Interview with John Laws

2UE

Friday, 25 November 2005
9.30 am

SUBJECTS: Tax, interest rates, surplus

LAWS:

Treasurer good morning.

TREASURER:

Good morning, good to be with you John.

LAWS:

Good to talk to you Peter, when do we get them?

TREASURER:

You are talking about Christmas…

LAWS:

No.

TREASURER:

…25^th of December.

LAWS:

I am talking about tax cuts.

TREASURER:

Well we introduced the last round of tax cuts on 1 July of this year and of

course we have already legislated another round on 1 July of next year so there

is quite a bit in the pipeline actually.

LAWS:

But can we expect any more than that?

TREASURER:

Well what I said yesterday was if we can fund health pressures, if we can meet

defence pressures, if we can balance the budget and we have done all of those

things and that leaves room to, then of course we would love to reduce tax and

we have reduced tax in the 2003 budget, 2004 and 2005. So if we could do it

next year, yes of course we would love to.

LAWS:

Okay, I know you won’t speculate on the size of the surplus itself, but

if we do get tax cuts what would the average size of those be?

TREASURER:

Let me say, we are forecasting a surplus for this current financial year. And

let me explain to people why it is important that we have a surplus budget.

Where the Government has a surplus budget it is building up savings and where

the Government is building up savings rather than borrowing, it is keeping down

interest rates. So you wouldn’t do anybody a favour if you didn’t

run a surplus budget because that would put pressure on interest rates and it

would be of no assistance to Australians to say – I will give you a tax

cut and the consequence of that will be you pay more on your mortgages –

I don’t think they would thank you for that. So it is a question of making

sure that you keep adding to Government savings – we have got to fund

our health obligations, we have got to fund defence…

LAWS:

Well I imagine…

TREASURER:

…if we can do all of that we ought to keep tax rates as low as we can.

LAWS:

…yeah, well I accept that and I understand that many people would be

prepared to sacrifice a tax cut if more money went into something like mental

health or roads or health generally. I think a lot of people would be prepared

to…

TREASURER:

Well you see, this is the point. You have got to hold everything in balance.

We know that health costs just increase year after year. They increase year

after year because our population is ageing, because new treatments are becoming

available. So whatever you do next year you are going to be spending more on

health. We have the challenge of terrorism and our response to that which has

been extremely expensive. We want budget surpluses because that helps keep interest

rates down. Now, if you can do all of those three things and reduce tax, well

we would love to do so but let me tell you, these all big asks and it takes

a lot of work and a lot of organisation to get ourselves into that position.

LAWS:

Yeah, if people only get a tax cut of say $10 a week, they will hardly be crowing,

I mean given the price of petrol, the price of everything now.

TREASURER:

Well hopefully the price of petrol will come down, it is already coming down

but I think the most important thing to people frankly is their mortgages. People

will hardly thank you if interest rates went up and of course we are the Party

of low interest rates so it is important that we keep interest rates down and

a big part of that is running surplus budgets adding to savings. So, there are

some people who run around and say, ‘oh well, you know, why don’t

you give away your savings and you might be able to reduce taxes.’ Well

let me tell you, no fun if your tax comes down $5 a week and your mortgage goes

up $30 a week.

LAWS:

No, no fun in that at all. A lot of people also say – and I am a bit

inclined to say the same thing – if you have got all of that surplus that

means that your tax is too much.

TREASURER:

Well, look, as I said before, if you had a surplus that is that you are not

spending more than you are raising, in fact what you are doing is you are repaying

debt and we have now repaid nearly $90 billion of the Labor debt remember, and

that has been a very big part of keeping pressure off interest rates. Let me

make that point again. If the Government borrows money the Government is in

the market driving interest rates up, if the Government saves money the Government

is in the market driving interest rates down it is that simple.

LAWS:

This notion of slashing thousands of pages from the Tax Act, what kind of effect

will that have, if any?

TREASURER:

It will make tax laws much simpler. There is a whole lot of sections in that

Act which are never used. They are there, you know, you are reading the Act

and you have got Section 1 and Section 2 and Section 3 and Section 3 is never

used, it doesn’t apply to anything and Section 4 may never be used, it

doesn’t apply to anything. I am not giving you real numbers here. So,

an important simplification is if it isn’t used just get to rid of it,

don’t leave it there, people don’t have to read it, they don’t

have to wade through it, it makes it easier for tax practitioners. My view by

the way is that probably very few taxpayers ever read Tax Acts so it is doesn’t

worry them so much but it is certainly for accountants and lawyers and businesses

and people who do look at the Tax Act, it is going to make things much simpler.

LAWS:

Yes, why would you ever have 8,000 pages in the Tax Act? I mean, how is that

possible?

TREASURER:

Because what has happened over the years is as new situations have arisen,

new laws have been made to cope with it and nobody has ever got around to abolishing

old laws in relation to transactions that are long passed. It has taken us a

while to identify all of these old laws that can be repealed – about two

years…

LAWS:

Well I can understand that with 8,000 pages to go through.

TREASURER:

…and to get rid of 2,600 is the biggest legislative simplification that

we have ever had. And by the way, this Act has been in place in various forms

since 1936 so there have been Governments going back…

LAWS:

71 years.

TREASURER:

…as far as Curtin and Chifley and Menzies and Lyons that were adding

to the Act without taking away so the fact that we have sat down in 2005 and

worked out all of the redundant provisions and can get rid of 2,600, I think

it is a good project actually. I notice that there has been very good response

from business to it today.

LAWS:

Oh yes, well understandably they haven’t got to wade through all of that

other stuff.

TREASURER:

Yep.

LAWS:

Will the surplus reach $14 billion?

TREASURER:

Look, one newspaper put out a story yesterday but I think the newspaper itself

would concede it didn’t have the evidence to back it up.

LAWS:

Okay so it won’t reach $14 billion?

TREASURER:

Well you heard my answer.

LAWS:

I did, which indicates to me it won’t reach $14 billion.

TREASURER:

(Inaudible).

LAWS:

Have you got anybody working on this Budget with you in case you become Prime

Minister before it is handed down?

TREASURER:

Well look, (inaudible) the Budget preparations start every year in November,

it goes for six months you know, we have a short break over Christmas but it

has already started and we are preparing all of these things and it keeps going

right through to May.

LAWS:

Are you going to hand it down?

TREASURER:

John, I am preparing the Budget and everything is proceeding on track.

LAWS:

Okay. I hope you have a nice restful weekend Peter, it is good to talk to you

as always.

TREASURER:

Thank you John, all the best.

LAWS:

Thank you very much.