TRANSCRIPT
THE HON PETER COSTELLO MP
Treasurer

Address to the National Press Club

Wednesday, 14 May 2003
1.00 pm

 

SUBJECTS: Budget

PRESENTER:

Ladies and gentlemen, welcome to today’s National Press Club Telstra Address.

As time is short today, the Treasurer does have to return to Parliament around

1.45pm for Question Time. As time is short and obviously our guest requires

no real introduction other than to say this is the eighth consecutive time that

he’s appeared obviously here, for the Post Budget Address.

Let’s please welcome today our guest, Peter Costello.

TREASURER:

Thank you very much Laurie. And thank you to my friends in the press for coming

out again for another post Budget luncheon and to all of our guests here. It’s

become a little of a ritual hasn’t it – the Budget on the Tuesday night, the

address down here on the Wednesday and the selling of the Budget through the

week and the week thereafter.

But I want to take you back if I can to when we started working on this Budget.

We begin working on a Budget in about November, some six months before a particular

Budget is brought down and we convened our Senior Ministers in November of last

year to determine what the shape of this year’s Budget would look like.

Let me take you back to that time. It looked like there would be military action

in Iraq but Australia had not made a commitment. We were suffering a very, very

severe drought and it was clear that Australia would be well down in relation

to farm production. It was clear that there would be big drought assistance

measures that were required. We were looking at a very uncertain world outlook

with the United State economy weak, Japan weak, Europe weakening particularly

Germany, the United Kingdom subdued. And so we were looking at the way in which

we face up to the recurrent requirements of the particular Budget round and

also advance our structural reform.

We have got something of a tradition now of putting down a big structural reform

statement as part of each of our Budgets. Last year the Intergenerational Report

allowed us to put down a structural statement about what we have to do in this

country if we are going to get health and pharmaceuticals on a sustainable basis

over the next forty years and how we are going to respond to the pressures which

the ageing of the population is giving us.

This time we determined that it was higher education reform that ought to be

the statement which formed the structural reform programme for the forthcoming

year and come through the Budget.

And so, as we looked at all of those things we undoubtedly had great pressures

that were coming in, in relation to the 2003-2004 Budget. Of course the biggest

of these was defence spending. The Budget papers will show that the defence

spending increase since 2000-2001 consists of a number of components and you

can see that in the way in which this layered diagram sets up the build-up we

have had in defence funding since 2001. The blue represents the forward estimates

which would have been the case without any changes. They were growing over the

course of the forward estimates and would have had defence spending at around

about $12 or so billion by 2003-2004. In 2000-2001 you can see from the green

we made a commitment to East Timor. In the early years of that commitment it

cost about a billion dollars additional per annum. It is now beginning to phase

down and it is costing us about half a billion per annum. It will be ongoing

even after Australian troops, or even if Australian troops were to completely

leave East Timor because, as you can see from the yellow continuation, we raised

an additional battalion in order to maintain that commitment, to rotate through

East Timor so that we could have adequate defence preparedness in relation to

that commitment.

In 2001-2002 we embarked on the biggest build-up in Defence White Paper expenditure,

which you can see in the grey, an increase of $27 billion over a decade determined

to modernise Australia’s equipment and to build technological changes and to

take advantage of the replacement of numbers of platforms over the course of

that ten years.

And then as you can see in relation to this Budget with the red funding on

top of that, we announced new measures principally in relation to combat readiness,

the tempo of the defence force, special operations and additional commando companies.

Defence spending will increase to $15 billion in 2003-2004 and grow across

the forward estimates. Defence was our first priority when it came to expenditure

in this Budget.

Our structural reform package in relation to higher education has really three

components. But in the debate that we have had over the last 24 hours some people

have overlooked that one of those components is increased Commonwealth funding

in relation to the higher education sector. In fact, a 7½ per cent increase

over three years. That is the blue. The forward estimates were growing anyway.

