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Interest Rates, GST, Port Arthur, Self-Funded Retirees, Austudy

Transcript No. 2001/079





Interview with Andrew Carroll – Radio 4QR

Tuesday, 29 May 2001

9.40 am


SUBJECTS: Interest Rates, GST, Port Arthur, Self-Funded Retirees, Austudy


Time for us to be speaking with the Federal Treasurer, Peter Costello, and

good morning to you and thank you for coming into the studio.


Great pleasure Andrew.


And I hope those students enjoyed their photograph with you this morning?


Yeah, good students and theyd done a terrific project.




And I hope they go well.


Im sure they will. They are talking about inventing the future. Well youre

about, I guess, creating the future. What is the Treasurer of Australias

social vision? Without getting onto the Budget just initially, Im sure youve

got a lot of questions on that, whats your social vision, whats your

vision for the future?


I would like to see Australia maintain its place amongst the first row of the

nations of the world. We are one of, one of the most prosperous nations of the

world. Id like to see us stay there and I would like to see a country in

which every young person has the opportunity to grow and realise their dreams,

which can afford to look after its older people, which can have good health

care, and which becomes a model country for the nations of our region.


You referred in your presentation yesterday at the Sheraton to the time when

you were, when you were sort of buying your first house and what have you,

facing interest rates, very high interest rates, 22 per cent I think you

mentioned, or 17 per cent or what have you.


17 per cent for the home and 22 per cent for the overdraft.


But does the, does the social vision that you have just outlined depend very

much on the economic performance in that sense?


Oh, it does, because lets go back to those days, and I talked about when I

was a young married with my first child, and I was trying to hold onto a home

with a mortgage of 17 per cent. When you have families that are threatened in

that way and theyre wondering whether they can hold onto the house, whether

they can hold onto their job, its very hard to work on improving the social

condition because youre so much on the breadline. And I think giving people

economic security is the first priority because that gives you the capacity to

move onto these other social ideals and obligations. Let me give you one

example. We operate a pretty good health system in Australia. By world standards

its a pretty good health system.


Yeah, with some real, with some real issues coming


Not perfect, not perfect, not perfect. But if you were to compare it to the

American health system or to the nationalised health system in Britain, a pretty

good health system. Now it costs a lot of money to run the health system. Its

about $30 or $40 billion, and you have got to have a strong economy and a good

tax system to keep it there and thats the economic base that I talk about.


Yeah, but is it a sustainable health system, because you havent mentioned

sustainability and none of these things you talk about occur unless they are

actually sustainable.


Sure. And youve got to have the revenue base to sustain them and thats

one of the reasons why we changed the tax base, incidentally, its one of the

reasons why we introduced GST because the money from the GST goes to the State

governments to sustain their investments in education, and hospitals, and all of

those other things. I think the point that I was making yesterday, is, if you

want decent social services, if you want to be able to pay the pensions, if you

want to be able to fund the hospitals, if you want to be able to pay the

teachers in the schools, you have got to have a tax system which will maintain

those services – one of the reasons why we changed it.


Its interesting you raised that because in our first half hour of the

programme this morning we spoke with Ian Hall from Insolvency Recovery Services,

Price Waterhouse Coopers, who was saying that theyre seeing a lot more

businesses now who are in fact not paying their GST because they cant afford

to. And that theyre not being chased yet by the ATO, youre holding off on

them. What do you say about those businesses that are now not paying your GST

because they cant afford it?


Well theres no global evidence of that. The collections out of GST are as

forecast so


Well theyre down a bit. Theres a lot of anecdotal evidence (inaudible)


Well, looking at the overall budgeted figures, theyre as forecast. A lot

of people said youll get a lot much more, more than you budgeted. What we got

is about what we budgeted. So theres no evidence of that yet, but I would

say, look, businesses, like individuals, have an obligation to pay their tax.

Thats what the law says. If anybody needs help in figuring that out, or if

anybody has circumstances beyond their control which means they cant file

their returns, you can always get waivers from the tax office in relation to

penalties and the like, and weve always said while setting up a new tax

system, you have got to be lenient with people and anybody who finds that they

need a bit of extra time or theyve got a reason why they couldnt put in

their return, they should contact the tax office. I dont do that myself. Thats

a question for the tax office.


