Ministerial Council Meeting; petrol excise; interest rates; Senator Heffernan; Doorstop

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Ministerial Council Meeting; petrol excise; interest rates; Senator Heffernan; Doorstop


Press Conference
Friday, 22 March 2002


SUBJECTS: Ministerial Council Meeting; petrol excise; interest rates; Senator

Heffernan; Doorstop


Todays Ministerial Council on Financial Relations between the Commonwealth

and the States agreed that the distribution of GST revenue and guaranteed payments

to the States in 2002-03 will be $31,025 million, approximately $31 billion.

That is, the GST proceeds in their entirety will be paid to each of the State

Governments, and the GST proceeds in their entirety now fund all of the education

systems and all of the law and order systems in all of the States. No Labor

State Government requested a rollback of the GST, in fact, there was quite

a spirited discussion, an argument between the Labor States as to who should

get more, because what the Commonwealth does is, it puts together a pool of

$31 billion and this is allocated between the States according to needs and

according to capacity of the States to fund a minimum level of services which

is expected around Australia. The States have complained that they will not

be receiving increased payments for petrol excise indexation. And they have

complained that this will cost them $160 million. As you will see from the

release, the net amount that it would cost is $130 million as is shown in Table

6a of the press statement that you have, and of course that is $130 million

out of total payments of $31,025 million just to put that in perspective. The

reason why States will not be paid petrol excise indexation is that petrol

excise indexation is not being charged to consumers, it is not being collected

any more on behalf of the States, and as a consequence cannot be paid to them.

I should make this point that the State component of petrol excise is about

8.1 per cent, the Federal component is about, was about 30, 30 cents, 8.1 cents

I should say, the state component was about 8.1 cents, the Federal component

was the balance. As you know, neither of those are being indexed and as a consequence,

neither Government will receive increases in those excise levels. Excise was

abolished. An agreement was signed between the States and the Australian Taxation

Office for the administration costs of GST in 2002-03 and following. An agreement

was also entered into for a national excise scheme for low alcohol beer. This

scheme essentially extends the State minimum to all States of the Commonwealth

and it will be picked up by the States from their current subsidies, through

the course of 2002-03 and eventually when the guaranteed minimum agreement

comes to an end by the Commonwealth. This should have the effect of making

low alcohol beer cheaper in some States. If I can take you to page 3 of the

press release, you will see that low alcohol beer will become cheaper, it is

expected in Queensland and in Western Australia and the Northern Territory,

with a slight impact on the packaged price in Tasmania of 22 cents on a carton

of 24 beers. It was also agreed that National Competition Policy payments would

continue, that specific purpose payments through and to the States would continue,

the Loan Council Allocations were approved. In addition to that, we had a useful

discussion I believe, in relation to Public Liability and insurance issues

and I might also just highlight one other thing that was discussed at the meeting.

The Commonwealth has a policy of seeking to extend pensioner concessions to

self-funded retirees. And the pensioner concessions on things like gas, water,

electricity at the moment are only available to pensioners. The Commonwealth

has a policy to seek to extend those concessions to the self-funded retiree.

The Commonwealth has made an offer to the States to pick up 60 per cent of

the cost of extending those concessions to self-funded retirees. Now, I saw

some of the State Treasurers suggesting that this was somehow a claim to get

money back from them. It is an offer of money to the States to pick up 60 per

cent of the cost of the concession for self-funded retirees with a request

that the States pick up the remainder, the remaining 40 per cent. Now this

is an offer of Commonwealth money that is being made to the State Treasurers.

We would ask and recommend, that they do join the Commonwealth in picking up

the concessions which they already give to pensioners, and we are prepared

to go 60 per cent of the way in relation to that. And I would recommend that

to each of the State Governments to consider.

Any questions?


Mr Costello, Access Economics has (inaudible) related figures (inaudible)?


No, well what they would have been working off and what you would have seen

is a statement of the month by month amounts that come in. These are notoriously

lumpy, it is very difficult to say at any particular period which, what the

final outcome is going to be on the basis of that particular months collections.