That is the red. The blue is the step up in Commonwealth contribution to higher

education, 7½ per cent over the next three years and continuing.

And in return for that step up of Commonwealth funding in the higher education

sector, we are asking for changes, yes, we are. Changes in governance in relation

to University Councils, workplace relations, to make universities more flexible,

to make sure that universities, like other institutions including the public

service, deliver best value for money. So in return for additional funding we

want to make sure the institutions are flexible and operating on a very sustainable

basis.

The second element of the higher education reforms that we announced last night

is flexibility in relation to course fees. A flexibility for the HECS funded

places where universities can vary those charges down or vary them up to a maximum

of 30 per cent.

Let me make it clear that the Commonwealth will continue to fund the full HECS

fee as varied and has lifted the income threshold from which the repayments

take place so that a student by 2005 makes no repayments unless their income

goes above $30,000. That’s the second area. We hope that universities where

they have high demand will be able to reflect that. We hope they will be able

to reflect it where they have low demand. We hope that there will be competition

between universities to get more incentive and competitiveness and flexibility

into the system.

The third area of our higher education reforms is in relation to the loans

programme H-E-L-P HELP. The HECS funding will continue as I said earlier but

there will be new higher education loans programmes available at a 3½ per

cent real interest rate for fee paying students, and there will be an overseas

or OS or OS-HELP for those students that want to study overseas. These are programmes

not available at the moment. They are not available at the moment. They are

a new option which is being introduced for those students that want to take

advantage of them.

Higher education is a structural reform, a big structural reform, an overdue

structural reform. And the Government’s reform agenda moves on in relation to

education.

The other area where we were increasing spending as we came up to this Budget

was in the health area. You can see from, again, the layers that we laid down

here, the increase in all areas, in all areas of the health system. The red

area, the Medicare Benefits Scheme, the yellow area the Pharmaceutical Benefits

Scheme, the fastest growing area of Commonwealth expenditure being driven by

of course the ageing of the population, but also by scientific advance as new

pharmaceuticals become available to Australians through the subsidised system.

The Health Care Agreements which as I said last night are being increased by

$10 billion over the last five years, Health Agreement. And the other principally

private health insurance initiatives and programme funding also growing.

You can see from the course of 1996 to 2006, that health spending moves from

nearly $20 billion to $40 billion, a very significant build-up in health spending.

As I said last night in the Budget Speech, a 65 per cent increase from the next

Budget year back to 1995-1996, a 65 per cent increase. Now some of the drivers

that are operating in this area are of course are the ageing of the population.

But health is increasing not just because of the ageing of the population but

the scientific driver. Two drivers in relation to health care expenditures.

Even driving faster in the pharmaceutical areas but of course a big area of

government expense and one that we have able in this budget to meet. How are

we able to meet some of these expenditures, well the biggest change that has

occurred in relation to expenditures during the course of my time as Treasurer,

is our reduction in public debt interest. The pay off from retiring debt is

that our interest payments have fallen. When I first became Treasurer, we had

to fund nearly $9 billion just to pay our interest bills.

That’s now fallen by about $5 or $6 billion. It’s $5 or $6 billion we save year

after year because we have got our debt down. It has given us the opportunity

to redirect funding to other areas so, as our public debt interest payments

have fallen, our ability to provide for hospitals and schools and families and

children has grown. This grab illustrates the pay off from good economic policy.

Retiring debt gives you a recurrent saving. Now it’s tough to retire debt, you

have got to get a surplus and beyond to retire debt. But the pay off of our

work in relation to debt is a saving which has now given us opportunity to redirect

to other things. I have said before, and I say again, the blue line represents

payments for the past, the green line represents investment in the future. And

the smaller the blue and the larger the green the more pro-future your policies

have become. And that’s an indicative change that we have seen over the last

five years of course as we cope with the ageing of the population, the ability

to shrink that blue and to finance our programs becomes even more important.

