TRANSCRIPT
THE HON PETER COSTELLO MP
Treasurer

Interview with Matt Brown
AM – ABC

Wednesday, 12 November 2003
8 am

SUBJECTS: Latham’s inheritance tax, Debt financing, Economy

TREASURER:

Well, Mr Albanese is supporting a wealth tax, he makes the point that

Australia doesn’t have a wealth tax and it is one of the few OECD countries

that doesn’t, and he is right about that. By wealth tax I mean death

duties, and he is advocating the re-introduction of death duties. You

will recall in the 1998 election campaign Labor advocated increasing

capital gains taxes, this has been a recurrent and constant theme of

Labor that they would like to actually introduce taxes that hit savings

or wealth, it is something that Mr Latham has also supported.

BROWN:

Latham has ruled out a wealth tax, and isn’t a report that the Government

has asked for about how to fund aged care, and the growing needs of aged

care, looking at introducing some kind of an idea of death taxes?

TREASURER:

It is interesting that you should say that about Mr Latham – Mr

Latham has of course supported inheritance taxes as part of his Progressive

Expenditure Tax, which is one of his kooky and bizarre ideas that he

was pushing back in the late 1990s. Now, he is very gung-ho about the

Progressive Expenditure Tax as an alternative to the GST, and as part

of that an inheritance tax.

So, you will find that when Labor is cornered on these things, and it

is pointed out to them that this is not particularly popular, they say

that is not really our plan, but they are on the record supporting the

concept of wealth taxes in all sorts of places.

BROWN:

Anthony Albanese also said last Friday that debt financing needs to be

seriously considered, in other words that governments can borrow money

at low interest rates, and the private sector should look at spending

that money on important national projects. You say that risks raising

interest rates.

TREASURER:

Well, debt financing is just another way of saying run a budget

deficit. That is all that is, it is…

BROWN:

And what is the risk of doing that?

TREASURER:

Well it is a fancy way of saying, spend more than you raise, that’s what

Labor in fact did through all of the period of the nineties, until they

were turfed out of office with a $10 billion deficit.

BROWN:

He’s not alone, he was quoting the Australian Industry Group, in making

his argument.

TREASURER:

Well, the Australian Industry Group can also advocate deficit financing

if they want to do so, but we know the Labor Party practised it, we know

the consequence of that was mortgage interest rates were around 10 ½

per cent after they’d run up $80 billion worth of debt with 5 budget

deficits in the early part of the 1990s before they got turfed out of

office.

BROWN:

On that subject, the National Australia Bank’s latest survey shows strong

growth, lots of forward orders, high business confidence, doesn’t that

make a case for a less stimulatory monetary policy?

TREASURER:

Look, Australia has been through our worst drought in a hundred years,

and the international global economy has been weak. Now, if the international

global economy picks up and if the drought breaks, then the Australian

economy will be stronger. That is a good thing actually, because it will

mean more people are in work.

BROWN:

A good case for a less stimulatory monetary policy though?

TREASURER:

Well, the Reserve Bank said in its decision after its last board meeting,

that it believed as the Australian economy strengthened in response to

world events that it thought that interest rates didn’t need to be expansionary,

and that is the observation that it made in its Statement, that is the

principal reason that it gave, for the decision that it took.

BROWN:

And if that trend continues, then there would be a case, wouldn’t there,

for more rate rises?

TREASURER:

Well, look, I never comment on the future direction of interest rates,

but I will make this one point. There are a number of people that will

try and say a strengthening economy must be a bad thing, they will not

look for the silver lining, they will try and look for the black lining…

BROWN:

And you won’t…

TREASURER:

…in every piece of good economic news. Can I make this point? A stronger

economy is not actually a bad thing, a stronger economy gives people

work opportunities, it gives us the opportunity to share in general prosperity.

BROWN:

Are you worried that voters will see the dark lining on these clouds,

not the silver lining? But if there are two more rates rises by early

next year for example, they will be blaming you.

TREASURER:

Well, how have you led into this discussion? The National Australia Bank

says the Australian economy is strengthening and businesses are confident,

what, so we are supposed to expect that is a bad thing?

BROWN:

Well, it would be a bad thing, presumably for you, if it meant that the

Reserve Bank had to raise interest rates.

TREASURER:

I think, I think for me, like all Australians, a strengthening economy

is a good thing, why? Because it means that people that want to work

can find jobs, and kids that have been out of work can get back into

work, and they can find useful, and they can find positive attitude to

life, and I think it will make Australia a stronger place.

BROWN:

Alright, Access Economics is predicting that you will have several billion

dollars more than you are predicting in your Budget by the time the surplus

is revealed next year, there must be some pretty strong competition amongst

your colleagues for a slice of that growing pie.

TREASURER:

Well, I don’t comment on Access Economics.

BROWN:

What about your colleagues? There must be a fair clamour at your door

for a share of the riches that may well be available.

TREASURER:

Let me make this point, Matt, as you would expect amongst talented and

persuasive people, there are always proposals to improve policy, and

if we could fund them all, we probably would, but at the end of the day,

you have got to make sure that taxpayer’s money is spent wisely, and…

BROWN:

Have you seen any good ideas, any wise ideas, so far?

TREASURER:

Well, that is what we try and do. We priortise, and in the last Budget,

what were our priorities? Defence, our troops in the field, and cutting

taxes. As we come up to next year’s Budget, defence and security will

still be a priority, and we will make sure we support our troops in the

field, and if we have the capacity to do some other good things, we will

do that too.

BROWN:

Peter Costello, thank you.

TREASURER:

Thank you very much.