Transcript No. 2000/90

Good morning Peter.

Good morning John.

Looking spic and span for a Cabinet meeting.

Yes, Cabinet meeting in Sydney today starting at 10 o’clock. So if I’m brief

I’ve got to race across there to get there for the start.

Well given the traffic in Sydney it’ll only take you 5 or 6 minutes. Petrol prices

going to be on the agenda?

No, the policy in relation to petrol prices I think is pretty well known. Obviously

there’s a lot of concern about rising world oil prices and there’s not much the

Australian Government can do about that, other than make representations to the producing

countries involved. The price is not just rising in Australia of course, they’re

rising around the world.

Yeah but we don’t care about round the world for the minute, we care about us and

they’re rising dramatically. You could do something about it couldn’t you.

Couldn’t you peg the indexing? Couldn’t you stop that?

Oh the index which took place on 1 August was 0.6 of a cent. I don’t think people

are complaining about 0.6 of a cent. What they’re complaining about is that

they’ve seen prices go from the mid 80s to the high 90s. And 0.6 of a cent indexation

obviously hasn’t caused that. What’s caused that is the rise in world oil

prices, been a deliberate policy of the OPEC nations to increase world oil prices and

until such time as those countries lift their production, the oil price is going to stay

high. We need it to come down.

But you, but you continue to make money out of it don’t you. Because the GST is

added, whatever it is, if it goes up you still get your GST.

The Commonwealth takes an excise, which is fixed. It doesn’t move as the price

goes up. As the price goes up, the GST which goes to the States does go up, that is true.

But overall, as a consequence of the tax changes the amount of tax taken out on petrol and

diesel has actually fallen.

Yeah, but well, it fell and then went up again didn’t it? I mean it’s now

forty six and a half cents a litre.

The, there are two components of the taxation on petrol. There’s the Commonwealth

component which is a straight excise. It doesn’t move. And that’s at thirty

eight cents a litre. There’s then the State component which is the GST, which moves

up as the price moves up. But when you take into account the reduction, because the

Commonwealth reduced the excise, the amount per litre, plus the input tax credits, plus

the cuts in diesel, the overall taxation fell.

Yeah. You cut it to, it used to be forty four cents a litre, you brought it down to

about thirty eight cents…

Thirty eight that’s right.

…with the GST collecting around 8.6 per cent. So suddenly the tax rate has risen

to forty six and a half cents a litre.

Yeah, but you’ve got to take into account that for business, they get all of that

GST back. That is anyone in business doesn’t actually pay the GST. So what they

actually got was they got a cut in taxation and in relation to diesel, diesel was at forty

four cents and that was cut for transport to twenty four.

So that really works out to be what, a couple of, 2.8 cents a litre windfall that you

didn’t think you were going to get anyway, but you are now getting.

The Commonwealth doesn’t get a windfall. The GST goes to the States. The

Commonwealth actually cut the excise and it’s fixed, apart from indexation which I

said was 0.6 of a cent.

But the consumer is the one who is getting hurt and the consumer is the one you should

be taking care of.

I agree with that. The consumer is being hurt by the fact that petrol prices are

rising. And I can tell you I don’t like it.

What did you pay a litre last time you filled up?

Oh, I think I got it for 95 cents.

You are doing a lot better, 98.9 this, the last time we…

Oh it’s pretty obvious, I’ll make another point about this, that the prices

go up, they seem to go up on the Thursday and the Friday or the Saturday and then they

come down the Sunday, the Monday and the Tuesday, so if I can I always buy on a Tuesday.

Yeah well it’s, if that’s not profiteering what is?

Well, I’m very interested. I watch this very carefully. I watch petrol pricing

very carefully.

Well they’re profiteering aren’t they?

And there seems to be a cycle in the main capital cities at least, where it goes up

coming into the weekend and it comes down during the week. Now obviously we’ve sought

an explanation as to that. The explanation that the oil companies give is that they

actually discount, that is, that the real price is the Friday price and the Saturday price

– this is their explanation – and then they start discounting during the rest of the

week on the Monday and the Tuesday and the Wednesday.

