Transcript No. 2001/071

TRANSCRIPT

of

THE HON PETER COSTELLO MP

Treasurer

Radio 6PR – Interview with Paul Murray

Wednesday, 23 May 2001

10.35am

SUBJECTS: Budget

MURRAY:

The Treasurer is on the line now, good morning Peter Costello.

TREASURER:

Hello Paul, how are you?

MURRAY:

Very well thank you. Congratulations.

TREASURER:

Thank you.

MURRAY:

I suppose those congratulations are mainly aimed at the fact that you finally seem to

have accepted that Australia’s pensioners have been put on the ropes by your GST.

TREASURER:

Well, this is a benefit for Australia’s aged pensioners whether they are full or

part pensioner, they should be getting a bonus next month of $300. We’ve got the

legislation in the Parliament and provided the Labor Party doesn’t try and delay or

obstruct or try and play some silly game with it, it can be paid next month. I think it

will be welcomed by all Australian aged pensioners.

MURRAY:

Am I being cynical to take the point of view that a $300 cash payment to the pensioners

and considerable tax cuts that go with them seem to equate to an acceptance of a major

stuff up in the way you handled them when the GST was introduced?

TREASURER:

Oh no, because this is in addition to the increases in the pension that were introduced

on 1 July. On 1 July we increased the pension by 4 per cent and we’ve kept it 2 per

cent above the cost of living. And the cost of living takes into account tax changes. So

we’ve already increased it over and above the effect of the cost of living in tax

changes. This is in addition, this is a dividend if you like. The Budget was stronger

last, in this current financial year than was expected. The economy can profit from it and

pensioners deserve it. It’s like giving a dividend from better economic policy back

to the pensioners of Australia.

MURRAY:

Peter, many of those pensioners are already saying this $300 is only one-third of the

$1,000 that they were expecting to get anyway?

TREASURER:

Well, some pensioners got $1,000, some got less. It depended on the income you had from

savings. The Government paid dollar for dollar the income people had from savings. If they

had $1,000 the Government paid dollar for dollar $1,000. If they had $500 it was $500.

Some pensioners probably didn’t have any, that was a bonus to compensate people for

savings, that’s what that was related to. But this is not to do with savings or

income, this is not means tested, if you happen to be an aged pensioner or part pensioner

you get it. Even if you are a part pensioner and its $300 lump sum, not taken into account

on the income test.

MURRAY:

Peter I just wonder how much a $300 lump sum is going to be helpful to pensioners. I

mean, I think history shows that lump sum payments like this get spent very quickly. It

certainly doesn’t help them in the long term.

TREASURER:

Well, they might be able to buy something that they wouldn’t have otherwise

bought. It’s $300, I’m not saying that it’s the biggest sum of money that

you’ve ever seen in the world, but its $300, I can’t remember it ever being done

by the Government before. I can’t remember a bonus ever being paid to pensioners

before in relation to their pension. I think most pensioners would say to you, well, you

know regardless of whether or not you would like more, the fact that they have been paid

$300, I think they would see as welcome. Now there are 2.2 million people in Australia who

will benefit from this, so at $300 its about $600 million it will cost.

MURRAY:

Well there’s no doubt you’re pumping a fair amount of money into the economy

through the pensioners, it will certainly have an economic effect.

TREASURER:

Well, that’s right. That’s why I say the reason we’re doing it is

three-fold. One is, the economy can do with stimulation, I think if you pump $600 million

out to Australia’s pensioners and if they do spend it, that will be good for the

economy. Secondly, the Budget can afford it, we can afford $600 million because we came in

better than was expected in the current financial year. So we’re coming in better

than was expected, we can afford to pay a dividend and this is a group of people who

deserve it. So the economy can benefit, the Budget can afford it, they deserve it,

let’s make the payment next month. Now it’s got to go through the Parliament and

provided there’s no funny business from the Labor Party they will get it next month.

MURRAY:

Peter, your Budget has got mixed reviews today and as I said in my intro, I don’t

know if you heard it, there’s a lot to like in this Budget. I think we should concede

that straight away, but you have been criticised by a lot of the economic commentators for

having a firmer eye on politics in this Budget than on the economy. I just want to put to

you the view of Ross Gittins, the economics Editor of the Sydney Morning Herald and get

your view. He says ‘Peter Costello is obviously too preoccupied with politics to

worry about the economy and too worried about the past to spare any thought for the

future. Indeed this is the I’m sorry, I’ll try that again Budget’.

