Transcript No. 2000/13

TRANSCRIPT OF

TREASURER

SUBJECT: GST & Charities, Economy, Employment, GST & dual

prices, National Textiles

Let me first of all respond to a report released today by the Australia Institute

concerning GST and charities. The first point I make about the Australia Institute is this

was the same institute that last year predicted that the GST would lead to 65 deaths a

year because it would increase air pollution. So I think today’s report is more

responsible than that. It makes a number of observations. It talks about clarifying the

common law definition of a charity, which the Government has already indicated it will

look at and that’s an on-going issue. In fact, definition of charity I think dates

back some 400 years, so probably is time to have a look at it again, and the

Government’s indicated, separate from tax reform, and that is a separate issue from

tax reform, it intends to do it. Interestingly enough the report does not recommend

exemption certificates, which is interesting. Some of the press releases that have been

issued today by charities are still calling for exemption certificates which is not

something that the report goes into. And the main thrust of the balance of the report is

that commercial activities by charities should be GST-free, to which I make a couple of

points. All charitable activities are GST-free. The Government has said that commercial

activities should be subject to the normal rules. Let me give you an example. Charities

have won hundreds of millions of dollars of contracts on the Job Network. In fact

there’s been a lot of debate about the extent of the contracts they have won. They

are required when they’re tendering for those contracts to tender GST inclusive, as

the private sector is. You couldn’t have a situation where on the one commercial

activity some people were tendering GST-free and some people were tendering GST-inclusive.

So on those commercial activities where you have charities competing in the private sector

the rules should be the same, that’s always been the Government position. The

Government says that in its charitable activities when charities are engaging in food, and

shelter, and clothing, and all of those sorts of things, entirely GST-free, which is

something they don’t have at the moment because there is no such thing as wholesale

sales tax free. But where they go into commercial activities those rules apply. Now, I

think it’s a sensible rule that’s been operating in relation to Job Network,

it’ll operate in relation to other activities. And the Government has undertaken

extensive consultation with the charitable sector. We’ve had a consultative committee

working on these issues for a long period of time, its work is continuing. Most of the

recommendations that it’s come up with have been accepted. And in relation to ways in

which the administration can be improved, we have been very, very cooperative with it.

Thank you.

6.8 per cent unemployment figure, does that mean 5 per cent is within reach?

Well, you’re going to see that unemployment figure bounce around a bit. Seven last

month, I think 6.7 per cent the month before, 7 last month, 6.8. I’ve consistently

said I think it’s 7 or probably a bit below. I also think by the end of this

financial year, by June, it will be moving down towards 6 , which of course would be the

lowest unemployment rate for a decade. Now, I’ve said before, if, if over the next

four years the economic performance of Australia was the same as the last four years, it

would get jobs growth above 2 per cent and economic growth above 4 per cent, and we

created another net new 600,000 or 700,000 jobs, then you would see work opportunities for

people that are unemployed. And you would see a reduction, a continuing further reduction

in that unemployment rate. But can I say, the unemployment figures today are good news –

6.8 per cent unemployment is within the lowest we’ve been over the last decade.

Unemployment is coming down because our economy is strong. We have to make sure we keep

our economy strong. We have to engage in the big reforms to keep it growing and the pay

off for economic reform will be more jobs for Australians who want to work. That’s

the great goal of economic policy.

Do you expect, what’s your view on interest rates later this year?

Well, I don’t talk about future direction in relation to interest rates.

There’s another side to the interest rate story and let me put it to you. As the

world economy picks up steam, that will be good for countries like Australia. It’ll

make it easier for us to sell our exports. It will be a contributing factor to economic

growth. In this country over the last two or three years, because of the Asian financial

crisis, the world was working against us on growth and now it’s starting to work for

us, which is a good development. And what that means is that we have more impetus on

economic growth than we had during the last two or three years. We revised up our growth

forecasts for the current year and we put out a strong growth forecast for next year in

our Mid-Year Review. If you can keep the growth up around the 4 per cent level, we’ve

seen the benefit of what that can do over the last four years. The benefit will be the

same in the next year or so, you’ll get 2 per cent growth in employment or above and

unemployment will continue to fall – it’s almost mathematical.

