Ministerial Council, GST, ACCC, Graeme Samuel, Qantas, Superannuation tax, Gulf War

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Ministerial Council, GST, ACCC, Graeme Samuel, Qantas, Superannuation tax, Gulf War



Senate Alcove, Parliament House

Friday, 28 March 2003
3.15 pm


SUBJECTS: Ministerial Council, GST, ACCC, Graeme Samuel, Qantas, Superannuation

tax, Gulf War


Well, the fourth Ministerial Council on Commonwealth State Financial Relations

has been held today and the Commonwealth and the States have agreed on the allocation

of GST revenues. In the next financial year $31 billion in GST revenue will

be distributed to the six States and the two Territories, and in addition to

that $1 billion as Budget Balancing Assistance. Importantly for the first time

there are a number of States that are now receiving GST windfall, the state

of Queensland, the ACT, Northern Territory are all now receiving GST revenues

in excess of what they would have been receiving under the old system and no

longer require Budget Balancing Assistance. The GST revenues to the States are

now fully funding their education systems and their law and order and policing,

and as the Labor Treasurers noted, a number of them in the discussions, as being

a very positive reform for Australia and part of the reason why the Australian

economy has been able to stand up so well notwithstanding the difficult international

situation. As well as that there were discussions on other matters of interest

in financial relations, and the meeting was one of the most positive that we

have had in recent years, no doubt part of that was because the GST, every last

dollar of which goes to the States and Territories, is now providing a funding

base for them to deliver their services.


Treasurer, I know we have heard it all before but NSW and WA were complaining

on the way in that they are carrying the rest of the country on their backs

and that it is not a fair carve-up. Have they got anything to complain about?


Well the way in which the system works is that all of the GST revenue goes

to the States and the Territories. Some of the States argue that as between

themselves some States are getting larger shares and others are getting smaller.

But that is an argument between the States as to how to divide up as between

themselves. There is no argument with the Commonwealth here. The Commonwealth

is giving every single last dollar of GST revenue, $31 billion, to the States,

now funding their schools and their teachers and their classrooms and their

police. Every single last dollar of GST revenue is received by the states. They

have arguments between themselves because some States say they should get more

and others less, but if you listen to all of the States every one of them thinks

that they should get more and all of the others should get less. They can’t

all be right.


Are the States who have healthy growth being penalised though?


No, the way in which it works is that there is an allocation as between the

States to ensure that every one of them can deliver a certain standard of service.

If you happen to have a State which has a wide dispersal of population, that

is less population density, you tend to get equalised up and to receive more

than if you have a smaller state with a concentrated population density. That’s

the way the system works.


Was there any discussion about a new chairman for the ACCC?


Well again the States themselves divided on that, for supporting Mr Samuel,

who the Commonwealth also supports, and no other candidate has any significant

support. So plainly Mr Samuel is the preferred candidate.


So you will continue to push for Mr Samuel?


Well he has the support of a majority of Governments.


Will you nominate him yourself?


Well, we will see how the discussions go, but the fact is he has a majority,

the majority support, five governments support him, and of course including

the Commonwealth which totally funds the ACCC.


How do you actually break the deadlock though, its four versus four, so given

the Commonwealth doesn’t have a vote?


Well the Commonwealth obviously, seeing as it is four versus four, I think

that the Commonwealth will have to break the deadlock…




…well the Commonwealth will support Mr Samuel.


Treasurer, was the issue actually discussed at today’s meeting?


Only in those terms.


So you will force the issue at COAG, is that how it will work?


No, no, no, as far as we are concerned, not only does he have a majority support,

there is no other candidate that has significant support. At the end of the

day there is no other candidate.


So it requires you now to formally nominate him and get the process going. When

will you do that?


Well we will do it when the timing is right.


Will you meet the June 30 deadline when Mr Fels leaves the chair?




Treasurer, Qantas has announced it is dropping huge (inaudible) flights, is

it the first major domestic casualty of war?


Look, casualties of war were the brave soldiers fighting in the war, and they

are the people who our thoughts are with at the moment.


Is it a sign of things to come if Qantas has had to take such drastic action?


Look, the things that will affect Qantas’ business are things that affect airlines

around the world -September the 11th, Bali, heightened security.

I guess the good thing we can say about Qantas is that it’s probably the most,

or at least one of the most profitable airlines in the world. But is it a good

time for airlines? No it’s not, and the biggest effect I think was September

the 11th. September the 11th as we know didn’t do much

for the airline business.


(inaudible)…oil company case mean that the critics are right that they were

running publicity and harming companies good names before they had proper evidence?


Look, I welcome the fact that they have made an announcement. I think they

did everything they could to gather the evidence, but as you look back on it,

the level of publicity that surrounded the announcement of the investigation

seems to be out of proportion to the result which was achieved.


(inaudible)…fix that?


Well I don’t know that we have got, I don’t know that this is a problem of

legislation, I think this has highlighted the issue of how regulators should

deal with the press, and I think that the lesson here is that regulators should

be perhaps understated in their dealings with the press.


(inaudible)…saying that you are effectively getting rid of the executives

tax break by reducing the 47 per cent to 38 per cent tax on lump sums super

payouts, just wondering what your side of the story is and (inaudible) was introduced

in Parliament?


Well as per usual Mr McMullan is wrong.




Because there is tax on contributions, and when you take into account the tax

on contributions as well as the tax on exit, the marginal rate is 48.5 per cent,

again he hasn’t done his homework. He left out of the equation the tax on contributions.

So we took this as a policy to the election, its in our election policy, we

were elected on it, that the rate should be 48.5, and the rate will be 48.5.

Sorry, just another mistake by Mr McMullan.




No, because he has left out the contributions. I don’t think he understands,

and if he had sought information, he would realise that the money is taxed at

15 per cent on the way in, so it is the tax on contributions plus the tax on

exit, which you have to take into account which brings it to 48.5.


Treasurer, the war is obviously having an effect on the global economy, are

you confident the economy will recover and will it do so quickly?


Look, it is a very difficult period for the world economy. The United States,

the world’s largest economy has been through a recession and is going, is now

coming out of a recession but is growing slowly. Japan the world’s second largest

economy has been through a recession, Europe is flat, there is the uncertainty

of war, and oil prices are high.

Now, the IMF will be updating its forecast for global growth, in the next month

or so, I expect that it will be revising down world growth, because these are

difficult issues and in Australia we have faced not only the international situation

but we have had in addition to that simultaneously our worst drought in the

century. But it is a tribute to the resilience of the Australian economy that

we have continued to grow and I think that the Australian economy will continue

to be resilient. Last question.


Will you be going to Washington for the April meeting?


Don’t know. Probably not I would say.


Can the Bombers get up?


Every chance, every chance. Good luck to them. Thank you.