

I think it’s important that we internationally benchmark the Australian taxation

system so that we can get clearly in front of the public and in front of the

commentators where we sit. Where we sit on the scale between high-tax countries

and low-tax countries.

CASSIDY:

But don’t you know that now? The figures are available.

TREASURER:

As it turns out, nearly all of the figures show Australia as one of the lowest

taxed countries in the OECD.

CASSIDY:

So why the need for an inquiry?

TREASURER:

But what we need to do is we need to get the full-rounded picture on the table.

Let me make these points. Some people compare Australian tax rates to US tax

rates, federal tax rates, that the US has state income tax, city income tax.

Some people compare Australian tax rates to European tax rates, but Europe has

what’s called social security contributions which is a tax by another name.

You’ve got to get all of these on the table to get some kind of international

comparison. Once we do that, what I hope will occur is we can find out where

Australia leads, and there are many areas where we lead, but we can also identify

areas where Australia lags and they ought to become the priority as we improve

our tax system.

CASSIDY:

How quickly will this review be done?

TREASURER:

It will be done by the beginning of April.

CASSIDY:

Obviously, people are now wondering, is he softening us up here for tax reform

or is he trying to build a case that tax reform is not necessary?

TREASURER:

What I’m trying to do is I’m trying to identify those areas where Australia

lags so we can concentrate on them. Now nobody would say we’ve got a perfect

tax system in Australia, so let’s look around the world and let’s see who does

it better. I think as we look around the world by the way, Barrie, we’ll find

that by international comparisons there are significant areas where we lead.

I think we’ll actually show that our company taxes and business taxes are quite

low by developed economy standard. But let’s now pre-judge the issue. Let’s

have a look. Where we lead, we ought to maintain our advantage. Where we lag,

we’ve got a focus and a priority to start addressing that area.

CASSIDY:

Everyday someone is calling for tax reform, not tax cuts, tax reform. But if

they mean by that lowering the top marginal rate, your message seems to be simple

– forget about it.

TREASURER:

No, let’s internationally look at where we compare and how we compare, where

we lead.

CASSIDY:

You’re not saying, “Forget about lowering the top rate”.

TREASURER:

What I’m saying at the moment is let’s get some facts on the table. We’ve got

a month, we’ve got two respected business leaders. It will be led by Peter Hendy

and Dick Warburton, the chairman of our tax board. They’ll look at all of the

material, much of it on the public record with OECD studies and the like. Bring

it all together, put everything into the mix, all of the relative comparisons,

State, local, federal, business, individual, indirect. And let’s just try and

get some facts into this debate so we can work out where we lead and where we

lag.

CASSIDY:

On funding generally, you really can’t ignore for very much longer, can you,

the pressure for NSW and Victoria for more money relative to the other States?

TREASURER:

One of the things about the increased royalties that are flowing to mining

States like Queensland and Western Australia is that their revenue base is increasing

and the consequence of that is that is beginning to redistribute money back

to the larger States. These are all matters that are taken into account by the

independent umpire, the Grants Commission. But I think you’ll find – and this

is the way the system is designed to work – that if a State takes advantage

of a windfall, and mining would be a windfall in royalty terms at the moment…

CASSIDY:

In Western Australia and Queensland.

TREASURER:

…yeah, that’s taken into account and averaged back. You see, we’ve got an

independent umpire and it makes a decision.

CASSIDY:

The Reserve Bank Governor has said that it’s time to fix this up.

TREASURER:

Let me go through this. The GST cake is about $36, $37 billion which we’ve

put in place. How it’s sliced between the States is on a formula the States

agree as between themselves. It’s done by an independent umpire. We’ve grown

the cake and the States fight about their slices. Let me make this point. When

you hear States fighting about slices, it’s not a fight against mum who baked

and cake, it’s not a fight against the Commonwealth, it’s a fight as between

the siblings.

CASSIDY:

It’s hardly a perfect formula, though, is it, because the smaller States are

going to gang up on the two large States?

TREASURER:

If it’s not a perfect formula and the States can improve the formula, we would

be very very pleased to implement it. But I’ll point one thing about this formula

– what this formula has built into it is that if you have a new source of revenue,

that’s taken into account. So royalties in Western Australia and Queensland

are now taken into account. One of the reasons why NSW, incidentally, was assessed

as having great revenue capacity is the predominance of head offices and property

values. So all of these things are taken into account.

CASSIDY:

Just finally on the Wheat Board and within the Government now is there at least

a sense of not guilt, but embarrassment, embarrassment that more should have

been done along the way?

TREASURER:

Cole will come out and he will make his finding on whether or not bribes were

paid, who knew about them, and who is responsible. I’m not in a position to

give you any of those findings. But just let me say, and I think I speak for

all people who are interested in the outcome of the Cole Royal Commission here,

if the wheat board paid bribes it’s a disgrace because it was a contravention

of the Oil-for-Food Program. It was a contravention of a UN program. It is not

permissible and if people are found to have done that, then they ought to be

charged.

CASSIDY:

But is it equally a disgrace that the Government knew nothing about this?

TREASURER:

If the Government went to the Wheat Board and the Wheat Board gave it assurance

after assurance after assurance and no reasonable basis to query that, then

that’s the finding that Commissioner Cole will make. Let’s see what Commissioner

Cole makes in his findings.

CASSIDY:

Would it disturb you to hear that some politicians may have sold Australian

Wheat Board shares late last year, John Anderson among them?

TREASURER:

They have to declare the share they hold, they have to declare when they buy

and sell them. It’s all on the public record out there and people will be able

to put questions to them. But if the implication is was he somehow insider trading,

I wouldn’t believe that for a nano second. I know John Anderson. I know he’s

a man of enormous integrity and if there’s some suggestion that he bought or

sold on inside information, I would reject that entirely.

CASSIDY:

Just finally, how are you planning to celebrate the 10th anniversary?

TREASURER:

Well, like everybody else, I’ll be in Canberra, in parliamentary sittings.

Maybe they’ll give me an early night off.

CASSIDY:

Thanks for joining us this morning, appreciate it.

TREASURER:

Great to be with you, Barrie, thanks.