Budget – Interview with Jon Faine, 3LO

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May 11, 2004
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May 11, 2004
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May 13, 2004

Budget – Interview with Jon Faine, 3LO




Interview with Jon Faine

3LO 774

Wednesday, 12 May 2004

8.30 am



Mr Costello, good morning.


Good to be with you, Jon.


$10 million for circus arts proves that you’re trying to deal with problems

suburban families have juggling the dilemmas of family life. Can you buy votes?

And, for you, a chance of being Prime Minister? Is that what this Budget’s



No, this is a Budget which is about economic management, and as I said last

night, if you don’t have strong economic management, if you can’t

keep your economy growing, you can’t do anything for families. No consolation

to a family if they don’t have a job or they can’t afford the mortgage.

So if you can run strong economic management and if your economy is picking

up employment and unemployment is now as low as it’s been for 23 years,

you can afford to bring benefits to families and reduce taxes, which is what

we’re doing.


No, what you’re really doing is just giving back people the proceeds

of bracket creep aren’t you? But you’re targeting it to people who

you hope will vote for you to re-elect the Howard Government, and maybe even

a Costello one?


Well, let me say something about the income tax cuts. At the moment, you can

go on a 42 cent rate of tax when you earn $52,000. It’s not a high income,





There would be many police and firemen who would be in that category, people

doing overtime. And so what we’re saying is that those thresholds ought

to be increased and you shouldn’t go on the top rate of tax until you’re

paying $80,000, and I think that’s reasonable.


But you’ve also said you’re concerned about the growing gap between

the rich and the poor in Australia, and the poor get nothing out of this Budget,

that I can see.


Well I don’t think if you’re earning $50,000 or $60,000 you are



But if you’re earning $35,000, you’re poor.


Well I’ll come back to that in a moment. And you shouldn’t be

up on the top marginal tax rate. But when we reformed tax in 2000, and we cut

all the rates for low income earners, we cut the rates, and we also had these

proposals to lift the thresholds for middle income earners. That was defeated

by Labor in the Senate, and ever since then this has been the unfinished business

of our tax structure. So we’ve come back to it again, and we’ve

said all of the changes were put in place for the lower income earners, back

in 2000 on the tax scales, and now it is the time to close the circle and deliver

the relief to the middle income earners. This is, this is the unfinished business

that Labor defeated in 2000 and it ought to be done now. And I heard that Labor

will now pass these tax cuts and I think that’s the right decision. We’ve

just got to do it quickly, we’ve got to get them in place by 1July.


Mark Latham on AM says, well four out of five taxpayers are left out and it’s

unfair. For all the hype, he says it doesn’t deliver one red cent in tax

relief to the great bulk of Australian taxpayers. There will be a lot of people

wondering what all the fuss is about this morning because it doesn’t do

anything for them.


Well you see there are a lot of families, Jon, that don’t pay any tax

and if you cut tax rates, you don’t give them any benefit. So what we

decided to help families was not to do it through the tax system, but through

the payment system and there will be an increase of $600 for the qualifying

families per child; $1,200 for two children and $1,800 for three children. So

that’s a much better way of targeting lower-income earner families, than

through the tax system, because there are so many of them that don’t pay

any tax at all.


So do you need to have babies to be a family in your mind, because there are

plenty of families where they’re not having babies?


Well, well, as I said last night, nothing wrong with boosting the birth rate.

But having said that, the payments are made in respect of children because,

as you know, families that have children have additional expenses. There’s

the expense of child care, there’s the expense of education…


To say nothing of running shoes.


Running shoes, of housing, and food, and the bassinette, and the seat in the

back of your car. People who have children have additional expenses, and the

payment is made in respect of the children. Really you can call it family payments

but you give it to the parents because it’s to help them with the cost

of raising and nurturing and rearing the children.


