Treasurer

Doorstop Interview

Interview with Stephen Mayne

774 ABC

Tuesday, 20 December 2005

8.30 am

SUBJECTS: Industrial relations, Treasury minute, wages, racism, tax, Telstra regulation, Snowy Mountains Hydro, toll roads, Christmas

MAYNE:

Well it has been a big December for Treasurer Peter Costello. First we had the Gerard affair, then we’ve had the public détente with the Prime Minister, and now we have had the debate about Treasury documents, about the industrial relations reform. Good morning Treasurer.

TREASURER:

Good morning Stephen. Good to be with you.

MAYNE:

Now how would you sum up your year?

TREASURER:

I think we have done some good things this year. We cut tax in the Budget. We introduced those tax cuts from 1 July – a tax cut for every Australian who pays income tax. We have established the Future Fund, which will fund some of our liabilities out into 2020, which we have never been able to do. We have withstood high petrol prices which have dampened consumption a bit, but the economy is still on track, and unemployment is at a thirty year low. So all in all, with some big challenges, I think it has been a year of achievement.

MAYNE:

So in a policy sense it has been a good year, but what about for you politically?

TREASURER:

Well these are the most significant political issues for me. Budget, tax, economy, jobs, mortgage interest rates which have been stable in the face of a very difficult international climate and as I said hasn’t been easy, it has been a tough year, but by and large a year of achievement.

MAYNE:

And have you personally, I think it was with the Rob Gerard affair and the latest debate, have you personally in a political sense had a worse month in the job than December 2005?

TREASURER:

Oh yes, much worse.

MAYNE:

Yes, when?

TREASURER:

This won’t register on the Richter scale

MAYNE:

(inaudible)?

TREASURER:

well when Asia collapsed, when Korea ran out of reserves, when the Indonesian economy hit the wall and when Thailand went belly-up

MAYNE:

These are all policies

TREASURER:

it was the worst, I will never forget it, I will never forget going to work on Christmas Day 1997 trying to organise a loan for Korea which had run out of money and we didn’t know when it was going to stop.

MAYNE:

But for you on a personal

TREASURER:

That was the worst experience I have ever had in politics and we didn’t know if Australia would come through it. Oh yes, that was, I will never forget that, what I have called previously white knuckle time.

MAYNE:

Now just take us back to why did you say in the Parliament that there was no report from Treasury on the impact of the industrial relations reform when there was the 16 page Treasury Minute? Your critics are saying this is just weasel words.

TREASURER:

Well because The Australian had said that there was a specially commissioned report that had been provided for the Cabinet which didn’t show any benefit from IR reform and as the then Secretary of the Treasury put out a press release saying there was no specially commissioned research and it didn’t show that. And in the Parliament I referred to his press release. By the way, confirmed as recently as yesterday. I don’t think there is any doubt about this Stephen

MAYNE:

I think if you read all of the press though there seems to be a bit of a, well certainly the perception is that it was a bit cute.

TREASURER:

Oh there is no doubt about it, the Secretary of the Treasury reaffirmed the same thing yesterday. This is not me, this is the Secretary of the Treasury, he said it on the 5th of November and confirmed it yesterday so it you have got an argument about it Stephen, take it up with the Secretary of the Treasury, he should know.

MAYNE:

Now the Treasury Minute that was released yesterday, it points out that Australia has the highest minimum wage relative to the median wage in the developed world at 58 per cent. And do you agree that under the new system that will start gradually heading down, not all the way towards the US level of just 31.2 per cent, but we will lose our world’s highest minimum wage status?

TREASURER:

You had better be careful here, you have got to be very, very precise as I have found out. The minimum wage will not decline

MAYNE:

But it won’t rise as much.

TREASURER:

the minimum wage will be protected. So the question is

MAYNE:

But it won’t rise as fast as average wages though will it?

TREASURER:

well you know, the question is at what pace will it rise?

MAYNE:

Yes.

TREASURER:

We all agree on this one point that it won’t fall. At what pace will it rise? So you have got to ask yourself the question, will it rise at a faster pace than if the current arrangements were left in place under the new arrangements? Now this is a matter for conjecture

MAYNE:

Do you disagree with your Treasury?

TREASURER:

no, my view is this and I have said this, in a stronger economy with lower unemployment minimum wages would ordinary be higher, right?

MAYNE:

Yes.

