Doorstop Interview

Premier Motors

393 Scarborough Beach Road

Osborne, Perth

Friday, 4 February 2005
10.30 am (Perth Time)

SUBJECTS: Economy; motor vehicle sales; WA election; National Water Initiative

TREASURER:

For three years in a row now Australia has achieved record motor vehicle sales.

And if the sales for January of 2005 are an indication, it looks like we could

be headed for another record year. That is an indication of confidence in the

economy and the renewal of the Australian car fleet of course is good for the

environment.

The price of a car since 1996 in CPI adjusted terms has fallen 16 per cent.

The reason for that is the abolition of wholesale sales tax and the reduction

of tariffs. But at a time when the price of cars has been coming down unfortunately

the stamp duty on cars has been going up. And it has been going up here in Western

Australia. And it means that Western Australians are paying more in stamp duty

on cars than ever before. And I think the initiative that has been announced

by Colin Barnett in the state election campaign to cut stamp duty on cars is

very welcome. It will be good for the consumers of WA, it will be good for the

employers of WA and by putting extra money back in people’s pockets that

will help with the renewal of the fleet and that will have good environmental

consequences.

So, when the Government, the Commonwealth Government, introduced GST it was

always our intention that it would provide a strong revenue base for states

to cut taxes and I welcome the announcement by Colin Barnett that he is determined

to do that.

JOURNALIST:

What are you doing during your visit Mr Costello to support Mr Barnett campaign?

TREASURER:

I have been doing a number of functions, business functions and other functions

to support his election effort. And today I am highlighting what I think to

be one of the great practical initiatives that he has announced during the course

of this campaign which is the reduction in stamp duty on cars. You see the price

of cars is coming down because we abolished wholesale sales tax and we are reducing

tariffs. But the stamp duty, the state stamp duty on cars has been going up.

And that has been undermining a lot of the good price work that we have been

trying to accomplish at the federal level.

JOURNALIST:

Treasurer retail sales figures came in lower than expected. What effect is

that going to have on GDP growth forecasts?

TREASURER:

Well for the month of December retail trade was down 0.3 per cent which indicates

that there has been a slowing in retail trade. During that period incidentally,

we have been seeing strong employment and we have been seeing real wages growth.

So it is interesting that retail trade moderated somewhat. It is not unwelcome

particularly if the household sector has taken the opportunity to add to savings.

JOURNALIST:

But can you still keep (inaudible) per cent GDP growth forecast?

TREASURER:

Well as I said, it is not unwelcome. We would actually like to see savings

increase and if money is going into savings we would actually welcome that.

As to the Government’s forecasts, we put out forecasts twice a year. We

do it mid-year which I did shortly before Christmas and the next time we will

do it is at Budget.

JOURNALIST:

(inaudible) disagree with Colin Barnett on two issues – extended trading

hours and the canal. Is that going to reflect badly on him in this election

campaign?

TREASURER:

Well I have not disagreed with him at all on the canal. In relation to trading

issues, trading hours, I have my own views. Individual views and individual

people will no doubt reflect that in the referendum. What I have said in relation

to the canal is that if a Barnett Government signs the National Water Initiative

then they would be eligible for federal funding. And Western Australia is not

eligible for federal funding at the moment because the Gallop Government won’t

sign the National Water Initiative.

JOURNALIST:

So do you think such a project would require a major study before committing

that sort of money?

TREASURER:

Well let me make this point, that a state government can build any project

it likes any time.

JOURNALIST:

But…

TREASURER:

And let me go through it…

JOURNALIST:

…Federal Government support…

TREASURER:

Well no. A state government can build any project it likes at any time out

of either its own tax base or its GST revenues. If a state government wants

a federal contribution to a state project then it has to come within a federal

programme. As it turns out we have a federal programme which can assist with

water initiatives. It is called the National Water Initiative. It is a $2 billion

programme. And if WA signs it they are eligible for it. But Premier Gallop won’t

sign it so there is no eligibility at the moment. The only way you could get

into that programme would be if the government changed its view.

JOURNALIST:

Or if Mr Barnett says that he would sign that. So where does that leave the

Federal Government’s stance?

TREASURER:

Well…

JOURNALIST:

Would you support the canal?

