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September 30, 2004TRANSCRIPT
THE HON PETER COSTELLO MP
TREASURER
Interview with Paul Murray
6PR Perth
Wednesday, 29 September 2004
8.30 am
SUBJECTS: Access Economics; Economy; Taxation; Superannuation
Surcharge; Liverpool Council; Economic management; Interest rates; Petrol
prices
MURRAY:
Good morning Peter.
TREASURER:
Good morning to be with you Paul.
MURRAY:
Peter, are you stunned by Access Economics’ criticisms?
TREASURER:
No. I have brought down nine Federal Budgets, seven surplus Budgets, we
have reduced Labor’s $96 billion debt by $73 billion. That record of seven
surpluses has not been matched by any other Treasurers. So I think the record
is there for all to see. It is a very strong record. I don’t think there
is a stronger record around the world, with comparable countries: the United
States or Britain or France or Germany or Japan. So, it compares well around
the world and you would have seen in the papers today that the Bank of International
Settlements released a report saying that Australia probably had the strongest
Budget policy of any developed country of the world. And the record shows
it is extremely strong. So I am very confident that we can continue good
economic management.
MURRAY:
But just two days ago you conceded publicly that there was “not a
lot of room for error if the economy slowed dramatically” given the
way you have cut into the surpluses. Now Access Economics says that that
dramatic slowdown is likely to happen.
TREASURER:
There never has been room for error in relation to economic management,
that was the point I was making. That is why you can’t trust Mark Latham.
The margins for error are small when you are dealing with an $800 billion
economy. But I have brought down nine Budgets now and I have been responsible
for economic management over the last eight and a half years. The record
is there for everybody to see – seven surplus Budgets, we have reduced
Labor’s debt by $73 billion. What I would say to people is, in this election,
you can listen to what people say, you can listen to what Mr Latham claims
but look at what Labor did and compare it to what we have done.
MURRAY:
Yeah look, there is no doubt, people will say you have done very well on
the economy. You have built a reputation for fiscal discipline. The reality
is, you have spent $52 million, billion on new policies in the pre-election
Budget including all that cash to families. Since then you have spent another
$16 billion, $12 billion during this election campaign alone – $6 billion
in just one day. I mean, a lot of people will say that you are risking your
reputation for fiscal discipline with what is pretty reckless spending.
TREASURER:
Well when you go back to the Budget and you say, oh you spent $X in the
Budget. Let me remind you that we cut taxes in the Budget. This idea that
you spent money by cutting taxes, we cut taxes. It was the responsible thing
to do. Now the Labor Party says, oh they spent money. No, we cut taxes.
We reduced the amount that the Government actually takes. And I think it
was the responsible thing to do. The Treasury has put out its forward estimates
over the next four years which show that the Treasury believes that the
Budget on our policy will continue to be in surplus. It is the task of the
economic managers to keep the Australian economy growing. Now if the Australian
economy stops growing and we have a recession like the recession that Labor
gave us in the 1990s then Australia would be in trouble. But the object
of economic policy is to keep the economy growing. That is what I have been
doing for the last eight and a half years. That is what I intend to keep
on doing. That is, the real thing here is, who are the economic managers
who can be trusted with managing an $800 billion economy, to keep it growing
against all of the challenges that are going to come across us. Now we have
got challenges with rising world oil prices. We have got challenges with
terrorism. We have got all sorts of challenges out there and the critical
thing in this election is who can manage that economy? And I would say,
not only look at our record but look at the way in which we have dealt with
these problems in the past, compare it with Mr Latham and his record down
at the Liverpool Council where he couldn’t even manage a Sydney City Municipal
Council. Make your choice accordingly.
MURRAY:
Well Access Economics, I will go back to their criticisms, because they
were senior Treasury officials and it is a pretty well respected outfit,
on the tax cuts, they say that by the 2005-2006 year income tax rates will
be to the lowest levels since the 80s averaging about 19.3 per cent of income.
And they question whether it is sustainable given the downturn that we are
going to get.