Do you believe them?

Well we’ve asked the Australian Competition Consumer Commission to look at that.

And I…

He’s been doing a lot of good work, Alan Fels.

He’s doing a good job.

And I can’t understand why he doesn’t get his teeth into that. Because it

would appear to be profiteering. But does anybody really know who gets the money? I mean

where does it go.

Oh at the moment it’s going to the world oil producers. They were producing at the

beginning of 18 months ago, they were producing oil for ten dollars a barrel US and now

they’re producing it for over thirty dollars a barrel. The price has tripled in the

last 18 months. Now this is no accident. They decided that they would restrict production

so they could lift prices. It’s been a very successful tactic.

Why don’t you freeze those excise rates?

Well the excise rate is not really the driving component of the price.

Well it is. Because if it goes up the GST component rises with it.

The excise component as I said on 1 August was 0.6 of a cent.

Yeah. But it’s still, it still causes it to go up doesn’t it.

Ah, now I don’t think people are complaining that the price is let’s say 98.7

rather than 98.1. What they’re complaining is that it is 98 rather than 88. It’s

the world oil price that has moved that price up into the high 90s and in some cases above

a dollar.

Well in the past excise rates were indexed for inflation because they were at a set

level. But now the GST revenue increases with inflation because that’s levied at the

pump price so isn’t the GST delivering a form of indexing anyway?

The GST is a percentage. That’s quite right. It’s 10 per cent as you know.

And as the price goes up that goes up, of course when the price comes down, that will come

down. The Commonwealth component doesn’t move. It’s 38 cents. It doesn’t

move according to the price. It’s indexed twice a year, as it has been from, since

1983, 17 years ago. And with a low inflationary environment it moved 0.6 of a cent. Now I

hear some of the motoring organisations, by the way, say oh well, you shouldn’t index

the petrol excise at all. Which they can say because they only have to look at their own

narrow area of interest. But I make this point. We index pensions you know.

Yeah I’m aware of that.

That is, that pensions go up as prices go up. And it’s a good thing we do. And

that’s something that’s necessary for pensioners. Now if you’re going to

lift pensions in accordance with prices you’re going to have to get the revenue to

pay it. Which is why 17 years ago the petrol excise was indexed.

But the excise still adds 38 cents a litre to the cost of petrol.

Quite right. And I’d love to hear some of these motoring organisations, and I hear

them out saying, oh, we’re against indexation. Well, let them come out and say

they’re against indexing pensions too.

Well, I can’t see that there’s a comparison, that’s an odious

comparison.

Well, no no it’s a very good comparison, because if you are going to pay more

money on pensions as prices rise where are you going to get the revenues to pay those

pension increases if you don’t index your excises.

Well are you telling me that you don’t get the money anyway, it all goes to the

States? John Brumby argues that, says it doesn’t got to the States.

GST goes to the States, the excise goes to the Commonwealth.

Are you telling me that you pay pensions out of petrol excise?

Partly.

And cigarette excise?

Partly.

And alcohol excise?

Partly.

Can’t you take more out of alcohol and cigarettes and less out of petrol?

Well, I think last time I was on your program, you were telling me I should take less

out of alcohol, John.

Yeah, well what (inaudible).

…One of the reasons why I’ve been so tight on the alcohol one as well. I

mean, it’s all very well for people who are only looking at a tax point of view, like

the motoring organisations, of course everyone’s against paying taxes. But if you are

not going to collect taxes then you are not going to have any money to spend, and

you’ve got to get your money from somewhere if you are going to pay increases in

pensions, you’ve got to get your money from somewhere.

Yeah, well you’ve very cleverly, and you are a very clever man, touched on

pensions because it’s a sensitive issue, nobody is going to say reduce pensions.

Well, of course they’re not and that’s why when I hear some of the motoring

organisations saying you should never index a tax, I’d like them to say and as a

consequence you should never index a payment, because that’s the corollary, and they

don’t say that because they know people believe that you should index payments, of

course you should.

