Transcript No. 2000/106

SUBJECTS: Mid Year Review, Fuel, Roads, Employee Entitlements.

The Treasurer, Peter Costello has delivered the country’s latest economic snapshot with

the release of the Mid Year Review. And as expected the Budget surplus has been revised

up. But there are a couple of areas where spending has blown out. Inflation does, I

presume remain a concern. The only man who can tell me whether it does or it doesn’t is

the Treasurer himself. He’s in our Canberra studio. Mr Costello, good morning.

Good morning John.

How are you?

Not too bad thanks and you?

Pretty good. Is the GST effect on inflation greater than you thought it would be?

No it’s actually less than we thought it would be.

Really.

Yes we thought that in the September quarter the effect would be around about 3 – per

cent but it was below 3. So it was actually less than we forecast and less than most

people forecast.

It’s up from what 5.75 to 6 now?

Including the new tax changes it’s up to that amount but we take the tax changes out

which we think are around about 3 when we’re looking at it for monetary policy purposes we

think inflation will be around about 3, a bit over 3. That’s really being influenced not

by the factors in the new tax system but by the exchange rate, by world oil prices and

other things like that.

That higher inflation rate’s going to feed into the next round of excise rises though

won’t it?

The excise is indexed to the CPI, yes that is right. And if the inflation rate is say 3

per cent or whatever it is that is applied to the 38 cent excise.

Yeah but it’s more than 3 per cent.

Well there’s been a lot of talk about what the GST effect will be and the GST effect

will be I believe 3 per cent or around about that. The overall effect will be the effect

of both the September quarter and the December quarter. We know what the September quarter

was that was I think 3.7, we don’t know what the December quarter is yet.

Yeah but that GST effect will still flow through to the CPI and to the increase in

excise.

Oh that’s right. If you think that the GST effect were 3 per cent for example, then the

effect would be around about 1 cent.

Yeah well that’s what you’re saying, about a 1 cent a litre increase in February.

From GST.

Yeah but what difference does that make to your bottom line? A hell of a lot doesn’t

it.

Well they’ve been factored into the whole cost of the new tax system.

Well it increases your bottom line by about $50 million.

Well it’s already in the bottom line, it has been from the outset.

Yeah but when you get an extra cent in February you’ll get an extra $50 million.

Well that’s already, it’s true if your excise goes up then you take more tax. That is

absolutely true and that has been factored into the budget. That is not a reason why the

surplus is going to be greater. That was already factored in. In fact excise collections

detracted from the bottom line in this mid year review because although excise was the

same volumes went down. There’s a lot of people saying you’re going to get this big

windfall out of excise. That wasn’t the case in fact. The excise…

You did, you got a lot.

Well we got a lot of money but we didn’t get a windfall increase is the point I’m

making.

Well a few would argue that I think.

Well there are the Budget figures. It was 38 cents a litre and volumes went down. See

there are…

Well volumes went down because people couldn’t afford it.

Well there might be an element of truth in that.

There’s a lot of truth in it.

But there are some people who say oh well excise goes up as the price goes up. The

excise is always a constant amount. It’s 38 cents a litre whether the price of petrol is

50 cents or $1.00 or $1.50 or $2.00. The excise is constant. It’s not the excise that

pushes the price up, what pushes the price up is the oil price and that’s what’s been

increasing over last year.

That’s right but what pushes it up too is the GST factor.

And when we come round to the February indexation, the last indexation was in August

John and it was 0.6 of a cent. And we come round to the February and we’ll do the next

indexation. If the world oil prices come off as I sincerely hope it has, and bear this in

mind in every international forum Australia is trying to make its voice heard on bringing

down oil prices which means lifting oil production, then that’s the best chance of

bringing prices off.

This half pledge on roads spending. Will that help overcome the concerns that are in

place? I mean I don’t know if the government realises it but the government is not liked

very much at the moment because of the price of fuel, rightly or wrongly. Do you think

that’s going to appease the people by saying well we’ve got all this extra money and we

got a lot of it from you paying for the fuel so we’ll give you some back in the form of

roads? Is that going to appease the people?

Well can I make two points? Where the additional money came from was from company

profits. Company profits were high and that gave us more company tax.

Yeah but some of it did come from fuel.

Well in the Mid Year Review the revisions up were from, principally from company tax

and other unincorporated (inaudible)

Yeah but some came from fuel.

In relation to roads there has been a view, particularly in rural Australia put to us

that the infrastructure is running down, that the roads had not been maintained in the way

that they should and it’s because of our concerns about that that we’ve announced that we

want to put more money into road funding, particularly in relation to rural and regional

roads. I think it’ll be welcomed by the people who want better roads to travel on.

They are entitled to it though aren’t they? When you consider in rural Australia,

fuel prices are higher. Somewhere in the Territory yesterday it was $1.55 a litre and

consequently the amount they pay in GST is much higher. Much higher.

Well, I think all Australians are entitled to good roads, and you’ll only build

good roads by raising taxes, it’s an unfortunate, unless you want to make them all

tollways, which obviously you wouldn’t do in rural and regional Australia. And that

means we have to raise taxes to build them. We’re raising taxes and we’re going

to build them. I think that’s a responsible policy. You know, a lot of people said oh

this was irresponsible pork barreling. That’s what the Opposition was saying. I

don’t think it was at all. I think it was a very responsible policy.

Well, you haven’t done anything yet.

Well, that’s why I call it a policy. And now we start allocating the money. And

you’ve got to get graders on the ground to build the roads and that takes time. But

it starts with a policy.

I presume the amount of time it will take will put the commencement date just before

the next election.

Well, the commencement date will be as soon as we can do it. Whenever you’re

building a road John as you know, you announce the project, generally speaking you call

for tenders, people have got to survey it, you’ve got to get the equipment there, you

know there are lead times in building things.

