Transcript No. 58

Hon Peter Costello MP

Doorstop

Thursday, 27 August 1998

9.30 am

SUBJECTS: Tax reform, dollar

TREASURER:

It’s a great test for Labor today in relation to its tax policy is whether it can turn away from the wholesale sales tax or whether the wholesale sales tax is going to be the centrepiece of Labor’s vision for Australia’s tax future. The wholesale sales tax is now only shared by Australia with Swaziland, the Solomon Islands, Ghana and Botswana. And unless Labor can announce today that it supports the abolition of wholesale sales tax, its vision for tax is a third world vision. It is not a modern taxation system. The wholesale sales tax is not one of those taxes that you can fiddle with. The wholesale sales tax needs to be abolished and there is nothing better that you could do for Australian exporters than abolish wholesale sales tax and other embedded taxes because that will produce a boost to our exports of $4.5 billion. Now what the Government is about, is about a new tax system. If Labor can’t walk away from the wholesale sales tax, the tax which is now the tax preferred by Botswana, Ghana, Swaziland and the Solomon Islands, it is a party that cannot embrace the future and cannot do anything for tax reform in this country.

What’s modern about the decades old European goods and services tax?

Well if they’re only decades old they’re about 50 years in front of wholesale sales tax. And can I say this we’ve seen in recent years, countries in Asia, North America, in the Pacific embracing modern taxation systems. What country has embraced the wholesale sales tax in the last couple of decades, only applied by Australia, Swaziland, Ghana, Botswana, and the Solomon Islands. The wholesale sales tax is the preferred tax of Ghana, Swaziland, Solomon Islands, Botswana, Kim Beazley and Gareth Evans. That’s the extent of tax reform that they are interested in.

Mr Costello are you worried about the slide in the dollar?

Well obviously there have been developments in relation to the exchange rate but you know that I never comment on the level of the exchange rate. Obviously it’s international developments that people have taken into account.

Treasurer doesn’t it reach a point there, though, when you should actually be commenting on the dollar, if it falls to 50 cents is that a level where you start to comment?

No I don’t comment on the dollar because people try and read various indications into it and quite often they’re quite wrong. So it’s much better – a practice which I have consistently followed – not to comment on a particular level.

Would you expect the Reserve Bank to abide by tradition and leave interest rates where they are during an election campaign?

I know that people say that this is a tradition, it’s a tradition which we are unaware of. I have got to underline this point to you, that the Reserve Bank is an independent organisation. And one of the first things that this government did was enhance its independence. And it has statutory and operational independence and it is not constrained in the way that you have suggested. It has full independence to pursue its statutory objectives.

How do you plan to hold the slide?

Well as I said I don’t comment on the value of the dollar.

Do the economic fundamentals warrant this kind of treatment by international investors of the Aussie dollar?

Well you’d have to look at the economic fundamentals in Australia, I don’t think there’s been any new news in relation to that over the last week or so. The only news that’s been around has been news in relation to developments a long way away and that is what people are taking into account.

And you don’t think they are going to effect us?

Well as I said, you know, people will take into account the things that are in the news. Thanks.