Ministerial Council Meeting; fuel prices; tax reform

2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998
Petrol and Diesel excise reduction
June 23, 2000
Opening Address to OECD Forum 2000: Partnerships in The New Economy
June 26, 2000
Petrol and Diesel excise reduction
June 23, 2000
Opening Address to OECD Forum 2000: Partnerships in The New Economy
June 26, 2000

Ministerial Council Meeting; fuel prices; tax reform


Transcript No. 2000/64






Full transcript of interview with Michael Brissenden

Sunday, 25 June 2000

Recorded at 3.15 pm



SUBJECTS: OECD Ministerial Council Meeting; fuel prices; tax



Mr Costello, less than a week to go now until the biggest change to the

tax system since Federation, as its often said. Is it appropriate do

you think for the Treasurer to be out of the country at a time like this?


Oh yes. Im chairing the OECD meeting which of course is an opportunity

to showcase Australia and its performance over the last couple of years.

Weve been recognised amongst the nations of the world as one of the six

economies of the world which has been able to harness higher growth and

higher productivity. And weve also been recognised as world leaders in

many areas of Budget policy. And we are here to share some of those experiences

but also to capitalise on them and to use that as a platform to sell Australia

– its trade, its opportunities for investment, its opportunities for growth

– to the rest of the world.


Youve got a tax to sell at home, though, havent you? There are still

some significant problems doing that. One of those, the most thorny issue

perhaps, is this question of how much petrols going to go up or down.

Now you say the oil companies can reduce prices at the pump by 1 cents.

They say half a cent is the maximum. Are they wrong?


What we say, is that the oil companies, like every other company in Australia,

have to pass on the savings that theyre getting from the abolition of

wholesale sales taxes, from the abolition of excise on diesel which is

in their transport costs, and from the reduction in the costs in producing

their product. The argument in relation to the oil companies is no different

to the argument in relation to every other company in Australia. We are

not going to single out the oil companies and say they alone dont have

to pass on reduced costs of production. They do …


But they say its not possible.


every other company has to do the same. And when their tankers start

rolling out of their factories on 1 July, theyre going to be rolling

out with a 24 cent a litre reduction in the excise on diesel. Theyre

going to have opportunities in relation to all of their inputs to recover

direct and embedded wholesale sales taxes and we dont think oil companies

ought to be keeping that benefit. We think it ought to go to consumers.


Do you have any Treasury models or anything to suggest that they can

do it?


Oh well, the Treasury has looked at this as it has in relation to all

other industries as well, under its Prismod modelling. And as weve published

in our policy when it was released back in 1998, there are savings in

relation to oil, production of oil and petrol, just as there are savings

in relation to the production of all sorts of other goods. And to single

out this industry and say oh well, it doesnt have to pass on cost savings

would be to give it a benefit which no other company is to enjoy.


So you dont accept that petrol will have to rise as a result?


With the savings passed on to the consumer, with the reduction in the

excise on petrol and with the grants scheme which is put in place in relation

to non-metropolitan and remote Australia, consumers are being protected

by all of those decisions in relation to the price of petrol.


Can you guarantee that it wont rise and what will you do if it does?


We will have the Australian Competition and Consumer Commission looking

at those oil companies just as theyll be looking at every other company

in the economy, making sure that the benefit is passed on to the consumer.

Look, were not putting in place reductions in excise and wholesale sales

taxes and grants schemes for the benefit of the oil companies. Theyve

been put in place for the benefit of consumers and theyll be passed on.


But will petrol rise or will it not rise?


Well as I said, by passing on the cost savings, by passing on the reduction

in the fuel excise, the petrol excise, by passing on the advantage of

the grants scheme, then consumers are going to be protected as we have

put our policy and directed our policy at doing.


Does that mean petrol wont rise?


Petrol moves for all sorts of reasons. Petrol moves because


It wont rise as a result of the GST?


Petrol moves because the oil price moves, petrol moves because the exchange

rate moves, petrol moves because theres competition in the market, petrol

moves, weve noticed, if theres a long weekend. And you cant sit down

and say were going to abolish long weekends or a floating exchange rate

or a world oil price or lack of competition. But what I can say is this.

By passing on the cost savings, by reducing the petrol excise, by making

sure that the grants scheme goes to the consumers, consumers are going

to be protected.


Right so it wont rise as a result of the GST?


As a result of the whole tax changes that have been put in place, consumers

are going to be protected.


Okay. Theres a number of other little spot fires around as well, of

course, about this tax. One of them is I noticed this weekend mobile phones

are going to increase, the charges on mobile phones are going to increase

by 10%. Is that an unnecessary burden for business at this point?


