Press Conference

Parliament House, Canberra

Tuesday, 4 April 2006

12.50 pm

SUBJECTS: Tax law reduction, family tax, health care cards, economy, uranium, mining, childcare, wheat, same-sex unions, Banks report, Medibank Private, West Papua/Indonesia, Matthew Lloyd, NSW GST, fuel, therapeutic cloning

TREASURER:

Today I am releasing this Bill for public consultation. This Bill will repeal 4,100 pages of tax legislation in Australia and it will reduce the size of the income tax law by 1/3 or to be precise a little over 31 per cent. It will halve the size of the Income Tax Assessment Act of 1936. This is a Bill that has been developed after a report from the Board of Taxation which did a project for us on inoperative provisions of the Income Tax Act, I released its preliminary findings back in November of 2005, at that point we thought (inaudible) pages of inoperative law we have now with some minor amendments been able to add another 500 to make it 2,600 pages of income tax law which is inoperative and we have added provisions to repeal 1,500 pages of other Acts particularly things like the Sales Tax Acts which no longer apply because of the introduction of GST.

I am releasing this Bill today so that Tax Practitioners can check it, it is possible that you can have unintended consequences, we want to make sure that there are no unintended consequences in this repeal and after we have had adequate time for consultation I intend to introduce it in the Winter Sittings so that it can be enacted this year and so that re-prints of the Tax Legislation which will be prepared for 2007 can take into account the repeals.

But this is good news to reduce the amount of legislation by 1/3. It will be of use to practitioners, I don’t think the public interacts much with inoperative provisions of the legislation but it will be of use to practitioners, they won’t have to worry about the inoperative provisions and it will make their lives easier and it will make it plainer that the sources that are still currently operative in relation to tax law are much slimmer and therefore make their lives somewhat easier.

This is part of a proposal which the Government has been running for some years now in association with the Board of Taxation and there will be follow-up announcements in the near future on reducing complexity and regulation generally in particular in relation to the report that was done by Gary Banks and the Productivity Commission.

JOURNALIST:

Treasurer, you say that it will cut the Income Tax Act to half its current size, do you have any plans to make inoperative any of the tax thresholds?

TREASURER:

Well I don’t think I would make the tax-free threshold inoperative because if we did you would start paying tax from the first dollar and so I have no plans in that regard, Mr Hudson.

JOURNALIST:

Treasurer, you have talked about the EMTRs of late, just on (inaudible) topic regarding Family Tax Benefit, under the current system when you get maximum Family Tax Benefit you also get automatic access to a Health Care Card which is very costly. Are you considering un-linking those two so that you could expand Family Tax Benefits without the cost, the flow-on cost to the Health Care Card?

TREASURER:

Look, the Family Tax Benefit is of enormous assistance for Australian families and what it means is that Australian families with children even on average wages pay no tax – no net tax – which is of enormous benefit and it puts Australian families in a much better position than comparable families in other developed economies. Now, we have done that as a deliberate matter of policy because we think it is hard raising kids these days so we are not proposing to take away any benefits from them, I can assure you of that.

JOURNALIST:

That wasn’t the question. I think Health Care Card access you get that at about…

TREASURER:

I am not proposing any changes to Health Care Cards.

JOURNALIST:

Treasurer, we have had some quite strong signs from you about the economy in recent days and weeks, I was just wondering how you would describe its performance in the first quarter?

TREASURER:

Well I think the economy was perhaps a little slower in the second half of last year and we saw that reflected in the National Accounts figures, there are some good signs in the early part of this year but we haven’t got the National Accounts for the quarter yet but it looks to me as if the domestic economy has a little more momentum maybe than it had in the second half of last year and we had some very welcome trade figures yesterday, a big narrowing of the trade deficit and a big jump in exports and that is a very welcome thing as well.

JOURNALIST:

Treasurer, you have previously been an advocate for increased exports of uranium if possible, yesterday the Prime Minister said that he noted Labor’s Three Mines policy was ‘crumbling’ was his word, but he said that the Commonwealth may at some stage in the future consider some way to apparently get around opposition from State Governments. Can you expand on what that method would be?

TREASURER:

Well they are constitutional issues aren’t they, but it may be argued that under our trade and commerce power and it may be argued under our external affairs power that the Commonwealth has the ability to facilitate the trade and commerce of uranium and the export of uranium. Now, I can’t go any further in relation to that but you know, here we are in modern day Australia, in 2006, where we have the emerging Chinese economy which needs power, is interested in nuclear power which is a signatory to the nuclear non-proliferation treaty which will observe all of our conditions to which we will sell some uranium but people say it can only be sold if it comes from that mine and not that mine. Now, where is the logic? Uranium is either all bad in which case there should be no mines, or it is acceptable in which case there should be such number of mines as are commercial, but there is no logic in saying it is good at three mines and bad everywhere else. And I think the Labor Party will change its position but it is just a question really now of whether or not Mr Beazley can show enough leadership otherwise he will be dragged into it, probably dragged into it by Martin Ferguson I think.