Let me go then just as briefly as I can to how Australia stands in budget terms

compared with some of the other economies of the world. You’ll see from the

very right part of this grab, that we are forecasting a surplus in 2003-04.

A surplus of $2.2 billion. You’ll see that we expect an outcome in the current

financial year of 2002-03 of a surplus of around $3.9 billion. What I’d call

moderate surpluses, but surpluses. How do we compare? Well the European Union

on average, will have budget deficits of 2 per cent of GDP. In Australian terms,

it would be a deficit of about $14 of $15 billion. The OECD, a little over 3

per cent of GDP. The United States budget deficit in 2003 and 2004 is predicted

to be 4 per cent of GDP. For Australia that would have meant a budget last night

with a $30 billion deficit. 4 per cent of GDP of the United States, 4 per cent

of GDP Australia, that would have meant a budget last night of $30 billion.

Just to put the US financial position in an Australian perspective. And Japan,

which continues to have structural difficulty. What that shows is that Australia

is in a stronger position than the countries that we like to compare ourselves

with in Europe, the OECD, and even in the United States.

We can see that also in our debt position. You have seen me with this table

before. This is not absolute debt, this is debt as a percentage of your economy.

What we call a debt to GDP ratio. You’ll see that from 1990 on when we were

running deep deficits, our debt to GDP ratio climbed to nearly 20 per cent.

You’ll see that it’s now below 5 per cent, in fact it is below 4 per cent, on

a forecast for 2003-04. We have got our debts back in shape in private company

speak it would be called a robust balance sheet. We have got our balance sheet

robust. So, we are in a strong financial position. We are running a surplus,

and we have got a robust balance sheet as a Commonwealth and it’s put us in

quite a strong position compared to other countries. Here’s our debt to GDP

ratio’s falling, as you can see, whilst most of the other countries that we

compare ourselves, although making progress in the late `90s now have rising

debt to GDP ratios.

And can I make this point, at the end of a financial year, if you run a surplus,

you’ve got to do something with that surplus. It’s like a profit and loss in

a balance sheet. If you run a profit, you post your profit to your balance sheet.

If you run a loss, you take it off your balance sheet. If you run a surplus,

you reduce your debt. If you run a deficit, you run up your debt. People say,

what happens if you spend a surplus? If you spend a surplus, you don’t have

a surplus. It’s spent. People often say to me, well why don’t you build up a

surplus for spending? By definition, when it’s spent, it’s not a surplus. All

you can do with a surplus is retire debt. Now the truth of the matter is – or

build an asset, you build an asset against the debt, so you retire net debt.

You can retire gross debt or retire net debt, but you’ve got to retire debt.

If we in this financial year had run a surplus, let us say, of $4.6 billion,

then instead of paying off $2.2 billion worth of debt, we’d back pay $4.6 billion.

Instead of our debt to GDP ratio being say 3.7 per cent, it might be 3.6 per

cent. But there’s nothing else you can do with it. Once you spend it, it’s no

longer a surplus.

We took the decision in this Budget that if our balance sheet was strong, as

it has become over the last six or seven Budgets, if our Budget was in surplus

as it was, unlike the United States and the European Union, if we had met our

funding commitments as we had in relation to defence and terror and the drought,

then in those circumstances it would be responsible to return to the taxpayer.

Something different was what we had in mind in relation to last night’s Budget.

This was not your traditional pre-election tax cut. Plainly. If it had been

a pre-election tax cut, the media would have been right saying there were going

to be no tax cuts on Tuesday night. They would have come in 12 months time.

No, what this was, was because we had strengthened the balance sheet, because

we could meet our commitments and because we could maintain a surplus, it was

an opportunity to make a return.