Four per cent growth, employment growth above 2 per cent means falling

unemployment.

Are you concerned at all at the extent of the slowdown in employment growth

(inaudible).

Well, the figures bounce around from month to month, you know, 6.7, you know, 7, 6.8

and the labour force has always been a bit of a saw tooth indicator. Very large number of

new jobs in December’s figure, corrected a bit by this month’s figure. But the

good thing is the trend is always the same, that is, employment growing, unemployment

falling – that’s the important thing, the way in which the trend is moving.

It appears we’re going to have dual prices in our stores, how do you see that

system is going to operate?

Well, the Government is still discussing this with retailers. Let me make a couple of

points. The first point is this, Government policy that the price you see on the shelf is

the price you pay at the till, that is that you have tax inclusive prices as you have now.

That is the Government policy. You get into this question as to can shops change prices

overnight on the 30^th of June, 1 July? And there may have to be a lead up time

and a lead down time to that price turnover, and we’re discussing with the retailers

what the time should be. But the policy is and always will be, that the way in which this

will work is that the price on the shelf will be the price you pay. This is just a

transitional thing as to how you get from the 30^th of June to the 1^st

of July and whether you need a couple of weeks for the gradual turnover or whether you

need a couple of months and that’s being discussed with retailers.

Do you have a view as to what a reasonable period is?

We’re discussing that. I said, whether it’s a couple of weeks or a couple of

months, I think that’s the area that we’re now discussing.

Will goods on which prices fall also have to display dual prices?

I think they should. We’re going to have during the turnover period, the old and

the new prices, it’s got to be for all goods, doesn’t it? And because we know

that some prices are going to go down and some prices are going to go up, then if

you’re going to be implementing that over a period of time you’ll have both. Now

the retailers will probably say, oh, we don’t want to advertise the prices that are

going to fall because people won’t buy them. But I think it’s only fair that it

be an open representative situation. If the real basis and the need of this policy is

simply the time constraint that we can’t do it all immediately, so, we’ve got to

spend some weeks or some months doing it, they should do it in relation to representative

goods.

And can you see there might be some difficulties with that? Say, for example, service

stations having to display two prices out the front of the service station with a big

sign.

Well, service stations don’t need to supply two prices because the price of petrol

is going to be the same. We’ve said that, that we’re going to reduce the excise

and apply the GST so the price equalises back. They don’t need to display two prices.

Mr Costello, what’s your response to suggestions in the Australian this morning

that the Prime Minster’s been moving to protect his brother in the National Textiles

dispute.

Well, I reject that absolutely. I reject absolutely that there was any special

consideration given to National Textiles on the ground that the Prime Minister’s

brother was the Chairman of the company. That is absolutely false. I am a member of the

Cabinet, the Prime Minister has declared his interest at all times in the Cabinet. I am

responsible for the Australian Securities and Investment Commission. I have been informed

by the Australian Securities and Investment Commission that they are doing an

investigation in relation to National Textiles. That company has not received, nor will it

receive any special consideration. It will be treated like any other company would be

treated in similar circumstances under an investigation.

Workers at the Pelaco factory in Melbourne who say they haven’t had the same

treatment, they’re a million dollars short and they’re not getting any

assistance or help. It seems to be the, at least the aura of inconsistency.

Well, the Government is moving to set up a long term scheme which can handle all of

these matters in a consistent way. And that’s going to take some work, obviously. But

once you put in place a consistent scheme then you can assure that the rules are applied

even handedly.

In the short term though, is there going to be any relief for the Pelaco workers?

Well, I’m not going into case by case analysis. I’m saying that what

we’re going to do is we’re going to ensure that there is a consistent scheme

which can deal with all cases in the future. Now, why has this problem arisen?

Nothing’s been done for the last 13 years. This is the first Government that has come

to grips with this particular issue, and the important thing is to ensure that there is

consistency in treatment. Okay, any other questions?

Do you have any comment on the report on the front of the Australian today regarding

Telstra looking to perhaps off-load some of its assets.

No. Thank you.