Okay, look were speaking with Peter Costello, Australian Treasurer. If youd

like to get your headphones on Treasurer we will be able to go directly to our

first call. Ive asked enough questions, I know that you want to have the

opportunity to do so. Good morning to Ian.


Good morning, welcome to sunny Queensland Treasurer.


Look, if this is the winter climate I think Ill stay here. Is it always

like this?


Oh, most of the time. Its very nice in Queensland.

Now, Ive got two points, theyre quite brief, and theyre vital to,

to, I would think, that theyre vital to your re-election chances. As we know,

in the run up to a Federal election, which well be having this year,

yourself, the Prime Minister, and other politicians, make a lot of promises for

the next term of government. You know, hand on the heart stuff and its, you

know, whether your credibility and whether you believed in these matters is

critical to whether you get the votes or not. Now, the Prime Minister, in a

previous election campaign told us there would never be a GST and we were

comprehensively dudded, as you know. Now


Well, I dont


you see this will give you a credibility problem in this election.


No, I dont agree with that for a moment because let me, as somebody who

fought the 1998 election, it was fought on the question of whether or not there

would be a GST. We put out a comprehensive tax policy which was the abolition of

Wholesale Sales Tax, replaced with the GST, cutting personal income taxes, and

we fought the whole of the election campaign on that and it was only because we

won on that policy, that we implemented the tax reform process. I mean, the 1998

election, the whole of the 1998 election, turned comprehensively on our overall

tax plan including the GST. I mean the public was very much aware of that.


With no idea though, of the real impact on us though, at that particular



I dont think so


Fair enough, fair enough question?


No, I wouldnt, I wouldnt agree with that for a moment. We put out our

tax plan, which was the abolition, people forget this, the abolition of the

Wholesale Sales Tax, replacement with GST, cutting income taxes, abolishing

other taxes which were now in the process of doing like stamp duties, and we

argued it. We argued it up hill and down dale, and we introduced the legislation

to the letter of our policy. It was changed in the Senate and you couldnt

have anticipated that, thats because the Senate wouldnt pass the policy.


You expected everything to go right, but of course implementation, and youve

admitted this yourself, has been in some respects appalling, in other respects

not all that fantastic.


Look, when youre changing to a new tax system youre always going to

have implementation difficulties. I dont run away from that. But there are

now 150 countries in the world that have GST or Value Added Tax, and theres

only one country in the world left with our old system, which was Wholesale

Sales Tax, and thats Swaziland. Now, I think if you look through all the

other countries of the world, whether its Canada, or New Zealand, or Britain,

or France, or Germany, you would say that the implementation in Australia is

probably as good, if not better than those countries. But that doesnt mean its

perfect. Youre doing a big change here.


Alright Ian, Im sorry, I interrupted you, your second point?


Id like to thank the Treasurer for that explanation. The second point is

quite brief. I have in my possession a letter from Senator John Woodley of

Queensland to one of the Port Arthur massacre survivors, calling for an inquiry

into the Port Arthur massacre. Would the Treasurer and his Party support the

Democrats in that call?


I dont think so, John, obviously I havent discussed it with the Prime

Minister, but as far as we are concerned, the person that was responsible for

the Port Arthur massacre was brought to trial, and was convicted and is now

serving time. You know, I have heard these conspiracy theories that says it wasnt

him it was some one else, I dont believe them. The person that killed those

Australians in awful circumstances, I think, has been brought to justice and I

dont think we need an inquiry.


Alright, thank you Ian. Good morning to Ken.


Good morning Treasurer.


Good morning Ken.


Firstly, Id say that anybody who is a self-funded or part self-funded

retiree who doesnt vote for John Howard would be silly. So congratulations,

the main reason is not whats said (inaudible) about the $300, but its the

tax implications that certainly has quite an effect, that hasnt been very

well published. The question Id like to ask is that the Wallis Inquiry (sic)

recommended the tightening up of trusts that are taxed as companies. The

Government has gone cold on that. Id just like for you to comment as to why

theyve gone cold on that?