Well you should index some payments.

Yeah, well pensions is one you should.

Well, pensions is certainly one. That’s why I say it’s very clever to touch

on pensions because nobody is going to argue about that. You made a mistake with the booze

I’ve got to tell you. They’re never going to forgive you for that, the beer

costs more.

Oh no. Look, let’s go back to the beer. I don’t want to go over the old

ground but, what, the middy went up what 20 cents a middy, I think.

That’s a lot.

Well, the beer companies are making record profits and…

So are the petrol companies.

Yeah. And people have got more money to spend…

Well, well…

And the average family has got $50 a week more, they can buy a few extra middies at 20

cents, an increase.

OK. Well if somebody can ring me and prove to me that they’ve got $50 a week more

I will give them a large prize.

Well……

Because they haven’t got $50 a week more.

…A single income person with two kids on about $30,000, somewhere in that range.

Yeah, so it does take some qualification?

Oh not everybody, no. But…..

But I mean the grandiose manner in which you make these statements, which I love, would

indicate to me that everybody listening to us is $50 a week better off.

Well, if I gave that impression that everybody is $50 a week better off, let me clarify

it. A single income family with kids down about middle income or lower, because we’ve

given additional benefits to kids as well.

Can I quickly ask you about the Very Fast Train project. How far are we away from that?

It’s something that’s being worked up by the private sector, and when they

have a proposal I guess it will be put to Government. The original idea, of course, was

that it be constructed by the private sector and that it wouldn’t take any taxpayers

money. And if it didn’t take any taxpayers money than it’s not really a decision

for the Government, we’d love it to go ahead. If it gets to the stage where they say

they can’t make it profitable, they have to do it with taxpayers money, they will

come to us presumably and ask us for money.

Will you give it them?

Well, it depends how much and it depends how profitable doesn’t it?

Taxpayers’ funds aren’t unlimited, we are not going to put taxpayers funds into

bad projects. You’ve got to get the money from somewhere John, and if the Government

puts money on bad projects, that’s less that it has for good projects.

You would have to agree, however, that many people do think that Governments put money

into bad projects?

Oh, I’m sure they do. Yeah, I’m sure they do.

When you read this morning in one of the Gold Coast newspapers that ATSIC, to whom we

give, I think, $1.2 billion a year, is it not correct?

I think, yeah, of that order from the Commonwealth level.

When you hear that they’re funding meter maids on the Gold Coast, makes you worry

doesn’t it? I mean aboriginal health is in a mess, aboriginal education, aboriginal

sewage, aboriginal water supplies, and there they are putting money into the meter maids

on the Gold Coast. Are you going have a look at that?

If that’s what they’re doing I would think it’s a bad use of money. Yes,

I would, of course I would. I haven’t seen the story myself, but if they are doing

that you’d wonder how that’s advancing aboriginal welfare wouldn’t you?

You absolutely would, given the tragedies that exist in central Australia with young

people, 80 per cent more likely to get lung infections than anybody else on the face of

planet…

But why are they doing it? I haven’t seen the story.

Don’t ask me.

They’re giving it to meter maids?

Yeah, they’re dressing them up in fancy dress and spending money on them.

It beats me. I will look at it. I hadn’t heard of it.

First time I’ve seen you beaten.

Well, I haven’t seen the story. It beats me as to, if that’s happening, oh I

just can’t believe it’s happening frankly. But if it is happening, it beats me.

We give money to ATSIC and ATSIC actually spends it but it’s got to be done for

aboriginal welfare and I can’t imagine how that’s for aboriginal welfare.

I can’t quite imagine it either. But we’ll give you the story on the way out.

And I know you’ve got to go because you’ve got to go onto things even more

important than the John Laws morning show.

Are there such things?

I think the Prime Minister might think his Cabinet meeting is a little more important.

Well, no less entertaining either John.

Well, I don’t know about that because I’ve never been to one and I doubt

I’ll ever go. But I hope you have a good time at it.

Thank you very much John.

And thank you very much for your time. Treasurer, Peter Costello.