TREASURER:

Well I welcome the fact that he would sign the National Water Initiative because

that makes Western Australia eligible for up to $2 billion of funding. Now let

me make it clear, Western Australia is not going to get the total federal funding

of $2 billion because it has to be shared around the states. And once they have

signed it, then they can put forward their proposals. And Western Australia

will be eligible for funding and will get funding under a National Water Initiative.

JOURNALIST:

(inaudible)

TREASURER:

Well the project has not actually been put to the Federal Government. It can’t

be put until there is a change of government and the government signs the National

Water Initiative. But I welcome it and it will open the possibility of funds

to Western Australia which are currently being denied by the Gallop Government.

JOURNALIST:

(inaudible)

TREASURER:

No you can’t sign the National Water Initiative until you are elected.

And he has to get elected, then he can sign the water initiative, then he is

eligible for funding up to $2 billion. He has got to do the things in these

orders.

JOURNALIST:

(inaudible) retail sales figures. (inaudible) OECD view that a strong economy

is going to cause half a per cent interest rate rise by the end of the year

Mr Costello? (inaudible) indicated that the economy is not as strong as the

OECD thinks for instance?

TREASURER:

Well the OECD publishes its forecasts and we publish ours. The OECD forecasts

are not the same as ours. Both the OECD and us forecast continuing growth in

the Australian economy but there are differences between them. If you ask me

which I prefer, I prefer mine.

JOURNALIST:

(inaudible)

TREASURER:

I really prefer mine.

JOURNALIST:

Is there any implication to monetary policy then (inaudible)?

TREASURER:

In relation to retail trade? Well as I said, I think the retail trade figures

show that there is some slowing in relation to consumption. Now that is not

unwelcome. I have been talking for some time about the need for slowing in the

housing market and I have also been saying it would be a welcome thing if people

were saving more. Now if this figure, and let’s not get too carried away

with one month’s figure, but if this figure indicates that people are

rebuilding savings then actually it is quite a welcome figure.

JOURNALIST:

But it is not a worrying sign about the economy at this stage?

TREASURER:

Oh no, the Australian economy is in pretty good shape. The Australian economy

is now growing at a 3 per cent growth rate, on a 2 per cent inflation rate,

with the lowest unemployment in 30 years. We haven’t been in this kind

of territory for 30 years. And the important thing – and I keep coming back

to this – the important thing is we keep the economic reform programme going.

Sure, we have done better than most of the world over the last eight years but

we have got to keep the economic reform programme going. We need more reform

in relation to industrial relations, we need more reform in relation to competition,

we need more reform in relation to infrastructure, and we are determined to

do that.

JOURNALIST:

(inaudible) what is your position on the possible reform of Australia’s

tax system? There has been calls from various (inaudible)?

TREASURER:

Well look, we have done an enormous amount in relation to tax. We have cut

the company tax rate, we have halved capital gains tax, we have abolished financial

institutions duty, we will abolish bank account debits tax. We have introduced

merger relief and rollover relief. We have legislated for an increase in the

top tax threshold. We are going to introduce tax reductions for mature aged

workers. We are reducing the superannuation surcharge. This is a more ambitious

tax agenda than you have ever seen in Australia. Does it mean however that everything

is perfect? No of course you have got to continue to work at these things. You

have got to continue to work at keeping your tax system competitive. But we

have a very, very aggressive agenda going at the moment.

JOURNALIST:

(inaudible) talking to the Prime Minister in a couple of days time (inaudible)

major tax reform package (inaudible)?

TREASURER:

Well I think what we are going to do in tax is now pretty well known, that

on 1 July we are going to raise the threshold for the top marginal tax rates.

We have legislated it. We are also going to reduce tax for mature aged workers.

We are also going to reduce tax for parents who incur childcare. Now all of

these things are coming into effect. They are really big substantive tax reductions.

Billions and billions of dollars.

JOURNALIST:

On Telstra can you say when you will release the name of the successful bidders

for the scoping study for the full privatisation?

TREASURER:

Sorry I can’t, I don’t know.

JOURNALIST:

The G-7 has called for the western countries to reduce poverty in the world.

Is Australia doing enough in that area I mean, we are giving ourselves tax cuts,

are we doing anything for the people in our region who can’t feed themselves?