TREASURER:

Well, obviously I don’t agree with Ross, don’t agree with him in the

slightest. When you’re talking about the future and we’re talking in economic

terms, at the end of this year we will have paid off $60 billion of the Labor Party’s

$80 billion debt legacy. That’s freed future generations from $60 billion dollars of

Labor’s debt, that gives us an annual interest saving of $4 billion. So we’re

saving that, its just like when you pay down your mortgage, you just get the saving year

after year after year. And with that we can cut taxes and invest and that has been the

best investment for the future of Australia and young Australians that you could possibly

have made. I think Ross would concede, if you compare the situation to 5 years ago we are

now $60 billion better invested for the future of Australia

MURRAY:

Peter, the treasury in the Budget papers, acknowledges unprecedented uncertainty about

the world’s economic outlook, but your Budget is geared to a very optimistic outcome

from that. Now, you have only got a $1.5 billion surplus to play with and you are clearly

going to have a go at that in the lead-up to the election, in terms of handing out some

goodies there. Is it prudent to you to be so optimistic in your calculations?

TREASURER:

Well, look, there is a lot of uncertainty about the United States economy, that is

right. The United States economy has got into a bit of trouble recently, and it is the old

adage, isn’t it, you know, when the US sneezes the world catches cold. The United

States economy turned down, as most economies in the world did, late last year, and you

have seen very aggressive interest rate cuts in the United States to try and pick that

economy up. I think the aggressive interest rate cuts, and I think a bit more stability

which is returned to the US economy in recent months, means that over time, not

immediately, over time the United States will strengthen again and I am forecasting that

Australia too will strengthen through the course of 2001 – 2002, that is from now

basically till June of next year and most of the private sector forecasters also take the

same view. But, if there were a major additional crash in America that would affect us, no

doubt about it. I don’t think, you know, the Americans have been through a huge crash

on their NASDAQ, and a big slowing of their economy, I think from here on in the US I

expect it to stabilise and, if something, pick up.

MURRAY:

Okay, the Prime Minister has been denying all year that the New Tax system really would

deliver you a revenue bonanza, but how can you deny that now? You have delivered a Budget

full of tax cuts, $3.5 billion worth of election sweeteners, and you still managed to keep

the financial market screen jockeys in their shorts, with a $1.5 billion surplus, I mean

you must have just had money sloshing into the Treasury?

TREASURER:

Yes, it’s not the GST, because the GST goes to the States, as you know, that is

all of the GST is divided between the States and Mr Gallop over there is happily receiving

his GST cheque on a monthly basis. So, it is not that.

MURRAY:

That’s why I didn’t say the GST, I said the New Tax System…

TREASURER:

Yes, what we found is as we moved to the New Tax System, and this is what the GST has

done, is it has pulled a lot of people in from the black economy. We always said it would.

There are a lot of people that never paid their fair share of tax in the past and because

we have moved to this system we’ve now been able to find a lot of people that were

cheating on other taxpayers in the past. We have pulled them into the tax system and a

consequence of that, as you said, is honest taxpayers can get tax cuts and pensioners can

get more relief. So, to some degree, pensioners are being paid $300 bonus because people

that were previously cheating on the tax system have come into the system.

MURRAY:

One of the things, I think, that has been overlooked in analysing the Budget this

morning by many people is the way you have looked after the top end of town. You have cut

company tax rates from 34 to 30 per cent. The FID goes, the Financial Institutions Duty

goes, that is $1.2 billion off individuals and companies. Stamp duty on most share

transactions is abolished, excess imputation credits will save shareholders $500 million,

and you are giving business an enormous break on the purchase of new cars.

TREASURER:

Yes.

MURRAY:

Now, this is an enormous lessening of the burden on business. Where is the assurance

there that the average Joe benefits from this, in particular by more jobs, because what we

have seen as you have taken your foot off the neck of business over the term of the Howard

Government, is that they have just turned it into excess profits.

TREASURER:

Well, if you want more jobs you have got to have good businesses, that is the bottom

line. You won’t get jobs created if your businesses aren’t strong and so one of

the ways of creating jobs is to help business and you went through some of the ways we

have done it. But, that will also help the ordinary Joe too, because the ordinary Joe does

pay Financial Institutions Duty and the ordinary Joe, five and a half million Australians

own shares, you know, so when you take stamp duties off shares there is five and a half

million Australians who benefit. You know, people who might have a Telstra share, or

Commonwealth Bank share, or something like that. But helping business is a big part of

this Budget and I guess the biggest measure that helps business is the company tax cut,

that is a real help for business. But, also on cars if a business buys a car they

don’t pay any tax now and that is a real incentive now for them to go out and buy

motor vehicles, trucks, cars, that will be really warmly received by the motor car

manufacturers, and in turn if the motor car manufacturers are put on a better footing that

is good for jobs as well.

MURRAY:

Okay, finally Peter, I know you are pushed for time but we have five calls off air

about this and they are people interested in disability pensions. They say you looked

after the aged pensioners in this Budget, there was nothing for disability pensioners?

TREASURER:

Well, disability pensions were increase back on 1 July, we put those up by 4 per cent,

we keep them 2 per cent above the cost of living rises but in this Budget we have also

introduced additional benefits and those additional benefits, quite true, have gone to

aged pensioners and self-funded retirees who are above aged pension age, that is above 65

for men and 61 and a half for women.

MURRAY:

Okay, thanks for your time Treasurer.

TREASURER:

Thank you very much

MURRAY:

Thanks a lot.