TREASURER:
Well, if income taxes are low as a proportion of the economy, and they
will be, because we cut taxes, I actually think that is a good thing. You
know, I would be interested if people are critical of us because income
taxes in proportion to the economy are falling. I actually think that is
a good thing Paul. Income taxes as a proportion of the economy are falling.
There you go, Access Economics said it.
MURRAY:
But you’re going to need, you’re going to need revenue to pay for services
and what they’re saying is that the revenue that you will get from things
like the housing boom, that will be over, company tax receipts will be down
because the economy has slowed, and you get yourself into a position where
you will be strapped to pay for the services that we elect you to perform
for us.
TREASURER:
Well Paul, that is why I keep making this point. The important thing is
to keep the economy growing. You are right, that if you mismanage the Australian
economy, company profitability would fall and company tax receipts would
fall. You are absolutely right about that. So what do I say about that?
Well the task is to make sure that you don’t mismanage the Australian economy.
We have a situation at the moment where company profits are as high as they
have ever been. It didn’t happen by accident, it wasn’t a fluke. It didn’t
just appear. It wasn’t ordained from outside. The reason it appeared in
Australia, Paul, let me tell you, is we cut the company tax rate, we took
interest rates down, we introduced full refunds of dividend imputation,
we gave capital gains tax relief and the companies of Australia got a chance
to be profitable. The good thing for people is that if companies are profitable
then they pay more tax and they are paying more tax than ever before. You
are completely right. If Australian companies became unprofitable again
they wouldn’t be paying tax. So what is the task? The task is to manage
the economy and keep them profitable. That is my policy. That is my record.
MURRAY:
And you are right to stand on your record. That is a reality of politics.
Another reality of politics is the Government’s run out of steam. And you
know, your Government has been around, well the Government you have been
part of has been around for a long time. And when people, including well
respected commentators like the Finance Editor of The Australian
newspaper say that your spending in this campaign has been reckless, then
people will wonder whether the Government has run out of steam.
TREASURER:
Well the Government has not run out of steam. Can I tell you, I am as focused
on the Australian economy as I have ever been. You know, after you have
been, after you have brought down nine Budgets and you have repaid $73 billion
worth of debt the thing you focus on, is if you have got an inexperienced
team in, they could undo all of that. They could undo all of that in a couple
of years. What focuses me is having made these hard yards, having got the
economy to where it is, the prospect of it all being undone with reckless
mismanagement with inexperienced people really worries me. And that is why
I am absolutely motivated. I don’t think that the Government has run out
of steam. On the contrary I actually think we are as invigorated and committed
as we have ever been, more so. Because now we have actually got some achievements
to defend and we want to make sure that they are not dissipated.
MURRAY:
We have got some callers lined up for you Peter. 922 11 882 is the number
if you want to speak to Treasurer Peter Costello today. Mike in Claremont
is first up. G’day Mike.
CALLER:
G’day Paul. Thanks and welcome to Perth Treasurer.
TREASURER:
Thank you.
CALLER:
The issue is superannuation surcharge and constitutionally protected funds
which affects thousands of Australians particularly those interesting in,
interesting South Australia and Western Australia. And can I stress that
this is a policy matter and not an individual matter. And Treasurer, the
concern relates to the wording in the Commonwealth legislation. Now I and
thousands of Australians receive a super surcharge account from the ATO
on an annual basis and we can pay it annually or when we retire when the
massive calculation is done. However if you want to defer interest, then
interest on the interest, you want to pay it annually. But the way the Commonwealth
Act is worded Treasurer you could end up paying more on an annual basis
than when you retire, you don’t get your money reimbursed. So for example,
if you can pay on a yearly basis you pay $25,000, your surcharge, when the
final assessment is done you only owe $20,000 there is no reimbursement
of the money. So I actually made representations through my local member
Julie Bishop, it went to your Minister Assisting Helen Coonan on the matter,
she didn’t answer sadly the policy question. I tried again, it went to Mal
Brough. Again the policy question wasn’t answered. Can you just stop our
frustration Treasurer and put this right please in the interests of equity?
