Transcript No. 99/23

Hon Peter Costello MP

Interview with Matt Peacock AM

Wednesday 31 March, 1999

8.10 am

E&EO

The Federal Treasurer, Peter Costello, has seized on reports that New South Wales

Labor power broker, John Della Bosca, yesterday urged Labor leader Kim Beazley to drop his

opposition to the Government’s GST package. Both Mr Beazley and Mr Della Bosca have

since denied the reports, although other Labor sources suggest they are accurate. But, as

crunch time in the Senate approaches for the GST these stories are music to the ears of Mr

Costello, whose already signalled his willingness to talk to Independent Brian Harradine

about his concerns over the new tax plan.

Mr Costello, Matt Peacock here in Canberra. You’ve heard Brian

Harradine’s concerns about the dealing of the poor in the GST. How eager are you to

cut a deal with him? What sort of concessions can you offer him?

Well, a 4 per cent increase in pensions, an increase in the income test, an easing

of the taper test, bonuses for older Australians . . .

He sat through all of this on the GST committee and he’s still not happy

obviously.

No, I don’t think so because when you actually look at that pensioners are

better off. Make no mistake, the Government, as part of its tax programme is going to

increase pensions and give them a real increase. An increase above and beyond any increase

in the cost of living. If tax goes down pensioners will be poorer. Now, today we are

introducing a Bill into the Parliament which is going to give every family with dependent

children additional benefits. And if you happen to be a family with two children,

you’ll get a tax-free threshold up to $15,000. No tax on your first $15,000 of

income, making families much better off. Now if tax goes down families won’t get

those benefits. So, we’ve now got a situation where we can have tax reform, increased

benefits for pensioners and increased benefits for families. But if we don’t have tax

reform, families are worse off and pensioners are worse off.

So you’re saying there’s nothing more to suggest to Brian Harradine?

You know, the funny thing is that even the ACOSS said that people would be worse

off, but they haven’t found one category of person yet worse off . . .

What about charity?

. . . and their own analysis showed that all low income earners were better off . .

.

But charities are clearly worse off at the moment, aren’t they?

No. Charities are better off. Under the new tax system charities are completely GST

free. They get back all of the taxes that they pay. They don’t get that under the

current system. Charities are great winners under this, they’re great winners. And

ACOSS of course said, we’ll try and find someone who is a loser. They haven’t

found any class of person that’s a loser. And then they said, oh well we’ve had

four goes at it, somebody ought to have a fifth go and try and find one. So, it’s all

very well to say, what more should you be offering? We haven’t yet identified any

person that’s worse off.

But charities still have problems with their wages packages. I mean there are

details that you have yet to spell out about what you can offer them, aren’t there?

No, no they’ve got another problem which is not related to GST and that’s

fringe benefits. That’s not related to GST at all because . . .

It’s still part of your tax package though?

No, no, no this is quite separate and independent. This has been a problem

that’s been coming up for several years, that charities can pay fringe benefits and

their employees aren’t liable for tax in the same way that other peoples’

employees, this has been a rorted system, not by charities, more by hospitals. Private

hospitals in particular. And we’ve had advice for several years to move, to even up

the taxation treatment, which we’re doing.

So, Senator Brian Harradine, the Labor Party, the Democrats, the three months or

more of inquiries, the witnesses, they’re all wrong, they’re stupid, they

don’t understand the legislation . . .

Well what did the three months of inquiry turn up? Not one fact, did it? Not one

fact we didn’t know. I said at the beginning that this would be an expensive use of

taxpayers money, and it was. We had, I think, four Senate committees sitting for four

months, we’ve had sixteen months. Over a year of inquiry. Not one fact that

wasn’t known. Now, the interesting development is, that, I think that the strategists

of the Labor Party realise that those inquiries didn’t go anywhere, and as was said

in the introduction, the strategists are now advising Mr Beazley to cut and run. And I

make this offer to Mr Beazley, that if he follows the advice that he’s obviously

getting from some of his strategists and if Mr Beazley does support tax reform, the

Government won’t take advantage, we won’t say that it’s a backflip. We will

give him positive credit for a positive contribution to building a new tax system.

Do you think that’s likely, that the Labor Party will change its position on

the GST?

Well you see, the ALP strategists are advising Mr Beazley of this already. As one

of them is quoted in the Bulletin today saying, the public’s sick of them rabbiting

on and sick of them taking 100 per cent negative stance. Now, leadership is all about

breaking out, and I say seriously to Mr Beazley, he shouldn’t measure his

contribution to public life by his success in negativism. He should measure it by his

success in building. And he can now build a new tax system. He’s being urged to do it

by his own party and I think it would be a new start for him if he did.

Now yesterday we had the worst trade deficit on record for Australia. You’ve

said that will mean a tight budget, but apart from that nothing much you can do?

Well, when you say apart from that, what I’ve said is, we need to run a Budget

in surplus and this is a very big thing. I mean we don’t want to get blas about

surpluses. Surpluses are hard to produce and they take disciplined economic work. The last

five Budgets before our Government was elected cumulated $90,000 millions of dollars of

deficits.

So can we expect more cuts in the next budget?

Well, I think we’ve got to run a tight ship and we’ve got to make sure

that we get a surplus. And getting a surplus and starting to pay back some of that $90,000

millions of dollars of debt is very important for our credibility.

But you’re already there, aren’t you? I mean, isn’t it steady as you

go or is it more contraction?

Well, to run a surplus we have to keep strong policy. But that $90,000 millions of

dollars of debt didn’t just go away when the Coalition was elected. By running

surpluses we stopped building the debt higher, but we haven’t paid that back. Now,

every year we turn a surplus we can retire some more debt. We turn a surplus this year,

we’ll retire some debt. But the big breakthrough on freeing the Commonwealth

Government from debt is the Telstra sale. We can wipe out Commonwealth debt. We can get

back to where we were before those five deficit Budgets by selling Telstra. And

that’s the great breakthrough. We can give a debt-free Australia, debt-free

Commonwealth Government to future Australians.

At the same time you’re giving 20 per cent pay rises to your public servants,

top public servants. Is that fair?

Well, in relation to the public servants, the pay changes that they’re having

are to try and bring them into line with State public servants. We had a terrible

situation where you get paid much more to go and work as a public servant in a State

capital. It was meaning that we weren’t able to hold our staff, so we’re trying

to bring their pay into parity with that.

$300,000?

Well as I said, we’re trying to bring the parity of Commonwealth public

servants to State public servants.

Now, Paul Keating’s piggery has been in the news recently. Have you had a

chance to examine any of the aspects of that deal from your portfolios perspective? I know

Daryl Williams is looking at it. But do you think there’s a concern there about any

possible breaches by the Commonwealth Bank?

Well, the thing is that the Government has a duty to ensure that the law is upheld

and the Attorney-General is advising the Government on the best means of doing that and

the best means of inquiry to ensure that the law is upheld. And I’m resting on the

Attorney-General at the moment, waiting his advice.

Mr Costello, thanks for joining us.

Thank you.