TREASURER:

It stands to reason doesn’t it? If unemployment were at 11 or 12 per cent one of the things you would do, you would think, would be to hold wages to try to get more people in jobs. If unemployment is at 5 per cent or let’s say it went to 4 per cent then you wouldn’t have the same response. My own view is as the Australian economy grows and becomes more productive minimum wages will rise and I actually believe that IR changes will contribute to that growth. It is an area of conjecture, we won’t actually know until the system is operated.

MAYNE:

But you have made a pretty bold prediction, haven’t you, that the you think that wages will, that the minimum wage will rise more quickly? If you are proved wrong it won’t be a good look, will it?

TREASURER:

Well, how will we ever know, by the way, because we would have to know what would have been arbitrated under the AIRC and compare it to what is arbitrated, or not arbitrated but handed down by the Australian Fair Pay Commission. Now, you know, Stephen you are required in forecasting to make assumptions and to take a view. The assumption I make, and I believe all of the international evidence shows this, is that more flexible wage systems lead to lower unemployment, higher productivity and that leads me to conclude that over time, I am not saying tomorrow or next week or next month, over time wages will be higher, that is my view.

MAYNE:

But Treasurer on another issue, The Age has a poll this morning suggesting that 75 per cent of Australians believe that there is some underlying racism in Australia. Do you agree?

TREASURER:

I think racism can be easily whipped up in Australia, I don’t think that there is racism on the street, no, I think we are a very accepting country, I think we are much more accepting by the way than nearly every other country in the world.

MAYNE:

You mentioned whipping up, the Sydney media, particularly Alan Jones has been accused of doing exactly that, whipping up the Cronulla riots, do you think Alan Jones went too far?

TREASURER:

No, I don’t. That is not what I mean by whipping up. I think it can be fanned, if gangs of youths come into a neighbourhood and try and take it over that can fan racism.

MAYNE:

So the whipping up you were referring to was the action of the so-called Middle Eastern?

TREASURER:

Well I just say gangs of youths. If people say, get down and launch an attack, a counter attack on gangs of youths, they can whip it up.

MAYNE:

Yes.

TREASURER:

It can be whipped up from both sides but you know, racism can be whipped up if there is violence, if there is disorder, if there is property damage, you can whip it up and the best way I think of containing those undercurrents is enforcing the law, you know, making sure gangs don’t roam the streets, making people feel safe in their houses, giving young people good job opportunities because if things start going wrong in society it can easily be whipped up and fanned. From both sides.

MAYNE:

Is it acceptable for young Australian men to wear the Australian flag as a uniform whilst engaging in violence and riotous behaviour toward members of another ethnic group, do you think that is appropriate?

TREASURER:

No I don’t like that, I don’t think the Australian flag should be used to engage in street violence. No, I don’t like that at all. You see the Australian flag represents the nation, it represents what is good about our nation and it is not something to be wrapped around as you are battering somebody in the street. I actually think that is a desecration of the Australian flag. The Australian flag should unite, it should not divide the Australian public.

MAYNE:

Can I quote from Malcolm Turnbull’s December email newsletter which went out at 4.30 pm last night, quote, I believe we have the means and the will to tackle a new round of tax reform in Australia. If we can’t afford tax reform today when will we be able to afford it? And if a government with a proven and trusted track record of economic reform is not qualified to take it on, who else would have the courage let alone the public trust to do so. If not us, who? If not now, when?’ Now that is a good question. Why do you seem to be the only person opposed to comprehensive tax reform?

TREASURER:

I think that is a slogan from the Velvet Revolution actually. You will correct me, you probably know more about these things than me, it is not an original, it is from Czechoslovakia’s Velvet Revolution.

MAYNE:

1989.

TREASURER:

Is that right?

MAYNE:

I think so, yes.

TREASURER:

What was your question?

MAYNE:

Why not now in terms of comprehensive, a question of if you embrace comprehensive tax reform now, you feel that that is an implicit criticism or acceptance that you haven’t done enough over the past 10 years as Treasurer despite that there has been quite a few changes?

TREASURER:

No, no, no, I believe actually tax reform is an on-going process, that it never finishes. You have heard the expression, two things are certain in life, death and taxes. Let me make a prediction, in 50 years time when you and I are gone there will be some Treasurer of Australia sitting in this studio talking about tax reform. Now I believe it is a continuous process and Stephen my view is we have got to continue to work to reduce taxes in this country, right? We have been doing that in the last three Budgets, we have got another tax cut legislated for 2006.

MAYNE:

They are fairly minimal though aren’t they, in the broad scheme? What about lowering the rate, broadening the base, bringing the Capital Gains Tax in line with the top rate, what is wrong with broadening the canvas?

