TRANSCRIPT

THE HON PETER COSTELLO MP

Doorstop
Senate Alcove Courtyard
Parliament House

Thursday, 30 October 2003
12.45 pm

 

SUBJECTS: IMF, Private Health Insurance Rebate, Child Care, ASIC Investigations,

Tax Rates

TREASURER:

The IMF has today released its report on Australia, an annual report

on Australia, and it is a very strong endorsement of economic management.

It notes that the Australian economy has performed remarkably in the

context of global weakness and the worst drought in a hundred years.

And a large part of that is the strong fiscal position, strong Budget

position, that the Government has put Australia in, and the determination

to structurally reform Australia’s economy.

Now, there are obviously continuing risks in the international environment,

and the IMF notes some of the risks to Australia. But to put it in context,

compared with all of the other developed economies, Australia continues

to perform remarkably well, overcoming international weakness and domestic

weakness. And growth is expected to strengthen in the course of 2004.

But, that doesn’t mean we can rest on our laurels. We have to continue

to work, we have to continue to prepare for the ageing of our population,

we have to continue with our structural reforms, it is the work of previous

years that have got us to this position, it is the work of today that

will strengthen our position for the years which are to come.

The drought has not yet broken, there are some areas in Australia where

there will be good seasons, but there are still some areas which are

in severe drought. The good news about the international trade figures

which were also released today, was that it showed that rural exports

have increased 11 per cent, so things might be turning in the rural area.

Although, rural exports have increased 11 per cent, they are still 19

per cent down on this time last year, so that will give you an indication

as to how severely the drought has affected Australia’s economy. There

is not much we can do about the drought, but we have to continue working

on structural reform in Australia.

JOURNALIST:

Treasurer, the IMF commended the strength of the Government’s fiscal

position. Are you attracted at all to suggestions from Government ranks

today, for $800m in spending to increase the private health insurance

rebate to 40 per cent and to remove the cap on childcare places, which

I think are several hundred million dollars more in spending.

TREASURER:

Well, let me make the point about the Government’s 30 per cent rebate

on private health insurance. There was no incentive, no financial incentive

to take out private health insurance until this Government introduced

a 30 per cent rebate. And that is delivering over $2 billion back to

people who take it out, and I think that is a very substantive, a very

substantive encouragement. And when you look at the very large sums that

are involved, it is hard to think how you could actually increase it,

because it is a substantive, 30 per cent rebate. Now, in relation to

spending proposals, no doubt Ministers, who have been given till the

end of October, to put in their bids for next year’s Budget, we will

have numbers of them. But as in previous years, we will look very carefully.

It is important that we keep our costs under control. We don’t want to

sit back now and give the game away. Sure, we have made great strides.

But we are not going to give the game away, and we are going to continue

to work hard on keeping our Budget in a strong position. And if we can

fund decent social expenditures, if we can support our troops in the

field, and if we can secure Australia’s security, then we like to return,

with a strong balance sheet, to the taxpayers. And that is what we did

last Budget.

JOURNALIST:

Treasurer, the Liberal Senators made the point though that if you increased

the rebate, it would lead to a decrease on demand of public hospitals.

Does that interest you at all? Do you think that that would be worth

putting the rebate up to 40 per cent?

TREASURER:

Look, it would lead to a decrease in calls on public hospitals.

But the idea that somehow you could claw money back from public hospitals,

after we have just entered into a five year agreement for the funding

of public hospitals, I don’t think is realistic. So, yes it would, there

is no doubt about that, but it wouldn’t be cost neutral. You wouldn’t

be able to claw that money back because we now have a five year agreement

for $42 billion to the public hospitals of Australia. Try clawing that

back.

JOURNALIST:

Treasurer, the RBA gave a very up-beat assessment for the economy, saying

the outlook is looking better than in the last few months, do you agree

with that and does this mean you will make any revisions to the Government’s

forecast for next year…

TREASURER:

Look, I think…

JOURNALIST:

…in MYEFO?

TREASURER:

…I think that growth will strengthen in 2004, and that will be because

the international economy is improving. I have just been at the G20 Meeting

in Mexico, and the US economy finally looks like it is turning the corner,

and the drought is breaking. We have a few other things that will go

against us, and I have made this point before. The appreciation of the

Australian dollar means that it will be harder for our exporters, so

that is a factor which is going the other way. So, you have got some

international factors that are going for us, some domestic factors that

are improving, some other factors that are going against us. I think

there might be a gradual strengthening of the economy in 2004, but there

are still the challenges that are out there.

JOURNALIST:

Can you as Treasurer tolerate Australian citizens using Swiss bank accounts

to trade Australian shares, out of view of the regulator?

TREASURER:

Well look, the Australian Securities and Investments Commission has announced

today that it is forming a special team to look at allegations which

have been raised in today’s press about Swiss bank accounts. And they

will be liaising very closely with the Australian Taxation Office, because

obviously, if there have been earnings, those earnings would be taxable.