Youve got to look at the collections over the course of the year. We believe,

based on previous experience that collections will be very strong in the latter

part of this financial year. Our Budget strategy remains on track, subject

of course to the two very large items that the Commonwealth has had to expend

additional money on. Those items are the cost of the policy in relation to

unauthorised boat arrivals and the cost of the commitment in Afghanistan. And

we are working in an Expenditure Review Committee on trying to assess those

costs for the next financial year 2002-03 as we speak, but I can assure you

that the Government intends to maintain a very strong fiscal position.


Treasurer, does the Inter-Governmental Agreement specify that the money from

petrol excise (inaudible) petrol excise will be passed on or would, were the

States and Territories told that they would be given money out of the pool.


The Inter-Governmental Agreement says that the Commonwealth will make good

Revenue Replacement Payments. The Revenue Replacement Payments in respect of

petrol were 8.1 cents a litre, indexed under the indexation arrangements which

have ended. The Commonwealth will continue to pay the 8.1cents per litre, indexed

up until the moment the indexation ended. The revenue replacements will be

paid in accordance with those agreements in full. The States argument is,

notwithstanding that indexation has ended and not withstanding that the 8.1

cents will not be increased in accordance with indexation in the future, they

should be paid it. It is not being collected they cant be paid it. The Commonwealth

is not collecting it, it is not taking it itself, it cannot pay it to the States.

The revenue replacement payments have been made in full. Now, you know, I know

that the States have made a great song and dance about this today. There is

$130 million in net terms out of payments of $31,025 million. In other words

I think the States were so overwhelmingly successful that they couldnt find

anything else to complain about and in addition to that the Commonwealth even

picked up the remaining costs on low alcohol beer subsidies. So, you know,

I know there is a lot of theatre that goes on at these meetings but with all

due respect, with all due respect there was not much to argue about today.


Treasurer, (inaudible) produced an excerpt, (inaudible) Brumby produced an

excerpt showing that payments to the States under the IGA was dependent on

consumption of petrol and CPI rather than having it tied to excise. What do

you say to that?


The payments to the States are, in the Inter-Governmental Agreement, called

Revenue Replacement Payments. The Revenue Replacement Payments is the 8.1 cents

that the Commonwealth collects on their behalf. We are still collecting that

on their behalf and we are still paying it but we are not going to collect

more. We are not going to collect 8.1 cents indexed to future CPI movements,

that has been abolished. The argument of the States today, by the way, is that

the Commonwealth should put up petrol excise to pay them more money. We will

not be putting up petrol excise, we will not allow the States to put up petrol

excise. We have abolished indexation. No amount from indexation is going to

the Commonwealth and no amount can be paid to the States. Now, I pay due respect

to them, they have, you know, made a good song and a dance over this particular

claim, but indexation was abolished, it is not being collected. The only way

that you could make good on the States demand for that money to be indexed

in the future and for them to be paid more would be by bringing back indexation

and we are not going to do it.


Treasurer, why did you feel the need to bomb them late yesterday in a letter

(inaudible) theyd be missing out on this money when you say it is so obvious

that indexation was (inaudible)?


Because I wanted to put it entirely clearly on the record and I wanted to put

the amounts on the record. Now, the gross amount was $160 million in 2002-03,

but the net amount is $130 million. And the reason why the net amount is $130

million is that because there is no longer any indexation you dont have to

index your subsidy for off-road diesel. So because the price goes up by a lesser

amount the subsidy that they had to be allowed to meet the price goes up by

a lesser amount.

The net amount is $130 million in payments which are of, which are going to

be made to the States of $31,025 million.


Does this decision reduce the impact on Commonwealth revenue of that decision

that was taken to abolish indexation in the last Budget papers, the impact

on revenue of that decision was (inaudible)will this reduce that?


The impact of that decision was principally a cut in the actual rate of 1.5

cents which the Commonwealth bore in its entirety. What this decision means

is that you will not be having any growth out of indexation and the Commonwealth

will not be taking any growth for itself or paying any growth to the States.