TREASURER:

Well, let’s go through it. You said bringing the Capital Gains Tax into line with the top rate.

MAYNE:

Yes because the three per cent on the top rate are the people who mainly get the benefit of the Capital Gains Tax concessions.

TREASURER:

That is one way of saying it Stephen, let me put another way of saying it, increase Capital Gains Tax

MAYNE:

And lower the top rate.

TREASURER:

no, no

MAYNE:

Well both.

TREASURER:

.okay, increase the

MAYNE:

(inaudible).

TREASURER:

increase the

MAYNE:

Reform, change one, change another, reform.

TREASURER:

yes, but let’s be specific. You have out forward a proposal to increase the Capital Gains Tax

MAYNE:

And cut the top tax rate to a world competitive rate of say, 35 per cent.

TREASURER:

now, you asked me that question, do I agree with increasing Capital Gains Taxes in this country? No, I don’t.

MAYNE:

Even though the three per cent on the top are the main people who benefit from a discounted Capital Gains Tax rate? So your argument is

TREASURER:

I am not sure about that

MAYNE:

well I think you will find that

TREASURER:

let me tell you why I am not in favour of increasing Capital Gains Taxes. I think if you increased Capital Gains Taxes in this country that that would be anti-savings, I think it would be bad for investment and I would also point out to you Stephen that nearly every other country and certainly the major developed economies of the world like Britain and America have a lower Capital Gains Tax rate than their top income tax rate.

MAYNE:

But we still have close to the highest rate in the world. I have got to ask you, have you, did you meet with Rupert Murdoch when he was here recently because The Australian seems to be running quite a feral campaign against you on tax which people are assuming is coming from the top, have you had a falling out with Rupert Murdoch?

TREASURER:

I don’t think you should assume that it doesn’t necessarily comes from the owner. I agree it is quite a campaign

MAYNE:

It’s very aggressive, isn’t it?

TREASURER:

well everybody has noticed it and it is very aggressive but I have got no reason to believe that it is from Rupert Murdoch.

MAYNE:

Okay now, the Fin Review reports this morning that the Prime Minister intervened yesterday in a meeting of Senior Ministers and flagged the possibility of the Government overruling the ACCC in relation to regulation of Telstra. Are you comfortable with this or should Graeme Samuel be given a free hand on Telstra?

TREASURER:

It is true we had a meeting yesterday and I won’t say anymore about that story other than that. In fact I am meeting Mr Samuel this morning to talk to him about the regulatory arrangements. This is a question of the price competitors have to pay Telstra to get onto the copper networks, right. So if Optus wants to provide a service to your house it has got to pay Telstra a price to use the Telstra network. And my own view is that that price should not be set by a Minister or by the political process. That price should be set by the ACCC (inaudible)

MAYNE:

And you will be saying that to Graeme Samuel this morning?

TREASURER:

That is right, yes, that is right.

MAYNE:

Is that a message from the meeting from yesterday?

TREASURER:

Well that is my view and the reason I am talking to them today is to just get some more details about all of this. Of course Steve, once we agree on the principle of course that doesn’t solve the problem because the next problem because the next problem becomes well what is that price and?

MAYNE:

(inaudible).

TREASURER:

Well it should be set by the ACCC, that is my view but what is that price is the, in this case, the $30 billion question.

MAYNE:

Because you have got a big conflict in a sense because you want to protect value which is now down from you know, 51 per cent was worth what, $50 billion at the peak, it is now $25 billion, you want to preserve value and you don’t want your regulator undercutting Telstra too much.

TREASURER:

Absolutely, the Government has a massive conflict of interest. On the one hand we are setting the rules, on the other hand we own the biggest player

MAYNE:

And it looks like now the Government is going to have a say in the regulation if you can believe today’s newspaper.

TREASURER:

This is the reason why the Government shouldn’t own Telstra because here we are on the one hand we want to maximise the profit, on the other hand we are writing the rules and we know that by skewing the rules we can increase our value. The Government just has a massive conflict of interest.

MAYNE:

Now Treasurer, just another couple of quick issues, have you got the same conflict in retaining ownership of the 13 per cent stake in the Snowy River, Snowy Mountain Hydro Electric Scheme? The New South Wales Government is selling their 58 per cent stake, are you going to sell your 13 per cent stake too?

TREASURER:

Well I think the Commonwealth would be interested in offering for sale it’s stake, yes. As I understand it though, the Victorian Government is opposed

MAYNE:

They don’t want to (inaudible).

