Transcript No. 99/24

Hon Peter Costello MP

Doorstop Interview

Melbourne Convention Centre

Thursday 8 April, 1999

9.30 am

SUBJECT: Senate Tax Inquiry, Tax Reform, Premiers Conference, Economic growth

TREASURER:

Well the Australian Democrats asked to set up a Senate Inquiry with the object of

getting some evidence as to how the Government’s tax package would be improved if

food were excluded from GST. And the experts which they commissioned, today have delivered

a report which damns the Democrats case. The report delivered today by Neil Warren and

Anne Harding completely explodes the Democrat position and recommends that food stay in

the GST. These were not the experts commissioned by the Government, they were the experts

commissioned by the Democrats in an attempt to try and prove that food should come out of

the GST. And they reported that it should stay in. So the Democrats own commissioned

economic advisers have recommended against the Democrat position and I think in fairness

the Democrats should now accept the verdict and they should now announce that they will

accept the report of Warren and Harding, and they will no longer attempt to take food out

of the GST. The second thing that this report does is, it confirms the Government’s

figures. Option one, confirmed. Not by our experts, but by the commissioned experts of

Labor and the Democrats, came and they said, that the costings of the Treasury were the

right costings and that there are no losers. This report cannot on any reasonable

assumption identify a loser from tax reform. They were given all sorts of assumptions and

asked to model them and they reported that you could only find a loser if you made

unreasonable assumptions.

On any reasonable assumption as found by these reporters, these modellists, not the

Government’s, those commissioned by the Labor Party and the Democrats, on any

reasonable assumption tax reform makes pensioners and lower income people better off.

Better off. That is, they will be better off if we do tax reform and if Labor defeats tax

reform they will be worse off. A very important point here. The Labor Party if it defeats

tax reform will make pensioners and the low income earners worse off, as found by the

modellers Harding and Warren, who were not appointed by us but by the Labor Party. So I

think it’s of no surprise that today the Labor Party and the Democrats sought to put

off their own hearing with a report from their own modellers, because their own modellers

said, that the Government’s figures were right, that there are no losers from tax

reform under reasonable assumptions and that food should remain in the GST. As far as

I’m concerned that ends the argument.

Do you think that’s the end of it as far as the Democrats are concerned?

Well, I think they should accept the verdict. The Democrats commissioned these

people, Warren and Harding, and asked them to try and produce a scenario which made tax

reform better by taking food out of GST and they came back and they found that it should

stay in. Now of all the modellers, of all the economists that they have now called, not

one, not one single one has yet recommended that food should come out of the GST. Not one.

I mean how long are we going to go on with this inquiry? This inquiry has now been going

since December of last year. They keep calling person after person hoping that they will

say that food should come out of GST and every person they call says the opposite. Now you

know, are we going to sit around and wait for 18 million people to go through that

committee? I think we’ve got to accept a verdict. Any other questions?

There are suggestions today that the Sates are going to ask for an additional $8

million to offset the GST at the Premier’s Conference. Is there any chance that they

will see any of that money?

Well look, we’ve made the most generous offer in the history of Federation to

the States. Which is all the revenue from a 10 per cent GST. All the revenue from a 10 per

cent GST. All of the revenue is going to the States and it’s a growth tax. That is

that as the economy grows their share of the revenue grows with it. Now this is the

biggest reform of Commonwealth State relations in federal history. It is the most generous

offer in federal history and I think the States will accept it and it doesn’t need to

be increased. And if you try and increase it, just bear this in mind, you would only be

taking it from somebody else, you would only be taking it from somebody else so somebody

else would be worse off.

But they’re saying they need more to offset GST. More than what you’ve

already given. Is there any chance of that?

Well they don’t need more because the GST revenues will provide them with the

largest revenues they’ve ever had. Now you can look a gift horse in the mouth and

say, you know I’ve got one great gift horse, I’d like two or three or four or

five. But the old adage is the best adage, better to take the gift horse in my view.

How do you think the Premiers Conference is going to go tomorrow? It seems

it’s going to be reasonably fiery on several fronts?

I think the Premiers Conference will be the same as all Premiers Conferences.

Colour and movement, sound and fury and every Premier claiming that they’re the

victim of every other Premier. And at the end of the day we have on offer the best package

the States have ever had access to and I think common sense will dictate that they’ll

agree to it.

What do you say to Mr Kennett’s comments regarding Victorian Federal Members

not doing anything for the cause of Victoria?

Well I work flat out. I work my guts out for Victoria. And you know, I’m so

busy that I think I’d better get back to work now and do some more. Thanks.

Treasurer, on a different issue, as the Balkan crisis continues do you see any

impact on world growth and possibly on Australia?

Well in 1998/99, the current financial year, we said in our mid-year review that we

expected the Australian economy to grow at about 3 per cent. We’ll exceed that. We

will do better than forecast. In 1999/2000 we thought that growth would come off a bit and

possibly dip below 3. I still think that growth will come off the very high levels that

we’re at now, but if the slow point of the Australian economy were 2 to 3 then we

would still be the fastest growing economy in the region, we would be growing faster than

the OECD average and we’d be growing faster than the G7. In a slowdown to a growth

rate of 2 to 3 per cent would be a remarkably good outcome and that’s the way

I’m looking at things. I’ll have more precise forecasts in the Budget when I

bring it down on the 11^th of May. But Australia has weathered the shocks

extremely well. The whole of Asia is in recession and the Australian economy is the

fastest growing economy in the developed world. I pay tribute to our exporters who have

managed to steer their exports away from Asia to European and North American markets.

It’s got a lot to do with locking in low inflation. It’s got a lot to do with

the fact that we balanced the Budget. It’s got a lot to do that we were able to bring

interest rates down to the lowest rates in 30 years. And if we keep good economic policy

going we can weather world economic shocks. But now is not the time to give up on good

economic policy.