GST/Aged Care, Polls, Business, Beazley

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When Labor is Having a Bad Week
July 9, 2000
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July 12, 2000
When Labor is Having a Bad Week
July 9, 2000
Press Conference Melbourne: Della Bosca, tax reform, Westpac Survey
July 12, 2000

GST/Aged Care, Polls, Business, Beazley

Transcript No. 2000/78





Interview with Mark Willacy



Tuesday, 11 July 2000

8.05 am

SUBJECTS: GST/Aged Care, Polls, Business, Beazley


Mr Costello, if we start with the GST, and there are estimates that about 100,000

frail, elderly Australians are being hit with the GST on home help services, such as

laundry, cleaning and cooking. That’s hardly an image the Government is comfortable

with, surely?


Well, those Australians who qualify for the home and community care packages, as you

know, not only get a subsidy, but of course those services are rendered GST-free, as

indeed charitable services are. And the Government has of course, been increasing the

number of places in home and community care over the last three years. In fact, there have

been very substantial increases to make sure that people who qualify get that funding.

Now, if you’re not qualified to . . .


But care agencies say there’s still not enough places going around though.


Well, sure. I’ve never come across a Government service yet that couldn’t be

the subject of additional funding. And I guess if you wanted to increase the funding to

any Government service, the first thing you would support would be a secure revenue base,

which is what the GST is all about. Let me make this point. At the end of the day, now

that the States have a revenue base which grows in line with the economy, they will be

able to fund these services, and the Commonwealth will fund them out of its company and

income tax base. But I’ve made this point before. Anybody who genuinely cares about

the social safety net in this country, will care enough to secure the revenue base to fund

it. And that’s what this Government did. All of those people who said, like Labor,

that they were against goods and services tax, but they want everything that the revenue

from it will fund, were essentially trying to sell a fraud on the public. They didn’t

have the guts to . . .


But you also said at the Press Club . . .


. . . support the revenue base, and yet they want to be able to pretend they’re in

favour of all of the services that it will fund.


But you also said at the Press Club two years ago that fixing inequity in society

should be done by adjusting our Budget, surely this is one case where you think that maybe

we should adjust your Budgets to cope?


Well, a Budget is simply this: the revenue that comes in from the tax system, and the

outlays which it funds. And the point I’ve made over and over again in this debate,

those people that genuinely believe in the social safety net care enough to secure the

revenue base which will fund it. The Labor Party position that it somehow cared about the

social safety net, but it would wed itself to a ramshackle wholesale sales tax on a

declining proportion of the economy, with a declining revenue to GDP operation, were not

serious enough, nor honest enough, to actually care about the social safety net. Now we

have that major reform in place. It’s been well received. I think today you

would’ve seen the polls in the paper giving credit to business, and I give credit to

business for all of the good work that it did. And now of course, after three years of

opposition, the Labor Party says, oh well, they want to keep it.


But those polls you talk about, 67 per cent of people surveyed by AC Nielsen believe

the rate of 10 per cent for the GST will rise, and that 61 per cent expect rollback to

occur regardless of who’s in power.


Yes, well that’s why we’ve gone to such great lengths to lock it in, because

we knew it had to be locked in against future Governments. And that’s why all of the

revenue goes to the States. The States have to agree to changes to the base or to the rate

– six States, two Territories, the House of Representatives and the Senate. Now, I’ve

seen a suggestion around incidentally, that a future Government might take the revenue off

the States, that is cut them out of this arrangement, and that’s obviously some kind

of attempt to threaten, by Labor, this agreement that the base and the rate can only be

changed with unanimous agreement. That’s why it’s so important that it take

unanimous agreement. That’s why we locked it in, so that you would have to get six

State Governments, two Territory Governments, the House of Representatives, the Senate, to

change either the base or the rate with all of the revenue going to the States. Now, what

that means of course, is that the States have to be consulted and they have to give their

agreement to any changes.


Can I ask you about business? We’re seeing many businesses, particularly small

businesses, absorbing the GST in their prices, what impact will that have when they submit

their first Business Activity Statements, because that is the next crunch, I believe, for

the Government?


Yes, well I’ve made this point before. For a lot of businesses that are now

charging GST and collecting it, they’re going to look as if they’ve got great

cash flow. And what they’ve got to remember is, that that has to be remitted to the

Government after the first quarter. And I’ve said to a lot of the micro businesses in

particular, why not consider this idea of setting up an offset account, put the GST which

you collect into that, that can be offset against your overdraft, you can get the interest

savings, and you’re guaranteed that the money’s there when the quarter comes up.

It’s a real . . .


But what about those businesses that aren’t collecting the GST, that are absorbing

it, and will have to still pay it through to the Government?


Well, those businesses that are absorbing GST have cut their prices. That’s

effectively what happened, they’ve cut their prices. The GST brings their price back

to where it previously was, and they remit the GST. They have cut prices, which is a good

thing for consumers, which is keeping prices down. One of the reasons why I think the

public response has been so positive to the introduction of GST, and that’s been the

experience to date, is, that what the public had been told over and over again was all

prices would go up by 10 per cent. In fact, as we said, some have gone up a little bit,

some are the same, some have actually reduced. And there are many people that are shopping

in supermarkets today who are actually paying less, that is they’ve got an income tax

cut, they’ve got more money to spend, and the prices are actually lower. Now, we said

that would be the case, but I think, you know, there was a lot of doubt about that. As the

week’s worn on, and the reception has been positive, as you can see over the course

of the last week a lot of people have actually said, yes, we were expecting big price

rises but it hasn’t eventuated. And that’s because we’re taking off a whole

lot of other taxes at the same time.


Kim Beazley says, the next election won’t be about tax cuts, but about national

investment and nation building. What projects has the Government got on the drawing board

now that the GST’s in place.


This is the most significant development. I think at the end of week one of GST,

Beazley’s now gone off GST argument. I think that was the most significant

development in the tax debate of the last three years. One week into the GST which he said

was going to be the way which he surfed to Government, he says, oh, actually the

issue’s no longer tax, the issue is nation building. Why? Two reasons . . .


Mr Costello . . .


. . . one is, it’s gone much better than he predicted. Secondly, as we always

said, Mr Beazley secretly wanted to keep GST all along, and now he’s owned up to that



Mr Costello, we’ll have to leave it there. Thanks for joining us.


Thank you very much.