TREASURER:
Well if this is a constitutionally protected scheme it must be a State
Government scheme of some kind. Is it?
CALLER:
That is right. Like, yeah, across Australia there are these, yeah.
TREASURER:
Yes, no, no I am just clarifying the issue. I think there are two things
that play in here. One is the imposition of the Commonwealth superannuation
tax and the other is the rules that are concerned. It would be necessary
to sit down and talk to the trustees about the rules, the way in which they
actually allow for that annual payment which we are happy to do. At the
Commonwealth level can I tell you, I think I have got even better news for
you which is that the Commonwealth, the Coalition Government, the Liberal
and National Parties are trying to reduce that superannuation surcharge.
Under our legislation it will go down to 10 per cent next year. We have
already got it down from 15.
MURRAY:
If you can get it through the Senate?
TREASURER:
No, no, we, well we wanted to take it further but we can actually, we have
actually got through the Senate a proposal to take it down. If Mr Latham
is elected he is going to legislate it up again back to 15 per cent. And
we have actually got it down to 12 ½ we have got a proposal to take
it down to 10, that will happen if we are re-elected. The bad news for you
is that if Mr Latham is elected he is going to whack that back up to 15
per cent.
MURRAY:
That’s a specific Labor promise?
TREASURER:
That is a specific Labor promise.
MURRAY:
Okay thanks Mike. Velma in Menora. Hi Velma.
CALLER:
Oh hello, good morning, Peter.
TREASURER:
Good morning.
CALLER:
And welcome to Perth. I’m just ringing, I’m not a member of any Party and
I’m part-pensioner, but I want to congratulate you on the way that you’ve
managed the country’s finances over the last eight years. I think you and
John Howard have done extremely well and I just shudder at the thought of
Simon Crean being in charge of the country’s finances. God help us.
TREASURER:
Well it causes me to shudder too I can assure you.
MURRAY:
You mentioned just earlier about the 29 page dossier that was released
yesterday on Mark Latham and his record at the Liverpool Council. It’s pretty
personal that stuff. Do you think Australians like you playing the man?
TREASURER:
Well I don’t think it’s personal at all. Here’s a man who was a Mayor and
you look at his financial record, I don’t regard that as personal. It’s
looking at his financial record. Mr Latham is allowed to look at my financial
record and he does every day. He can criticise my management in this area
or that area or the other area. Similarly, we are entitled to look at his
financial record and, you know, really when you look at it, it is very,
very frightening. Now, here’s a bloke running for Prime Minister, Paul,
he’s got a job application out there with the Australian people. Previous
experience: no private sector experience, no ministerial experience. So
what’s his previous experience? His only previous experience is as a Municipal
Mayor, so if you want to have some idea as to what he would be like, you
have to look at his previous experience as a Municipal Councillor. You know,
let’s suppose somebody turned up and said they wanted to be Prime Minister
and had no record in anything. You know, how would you actually judge them?
And he wants to be able to say, well okay, I’ve never had a job in the private
sector, okay, I’ve never been a Minister and you’re not allowed to look
at my time when I was a Municipal Mayor. In other words, nobody is allowed
to look at my previous experience before they vote me in as Prime Minister.
MURRAY:
But what he says, the most you could lay on him is that he put up swimming
pool fees.
TREASURER:
No. He drove the Budget into deficit. Eventually the Council couldn’t manage,
couldn’t manage to continue. The Council was suspended. He supported developments
at the Oasis Development Centre which came back to bite the Council, eventually
got it in financial trouble. That Council has been suspended. Now there’s
a lot people in Perth that won’t know about the Liverpool Council. This
is in Sydney. It’s probably the worst Council in Australia. It’s now been
suspended. There is now a receiver running it, and lo and behold, who is
the man that was responsible for its financial management back in the mid-90s.
MURRAY:
But he’s been out of if for a while, hasn’t he, yeah?