TREASURER:

Well we are doing many things. The first thing I would remind you of is that

Australia announced a $1 billion package for the Tsunami affected victims in

the Indian Ocean. That was the largest contribution of any Government. The Australian

public opened their hearts and their wallets with extreme generosity. The Australian

Government has already moved to forgive debt for heavily indebted countries

such as Nicaragua and Ethiopia. So we are making a contribution. You can only

make a contribution if you have got a strong economy. We have to keep our economy

strong. But if we do keep it strong, we can make a contribution.

JOURNALIST:

But that’s a one-off the Tsunami. Can we give them a billion dollars

a year to reduce poverty?

TREASURER:

Well the Tsunami is a billion dollars over five years. The Australian aid contribution

that we give on an annual basis is more than $2 billion per annum. So the Tsunami

aid is in addition to the annual aid.

JOURNALIST:

(inaudible)

TREASURER:

Well look, I think we should keep our economy strong and if we keep our economy

strong, we can help people in our region and beyond. We are quite focussed on

that.

JOURNALIST:

Is there any way the Federal Government would commit $200 million to this canal

without a feasibility study?

TREASURER:

Well if there is a change of government, if the National Water Initiative is

signed, then the Western Australian Gallop Government is eligible for money.

They have to put in an application and of course the Commonwealth has to ensure

that its procedures are met.

JOURNALIST:

(inaudible)

TREASURER:

Because, you know, we…

JOURNALIST:

(inaudible)

TREASURER:

Well a project of this scale would be very eligible. Absolutely. Under a National

Water Initiative to ensure that Australia’s water resources are properly

utilised and properly worked then a project of this scale would be very, very

eligible.

JOURNALIST:

Mr Barnett is talking about proceeding with his plan without doing a feasibility

study.

TREASURER:

Well how the Western Australian Government goes about it is a matter for the

Western Australia Government. But what I am saying is this, if the National

Water Initiative is signed by Western Australia the Western Australia Government

becomes eligible for Federal assistance.

JOURNALIST:

But there is no guarantee?

TREASURER:

Well you have got to apply. You know, you don’t just get written a cheque.

You have got to actually sign the agreement and you have got to apply. But there

is a guarantee of Federal funds for anyone who signs the National Water Initiative.

There is a guarantee. And until you, and until such time as you sign the National

Water Initiative there is a guarantee that you will receive no Federal funds.

That is (inaudible) conversely that there is a guarantee and you have got to

make your applications.

JOURNALIST:

But you don’t have to do a feasibility study to sign up (inaudible)?

TREASURER:

You have got to make an application, you have got to set out what the project

is, you have got to illustrate the nature of the Commonwealth assistance, you

have got to go through all of those things. But you won’t get money until

you have made an application. Absolutely right.

JOURNALIST:

So has Mr Barnett has made this commitment without some guarantee of financial

support from the Federal Government which he says (inaudible)?

TREASURER:

Well I think he has said that if he is elected that he will sign the National

Water Initiative. If he signs the National Water Initiative, Western Australia

becomes eligible for Federal funding. And he will apply for that Federal funding.

So I think he can say that, absolutely.

JOURNALIST:

What do you think about the canal proposal?

TREASURER:

Well, I haven’t studied all of the details of it but if it is a good

project it should be done.

JOURNALIST:

(inaudible)

TREASURER:

If it is a good project, it should be done.

JOURNALIST:

Is it a good project?

TREASURER:

Well it sounds like a good project to me.

JOURNALIST:

But could the Federal Government commit…

TREASURER:

Come on, last question.

JOURNALIST:

Could it commit though, hundreds of millions of dollars that is what you are

talking about if it has not been properly costed or looked into on a social

or environmental impact?

TREASURER:

Well there is a precondition here. It can’t commit any money because

Western Australia won’t sign the National Water Initiative.

JOURNALIST:

(inaudible)

TREASURER:

Well hang on, it will only sign it if there is a change of government. So if

there is a change of government, if it signs the National Water Initiative,

then it will get Federal funding, then it will apply, and then it will be eligible.

But there is only one way that Western Australia ever becomes eligible for funding

under the National Water Initiative. And it is under a change of government

I am afraid. And I can’t tell you what is going to happen on February

26th maybe you should tell me. Thanks very much.