Now you can argue about whether the tax cuts are generous enough or whether

they are too generous. But how do we fix in relation to those levels, we fixed

in relation to those levels as a return to the taxpayer, and that’s what I say,

responsible, responsible return to the taxpayer. A $2.4 billion return to the

taxpayer consistent with keeping our Budget in surplus. The return is higher

for those that are in the lower income brackets because they pay less tax. It

is less, in percentage terms, for those who are in the higher income tax brackets

because they pay more tax. The red line will show you in percentage terms the

return. And I make this point, there are some countries around the world that

are reducing taxes, but they’re not doing it on balanced budgets – the United

States is one. There are some countries around the world that are increasing

taxes – the UK is one, whilst the running deficit budgets. But there aren’t

many countries around the world that are running budgets which are in surplus

and reducing taxes – Australia is one. Australia is one and there wouldn’t be

too many others. Even in Australia, can I put to you, there aren’t many governments

that are reducing taxes. I know of, well, six States and two Territories that

are taking different views, but this is a return.

Now I’ll just finish with one last point, because I think when you’re looking

at the policy which the Government brought down last night, it’s also important

to look at alternatives that are being put forward in relation to it. And Mr

Crean, at some points last night seemed to be saying the tax cuts were not great

enough, presumably he’s in favour of larger tax cuts. At other points he was

saying that spending was not great enough, which presumably means that he thinks

spending should be increased. But let me make one very clear and very plain

point to him, he can’t be in favour of both. He cannot be in favour of bigger

tax cuts and bigger spending. He can be in favour of bigger tax cuts and less

spending, or no tax cuts and bigger spending, but he can’t be in favour of both.

I don’t know if this has occurred to him or not. He has two trucks out there.

One complaining about tax being too high and the other complaining that spending

is too low. His trucks had a head-on collision last night. They ran into each

other and they are both destroyed.

Here’s how he put his argument on 3AW this morning when asked, would he be

giving back what he said was $3.7 billion too much tax that the Government

was taking, he said this `Clearly it gives us scope to give more of it back,

and I’ve said that, I said that 12 months ago, I said it in the lead-up to this

Budget. Bracket creep should be returned to the families in the form of tax

cuts or the provision of services’. Returned as a tax cut or returned as more

expenditure. Can I make one point, if it’s an expenditure, it can’t be returned.

More services means keeping the tax and spending it. That’s what it means. It

means keeping tax and spending it. I don’t know that the point has dawned on

him yet, but you return to taxpayers, you have less capacity for increasing

expenditures. If you increase expenditures, you have less capacity for returning

to taxpayers. And if a difference does open up between the Government and the

Opposition on this point, then so be it. We think this Budget properly invests

in defence and security and health and education. We want to make sure that

we keep a Budget in surplus whilst we properly fund those areas consistent with

taxes being as low as they can be. That’s the way in which we approached the

Budget that we laid down last night. We are seeing the benefits of some of the

hard yards of the last six and seven years. Our country is doing as well, if

not better, than nearly all of the other countries of the developed world. Good

economic policy will make Australia strong and secure our opportunities in a

difficult international environment and this Budget is all about bringing that

about. Thank you very much.

PRESENTER:

Thank you Treasurer. Time now for questions we have a long list of questions

and only around 20 minutes for those questions so I would ask our media members

to keep their questions short and restrict themselves to just one question please.

JOURNALIST:

Treasurer, Veronica Brooks from Dow Jones. Last night you made a fleeting reference

to the Government possibly establishing an asset position if you can sell the

rest of Telstra. Could you explain how that might be structured and managed

and secondly how you might fire wall that from any future Government tampering

with that asset position.

TREASURER:

Sure, if I can get my net debt graph back up on the screen. As we reduced debt

you can see from the high point in 1995 and 1996. We have had less Commonwealth

bonds on issue and so much so that the financial markets have wondered about

whether this market would remain liquid enough to be worth an investment.

We have tried to maintain it’s liquidity at around $50 billion. Not because

we need $50 billion, but because the market says $50 billion is about the level

of liquidity. We said that as part of this budget we would look at the question

as to whether or not with the further surpluses and further assets sales we

would redeem all of those bonds and put Australia in a debt free position, or

whether or not we would keep those bonds out there and build a corresponding

asset position against it. So that net debt would fall but not gross debt. That

is the critical point there.

