Doorstop Interview Perth: Tax reform Interest rates Australian Dollar Essendon

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Address to the 25th Annual Conference of the International Organisation of Securities Commissions
May 17, 2000
Extension of Tax Deductibility for GST Related Expenditure
May 23, 2000
Address to the 25th Annual Conference of the International Organisation of Securities Commissions
May 17, 2000
Extension of Tax Deductibility for GST Related Expenditure
May 23, 2000

Doorstop Interview Perth: Tax reform Interest rates Australian Dollar Essendon


Transcript No. 2000/59


Thursday, 18 May 2000
12.25 pm


SUBJECTS: Tax Reform, Interest Rates, Australian Dollar, Essendon.


Out of Brisbane today is a story of a business man and a business woman

who are earning just over $50,000 a year and theyve been told by the

Tax Office that they are better off closing their doors and going down

to the markets under the new GST.


Well Id be very surprised if that was official advice because its not

true. And the fact of the matter is that if you are earning $50,000, under

the New Tax System youll get very large income tax cuts. At the moment

on $50,000 you can be paying 43 cents in the dollar on every dollar of

income you earn. Under the New Tax System your top income tax rate is

30 cents in the dollar and for anybody whos in the legitimate economy,

that means that their tax rates will be going down, Australia will get

a more efficient taxation system, theyll be better off and the country

will be better off as well.


Mr Costello can you guarantee that people earning less than $5,400 wont

be worse off?


Oh yes, there are provisions for people who are in receipt of pensions

to have increases in pensions, people who are, children in families, the

parents will be getting family allowance increases, and we even have a

scheme for somebody who can show that theyre not even paying tax or receiving

an allowance to get an additional benefit, so they can..


But can you guarantee that it will compensate?


Well, of course I can. That even if you are not in the tax system and

youre not in receipt of an allowance, and it would have to be a very

rare case to be in both of those situations, we have a scheme that will

provide those people with a benefit to cover price changes. And can I

make this point, Governments have been changing taxation for a very long

period of time. This must be the first time that a Government has ensured

that people are protected from tax changes. It was never done when Fringe

Benefits Tax was introduced, it was never done when Capital Gains Tax

was introduced, it was never done when the Labor Party ratcheted up Wholesale

Sales Taxes, they never increased pensions or cut income taxes and this

is the first time that Governments done it and it is a very comprehensive



Can Australia afford to go its own way on interest rates?


Look, the Australian economy has its own business cycle. But that is

influenced by world developments and world developments are particularly

influenced by the US economy. So that has an influence on us, yes of course

it has an influence on us. There is no escaping the world economic developments,

but within that context Australia has its own business cycle and we set

policy for what is appropriate to that business cycle. Let me give you

can example. Through 1997, 1998, 1999 Australia grew stronger than the

United States. We were a stronger, faster growing economy. As we come

into the year 2000 the United States is growing stronger than Australia.

And the authorities in the United States are trying to slow that economy

down. Now that has an influence on us, but the US business cycle is not

the Australian business cycle, there are differences, we are influenced

by the global economy, but we have our own business cycle.


Would another rate rise now be good for Australia?


Well, I never comment on the future direction of interest rates for obvious

reasons. Theyre set by the Reserve Bank of Australia, its independent,

I enhanced its independence and gave it that role. The important thing,

I think, in Australia is to keep the economic fundamentals strong. What

are the economic fundamentals? Growth, inflation, employment and jobs.

Thats what were focussing on.


But how concerned are you that another rate rise might affect your plans

for a soft landing?


Well, were forecasting growth at 3 – per cent in the next year, in 2000/2001.

Thats a little off the record that weve had over the last three years,

which has been about 4 per cent, but its still strong. We want to keep

the economy growing at around about that level because that creates more



Mr Costello, how low can the dollar go?


Oh, I dont comment on movements in relation to the Australian dollar,

but I observe that the US dollar is rising because the US economy is strong,

the US officials are increasing interest rates, and the US dollar is rising

against every currency in the world, the Euro, the Pound, the Kiwi, the

$A. And the real story in foreign exchange markets over the last couple

of days has been the rise and rise of the US dollar.


Are the Prime Ministers statements helping?


The Prime Ministers statements yesterday were very, he was not only

entitled to do them, but I thought that those who criticised him for making

them have totally misconceived the operation of monetary policy in this

country. Now, let me make this point. We have an independent Reserve Bank,

and I enhanced its independence by an agreement with the Governor. As

part of that agreement, the Government reserves the right to comment on

monetary policy. So once you understand that the Bank is independent and

makes the decision, it actually gives the Prime Minister, the Treasurer,

and the Government more freedom to comment on monetary policy, not less.

And properly understood, the Government reserves the right to comment

on monetary policy, as you would expect it to do, but the Bank makes the



What about comments Mr Beazleys been making about the impact of the

GST on the dollar?


Well I dont think Mr Beazley understands economic policy, and he makes

lots of comments from time to time. To try and understand them or rationalise

them is beyond me, and I think its beyond him too.


Can you still get a soft landing area even if interest rates go up, say,

half a percentage point?


Oh, we want to keep the Australian economy growing strongly, and to do

that well ensure that the fundamentals are strong.


Will you be doing the reconciliation walk across the Sydney Harbour Bridge?


Well, Ill have a look in my programme and if its appropriate, and if

the opportunity arises, as I said earlier, Ill try and make it.


Would you like to make a . . .


Ive got to say one other thing before I go . . .


(inaudible) . . .


Yes, thats right . . .


. . . what are your thoughts on the big game this week?


Well look, the big game this week is between Essendon and Geelong, and

Ive been working on numbers all week. Ive been going over them frontwards

backwards, upside down, through the front and out the side, but it all

comes down to one point. Its a surplus for Essendon by 31 points on Saturday

night. Thank you very much.