Doorstop Interview

Mendana Hotel

Solomon Islands

Tuesday, 4 July 2006

11.30 am

SUBJECTS: FEMM, Solomon Islands, GST, federal-state relations, industrial relations, COAG, guest workers

TREASURER:

The Forum Economic Ministers Meeting was opened today by Prime Minister Sogavare of the Solomon Islands, who indicated his commitment, his government’s commitment to economic reform. From Australia’s point of view economic reform holds the key to rising living standards in the Pacific, that without good governance and economic reform, standards of living will decline. And no amount of aid can make up for that. The absence of corruption, observance of law and order, and recognition of important economic institutions and private property are all critical for development in the Pacific. Australia stands ready to assist as we are in the Solomon Islands and in many of the other countries but the message we are reemphasising is that good governance is the key to economic development and until such time as governance is put on a sound footing, then living standards won’t rise and that is the long-term key to securing the situation here in the Pacific.

JOURNALIST:

Do you think there is an acceptance that bad governance was one of the reasons they have, that so many have gone backwards in last ten years?

TREASURER:

Well I think there is an acceptance in the Solomon Islands that the rioting, that the damage that was done to property had been frightening to foreign investors, that that is one of the reasons why things have gone backwards in the Solomon Islands. And if you look at international comparisons, the Solomon Islands rates very, very low on world governance indicators. Now the RAMSI led by Australia has managed to secure law and order but until such time as you have good government, absence of corruption, ending of bribery, recognition of property rights you are not going to get the kind of investment which will secure the future.

JOURNALIST:

We will be talking to the Australian leader of RAMSI later today and you met with him yesterday, can you tell us a little bit about what he told you about the mission here in the Solomon’s and how it is proceeding?

TREASURER:

Well I think the RAMSI mission to the Solomons has been very effective. The situation has been calmed on the streets, you can see that law and order is being observed, the Australian police aided by police from other countries are doing a magnificent job, you can see them on the beat backed up by the Australian Defence Force, that has been a calming influence. And Australia stands ready to assist its Pacific neighbours but these are independent countries, we can’t stay forever, we don’t want to stay forever. But what we want is to get these countries on a secure footing so that they can manage their own police and law and order and economic development. And the RAMSI taskforce will increasingly move into civilian assistance in economic policy, in governance, in the judiciary and those areas now that the law and order situation has been stabilised.

JOURNALIST:

And back home just on the GST, what is the Government looking at there to ensure that the States don’t squander the revenue that they are getting, that there is more accountability?

TREASURER:

Well the GST is delivering to state governments now around $39 billion per annum, per annum and rising. Now the agreement that we have with the States is that those rising revenues will be used to abolish stamp duties on mortgages, stamp duties on rents, stamp duties on leases and stamp duties on business transactions and we remain focused on ensuring that people get tax relief out of the rising GST revenues, which is the reason why GST was introduced.

JOURNALIST:

But government officials seem to be looking at something new, don’t they? I mean you have been talking about that for some time, what are you going to do that is going to make the States respond you know, more swiftly to this agenda?

TREASURER:

Well, the people of Australia were promised that the GST would replace a whole raft of other taxes and I am going to ensure that it does.

JOURNALIST:

Treasurer, your comments about the need for the national government to have full responsibility for the national economy, what kind of timeframe do you see for introducing that change?

TREASURER:

Well, I see a long term timeframe and a short-term timeframe. The long term timeframe is this: By 2100 Australia has got to fix its federal system. That is a point I made when I outlined the five great challenges for policy over this century. I don’t think anybody could pretend that the federal system is working for Australia and I welcome the debate. Now I think a short term step towards that is ensuring that we have a national system of economic regulation in relation to areas that are important to the national economy. This will include ports, interstate rail, interstate road, gas, electricity and other utilities. And we ought to work towards it. Now, the debate has now commenced, I don’t think anybody in the course of this debate has said that state regulation will ensure a better outcome for the national economy…

JOURNALIST:

What is the…

TREASURER:

…and the point that I will make is this; we are a country of 20 million people, we are competing in a world against European trading blocs of more than 300 million, North American trading blocs of more than 300 million, the emergence in our own region of powers like India and China with over 1,000 million people. We have 20 million. We need our national economy to be as strong as possible if we are going to compete in the modern world. And to think that you can divide a national economy of 20 million into sub-sets and get optimal results is the thinking of last century, it is not the thinking of the next century, this century.