We have come to the conclusion that we will keep the bond market liquid with

securities on issue of about $50 billion because we think it does add to the

financial markets and the alternative would be slightly higher interest rates.

And that is a decision which we announced on Tuesday.

In the future if surpluses or asset sales were sufficiently large that we had

to develop a substantive asset position against a liability, say superannuation.

We have said that we would closely consult. The normal way in which you would

do it, of course, is you would put it into equities. I have two concerns about

that. One is as you said if it were put into equities future Governments would

be able to spend it very easily and you have got to work on the theory that

there may be a Labor Government one day, so you would have to try and lock it

away in a way that could not be got at, and I think that is very hard. The second

thing is, of course, if you do go into equities you can lose money as well as

make it. This has always been very much on my mind how, you know, taxpayers

might well say that you put this money into equities and if you have got a negative

return in the last two years they might get very angry.

Now you explain, no doubt, that this was a long-term policy but you would have

to think about that very carefully as well. But I do not think we are yet at

the position where we have to decide that yet and that is why I said if we were

to get to that position we would consult widely on those mechanisms.

JOURNALIST:

Fergus Maguire from Bloomberg. On the tax cuts you announced last night returning

some of the surplus to taxpayers rather than repaying debt. Are we likely to

see, does this represent the change in policy and are we likely to see continuation

of those tax cuts when a surplus allows?

TREASURER:

Well, it represents a change of policy to this extent. I feel that our debt

to GDP ratio is, as you can see, pretty strong. It is pretty strong by international

standards and it is now reaping benefits for us in terms of intrest rate savings.

And, in addition to that we have now made the decision that we are going to

keep securities on issue. So, it does represent now I think the opportunity

to sit back and say well we have now got that debt problem which blew up in

the early nineties under control. We are in a comparatively stronger position

after we have funded our legitimate expenses we can return to the taxpayers

and to that extent I think it is a little different to the position where we

were in the late nineties where we were doing everything we could to retire

that debt. I feel that debt is now in a strong position as you can see from

the graphs that I have put up here. Certainly recognised internationally. I

make this point, since I became Treasurer in 1996 we have had two foreign currency

upgrades, foreign currency bonds upgrades. We were downgraded twice in the 1980’s,

we have managed to get both of those back. We reversed the damage of the 1980’s,

we now have triple A rating on our foreign currency bonds. With a position like

this I think we can maintain that. So, we are in a different situation, we are

much stronger, we have a much better credit rating as a consequence of what

we have done and I think we can start thinking about that return to the taxpayer

and that is why we did it on Tuesday night.

PRESENTER:

Belinda Goldsmith from Reuters.

JOURNALIST:

Belinda Goldsmith from Reuters. The Budget boosts funding for the ACCC, but

the question of who is going to replace Allan Fels when he leaves in a few weeks

is still unresolved. Is there any sign of a break in the deadlock with the States

on his replacement and on another high level appointment, have you made any

decision whether Ian MacFarlane will be re-appointed RBA Governor when his term

expires in September?

TREASURER:

Well, the situation in relation to the ACCC, as you know, is there are eight

voters and I am not one of them, nor is the Commonwealth. We just fund the institution.

We just fund every last dollar of the institution, but we don’t, and we are

answerable in the Parliament for the Commission. The only thing we don’t have

a say in is who runs it. There are eight votes under a voting formula that was

put in place by Mr Keating in 1995, for which I thank him very much. The voting

is four for one candidate, one for another, and one for another with one that

won’t vote and one that can’t decide which way to vote. But, my reckoning that

means that one candidate is well in front of others. If there is a vacancy the

Treasurer can appoint an acting appointment and I guess that if the impasse

is not resolved that is what we will do. We will make an acting appointment.