Well, we put out a draft piece of legislation. We asked for public comment

and the comment that came back was near universally against it. And some of the

complaints that were raised, was that you couldnt, the difference between a

trust and a company, is, a company has paid up capital, and you couldnt

distinguish in a trust easily between what was capital and what was income. And

the rules to do so became so complicated that a lot of people thought the

legislation was much too complicated to work and that was the professional

opinion, so we withdrew the legislation and said we wouldnt be proceeding

with it. We will look at ways to make sure that people who operate through

trusts pay their fair share of taxation but we wont be proceeding with that

particular legislation.


Okay Ken, thank you very much. This is 612 ABC Brisbane, its ten to ten.

Were speaking with Federal Treasurer, Peter Costello. Good morning Margaret.


Good morning Andrew, good morning Mr Costello.




Im another self-funded retiree with a different point of view. My total

income for this financial year was $12,500, so the tax threshold raise does

nothing for me because I wouldnt be paying any tax anyhow.


You would have been under the Labor Party rates, Margaret.


Yes, but thats a long time ago, isnt it.


Four years ago.


Yes, four years ago, okay, but I mean it hasnt done anything because Id

have been below the threshold anyhow. So all Im going to get is $17 a quarter

off my telephone bill. Now.


Are you eligible for a part pension?


No, well this is the thing Im going to say.


Oh okay.


Why is the assets test so high? Now my husband and I thought we had, we didnt

want to be pensioners and we thought wed made, you know, we made sure that we

wouldnt be. But things went wrong you know, like HIH, only it wasnt that,

and we ended up losing a lot of money, which, but our assets were still too

high. So at age 70 my husband and I, aged 70 still couldnt, I couldnt go

into any of these fancy things to hide my money anywhere. So Im now left,

because my assets are too high by a little bit, and so I could either you know,

buy a new house or go on a world trip or something I suppose. And what annoys me

a bit, is, that a single part pensioner can earn $1,100 per fortnight on top of

his part pension and the benefits. And the benefits are one of the big things




Yes and yet, although its not altogether a big thing, but it is a big

thing. And even the full pensioner can earn another, what is it $104 or

something on top of the pension, which brings him above my fortnightly income.



So Marg, the question?


Well, can I just make a couple of quick comments. It doesnt, it sounds to

me as if you are not disqualified from a pension because of your income. You can

be disqualified because of your assets.


Assets yes, thats what Im saying.


If you own your own home, now this is a rough figure, if you own your own

home you would have to have assets over $133,000 excluding the home, to be

excluded from any kind of pension. So you would have to have assets, excluding

the home.


Which I mean, how do you live on that amount money?




Yes. Because Ive got more than that. But it still only brings me $12,000



So you can, can be excluded if your assets, excluding your home are over

$133,000 and from a part pension but one of the things that you would be

eligible, for that we announced in the Budget is a Commonwealth Seniors Health

Card. That would get you


Well if that comes through? Will it come through?


Oh yes. Youd be eligible for that, I think, which will give you the

discount on the pharmaceuticals, it will give you the .


Oh a health card, Ive got that.


the telephone allowance, the same telephone allowance that pensioners get

and we also said in the Budget we are going to open negotiations with the States

to try extend some of the other pensioner concessions to self funded retirees.

So were working on your behalf Margaret, I can assure you of that.


Okay Margaret.


Can I have another thing? Now the $300 youre giving. You said you were

giving it to pensioners. Now a lot of pensioners already are now


Or part pensioners.


Or part pensioners. A lot of them already got that $1,000, well some didnt

I know, but a lot did. And you said you were giving it to them because they

deserved it. Does this mean that self-funded retirees dont deserve it?


Well self-funded retirees in the Budget were given the other benefits, the

increases in their tax rebates. You wouldnt pay any tax would you?


I dont pay any tax.


No, you shouldnt pay any tax now, you shouldnt pay any Medicare levy,

you should have a health card, you should get cheaper pharmaceuticals, youll

get the telephone allowance, youll get any other (inaudible) concessions. And

for pensioners, because many of them dont pay tax they got the $300 bonus.

But if youre also a self funded retiree you might have got that, did you get

that $2,000 bonus that we paid last year?


Difficult, Ive had to cut Margaret off because weve only got a few more

minutes. Sorry about that Margaret. And I do want to get to some other calls.