TREASURER:
Back in the mid-90s. Back in the mid-90s. And you know it’s the same old
thing, what he said is he’s going to spend all this money and then they
would find the savings to pay for it. Well, they spent the money but the
savings never appeared. So he says, it’s not my fault, somebody else should
have found the savings. He’s doing the same thing now, he’s saying I’m going
to spend my money here and then someone will find the savings. If Mr Latham
were to run Australia like he ran the Liverpool Council, the Government
would probably end up in receivership.
COMMERCIAL BREAK
MURRAY:
John of Noranda. Hi John.
CALLER:
Yes, sorry Mr Treasurer. I’m just making the query, you say that if Labor
gets in they’ll increase the interest fees, yet on the ALP financing government
policy, it states that Labor will investigate alternative funding options
including Government bonds. Doesn’t that mean that they’re not only going
to go on bond market to raise money to pay for their policies but they’re
also going to seek out other ways to charge?
TREASURER:
Well quite possibly. At the end of the day, if the Government goes out
and borrows money, that drives up interest rates because you’ve got a big
new borrower in the market. And if there’s a competition for funds and the
Government is borrowing a lot of money, interest rates go up. One of the
reasons why interest rates have been low since 1996 is that our Government
hasn’t been borrowing, it hasn’t been in the market driving up interest
rates. In fact our Government has been repaying debt. That is, instead of
drawing down on savings, adding to savings. And the consequence of that
is that the Government’s actions in the market has actually been driving
interest rates down, rather than driving them up. And if the Government
got back in the market and started borrowing again, it would push up interest
rates.
MURRAY:
Okay John, thanks. Dave in Jandakot, good morning.
CALLER:
Hello.
MURRAY:
Yeah, g’day Dave. The Treasurer’s listening.
CALLER:
It’s Peter here, Paul.
MURRAY:
Oh right. Sorry.
CALLER:
Sorry Mr Treasurer I was just would like to congratulate you in the way
you’ve conducted the finance of this country over the last eight years.
I wish you and the Coalition all the best and someone at Centrebet yesterday
on the radio put $200,000 to win 66, so I tell you what I reckon you’re
on a good thing.
MURRAY:
Okay Dave, all right, we haven’t got time for cheerios. I’ve got an email
from Hal who says with the latest petrol prices on the way up, I’d like
to ask any politician you talk to in the next couple of weeks, and you’re
sitting right here, what are they going to do about it? We have absolutely
nothing to do with the rest of the world in terms of petrol prices. We produce
our own oil for our fuel. Why on earth do we bow and scrape to the petrol
companies who use the world prices to push up our prices, I imagine if the
Government dropped the fuel excise as they should have under the GST, they’d
automatically win Government.
TREASURER:
Well let me make the first point, we do import oil. Australia is not self-sufficient.
We do import oil and when we import oil, we import it at the world price.
And as you know the world prices have gone above US$50 in recent times.
And that’s the single biggest determinant of the petrol price. Can I say
that when GST came in we did cut the petrol excise, we cut it from 44 cents
a litre to 38 cents a litre and we don’t index it, it doesn’t go up. The
petrol excise is 38 cents a litre. It doesn’t move. When inflation goes
up, it doesn’t go up, it’s still 38 cents a litre. So that as the petrol
price goes up, the Commonwealth excise remains the same. The Commonwealth
gets no additional money as a consequence of that. Now, there is a GST in
relation to petrol and as the price goes up, the GST which is one eleventh
or 10 per cent would raise more money. That goes to the State Government.
And I’ll just tell you what the Western Australian State Government is getting
from GST in this financial year, $3,613,000 with a $2,086,000 windfall.
MURRAY:
So talk to them.
TREASURER:
Well you know what happens in Queensland of course. The Queensland Government
uses some of its GST revenue to subsidise the price of petrol.
MURRAY:
Four cents a litre.
TREASURER:
Seven or eight I think. So that’s what happens in Queensland.