In relation to the Governor of the Bank, as you know, we appointed him in 1996

to a seven year term. His term is coming to an end this year. I think he has

been an outstanding Bank Governor and I think that when we look back on the

last seven years they will be perceived as years of very good economic management.

Need I say any more?

PRESENTER:

Laura Tingle.

JOURNALIST:

Laura Tingle from the Financial Review Treasurer. Just taking a leaf from you

and going back in history a little bit – eleven days. On Meet the Press at that

time Treasurer, you were asked when wage and salary earners would receive the

next income tax cut and most people would have been forgiven for thinking that

you weren’t going to give them one, but we’ll just put that aside. You say in

your answer at that stage that…

TREASURER:

Could you give the name of the questioner please Laura?

JOURNALIST:

Yes, Ian Henderson, actually…

TREASURER:

Right…

JOURNALIST:

…it’s nothing personal. You say we obviously want to deliver the lowest taxes

we can to the public consistent with good economic policy which keeps interest

rates low and the Budget in balance. Now, presuming these tax cuts aren’t going

to put upward pressure on interest rates, I am just wondering whether there

is any element in them which is looking at providing some underpinning for a

possibly softer economic outcome than you are forecasting?

TREASURER:

Well, the quote was as you read it, we want to provide low as tax as possible

consistent with keeping interest rates low and the Budget in balance and that

is what I think we did last night. That is precisely what I think we did. Will

there be, I think your question is, do I think that these income tax cuts will

be stimulatory…

JOURNALIST:

(inaudible)…

TREASURER:

…well, put it this way, they are more likely to be stimulatory than contractionary.

If they have an effect they will be stimulatory. What will be the level of stimulation?

Well, $2 ½ billion in a $700 billion plus economy, so, it is not 1 per

cent, is it? It is something less than that. So, you would expect that they

would be mildly stimulatory. I wouldn’t overstate the case but they are more

likely to have that effect than the reverse. Would that be a good thing? Well,

our growth forecast is three and a quarter per cent. That is less than we have

had in the late `90’s when we got used to 4 per cent growths on low inflation,

so that would be a good thing, actually. I think the situation is that the world

economy is weak, I think the Australian economy is suffering to some extent

from the down-turn in the United States, and Europe and Japan, and I think this

will be consistent with good macro management.

PRESENTER:

Lincoln Wright.

JOURNALIST:

Treasurer, I would like to ask about the cost of the war in Iraq. The Opposition

claims there is a black hole in the Budget because you haven’t fully costed

the existing deployment there and I was wondering whether or not, what your

opinion on that is. Will it cost more than $645 million over 3 years or will

it cost $1.3 billion which I think the Opposition is saying?

TREASURER:

Well, you seriously expect that I will agree with the Opposition? This is the

additional cost? We, regardless of whether we have a commitment in Iraq we pay

the soldiers and the sailors wages. We own the Hornets, and the Hercules, and

the PC3 Orions, and the frigates. We have the normal, what you would call I

guess, fixed cost in relation to the defence forces. The marginal cost or the

additional cost comes from tax free allowances in theatres of war, deployment

allowances, deployment costs, costs of ordinance – which is, ordinance – which

is used, and those things. That is costs over and above the costs that you would

otherwise have, and will fund anyway. Now in relation to that the cost will

be $645 million, that is the cost.

JOURNALIST:

But your own Budget papers say that you don’t know the final cost?

TREASURER:

Well, the cost will be $645 million on the assumptions as to when the troops

are brought home. And since we are in the business of bringing the troops home

we know that pretty squarely, pretty squarely. That is happening as we speak,

in fact I think the Hornets are going to arrive at Tindal airbase tomorrow.

And the return of the special forces will be pretty imminent after that. So,

the time we were putting the Budget papers together it may not have been quite

clear what the precise day is but by now it is pretty clear what it is, and

that is the additional cost.

PRESENTER:

James Grubel.

