TRANSCRIPT
of

THE HON PETER COSTELLO MP

Treasurer

Interview with Neil Mitchell

3AW

Thursday, 28 November 2002

8.35 am

 

SUBJECTS: Tax; Economy; Victorian Election; Drought; Telstra; Iraq; Dr Mahathir

MITCHELL:

First, in the studio with me, having just released the Mid-Year Economic Outlook,

the national books, the Treasurer, Peter Costello. Good morning.

TREASURER:

Good morning Neil.

MITCHELL:

Do you believe in Santa?

TREASURER:

Yes, Virginia there is a Santa Claus.

MITCHELL:

Good.

TREASURER:

“In the heart of every young child who believes in love, there is a Santa

Claus.” Is that how it goes? Something like that?

MITCHELL:

It’s all a bit silly isn’t it?

TREASURER:

Absolutely. What you ought to do is you ought to enlist the support of the

children of Australia and say, if they ban Santa Claus, there will be no presents

on the 25^th of December and I think you will have a near riot.

MITCHELL:

That’s a good idea. Get the kids…

TREASURER:

Get the kids in the street…

MITCHELL:

…mobilised…

TREASURER:

…demanding the return of Santa Claus. I can think of a few in my household

that will join a demonstration.

MITCHELL:

Do you agree with Robert Doyle that it’s all Steve Bracks’ fault?

TREASURER:

Well, if something’s gone wrong, it could well be.

MITCHELL:

The economic outlook released yesterday, in a sense, we have been Santa Claus

to you, haven’t we? We have saved your bacon with an enormous amount of tax.

We have paid an enormous amount of tax.

TREASURER:

Well, the Mid-Year Review actually showed that tax receipts are down. But…

MITCHELL:

Company tax up (inaudible)

TREASURER:

(inaudible)

MITCHELL:

…the predictions $840 million…

TREASURER:

…wage and salary earners down.

MITCHELL:

Income tax up…

TREASURER:

…income tax…

MITCHELL:

…$780 million…

TREASURER:

No, no, no, hang on. Income tax down – wage and salary earners down.

MITCHELL:

(inaudible)

TREASURER:

Now you are quite right. You are quite right that companies are paying more

tax. And we have had a pretty concerted effort to make sure that companies pay

their fair share of tax. And there have been some pretty good company profits.

So, I think that is probably a good thing…

MITCHELL:

But the prediction is for an increase of $840 million in company tax, $780

million extra in income tax, $410 million more in petrol and tobacco tax. By

any definition this is a tax-led survival.

TREASURER:

No, but income tax is down, and it outweighs all of those increases. Let’s

put…

MITCHELL:

So, what’s the prediction on income tax?

TREASURER:

That it will fall.

MITCHELL:

That it will fall?

TREASURER:

Yes. What the Budget figures showed yesterday, was that income tax collections

is down…on Budget. We have conversely to that, better receipts than we expected

out of companies and better receipts than we expected out of self-employed which

is evidence of a stronger economy. They don’t make up the overall fall in income

tax…

MITCHELL:

Okay, well…

TREASURER:

…tax receipts overall were down as compared to Budget forecasts.

MITCHELL:

Well what did…?

TREASURER:

…expenses were down as well so the bottom line is the same. So, we took less

in tax, we spent less and the bottom line is expected to be the same.

MITCHELL:

Well, every commentator in the country disagrees with you today.

TREASURER:

Well…

MITCHELL:

What percentage of GDP is now taxation? What percentage of the Gross Domestic

Product is now taxation?

TREASURER:

22 per cent.

MITCHELL:

Is that up?

TREASURER:

No, it is down on when we were elected. It was about 24 per cent when we were

elected.

MITCHELL:

Is it up since you introduced Tax Reform?

TREASURER:

No, it is down.

MITCHELL:

How much?

TREASURER:

About 2 per cent.

MITCHELL:

Is it, well is it not just over 17 per cent of the national income?

TREASURER:

No, that’s the figure that is income tax as a proportion of GDP.

MITCHELL:

Okay, is that up?

TREASURER:

It is down from what it was when we were first elected.

MITCHELL:

What about on last year?

TREASURER :

It is about the same.

MITCHELL:

Again, every commentator in the country seems to disagree with you.

TREASURER:

No, I don’t think that’s right, Neil. I don’t think that’s right.

MITCHELL:

The Financial Review, the Age, the Australian?

TREASURER:

No, I don’t think that’s right. What the Financial Review makes a point is

that company tax is high. When you take taxes Neil, it can come from individuals,

it can come from self-employed, it can come from wage and salary earners, it

can come from companies. Wage and salary earners are going to be paying less

than was forecast at Budget. But companies with high company tax, high profits,

will be paying a little bit more. The increases that we get out of companies

will not quite make up overall, tax receipts will be down a little bit. But

expenses are down. What expenses are down? We are paying less in unemployment

benefits because we have got more people in work and we have had some other

favourable parameter changes.