TREASURER:

so the cleanest way to do all of this frankly would be if all government’s agreed and put it up for sale, if the Victorian Government wants to boycott or veto I am not quite sure where that leaves the Commonwealth. I understand Mr Iemma is going ahead anyway isn’t he?

MAYNE:

Yes.

TREASURER:

The Commonwealth, we thought everyone was going to go ahead. We thought the Victorian Government was going to go ahead, we were a bit surprised when they pulled out so I don’t know where that leaves us.

MAYNE:

Now the Prime Minister last week opened the $1.5 billion M7 toll road in Western Sydney after the federal taxpayers contributed $356 million. If Canberra can help fund Sydney toll roads, why not make a contribution to Eastlink? You could fund for instance Robert Doyle’s policy.

TREASURER:

Well if somebody owns a road and is going to make a profit out of it, why should the taxpayer help them along with their profit?

MAYNE:

Well in Sydney’s case the tolls are lower because of the federal contribution.

TREASURER:

Let me make this point to you, in Sydney’s case the national highway which they were entitled to have free will also get a toll. In Melbourne’s case the national highway has no toll. Let me tell you something. This morning they are going to open up the Craigieburn bypass, fully funded by the Commonwealth.

MAYNE:

$306 million.

TREASURER:

I remember authorising the money in 1996.

MAYNE:

Are you going out there today?

TREASURER:

No, I would love to go but

MAYNE:

You are a busy man.

TREASURER:

no, well you know, just I fund these things, others open them.

MAYNE:

Others come and (inaudible).

TREASURER:

Now, that will come off the Ring Road, is it called the Northern Ring Road? The one that comes (inaudible)

MAYNE:

Yes the Western Ring Road.

TREASURER:

It joins up with the Western Ring Road, and it will come off that and it will go onto the Hume Highway. So if you come off that Ring Road, you go on the Craigieburn bypass, you go onto the Hume Highway, you will not hit a traffic light until Albury.

MAYNE:

Albury, yes, correct.

TREASURER:

And we are doing a bypass through Albury. Now, let me make this point. If you are a Victorian driving to Sydney or Canberra and I have done it quite a lot, you do not hit a traffic light and you do not hit a toll. New South Wales of course, if you want to drive from Canberra to the North Coast on the national highway you may not hit a traffic light, well you will actually, but you will certainly hit a toll. New South Wales got a worse deal if I may say so, by having tolls on national highways, this argument is sometimes run by the Victorian Government, oh, wouldn’t we like to have tolls on our national highway? Why would you want to have a toll on your national highway when you can have it for free? And this is my argument about the Scoresby Freeway. Why would you want to have a toll on the Scoresby Freeway when you could have had it for free? Let me make this point, Stephen, what is the construction cost of the Scoresby Freeway now?

MAYNE:

And $2.5, I think.

TREASURER:

Yes, okay, okay, and part of that is because they added in the Mullum-Mullum Creek bypass, the actual freeway itself wasn’t that and the Commonwealth was going to go halves. Let’s suppose the State contribution is $1 billion. Are you telling me the Victorian Government over four years doesn’t have $1 billion for a road?

MAYNE:

Well

TREASURER:

Yet they are forecasting far more than $1 billion in surpluses over the next four years. They could have funded this. They just chose not to, and everyone will pay a toll as a result.

MAYNE:

Now Treasurer just finally, our next guest Reverend Howard Langmead from St John’s in Brunswick will be discussing what we are calling the Oncer Brigade, those who only go to church at Christmas. Now you are a busy man, have you been managing to keep up attendances quite regularly this year and when will you be going over Christmas?

TREASURER:

Well I am glad you asked me that because I was there on Sunday night.

MAYNE:

At St John’s?

TREASURER:

Well I won’t name where I was but I was there on Sunday night and my wife sang in the choir and my daughter performed in the nativity play and say hello to Howard because I know him and he used to dress up as a clown, he was a part-time clown when he was he, that is the last time I saw him. I am not making this up, when I last saw him he was down in Prahran and he was doubling as a comedian and a clown.

MAYNE:

And are you a Christmas Eve or a Christmas Day?

TREASURER:

Christmas Day.

MAYNE:

Christmas Day.

TREASURER:

I like to get in bed early so that Santa doesn’t catch me awake.

MAYNE:

Alright, well Peter Costello thank you for joining us this morning.

TREASURER:

Great to be with you, thanks Stephen.