JOURNALIST:

James Grubel from AAP, Mr Costello. Given that a couple of measures from last

year’s Budget still remain locked in the Senate, blocked in the Senate, how

are you going to get some of the changes through in this budget through the

Senate, particularly the Medicare and the higher education. Will you be seeking

talks or have you sought talks already with the Democrats or will you be looking

at trying to get meetings with Meg Lees and the other independents and try and

circumvent the Democrats and the Labor Party?

TREASURER:

Well, you are quite right that some of the big structural reforms which we

laid down in last year’s Budget have still not been enacted. And I am glad you

referred to that because one of the problems that we run into in relation to

economic management is that long-term structural reform which is in the interests

of Australia and would be in the interests of both parties, if they were, either

of them were in Government, are being blocked in the Senate. We all know the

Pharmaceutical Benefits Scheme has to be re-based, we know that. In fact you

don’t even have to go to me as the authority for that. The co-payment in relation

to pharmaceutical benefits was introduced by Paul Keating, by Labor. We know

that you have to re-base the financials of that scheme if it is to survive.

The Labor Party knows that. They know if they were ever to get into Government

they would have to do it. So why does it remain blocked in the Senate? It has

nothing to do with policy. They know that people have used the disability pension

as an alternate to unemployment benefits. They know that. Various Labor Party

front benchers used to accuse us of keeping that pension beneficial so that

the unemployment rate looked lower than it was. And when we tried to fix it

they defeated it. They know that has to be fixed, so why are they voting against

it?

Let’s come to higher education. Are they going to tell us that they are against

HECS? They introduced HECS, John Dawkins introduced HECS. They know that the

universities want the opportunity to have flexibility and they need workplace

reforms, they know that. So what we actually need in relation to the Labor Party

is some leadership. We need somebody who is prepared to stand up and say, “There

are times when reform is in the interests of the country, and if I become Prime

Minister I would like to have seen this done.” That is what we need. And

what we get is this opportunism on all of these issues. Now, I would hope that

our Budget would go through the Senate on the support of the Opposition. They

know this has to be done. And if they, they were thinking to themselves, “Well,

you know, we might be in government one day and wouldn’t it be good if this

was done”, that is the attitude that they would be taking. Now, if the

Labor Party is not going to take that attitude and it is going to try and vote

down all of these structural reform measures, then yes, of course, we will have

to try and seek support from more responsible minor parties. Have I spoken to

them yet? No I haven’t because we haven’t even produced the legislation yet

let alone got it through the House of Representatives. But, if the worst comes

to the worst then of course we will seek to do what ever we can. We have not

had a majority in the Senate for a day yet in the last seven years. And all

we have accomplished we have accomplished in spite of the Senate. So it has

been pretty hard going.

PRESENTER:

Next question and it may have to be our last, is Karen Middleton.

JOURNALIST:

Treasurer, Karen Middleton from The West Australian. On Radio National this

morning, Minister Vanstone said that she has resisted giving welfare beneficiaries

just an extra five bucks because all they can do with it really is buy a sandwich

and a milkshake, and that is not much. Is she right?

TREASURER:

Well, look, Karen, I don’t know what she said and I don’t know what has motivated

her comments. But I think I can see where you’re going. I may be wrong about

this Karen, but I think I have been around long enough to think you are trying

to get an answer from me that you can use to cast doubt on tax cuts. Now, I

might be cynical Karen, and forgive me if I am cynical. But can I just say this,

my experience in relation to tax cuts, which I think is the nub of your question,

is this, would people like large tax cuts or small tax cuts? Well, I think that

is pretty obvious. Would they like tax cuts or no tax cuts? I think that is

pretty obvious. Would they like tax cuts or tax rises? I think that is pretty

obvious. So we can always work and we can always say that we’d like larger tax

cuts and I will be along with the majority of the public. The trick is, however,

to deliver them after you have met your expenses and balanced your Budget. And

if you can do that then I think that is good policy.

Thank you all very much for your time.