MITCHELL:

Can I really, read something from the Age? From the Age, Josh Gordon, Economics

expert, the Federal Budget has been saved by a surprise flood of tax revenue.

Do you deny that?

TREASURER:

Well, I don’t think Josh would be the most reliable economic reporter.

MITCHELL:

Righto. The Financial Review says the same thing.

TREASURER:

Well, let’s read from the Budget. “A downward revision to expected tax

receipts.” Let’s go to the areas. I mean, Neil, as I said to you, income

tax, wage and salary earners receipts are down.

MITCHELL:

What about GST, how much is that up?

TREASURER:

Company tax is up. I actually think that is a good thing as it turns out because

it means that…I will give you the figure, wage and salary earners down, forecast

$1.3 billion, wage and salary earners, you and I, well I don’t know if you are

a wage and salary earner, but wage and salary earners collections down $1.3

billion.

MITCHELL:

What about the GST?

TREASURER:

GST will collect about $170 million more than forecast at Budget time.

MITCHELL:

Is the GST providing you with the saving grace then?

TREASURER:

Not really. What actually helped the Budget this financial year is that we,

our expenses are down. And the biggest area is in relation to unemployment benefits,

that is we are paying less in unemployment benefits because more people are

in work.

MITCHELL:

What if the drought doesn’t break in the next year?

TREASURER:

Well, if the drought doesn’t break, if the drought continues in 2003-04, that

will have a very bad effect on the Australian economy.

MITCHELL:

What will it do?

TREASURER:

Well, it will mean that a lot of farmers who are already in dire straits will

be in even worse straits.

MITCHELL:

Yes, but what will it do to the national economy? What will it do to your economic

planning?

TREASURER:

What it would do if the drought continued for another 12-18 months? It would

affect our exports. And that would be bad for our economy as well. But the biggest

effect would be on the farmers because the farmers are already struggling and

have no income.

MITCHELL:

What if we go to war?

TREASURER:

…would have to go another 12-18 months.

MITCHELL:

What if we go to war?

TREASURER:

So, Neil we hope the drought breaks. I think every person in Australia hopes

that the drought breaks. It has been going now for about, coming on 12 months

and let’s hope it doesn’t go for two years.

MITCHELL:

These are the uncertainties aren’t they for your plans, the drought and the

possibility of war?

TREASURER:

Absolutely.

MITCHELL:

And the possibility of an increased security bill?

TREASURER:

Well, worse than that. The possibility of the US economy continuing in the

sick way that it has been for the last year, that would be the biggest risk

to the world economic environment. This is a very difficult time. You have had

an American recession, Japan in recession, all the European countries struggling,

and what that means is that Australia is out in front, but we are not getting

much help from the rest of the world economy. And that is the biggest risk to

the world economy and to Australia.

MITCHELL:

All right, what does that say to the average person? And with respect, we get

a lot of gobbledygook out of economic discussion. As it is, we have got commentators

and the Opposition saying one thing about you and your tax level. You are saying

exactly the opposite. Some are saying you are in deficit. You are saying it

is surplus. You could excuse the average person for sitting there saying I don’t

believe any of them. What does the average person do heading into such difficult

times. How do you manage your life? How do you manage your own economy?

TREASURER:

Well Neil, the last time we had a severe drought 20 years ago, unemployment

rocketed. And the last time we had an American recession unemployment rocketed.

That is what normally happens in the Australian economy. I guess the good news

is, and people know this, is that people have been able to maintain their jobs

through a very difficult world economic situation…

MITCHELL:

Can that continue?

TREASURER:

…and through a very bad drought.

MITCHELL:

Can that continue or do we have to look at increased unemployment?

TREASURER:

Well, look it has been my aim, and I have been Treasurer now coming up seven

years, to keep the Australian economy out of recession. I know what the recession

of 1990 did to this State and I know what the recession did to Australia. And

in keeping Australia out of recession and keeping people in jobs that is the

aim of our economic policy. Unemployment is 6 per cent. It is as low as it has

been for a decade. Normally in droughts and international recessions it rockets

but so far so good.

MITCHELL:

A couple of other things. Do you feel any guilt on behalf of the Government

of helping convince people to buy T2 shares given they have dropped 40 per cent

since they bought them?

TREASURER:

Neil, when people buy shares they have got to make their own investment decisions.

MITCHELL:

Well, yeah, but you talked them up.