But I mean, you would aim at getting it started before the next election, wouldn’t

you?

I’ll aim at getting it started as soon as we possibly can. We’d like to start

it you know next month if we could, but it’s just subject to the machinery of getting

graders on the grounds and contracts let and all of those sorts of things.

Is it, when you said it was unfair of the Opposition to say that you were pork

barreling, I mean Government’s do pork barrel don’t they, spend money in the

right areas? Are you going to spend money across the board or are we going to notice it

just in marginal seats?

Well, we spend money across the board on things that need to be done across the board.

What’s our biggest expenditure? The aged pension. What’s our next? The health

system. That’s for every Australian.

Yeah but when it gets down to infrastructure issues, then and understandably, I’m

not saying there’s anything wrong with it, then Governments who want to be elected or

re-elected aim at the areas where they’re most vulnerable. I mean that’s good

business isn’t it?

You know, I’ve always believed myself that the best thing that the Government can

do for people is actually to run a strong economy where their kids have got a chance of a

job and their interest rates are low. And that’s always been my first priority and I

wouldn’t do anything that would endanger those two objectives. It’s no great

consolation to you by the way if somebody’s given a local grant to your electorate

and your mortgage is 17 per cent, as was the case during the period of the late 80s, early

90s. And the grant doesn’t do much good if you can’t afford the mortgage.

I’ve always thought that the important thing is to run a good economic policy so

people can afford their mortgages to stay in their homes.

Yeah, if only all politicians felt the same way Peter.

Well, other people may have a different view to me but that’s what I’ve

always concentrated on as Treasurer.

I tell you what bothers me, these $2 shelf companies. We’ve got a problem in

Newcastle at the moment where fellows are about to lose their jobs prior to Christmas and

they get none of their entitlements at all because of this $2 shelf company thing.

Mmm.

So that should bother you.

Yes it does. We recently changed the law to make it harder for company directors to

avoid their entitlements and…

Avoid paying their entitlements?

Avoid paying their entitlements, their liabilities I should have said, you’re

right, to prevent company directors from avoiding their liabilities. We amended the

corporations law and there’s now a provision which penalises directors who

deliberately avoid payment of employee entitlements, so if there’s anybody out there

that thinks that they can deliberately avoid payment of employee entitlements, they could

well be breaking the law and they could be opening themselves up to prosecution.

Well, the, this organisation of which I speak, a manufacturing company in the Hunter

Valley called Steel, Tank and Pipe they owe 150 workers about $3.3 million in entitlements

like holiday pay and long service leave and stuff but because the workers were employed by

a $2 shelf company, they’re not going to get the entitlement, because of the Weeks

family says there’s no money to pay them.

Well, I’m not saying anything about that particular company because I don’t

know the facts surrounding that company but I make this point that a director who avoids

payment of employee entitlements can open themselves up to prosecution under the

corporations law and any person who thinks that’s happened can notify the corporate

policeman the A-S-I-C, ASIC. The second thing is, as you know we have introduced an

employee entitlements scheme where a company goes into insolvency and employees are left

out in the cold which is available I think up to $20,000 for each employee, so this scheme

could be looked at.

So, so what do I tell these blokes to do? These boys and girls who work for this

organisation that is about to dump them prior to Christmas.

Well, firstly if they have evidence of anyone breaching the corporations law, that

evidence should be given to the Australian Securities and Investment Commission, and

secondly if they are left in the lurch and their entitlements are not paid, they may be

eligible under the entitlement support scheme.

See, we’ve seen it before. We saw it with a company that was, was run by the Prime

Minister’s brother. The Prime Minister came to the rescue there. Is he going to come

to the rescue here?

Well as a consequence of all that, we put in place this employee scheme which is

available generally. I think there’s…

But, but it doesn’t seem to work, if what I am hearing is correct.

Oh, well how it works is, if you’re put off and you’re not paid, you can then

apply to this scheme to get the money. From what I hear, I think you said they

haven’t actually been put off?

No, they’re about to be, yeah.

Well, if they are not paid, then they can go to this scheme.

So who pays then?

Oh, well the taxpayer (inaudible).

Yeah but I mean that’s fine, and I’d be very happy to see them get the money,

I have no problem with that. But I want to know why the Weeks family, the Steve and Brad

Weeks who own the company, why they’re not paying? Why should we pay the bill for

these fellows?

Well, if there’s anybody, and I, look I really don’t know this particular

case so I, I don’t want to blackguard anybody when I don’t know the facts, but

if there is anybody, whatever their name is, who has taken action to protect their assets

to avoid paying an employee entitlement, that could well be in breach of the law.

Okay, thanks for your time. When do you expect to be leader?

Well, I’m quite happy being Treasurer John.

You can’t be happy being Treasurer?

Well, you know, you have your good days and you have your bad days. Yesterday was a

good day, it was a good news story, the economy is strong and unemployment is falling, the

Budget is in good shape…

And the dollar’s shot to ribbons.

Yesterday was good and if we can keep the Australian economy growing, we can get more

people in jobs. And that’s what it’s all about.

Okay, but when do you expect to take the reins?

Oh well, I’m happy being Treasurer John.

But you’d be happier being leader wouldn’t you?

Oh well, you know, you, you…

You’d have to say yes.

Oh look, all I concentrate on is doing the best job I can as Treasurer.

Yeah, well concentrate on the question. You’d have to be happier being leader.

Well you and I know that…

You’d be happier being leader.

You know if you speculate on these things you get into a lot of trouble. So I’m

just happy being Treasurer.

Okay, good to talk to you Peter.

Thanks very much John. See you.

Yeah I hope I see you soon. Peter Costello who is our Treasurer and he is very happy

being Treasurer.