And the corporate regulator is very focussed on this issue. Its special

team will be examining this to see if there is any new information. The

corporate regulator will be expected to enforce the law without fear

or favour. And you have seen the corporate regulator doing that in recent

times, without mentioning any names at all, the Australian Securities

and Investment Commission has not been averse to brining charges where

there is evidence against high profile people and it has come under a

lot of attack from some of those high profile people as a consequence.

But it is not going to be deterred by that.

JOURNALIST:

But Treasurer, is the law good enough or does ASIC or the ATO require

further powers to make sure that these sorts of examples like the Rivkin

example don’t occur again?

TREASURER:

I am not aware that there are any deficiencies in the law. I have made

the point earlier that some very high profile people have been brought

to trial in Australia recently, but if you want to have a look at a weakness

in the enforcement of taxation law, we know where it stands – the secrecy

of Swiss banks. Now let me make this point, the OECD has had a report

which has been going on for some time against international tax havens

and has been attempting to get the developed economies and the developing

economies of the world to close down such tax havens and to share information.

This is a project which Australia very much supports. Switzerland was

not part and did not agree to the OECD work. And we know that Swiss bank

accounts are the easiest way to keep information away from tax authorities,

not just in Australia, but around the world. Now unfortunately the Australian

Government has no control over Swiss law but we are working very, very

hard in the OECD to try and encourage Switzerland to come into this project

which would mean that it would exchange information with the Australian

Taxation Office.

JOURNALIST:

(inaudible) for Telstra, will you be resubmitting the Bill in three months?

TREASURER:

The Australian Government will be calling on the Senate, yes, to pass

its legislation. This has been a matter which has been debated on many,

many occasions before and we will be putting that back to the Senate.

Yes of course we will.

JOURNALIST:

Treasurer, are you concerned about the leakage of taxation revenues overseas?

TREASURER:

Well look, the Australian Taxation Office has been very well funded with

a very substantial increase in its resources, not this year, but last

year. You will have noticed that the Report of the Australian Taxation

Office indicated how much of the black economy has been brought in. Even

to the extent where I see some people are now saying, oh well that’s

increased tax collection in Australia. Yes it has. Yes, it is harder

to operate in the black economy these days and we are now getting a pay-off

from the GST, as the Tax Commissioner has himself said, it’s given new

mechanisms to cross-match between companies. And there has been an additional

collection out of the black economy and there has been an additional

collection internationally. But I make this point, that internationally

you need other countries to share information. That is why we have been

such a strong supporter of the OECD report. Now I have just been at a

meeting of the world’s 20 Finance Ministers and central bankers in Mexico

where I put this very squarely on the table, very squarely. And there

was amongst those 20 Finance Ministers and central bankers strong agreement.

And our communique re-emphasised the need for all countries, for all

developed countries to cooperate with this OECD project. And unfortunately

some of the companies, some of the countries that are not cooperating

were not there.

JOURNALIST:

Treasurer in past years you and Senator Minchin have told Ministers that

new spending proposals have to be matched by savings. Are you doing the

same this year?

TREASURER:

Oh look, it will be a tight Budget. They are always tight Budgets. We

have had a very substantial drought, the world economy has been weak,

it may be recovering, the exchange rate is probably working against Australian

exporters and it will be a tight Budget. And we will, look, there are

Ministers that always have wonderful new ideas, over brimming full with

wonderful new ideas, but unfortunately in a Budget, when you are dealing

with people’s taxes you can’t fund everybody’s great ideas.

JOURNALIST:

(inaudible) the Mid Year Review Treasurer?

TREASURER:

Sorry, sorry, yes, what?

JOURNALIST:

(inaudible) question again?

TREASURER:

Well it will be a tight Budget and Ministers know that.

JOURNALIST:

The IMF…

TREASURER:

Yes, yes, last question.

JOURNALIST:

…recommended that the thresholds be lifted and that the top marginal

tax rates be reduced. Do you agree?

TREASURER:

I certainly agree with lifting the threshold at which the top marginal

tax rate applies. Yes I do. We went to an election promising to increase

it from $50,000 to $75,000. We were elected. In my view, we had a mandate

to do it. That was defeated by the Labor Party and the Democrats, who

opposed our tax plan. Since then we have increased thresholds again so

I thought $75,000 was appropriate back in 2000. If I had have had my,

if the Government had been able to implement its tax plan, that threshold

would be higher than $75,000 today. So, go back, from time to time, one

reads the musings of Opposition Members who muse on the fact that that

threshold should be higher. Lovely musings, one problem, when they had

the chance to increase it, they voted against it. So don’t report their

musings, look at their votes. These are people who vote contrary to musings.

They have such confused minds.

JOURNALIST:

Treasurer…

TREASURER:

Such confused minds. But we have always been very solid on this point.

Not only did we propose it, we won an election on it. And when we won

an election, we put the legislation in. We don’t muse, we act. We act,

and you know, I would recommend to you, go back to the muses and ask

them why their musing didn’t lead to voting. What happened? Where was

the intellectual disconnect? And why did it come about? Thank you. Thank

you very much.