TREASURER:

Well, Neil we are actually pretty careful not to give stockmarket advice. Even

yesterday I was asked the question what do I think is a fair value for Telstra

and I said, look if I start talking about what I think fair value for Telstra

is, I would be accused of giving stockmarket advice. And that’s what I won’t

do. And I have to be very careful about that. Look, when people bought in T2

they make their own decisions. You will recall that after T2 the share price

rocketed up and now it has come down. But the thing about stockmarkets, this

is my experience, is some things will go up, some things will go down but it’s

much better to look at the long term, the long term.

MITCHELL:

If the US economy has trouble or the drought continues and all these awful

prospects and we do go to war, is not a war tax inevitable?

TREASURER:

Well, I hope we don’t go to war.

MITCHELL:

Well we all do, but is that not inevitable?

TREASURER:

Well, Neil, now people say to me what happens if Australia goes to war? And

I can’t answer that question because we hope that we don’t go to war, and it’s

a pretty meaningless question unless you are actually prepared to detail the

kind of commitments that you have to make.

MITCHELL:

Now I find it impossible to believe that this hasn’t been a matter of discussion?

TREASURER:

What has been a matter of discussion is that Australia has been at war, we’ve

had SAS troops in Afghanistan, they will be there until Christmas. We had Hornets

in Diego Garcia. We have ships in the Gulf. That military commitment has all

been funded out of this Budget. Now you say to me, what about another military

commitment, you would have to tell me the level of Australia’s commitment before

I could go any where near costing it and telling you how it could be paid for

and since nobody can answer those questions and since nobody, and since we all

expect that it won’t and hope and pray that it won’t happen, it’s just wrong

to speculate about it.

MITCHELL:

We’ll take a break and come back with more from the Federal Treasurer Peter

Costello.

Break

Twelve to nine, coming up after nine the campaign to save Santa what the official

rules say and also a man whose just got a hundred thousand dollar electricity

bill, but with me is the Federal Treasurer, Peter Costello. State election,

will it damage Victoria if Steve Bracks wins?

TREASURER:

Victoria could be a better and stronger place with a change of Government.

MITCHELL:

Who would you rather work with?

TREASURER:

Well, I would rather have the best managers in control of the Victorian economy

and I think that is a change of Government. Let me make this point, we can see

it from the national level. Building costs in Victoria for the same building,

something like 20 per cent or 30 per cent higher than in New South Wales. An

investor comes into Australia and says I can put my plant in New South Wales

or I can put it in Victoria. Where do you think they put it?

MITCHELL:

But Robert Doyle’s lost it hasn’t he?

TREASURER:

They aren’t going to put it where it is going to cost them 20 or 30 per cent

more, that’s for sure, so who do you think misses out on the jobs?

MITCHELL:

Do you agree Robert Doyle will be very fortunate to get over the line?

TREASURER:

I agree that Labor is favourite and I agree that the polls have them in front,

yes I do, and I agree that they are currently coasting up to the election expecting

a big win.

MITCHELL:

Will Steve Bracks, if re-elected, damage Victoria?

TREASURER:

Well, Steve Bracks, if re-elected, because he does not have the ability to

stand up to the unions, will lose investment that Victoria would otherwise get,

yes. And that means we will lose jobs we would otherwise get.

MITCHELL:

These are very uncertain times, how do you feel about the next few months and

the threat that we live under?

TREASURER:

It is a difficult environment. It is, you know, we have had a terrible tragedy

in our country, Bali. We have closed an embassy…

MITCHELL:

(inaudible)

TREASURER:

…we have guards in public buildings, we have sky marshals in our planes.

We are raising a regiment to deal with chemical, biological, nuclear incidents.

This is a difficult world and in this country and outside it, it appears that

there are people who have links to organisations that were involved in the Bali

bombings.

MITCHELL:

What was your reaction to what Doctor Mahathir’s been saying, and he said it

again overnight, we have got to decide whether we are Asian or not if we are

going to be accepted into the region?

TREASURER:

Look, we are Australian, and Australia is part of the Asia-Pacific region.

We are a strong economy in this part of the world. We contribute a lot to the

security in this part of the world. We work closely with the nations in this

part of the world and we have common interest in security. And I will not accept

anybody suggesting otherwise.

MITCHELL:

It seems to me that he is almost peddling hate against Australia, why?

TREASURER:

Look, different countries have different interests, don’t they, and they pursue

their interests in the way that they see fit. Now, I think in the economic sense,

because Australia has been the strong economy in the South-East Asian region

– we came through the Asian Financial Crisis unscathed and all of the other

economies went down – some people look at that and they see Australia’s comparative

success, and that influences their thinking. But…

MITCHELL:

Jealousy.

