Transcript No. 62

Hon Peter Costello MP

Doorstop Interview

Friday, 6 November 1998

9.10 am

SUBJECTS: Tax reform, banks

TREASURER:

There’s been a lot of nonsense talked over recent days about the impact of the Government’s new tax plan on low income earners. As the Government conclusively showed during the election campaign the new tax plan moves prices by 1.9 per cent, meaning that low income earners are better off under the new tax system. And they’re better off which ever way you look at it, if you want to do analysis on not as reliable or accurate measure, the Household Expenditure Statement, you come to the same conclusion. The Labor Party has been maintaining a dishonest campaign, saying that lower income earners will be worse off, they will not. They will be better off and they are better off under all of the analyses, including the analyses on the Household Expenditure Statement, which I intend to release to the Parliament next week to give the truth for once and for all to the Labor lie in relation to low income earners. Low income earners who have a 4 per cent increase in their pensions are better off under the new tax system as a consequence of the Government’s changes.

This current deal between the Democrats and Senator Harradine, is this the break you’ve been looking for?

No, the break that we’re looking for is for the Australian Senate to recognise the outcome of the election. For the Australian Senate to accept the verdict of the people, that’s the break that we’re looking for and the Democrats are certainly talking about some kind of inquiry to look at various issues. You don’t need an inquiry. I can make available all material that they want, I’m releasing further material next week to the Parliament as a whole, not just to a committee, but to the whole Australian public. I’m quite willing to brief them on all of the questions that they might have and our view is that the Australian people should be the deciders of this and people decide these issues in elections and they did that on the 3^rd of October.

It must be a welcome move this sort of move towards compromise on an inquiry?

Well you see you have got two groups, haven’t you? You’ve got the Labor Party who are absolutely irrelevant to Australian political debate now, having decided that they will oppose anything. You see the Labor Party says it wants on inquiry but regardless of the outcome of the inquiry will vote against the legislation. So what point is wasting taxpayers money on an inquiry. You’ve then got the Democrats who say well, we may have a bit more of an open mind, and to them I say we have all the material that they can require, all of the material that’s been put before the Australian people and if they want more I stand ready and willing and available. But I think the people of Australia want the Parliament to get on with the issue. We went to an election, it was decided in the election and now they want the Parliament to get on with the issue. Not to sit around and to rake over the bones of defeat as the Labor Party is attempting to do.

Does the NAB’s profit yesterday mean there’s a need for further bank competition?

I don’t think that you can look at profit results to determine whether or not there’s competition, I think what you look at is consumer benefits to determine whether or not there’s sufficient competition. Now let me make a couple of points. Home mortgage rates are now as low as they have been in Australia for 30 years. That’s mostly a result of economic policy, the Government’s economic policy, but also partly a result of increased competition in the home lending market. The business overdraft rate is now as low as we’ve ever recorded in Australia, principally as a result of good economic policy. But if we see increasing competition in relation to business lending that will be a mark of increased financial institution competition. That’s the way that we are going to measure this.

Any clues on when mortgage rates may get lower?

I never speculate on the future direction of interest rates.

Are you concerned Treasurer that Australia’s largest company has threatened to move offshore in the event that you don’t move on the merging of banks?

I’m not sure that that’s what the NAB has said, the NAB has consistently, well the NAB’s consistently made the point that it wants to merge, we know that. The Government has a firm policy which the NAB is aware of, we’ve got these issues under review. The second point that I think the NAB makes, and other companies make, is that in a global market you can get bigger markets offshore. But you can tap those markets offshore from an Australian base if you have a competitive Australian taxation system.

And one of the things that we are now about is building a tax system which will make it much better for Australian companies to make this their home when they go global. Well let’s face facts here. We are talking about building a new tax system. The Labor Party opposes it, the Senate is delaying it but there is no time here for Australia. If we sleep in our tracks you’re going to see Australian companies increasingly being placed at a disadvantage, this is just one element of the business regime that we need to improve.

But Stan Wallis says you’re creating barriers for real growth and you’re reducing competition and consumers are worse off as a result of you not moving on the policy?

I don’t know what Stan says but Stan Wallis has done some very good work in relation to the financial system, nearly all of which has been adopted by the Government. But the Government has a policy in relation to the big four which it announced in response to the Wallis inquiry and that’s the policy which applies. We are looking for increased competition and we measure increased competition by benefits to consumers and if we think that consumers can get a better deal that’s what’s going to govern us in relation to the policy. Thanks.