Company tax receipts have massively increased since your tax reform, and in

fact that income for the Commonwealth is what underpins your generosity on several

fronts in this Budget, but there’s no tax relief for corporations. Big

business is saying, well, we’re paying for this, what’s in it for



Well that’s right – where is the revenue coming from? It’s come

from company tax. Company tax collections have been very strong. And the reason

for that is that company profits have been very strong. Company profits as a

proportion of our economy, as a proportion of GDP, are the highest ever recorded

in Australia. That is, company profitability is the highest ever recorded in

Australia, and the consequence of that is that companies are paying more tax

and the more tax that companies are paying is being shared with Australian families,

and I think that’s good economic management.


But the Liberal Party at State level is saying, well, gee companies, if you

want them to be the engine of the economy, you have to give them tax relief.

How come the same argument doesn’t work with the same party at Commonwealth



Well they’re talking about tax relief on land tax…


On all (inaudible) taxes – payroll tax, you name it.


Where company collection, where companies are paying much more land tax than

they’ve ever paid. But the company tax at the Commonwealth level is the

company tax rate, and as it turns out, we actually cut the company tax rate.

It was 36 per cent, we cut it to 30 per cent. So, you’ve got increased

collections but cut rates. So it’s actually a very interesting story –

how we cut the rate of company tax, but received more, now a big part of that

is profitability.


So why not cut it even further? Why not give them more relief? Why not generate

more employment, more investment if that’s what, all you have to do?


Well, I’m not saying that the cutting of the rate led to the increased

collections. It certainly doesn’t appear to have detracted from it, but

what’s actually led to the increased collections is that companies are

more profitable because we’re living through a strong economic environment.

But company tax rates cut from 36 to 30 per cent. Most Australians’ income

tax is 30 per cent and that’s why I think tax relief should be given to

those Australians that are on higher income tax rates than companies pay. Some

are on 42 and 47 per cent. It’s another reason why we’ve got to

change the income tax structure for those people earning up to $80,000.


You’ve missed the opportunity to index tax rates so that they keep track

with increases in the costs of living and wages in the community, so you don’t

have the ongoing problems of bracket creep. You’ve suggested yourself

that you could do that time and time again, but you don’t do it every



Well it’s never been our policy, Jon, but can I explain this…


Instead we’re expected to say thank you, thank you for something that

rightfully, really should be ours anyway.


Well I think these income tax cuts that we’ve announced are rightfully

the Australian public’s and they should be legislated and they should

come into effect on 1 July, I do think that.


Well why not index the tax rate?


Well let me come back to this question of tax rates. Jon, inflation in Australia

is very low. People used to talk about bracket creep during the Hawke Government.

You know why? Inflation was about 8 per cent per annum. Now it’s below

2 per cent. And we have so changed the tax structure that there is no change

in the rate between $21,600 and $63,000. Very few Australians move their tax

rate because that band is so wide. We’ve dealt with this problem in another

way by having such a wide band and by having low inflation. This is not the

story that it was in the 1980s. This is a very different Australian climate

and we’ve dealt with it in those two ways.


Peter Costello, before you move onto your other media commitments, the State

Government have already criticised the Budget saying that Victorian road projects

that they were led to believe would be assisted by the Commonwealth, such as

the Geelong Ring road, the Calder Highway project, the Pakenham Bypass have

been ignored. Why?


We have a signed agreement with the Victorian Government to build the Scoresby

Freeway, and $440 million sits on the table for the building of it. We’ve

got a signed agreement to build the Scoresby Freeway, dollar for dollar, with

the Victorian Government, which is, it’s a signed agreement. And they

have written to everybody out there saying they would build it with no tolls

before their State election.


Well why punish the people in Geelong?


We’re not punishing. We’re not punishing anybody.


Why (inaudible) the money they need for those road projects…(inaudible)…

stand-off over the Scoresby?


It’s not a stand-off. We have an agreement to build it, and we’re

not punishing it. We want to build it tomorrow. We’ve just got to get

on with it. Mr Bracks has, he’s got to, you know, he’s made the

wrong decision, he’s got to keep his word and he’s got to honour

the agreement.


And he’ll face the consequences at the ballot box if he’s got



No, no.


But why should you withdraw money from Geelong, the Calder and Pakenham because

of that?


But no money has been withdrawn.


Withhold I mean, not withdrawn, withhold.