TREASURER:

…our success shouldn’t be seen as putting anybody else down. Our success

should be seen as a strong economy in this region which wants to make a contribution

and can help other economies. And can I say, during the Asian Financial Crisis

we were the strong economy of this region and we offered financial assistance

to the neighbours that were getting engulfed in that Asian Financial Crisis.

I was personally involved in Thailand, Indonesia, Korea. So we did not take

our success and use it for bragging. We took our success and we offered help.

MITCHELL:

Okay, was there a Cabinet decision on the closing of the Philippines Embassy?

TREASURER:

Look, these decisions are made by the Minister and the National Security groups,

not by the Cabinet.

MITCHELL:

Was there a reluctance to do it?

TREASURER:

No, the Minister and the Security officials will make those decisions which

are necessary and right, that is why it is done.

MITCHELL:

Are you aware of any specific threats to this country at this stage?

TREASURER:

We have credible evidence of potential threats and when we receive them we

issue warnings.

MITCHELL:

So no specific threats have been received?

TREASURER:

We hope that they do not come about but we issue warnings and people should

look at the warnings that have been issued.

MITCHELL:

So no specific threats have been received?

TREASURER:

Well look, Osama bin Laden has made a threat against Australia. He has broadcast

a threat against Australia. Now, a terrorist does not ring up and say be down

at such and such a building, at such and such a time, you know Neil. But Mr

bin Laden himself, the head of the world’s most dangerous terrorist organisation

has broadcast threats against Australia.

MITCHELL:

Will you be acting Prime Minister over the holidays?

TREASURER:

I could be, yes.

MITCHELL:

Is the Prime Minister having a break?

TREASURER:

Yes, he is, yes.

MITCHELL:

So it is possible you will be.

TREASURER:

Yes.

MITCHELL:

They are unstable times, is it preferable that we sort out any question to

do with the future leadership of this country as soon as we can?

TREASURER:

Look, the Prime Minister has said that he is going to consider this matter

next year and he will do that. And in the light of that we will all, we will

all be informed of his decision.

MITCHELL:

Have you discussed it?

TREASURER:

Well, obviously he has talked about it publicly and obviously we have referred

to that…

MITCHELL:

So it is still his decision?

TREASURER:

…what he has said publicly, we have referred to.

MITCHELL:

Privately?

TREASURER:

Well, we do not take it any further than what he said publicly.

MITCHELL:

So it is still his intention to make a decision next year?

TREASURER:

Yes.

MITCHELL:

Yes? I would just argue that in unstable times there is a need for stability

of leadership and the sooner that can be sorted out the better.

TREASURER:

Well look, he said he is going to think about this next year and there is nothing

to be done, nothing to be said, and it is actually very stable.

MITCHELL:

Well it is until next year. You’d still like to lead one day?

TREASURER:

Neil, let’s see what happens next year.

MITCHELL:

How many more Budgets in you?

TREASURER:

It looks like we have got one more in May of next year.

MITCHELL:

Only one?

TREASURER:

After I have done that one then we will start working on the next one Neil,

don’t try and read into anything that I say anything to the contrary.

MITCHELL:

Are you enjoying being Treasurer?

TREASURER:

It’s, look, it’s a tough job and it is a tough time. But, you know, I was recently

at a meeting on the weekend with the world’s twenty Finance Ministers and central

bankers of the big economies. As we went round the table, economy after economy

is struggling, I couldn’t help but think that Australia was leading the world.

And we have got our difficulties sure, but gee, we have managed to overcome

them in a way other countries haven’t.

MITCHELL:

We have a quick call to finish which goes back to where we started – Santa

Claus. Hello Caroline.

CALLER:

Hi, how are you? My daughter heard Mr Costello say that there will be no presents

and her mouth dropped to the floor and then she looked at me and she said “I

have been so good all year.” And I have gone, yeah right. And the she goes

“Why isn’t Santa coming?” And I have tried to explain that some people

wanted to ban Santa. And she says, “You can’t ban Santa”. And then

I thought about it, it’s all my fun. If they ban Santa that is half of my fun

gone.

TREASURER:

Well, Carol, couldn’t agree with you more. I am in the let’s keep Santa camp.

And, as I think I said to Neil, there is this famous article written in one

of the American papers, it said “Yes Virginia, there is a Santa Claus and

while Santa Claus lives in the heart of any young child he is very much alive.”

And he sounds as if he is living in the heart of your young child that’s for

sure.

MITCHELL:

Treasurer, thank you. What would you like for Christmas? The Lodge?

TREASURER:

I’d like a few days off actually. Maybe also I would like a fine day for Boxing

Day so that the first day of the Melbourne Test can actually be played rather

than be washed out.

MITCHELL:

Thank you for your time.

TREASURER:

Thanks very much Neil.