JOURNALIST:

You see this as urgent then and something that should be done in the next, what, 12 months, 2 years?

TREASURER:

I see this as an area that we should progress in the next year, we should work towards a national regulatory system for national infrastructure of importance to the Australian economy.

JOURNALIST:

Mr Costello, you have got a pretty…

JOURNALIST:

Could there be a constitutional change involved in that process?

TREASURER:

Well, I think we can do that without constitutional change, but when I switch to the long term-issue, the 2100 issue, you might be looking at constitutional change by then, but I don’t think you are looking at it in the next couple of years.

JOURNALIST:

Mr Costello, you got a pretty nasty Newspoll in the week where a lot of Australians got a big tax cut, do you think the industrial relations reforms are starting to bite, what do you think of the result?

TREASURER:

Well can I say this, people don’t receive tax cuts until they receive their fortnightly pay or their monthly pay so they won’t feel it in their pay packets until the middle of the month, the end of the this week at the earliest, the middle of the month or the end of the month and I hope people will see the Commonwealth Government, the Coalition Government cutting taxes. They will feel that in their pay packets and that is still to flow through to the economy and the good news is you won’t just find it for one fortnight, you will find it for every fortnight throughout the year. And that is what cutting taxes does, it puts more money back into the pockets of people.

JOURNALIST:

And what about industrial relations, the polls have also been interpreted as showing that this continues to get worse for the Government politically.

TREASURER:

Look, I am not going to do a day by day commentary in relation to polls but I will say this, economic reform encompasses industrial relations reform. And we have to keep moving in our country, we have to lock in our prosperity. If we don’t lock in our prosperity and develop it, our country can go backwards. It can go backwards as other countries in the world have done and that is why I say a country of 20 million people in a globalised world has to aim for best practice and that it what I am totally focussed on.

JOURNALIST:

Just on the reform agenda, at next months COAG meeting, will you be laying out what you would like to see in the areas of road and rail and other…?

TREASURER:

Well one of the things that will be before COAG in fact came out of the February COAG meeting was an agreement to have national regulatory arrangements in relation to national economic infrastructure. Now, let’s take the area of ports. We can do regulation of port access and pricing through seven different institutions and if you think that is efficient in a country of 20 million, you will support that. I don’t think we can afford seven different institutions in a country of 20 million people and I would like to see this done by one competent institution. That is the kind of decision making that I would like to see come out of that conference.

JOURNALIST:

One area that some of the Pacific nations are saying Australia could do more is in taking even on a trial basis some unskilled labour. Do you see any merit in that idea?

TREASURER:

Look, we open Australia to people who have skills where Australians – because we have high employment – where Australians are not currently matching those skills but I don’t think it would be in the interests of Australia nor do I feel it would be in the interests of the Pacific Islands or Australia to open its labour market to people who don’t have skills or areas where we don’t have shortages. It wouldn’t be fair to Australians, it wouldn’t be fair to Pacific Islanders either if they came to Australia and didn’t find work. So, I think our immigration programme which is based on skills where there are shortages, where there are no Australians that are looking to fill the shortages is the right one. And as I said in the conference today, even for Pacific Island nations, if they keep sending their best and their brightest off to Australia that is not going to help them long term. They need their best and their brightest to stay in their own countries. I wouldn’t want to see a situation where all of the educated, skilled Pacific Islanders are Australians because I think the Pacific Islands need those people more than ever.

JOURNALIST:

But the farmers would say that they are shortages of labour in that sort of seasonal fruit picking type industry, it is presumably you know, the sort of skills that Pacific Islanders would have that they could be brought in for a season at a time, why is that not something that could then benefit these economies and settle down some of the (inaudible)?

TREASURER:

Australia has never been a guest worker country. We have never been a country where we bring you in and ship you out. Australia is an immigrant country and when we open our doors, we open it to people who come to stay. And I don’t think Australia will be a guest worker country and I don’t think Australians would want to see that. I think Australians are very generous people, we are an immigrant nation, we have taken immigrants from all over the world and we will take immigrants who can make a valuable contribution and fill shortages that Australians can’t. But I don’t believe it would be in the interests of Pacific Island nations and I don’t believe it would be acceptable to Australia to ship workers in and out on a short term basis. Okay, thank you.