No money has been withheld. Not a cent has been withheld. What the Commonwealth

does is it enters into agreements with State Governments for the most important

roads in an order of priority, and it’s got the agreement, the order of

priority is Scoresby Freeway. And then after we do the Scoresby Freeway, we

move onto the next one. But Jon, can I just say, there has never been a State

Government in the history of Australia that has signed an agreement for road

funding and then reneged. This is a first in the history of Australia.


So are you not going to give any money to Victoria for any road building until

you sort out the Scoresby? Is that …


No, no we have allocated money for other areas in Victoria. We’ve allocated

money on Pakenham, we’ve allocated money on Calder. We’ve allocated

money on a lot of these projects in previous budgets.


But no fresh allocation, no fresh money to let them get on with it.


And, no, no, no that’s not right either. We allocate them in the order

of their importance and the first one to go is the Scoresby Freeway, so, you

know, I really do say to Mr Bracks, come to your senses, come on, let’s

get on with it.


Alright, I’ve only got a few more minutes, Mr Costello. I can’t

find money for major infrastructure or nation building projects, so is it a

Budget of wasted opportunities or are you just holding on to make announcements

for an election campaign that’s in the next six months?


We announced a really big nation building project called AusLink last night,

which is going to rebuild rail track, particularly freight lines and roads.

And part of the AusLink of funding for the Scoresby Freeway, funding in relation

to other road projects which really are nation building.


But it doesn’t meld into the imagination, like for instance, the Alice

Springs–Darwin railway line did?


Well our Government built the Alice Springs line.


Yes, I’m saying there’s no fresh announcement. You’ve got

this bucket of money.


Well hang on, Jon, I mean, you can’t build more than one rail line from

Alice Springs to Darwin.


No, I’m not suggesting you do.


But what you can do…


You know what I’m talking about, don’t you? …(inaudible)…equivalent



Those kinds of once in a century projects, once you’ve done them, you’ve

done them. But can I say a Scoresby Freeway through the outer East to link up

with the ring road would be the biggest road project for Victoria in relation

to freight probably we’ve had. It would be a fantastic project. You could

come right up from the South-Eastern suburbs through the Eastern suburbs toll

free and onto the ring road and out through the North, that really is a great

project and …


Putting it back on the State Government.


Alright. We’ve got the money ready and we’re ready to start building.


Peter Costello, Mark Latham has attempted to steal your thunder this morning.

He’s announced he is cancelling overseas trips in readiness, including

a trip to Washington, in readiness for an election campaign. He keeps getting

under the radar really doesn’t he?


Well I think there might be other reasons why he cancelled his trip to the

United States.


Such as?


Well, it wasn’t shaping up too well.


What are you saying he wouldn’t have been made very welcome?


Well, I don’t think it was shaping up too well.


So he was looking for an excuse to cancel his trip? Is that what you are saying?


Funny announcement. The day, under the cover of the Budget, a funny announcement

to make today.


Alright, now I won’t waste our time asking you about a leadership challenge,

but every media appearance that you make features at least one attempt to catch

you off your guard. And that one’s not going away, but it’s distracting

the Government from getting its Budget message across isn’t it?


Well I think it’s important that we do talk about the issues that are

important, and it’s not about me, it’s about what we can do for

the people of Australia, and that’s why I love talking about policy. I

think that in this Budget we’ve been able to show some of the results

of strong economic management and now the task is to get it through the Senate.


Well the Prime Minister is saying, well look, I’m loving the job, I’ve

still got a lot to offer, even as recently as half an hour again, on AM again.


Sure, when you get the chance to do good policy, whether you are a Prime Minister

or whether you’re a Treasurer or whether you’re a member of the

Government, it’s what politics is all about.


You’re happy to keep on being the Treasurer into the foreseeable future

then are you?


Very happy as the Treasurer, Jon, I am and I’ll be a lot happier if we

can get this through the Senate.


Happy to be the Treasurer into perpetuity?


Look, my future and the future of the Government, Mr Howard’s future

is in the hands of the electors. What happens in the next Parliament will be

determined by the electors of Australia.


I’m making you late for your next appointment. I’m grateful to

you for your time and thank you.


It’s always good to talk to you. Thanks Jon.