MURRAY:
Matt from Swan View is on the line for you. G’day Matt.
CALLER:
G’day. I just want to talk to Costello about, he’s going on about the Labor
Party not being good economical managers. He’s been in there for nine years
right, he’s saying what a good bloke he is. There was a time when he wasn’t
bloody in as an experienced Treasurer. The only reason why he’s got a surplus
today, he’s taxed the pants right off every Australian, the average Australian.
He has introduced this Goods and Services Tax, he has made us the higher
taxing people in the country, in the world, and he’s sitting there gloating
about what a good bloody bloke he is.
TREASURER:
Well that’s completely wrong. According to the OECD, which is the group
that monitors the developed economies of the world, Australia is one of
the lowest taxed developed economies in the world, one of the lowest. I
think there are about two or three below us.
MURRAY:
Access are today questioning whether you’ve taken taxes too low.
TREASURER:
Well, and Access Economics is today questioning whether we’ve taken them
too low. Let me tell you one of the reasons why revenues have been strong,
is not because taxes have gone up, but 1.3 million more people are in work.
Not because you put tax rates up, you’ve just got more people in work paying
them. And when you get people off the dole, you save the money from paying
the dole, when you get them into work, they actually pay taxes, then you’ve
got a much stronger economy. And on all of these international measures,
Australia is a low taxed country compared to, you know, all of the Europeans,
and compared to the Scandinavians, and compared to nearly all of the developed
economies of the world.
MURRAY:
Thanks Matt. Jason from Orelia. Hi Jason.
CALLER:
Morning gentlemen. My question is about the LPG. Now the greenhouse emissions
etcetera have got to be coming down apparently, so lots of people are switching
over to LPG, one for the economy, one for price. But the price of LPG has
doubled over the last five or six years and it is ridiculously high, especially
when it’s sold to the Japanese and Chinese for about four or five cents
a litre. I’m wondering if they’re going to drop the excise or do something
along those lines to make LPG a little bit more fairly priced?
TREASURER:
We don’t have an excise on LPG. So, it’s not a tax question.
MURRAY:
But you’re looking at putting one on?
TREASURER:
There is a proposal which has been laid down to have a, I’m just trying
to remember the amount, to have an LPG excise introduced in a few years
time which will go to about, from memory, don’t hold me to this, about 50
per cent of the petrol excise, so it will never be the same as the petrol
excise and that doesn’t apply at the moment. So it’s not a tax question.
Apparently, I’ve made enquiries about this myself. LPG is a by-product of
oil and as oil prices go up, so can LPG prices, but it really depends as
much on anything on the demand apparently and if the demand grows in world
markets, then the price of LPG can go up.
MURRAY:
We’re almost out of time. I just want to get your view on one thing. On
my estimation, if the Green vote is strong enough at this election, the
Greens preferences to elect a Labor Government, then it’s likely that the
Greens would also then get control of the Senate. Is that your view?
TREASURER:
Yes they could have the, when you say control, they would have the deciding…
MURRAY:
Balance of power.
TREASURER:
Balance of power. Yes, that’s right. Quite right. And in that case you
would have a Labor Government which had been elected to the Lower House
on preferences relying on Green Senators with the balance of power in the
Senate. And the Greens would be an incredibly powerful force over a Latham
Government. Bears thinking about too.
MURRAY:
Yes, does indeed. We’re waiting today of course to see Mark Latham’s campaign
launch, a little later than yours. Has he got any money left to spend?
TREASURER:
Well, it depends what he’s going to announce in his campaign launch. Apparently
he’s going to call Vision or something. I think it’s more about Division
that it’s going to be about Vision. If you look at the school’s policy for
example that Latham brought in, it’s the Division policy to try and set
Australian against Australian. And I think in many respects Mr Latham wants
to take us back to the old Australia of division and I don’t think it’s
going to be the future.
MURRAY:
Well we’ll find out a little later in the morning. Thanks very much for
your time today Peter.
TREASURER:
Great to be with you, Paul. Thanks.