But the impact of that decision was principally the 1.5 cents.


Mr Costello, just on a different topic, do you share the Prime Ministers confidence

this morning that theres no leadership challenge in the wings.


Well I havent heard about one, no.


Treasurer does the US Federal Reserve (inaudible) monetary policies (inaudible).

What sort of impact do you think that could have on the Australian monetary



I dont think that impacts on Australian monetary policy. I think Australian

monetary policy will be decided in accordance with domestic conditions. We

will have an eye obviously to the inflationary risk and obviously to Australias

economic prospects. The US is only relevant in so far as the US economy affects

the Australian economy, but we do not tie our monetary policy with a view to

movements in the US.


Treasurer, if you were Prime Minister would you have handled the Heffernan

case any differently?


Look, Senator Heffernan did not tell the Prime Minister that he was going to

do it. So the Prime Minister could not have done anything more than he did.

What he did is he sacked Senator Heffernan afterwards. There seems to be this

implication that the Prime Minister somehow could have said to Senator Heffernan

dont go and do it


But you might not


he did not know he was going to do it.


(inaudible) as much faith in him as he did in the beginning.


Well I dont think Senator Heffernan made the speech because the Prime Minister

showed faith in him. Senator Heffernan made the speech because he believed

that it was true at the time. He was wrong, he should not have done it.


So you think he should stay in the New South Wales State Executives Office?


That is a matter for the Prime Minister.


But isnt the question do you support, given in the aftermath of the speech

being made, the hoard of revelation that the documents were false, and would

you have lent the same sort of support that the Prime Minister did in that



I dont think the Prime Minister did lend support, I think the Prime Minister

made it clear that this was unauthorised and immediately stood Senator Heffernan

aside. Now the Prime Minister became aware, as far as I know, that the document

was false about the same time as everybody else did after it was published

in the Sunday newspaper. So I do not think it is right to say that the Prime

Minister say somehow in that period was involved. I think the Prime Minister

was like everybody else, these allegations had been made, he thought that the

right thing to do was to have Commissioner Ryan to have a look at it. By the

time Commissioner Ryan did have a look at it, which as I understand was on

the Monday, it had been concluded by all, including Senator Heffernan that

it was false and at that point Senator Heffernan was dismissed.


Treasurer, Southern Pacific Petroleum have asked the Government for an excise

rebate at production for all their products. They say that this is urgent (inaudible)do

you support that application?


Well, I am not going to comment on it because if there is an application before

the Government it will be made by the Government in due course.


Mr Costello, do you concede that Liberal Party fundraising will be damaged

as a result of Senator Heffernans (inaudible)?


Look, can I say that if people make donations to the Liberal Party we always

thank them. We do not change our policy, we always thank them, and if business

feels that having a Coalition Government in office is good for business I welcome

that, I think its good. I think having a Coalition Government in office has

been, has been good for Australia for interest rates. And I think those people

in business who do support us support us because of our economic management

and I think that is what they take into account.


But wont people stop giving because, wont people stop giving


Two last questions, this one and that one, yes, sorry.


dont like what Bill Heffernan did. I mean do you concede that that could

be a problem?


Well, I would say to the members of the business community who are wondering

whether or not to support us that look at our economic record, and I think

that is the most important thing here. Yes.


Just in relation to the theatre today, do you have any regrets about your performance

this morning in relation to the New South Wales Treasurer?


Well, I was trying to answer questions and he started interjecting as you saw

and I tried to resolve it in a good natured way. But, as you know round here,

it is very unusual for somebody to walk in and start interjecting when you

are answering reporters questions. I dont think it has ever happened to me

before. He obviously saw a theatrical opportunity and he took it. I tried to

resolve it in a good natured way because obviously he was trying to provoke

something, I didnt want him to be successful so I tried to resolve it in a

good natured way. I think he appreciated that, but I would say to him that

it is very unusual to walk in on somebody elses press conference in Canberra.

I dont think I would ever do it to him, I dont think I ever have done it

to him and I recommend that he not do it to other people.

Thank you.