Doorstop Interview

Treasury Place

Melbourne

Monday, 27 August 2007

10.30 am

SUBJECTS: Labor’s plans for GST, polls, equine influenza, State by-elections, Ford strikes

TREASURER:

Mr Rudd has said that he plans to claw back GST from the States in order to fund a Commonwealth takeover of the hospital system.  Just to put this in perspective, this would require a clawback in 2010 of about $20 billion a year or about 40 per cent of the GST revenue.  Mr Rudd, when he says he wants to claw money back from the States for a Commonwealth takeover of hospitals, needs to claw back 40 per cent of all GST revenue.

Now, nobody in their wildest imaginations would think that the State Premiers would surrender 40 per cent of the their income, 40 per cent of their GST.  And I have no doubt at all what the State Premiers will tell Mr Rudd, is if he wants another 40 per cent of the GST he should just put the rate up, from 10 per cent to 14 per cent, which would be a far easier way for Mr Rudd to get his hands on 40 per cent of the GST.  Of course, if you have Labor in government at State and Commonwealth levels, then you could get an agreement to increase the rate of GST.

The point I want to make today is that this promise that Mr Rudd has made to claw back from the States GST to fund a takeover by the Australian Government of the State hospital system, involves a sum which is of such magnitude that he hasn’t even contemplated it.  And he doesn’t have an understanding as to how it could be done.  And as a consequence you are seeing an inexperienced political leader making brave threats which could never be carried out except at extreme cost.  And the State Premiers who have never surrendered a dollar voluntarily in their lives are hardly going to surrender 40 per cent of their GST to Kevin Rudd. 

As per usual, they will stand him up and if they stand him up there is a real risk to the Australian people that the outcome of this promise will be an increase in the GST rate. 

JOURNALIST:

Just on the overnight poll movements, Treasurer, just wondering why do you think people think that the Liberals are not as strong at economic management as previously thought?

TREASURER:

Well I would like to see all the details of this poll because there was an IPSOS poll done in May earlier this year. The Daily Telegraph revealed that the person in charge of the questions was Rebecca Huntley, a member of the ALP policy executive and a fundraiser for Maxine McKew. 

JOURNALIST:

So you are saying the poll itself, the questions itself were biased? 

TREASURER:

Well we would have to know whether Rebecca Huntley had any engagement on this poll – the last one she did.

JOURNALIST:

On the State-Federal issue, do you think there is a mismatch between the States revenue raising capacity and their responsibility for spending?

TREASURER:

Well the States have always wanted a growth tax and we put in place a growth tax which gave them growing revenues which is 10 per cent of Goods and Services – the GST.  That has put the States on a better financial footing than they have ever been before.  There is no doubt about that.  Now, to think that you are going to be able to claw 40 per cent of that back, as Mr Rudd apparently does, shows how inexperienced he is.  Even now that they have that 10 per cent GST, they still want more revenue.

JOURNALIST:

But the States are saying that this would give the Government co-operative federalism and fits in with the National Reform Agenda.

TREASURER:

Well you find a State Premier that will go on the record today and volunteer to return 40 per cent of the GST to the Commonwealth. 

JOURNALIST:

But isn’t this just a big stick?  He is there holding up a big stick and saying, you know, get your house in order by 2009 or else, this will concentrate their mind?

TREASURER:

Well, who knows what he is doing?  I don’t think he knows what he is doing because last week he was going to take over the state hospital system.  Today he says, oh what’s more, I will claw back from the States the revenue required to run it.  When you look at the figures, he needs to claw back 40 per cent of the GST to make good on his promise.  Now, perhaps I’ve been on another planet.  I have never seen a State Premier surrender a dollar, let along surrender $20 billion a year or 40 per cent of the GST.  Find a Premier today that will go on the record and say: ‘I will voluntarily return to the Federal Government 40 per cent of my GST.’  I think what you will find is you will find there are a lot of Premiers will say: ‘if Canberra, under Mr Rudd and Labor, wants 40 per cent of the GST, they can put the rate up.’  That is what they will tell Mr Rudd.  And of course, with unanimous Labor in the State and the Territories, they will have the right to do it. 

JOURNALIST:

If push comes to shove though, will the Commonwealth have the power to recoup that money or is just sort of a legal upper-hand that the States…?

TREASURER:

Well of course, you would have a massive brawl with the States.  If you went to the States and said: ‘we are going to take away 40 per cent of your GST revenue,’ you would have a massive brawl.  I can’t imagine any State ever agreeing to that.  The States want to keep 100 per cent of the GST – and get more.  Do you think they are going to voluntarily surrender 40 per cent, $20 billion a year?  Now, the reason this arises is that Mr Rudd is there on the front page of the newspapers today saying he is going to cut GST to the States.  What planet does he come from?

JOURNALIST:

What implications does the horse flu outbreak have for the national economy?

TREASURER:

Well I don’t think it is a good thing.  Horse racing is a very important industry to Australia when you take into account breeders, trainers, jockeys, race meetings.  And the fact that we have had this outbreak of horse flu is very serious.  It will affect the economy.  It will affect everybody who is involved in breeding, training, racing horses.  It is a terrible thing.  And our authorities are going to try and get a grip on it as quickly as they can.  They are taking quarantine measures and let’s just hope that they can contain this outbreak. 

JOURNALIST:

Treasurer, just on the Galaxy poll, do you think there is a sense of ingratitude?  That, you know, the majority of voters are saying that it is not good economic management for taxes as the result of the surplus? 

TREASURER:

Well I would make the point that tax was cut on the 1st of July when every Australian had an income tax cut.  And of course for those that are over 60, all taxes on superannuation, whether they be pensions or lump sums, where they are paid from a taxed superannuation fund, were abolished:- all taxes abolished for people over 60 receiving superannuation.  So, there has been a round of tax cuts with the superannuation tax cuts the biggest of all which took effect on the 1st of July.  And the Government has legislated another round of tax cuts to take effect on the 1st of July next year. 

JOURNALIST:

Would you have liked to see the State Liberal Party field candidates in these two by-elections (inaudible)?

TREASURER:

Look, this is a matter for the Division.  They have made their decision; of course I support their decision.  But the Division takes all of these things into account before making a call one way or the other and they have made that call. 

JOURNALIST:

On the situation with Ford workers, is there anything that can be done federally to assist them?

TREASURER:

Well I call on the parities to go back to work.  Bear in mind that this strike is not just affecting the immediate people concerned but it is affecting a whole lot of innocent parties who have been stood down not because of anything they have done or any dispute they have.  And so I would call on the parties to return to work.  All right, thank you.