TRANSCRIPT
THE HON PETER COSTELLO MP
Treasurer

Doorstop Interview

Sheraton Towers Southgate
Southbank, Melbourne

Wednesday, 1 October 2003
9.05 am

SUBJECTS: Final Budget Outcome; Tax Cuts; Interest Rates; Union Dispute.

JOURNALIST:

Treasurer will your November Mid Year Review include a revised forecast

for economic growth for the current fiscal year?

TREASURER:

When we bring down the Mid Year Review we look at all of our forecasts

including economic forecasts and Budget forecasts. Now, I am not saying

that it will change necessarily but every one of the parameters will

be re-evaluated and we will restate our forecasts for the Mid Year.

JOURNALIST:

How committed is the Government to delivering tax cuts after yesterday?

TREASURER:

Well, we are very focused on balancing our Budget, paying for decent

social security services, supporting our troops in the field, securing

our country, and if we can do all of that, we would like to have the

lowest tax base consistent with that. Now, we cut income tax on 1 July

of this year because we believed that in this current financial year

we could meet those just obligations and reduce tax. If we can do the

same thing in future years, it would be our policy to do so. But it is

conditional upon being able to balance our Budget, pay for decent social

services, support our troops in the field and secure our country in a

safety sense.

JOURNALIST:

So when could we expect another tax cut? Next year?

TREASURER:

Well, as I said, we have just cut taxes, we cut them on 1 July of this

year. If, in the future, we were able to balance our Budget and pay for

decent social security, support our troops, secure our country then we

would always like to do it with the lowest tax base possible.

JOURNALIST:

There have been estimates in the press today of $10 a week. What do you

think of that?

TREASURER:

Well, the press can estimate all they like but I am not looking at next

year’s Budget, I am looking at this year’s Budget. And in this year’s

Budget we cut income tax. We cut it by $2 billion and people are now

receiving those income tax cuts, they passed through the Senate and they

were delivered on 1 July. What we might do in future Budgets, I will

look at the time when future Budgets are brought down.

JOURNALIST:

Were you surprised how far out your estimates were?

TREASURER:

Well, the Final Budget Outcome was about 1 per cent of GDP, 1 per cent

of GDP surplus. We were forecasting a little over half a per cent. So

the variation is what, under half a per cent, that’s not a great deal

you know.

JOURNALIST:

What about on the surplus though?

TREASURER:

Well, on the surplus, on the surplus, the variation is about half a per

cent of GDP, a surplus of $7.5 billion is 1 per cent of GDP. We were

forecasting a little over half a per cent of GDP so the variation is

about half a per cent of GDP. I have often said, I am not surprised by

a variation of half a per cent of GDP, what I am surprised by is an accuracy

that you can get it down to half a per cent of GDP. These are large sums

but in proportion to the amount of Gross Domestic Product or in proportion

to the Federal Budget, it is a pretty small proportion actually.

JOURNALIST:

Do you concede that there’s a possibility that the previous $4 tax cut

may have been absorbed now by bracket creep in light of one of the reasons

revenue is up is increased income tax?

TREASURER:

Of course it hasn’t been. This Government over the course of the Government

has cut income taxes, taking into account all movements in prices, has

cut them. Now, let me make this point again, on 1 July this year, for

this financial year, we cut taxes by $2 billion, for this financial year.

The Budget outcome which I announced yesterday was for the last financial

year. That’s the year that has passed. People ask me about future tax

policy, that is for next financial year. We are talking about three different

years here and you have to keep all of that in mind.

JOURNALIST:

Treasurer, would you be concerned that if you were to cut taxes even

further that that may stimulate the economy to the point where the RBA

would need to raise interest rates?

TREASURER:

Well look, when we take into account economic policy, it’s a good point

that you have made. It’s not just a question of balancing your Budget

and running a tax policy, you have also got to look at overall demand

in the economy and you have to make sure that you are keeping an eye

on other parts of the economy that can be affected by fiscal policy.

And it’s a good point that you make. I am not saying what I would do,

I am just saying I keep in mind fiscal policy and the part that it plays

in relation to aggregate demand.

JOURNALIST:

Treasurer a Geelong wool factory has shut down this morning citing an

industrial dispute so about 100 people have lost their jobs, and the

company is claiming that, sorry, rather the union is claiming that the

Howard Government’s lock out, laws on lock out, are to blame.

TREASURER:

Well, it looks to me like it is a long shot doesn’t it? If the union

calls an industrial dispute the Federal Government is responsible? I

would have thought if the union calls an industrial dispute the union

leaders can take responsibilities for their industrial disputes. Let

me make this clear, industrial stoppages which damage companies also

damage employees. That is the reality of the situation. You have got

no employees without an employer and employees need employers and they

need businesses to be profitable and if an industrial dispute affects

the profitability of a business everybody is a loser. So, I think it’s

best if employers and employees can co-operatively work these things

out, that is what our policy is designed to allow, and our policy is

designed to get agreements between employers and employees. Thanks.