Hello Barry.


Treasurer, your response to what Im about to say will define for me

whether you are mean and tricky and listening and whether young people are more

than just a photo opportunity for you. Ive got in front of me a copy of

Liberal Senator Brett Masons taxpayer funded North (inaudible) electorate

report which was distributed I believe only in the seat of Dickson. It devotes

one and a half pages to promoting the local Liberal candidate, which I believe

is illegal to do. But within it, it doesnt mention GST once, it doesnt

mention BAS once, it uses a Sydney waiter, a Sasha Lukic to justify or prove

that the Liberals work for the dole plan is really working. Now what Lukic says

is this, hes become highly critical of his generation arguing they are

undisciplined and disrespectful. Generation X is becoming a bunch of pot smoking

imbeciles. Now Im a parent of three wonderful children aged between 17 and

22. I find that publication offensive, just as I found the sense of your failure

to mention education in your Budget speech




and education in your Budget papers.


Actually Barry I did mention education. I mentioned increased tertiary

places, increased rural places. The Government also funded increased literacy

and numeracy, but anyway keep going.


Why does your Government regard our children with contempt and have no vision

for their future? All you did in your Budget was attempt to buy the votes of the

over 65s, there is nothing for young people.


Yes well, thats not right. Because if you were listening to the Budget

speech Barry, you would have heard me announce an asthma plan for young people.

Asthma affects one in four school children. We have introduced the most

innovative plan to care for asthma sufferers and to treat them before they get

to the stage of hospitalisation. You would have heard me in the Budget speech

talk about the new diabetes plan for younger Australians to try and intervene in

relation to diabetes. Weve funded the largest literacy and numeracy program

in Australias history to give young people skills. We increased the funding

for national training to record levels. We also increased the number of

university places both for those in rural Australia and for those in education,

and you ask me about work for the dole. Ill tell you, I think work for the

dole is a good idea. Ive mixed with a lot of kids who have been on

unemployment benefits for a long period of time with nothing to do,

notwithstanding that weve created 820,000 new jobs in the last 5 years. Or

rather that 820,000 have been created in the last 5 years. And those kids say to

me they like doing work for the dole because it gives them something creative to

put back into the community. It gives them skills and it increases their chances

of work.


All right thank you very much Barry. And final call and Im sorry to all of

those callers we didnt get to. And Im sure youre as frustrated as we

are in that sense that we dont have the extra amount of time wed like to

have with the Treasurer, but good morning Julie.


Hi, good morning. I belong to that forgotten group, full time students. Im

a mature aged student, Im 30, Im 31 this year. Im on Austudy, which is

$145 minus tax per week. My only option to survive is working casually. Now the

dole gets nearly $200 a week I believe, and people my age on the dole are also

eligible for rental assistance, whereas I cant get that at the moment. Im

penalised for being a student over 25. If youre under 25 you get youth

allowance, you get rent assistance. By the time I graduate Ill be 32 and then

Ill be penalised when I go to take out private health insurance


Julie, little time left. Can the Treasurer respond?


Yes, please do.


Thank you.


Well look, Im not quite sure what the question is, but


Whats in it for me? You know, how are you ever going to win my vote or

people like me. Yeah well suffer for 3 or 4 years till we get our degree and

then well be out working. But, you know, how are we supposed to survive in

the interim?


Well, look the Government provides Austudy benefits for people that are

studying. And look you can always say that they should be higher and thats

fair enough. But you have got to remember that somebody has got to pay the tax

to fund these benefits and there are other taxpayers that are paying taxes to

fund those benefits. What I would say to you, is, in a strong economy with

820,000 additional jobs created over the last 5 years there are much better

chances today for you to get a job and when you do, your income tax rates are

going to be much lower than they used to be because this Government reduced

income taxes. And if youre on an average wage you used to face a top marginal

tax rate of 43 cents and we cut that down to 30 cents and I think thats good

for people in the workforce and I hope you do finish your studies, and when you

are in the workforce you get the benefit of lower income taxes as a consequence.


Well thank you very much Julie and thank you Peter Costello, Federal

Treasurer. Lets do it again, obviously we will before the election. Thank you

for your time and enjoy your stay in Brisbane.


Thank you very much.