Well of course for business, if youre actually paying GST you can claim

it all back. So for a business, all GST is reclaimable. Business doesnt

pay GST, so it couldnt be a burden, whatever it is. I havent seen the

clipping which you refer to. Whatever it is, the business would get it

back in its entirety. Its only wholesale sales taxes that you cant get

back. But for GST, any business that pays GST on a business input, it

claims the whole of it back.


Well a lot of people use mobile phones, too. Is it an unnecessary burden

on ordinary phone users?


Well youre going to have some prices that go up, some prices will go

down, some will be the same. But for the consumer, the consumer has more

money to spend. The consumer is getting more money to spend as a result

of income tax cuts and increases in family benefits. So consumers, after

they have more money to spend, will be able to not only pay for such price

rises but will be in a net better off position.


Im sure it wont come as any surprise that the unions have already called

for wage increases as a result to offset the costs that they say people

are going, ordinary workers are going to incur under the GST. Do you expect

that therell be more of this sort of wages pressure in the next few months?


Well there shouldnt be because if youve got more money to spend on

the same wage, theres no grounds to therefore seek a wage increase. Now

lets go back to 1985. Youll recall that the Labor Party wanted

in 1985 to introduce a broad based consumption tax of 12%. 12 all right?

And the ACTU at the time led by ACTU President, Simon Crean, said that

if there were income tax cuts they wouldnt be seeking wage rises. That

was their position when Labor had the plan for a broad based consumption

tax. We now have a GST not at 12 but at 10 larger income tax cuts.

What basis would there be for wage claims? Now I know therell be some

unions thatll want to do their best to try and help the Labor Party by

creating dislocation around the place, but there is no economic case for

any wage increase. And if you want proof of that, go back to 1985. Here

we are in the year 2000, 15 years after that 15 years after the Labor

Party tried to introduce a broad based consumption tax. Weve finally

got around to it. Were finally catching up with the rest of the world

and there are some people in Australia led by the Labor Party wholl try

and pretend that you can ignore the economic developments and the need

for taxation reform but you cant. You wont keep wholesale sales tax

in Australia. Today Australia and Swaziland are the two countries of the

world that have a wholesale sales tax. After 1 July itll just be Swaziland.

Now here is the complete hypocrisy of Labor. If wholesale sales tax is

so preferable to a goods and services tax, why wont they abolish it and

bring back the wholesale sales tax, rejoin Swaziland, if theyre ever

elected? Because they know, like we know, that Australia needs a modern

taxation system. They just havent got the courage to do it. Thats the



Are you convinced that the people are with you on this? The Prime Minister

says the electorates made up its mind, its made its choice and hes

prepared to lose an election on this issue alone. Are you?


Im never prepared to lose any elections and Im sure the Prime Minister

doesnt have in mind losing any elections. Look, we are going to be part

of the modern world with a new taxation system. This idea that we would

go it alone, that Australia and Swaziland are the only two countries in

the world that have it right. I made the point earlier. Not even the Labor

Party believes that. The Labor Partys deepest, most choice wish is this:

that we should introduce a new taxation system so they can take the benefit

of it. Now Labors had an incredibly easy run, havent they? Here they

are, theyve been campaigning against something they want to keep, they

are desperate to keep, they are desperate to take advantage from. Because

they know, like we know, that Australias got to be part of the modern

world. And I think once we do modernise our taxation arrangements, we

see benefits flowing from it, people will be glad that the Government

was prepare to lead.


Even if it costs you politically? If you do lose on this issue?


Look, were in July of 2000 with the largest income tax cuts in Australias

history about to come into effect, increases in family benefits, reductions

in company tax and capital gains tax, abolition of wholesale sales tax,

and its replacement with a goods and services tax. Australia meets the

modern world. We know it had to be done. Labor, as long ago as 1985, were

talking about doing this. Finally the times come and I think Australia

will be a better country for tax reform.


And if costs you government, will you lead an Opposition?


Well as I say, its July of 2000. I dont concede for a moment that we

should be calling the next election. And I make this point. If this is

an issue for the next election, Kim Beazley should pledge today that

if hes elected Prime Minister, he will repeal the goods and services

tax. That would really make this an issue at the next election. Kim Beazley

pledges the repeal of goods and services tax and a vote for Labor is a

vote for the wholesale sales tax. To re-modernise Australia back to Swaziland

standards …


And would you lead an Opposition ?


and Id be happy to fight him on that issue. Absolutely happy to fight

him on this issue. But I dont want this complete hypocrisy from the Labor

Party to say were so opposed to goods and services tax we want to get

elected and take advantage of it. That would be the most patently false

position thats been put in relation to taxation policy. If Beazley really

believes what hes been saying for the last couple of years, he will pledge

now to repeal goods and services tax and introduce wholesale sales tax.

If he cant do that, it shows that his campaign is essentially, as we

all know, a fraud.


Treasurer, thanks very much.