JOURNALIST:

(Inaudible) new uranium export contracts or export deal with China potentially and the value that the resources sector is adding and making to the Australian economy at the moment, do you favour any additional spending through the coming Budget or in the months subsequent to the Budget that would encourage more minerals exploration?

TREASURER:

Look, investment is very strong at the moment. I think we have got about $30 billion of new investment going in mining and this is as you would expect with prices strong and the mining cycle basically works off prices, prices go up, investment comes, the production is lifted and then you normally have a slowing of prices because production is lifted all around the world and you know, investment trails off and then we go into the next cycle. But we are really at the sharp end of the cycle at the moment and investment is very, very strong. I am not sure that we need further incentives in the mining industry.

JOURNALIST:

Just on the childcare rebate, there has been some criticism of it in the sense that the maximum benefits flow to people that work 50 hours a week and spend up on expensive childcare, and on the other hand the maximum benefits from the Family Tax Benefits system flow to mothers that stay at home for the rest of their life after the birth of their first child. Are you going to look at sort of doing more for the middle ground in the sense that you might have a family where two parents are working part-time and sharing responsibilities a little bit?

TREASURER:

Well I am not sure that I agree with the way you put it. The childcare rebate is a rebate, it is 30 per cent of your costs capped, now because it is a rebate at 30 per cent, its value is highest in the hands of people who are on a tax rate of 30 per cent. So, it is of more financial value for people who are in that 30 per cent tax range which as we know is going up to quite substantial incomes but covers all of the middle income earners, and it is capped. And again the capping of that means that the benefit is limited against those examples you gave me of high income earners which very large care.

JOURNALIST:

(inaudible) receive the cap (inaudible).

TREASURER:

Well I have seen in the paper some, particularly in Sydney some childcare centres which claim that they do exceed the cap. I have seen that in the paper and they tend to be inner-city. I can’t tell you how many, it is not a large number but there are some but the other point I make is that because it is a 30 per cent rebate, and we did this deliberately, it is skewed principally to people on the 30 per cent tax rate and is of lesser value, still of value but of lesser value to an income earner that is on the top tax rate and so in that sense it is quite well targeted I think. Yes, Sir. I am working my way from right to left.

JOURNALIST:

Mr Costello, you mentioned that the resources industry is still pretty strong, is it your sense that commodity prices over the first quarter have probably been even stronger than you had expected at the time of MYEFO?

TREASURER:

Look, they have been strong but you know, I know what lies behind your question and I just point to you that it is not just prices it is volumes and volumes – and I have said this before in the second half of last year – volumes were a bit disappointing, it was taking some time before the investment took place to lift capacity and we saw in this – the figures that were released yesterday – a lift in volumes, very, very welcome but I would like to see that continue for some time. Mr Brissenden.

JOURNALIST:

A couple of quick questions, firstly it is reported that a group of senior US politicians have asked their US Trade Chief, Rob Portman to address the issue of monopoly control at the WTO, talking specifically about the Single Desk. Do you think that the Single Desk is damaging our free trade credentials?

TREASURER:

This has always been on the agenda of the WTO, it has always been one of the matters that has been up for discussion and I think the Australian Government’s position would be if there were any change in the WTO we would be entitled to very big trade-offs. That is if the WTO is going to focus on that area we would want the WTO to focus on the abolition of tariffs and export support as well and then you would have to look at the proposal. If in return for let’s say, unlimited access to the US market and if in return for the abolition of US agriculture subsidies we were made that offer to do something about Single Desk, well then you would look at that most definitely. But can I tell you in the range of things that distort world agricultural trade, Single Desks is far further down the list than tariffs and export subsidies.

JOURNALIST:

Do you have a view about the ACT’s same-sex legislation (inaudible)?

TREASURER:

Well the Commonwealth Government’s position is that we will not be facilitating Commonwealth marriage celebrants to perform those ceremonies and that is a view I endorse.

JOURNALIST:

Mr Costello, you mentioned the Gary Banks review just earlier and you said in the next couple of weeks you will be making some announcements…

TREASURER:

Shortly, I hope.

JOURNALIST:

…is that before Budget?

TREASURER:

Yes.

JOURNALIST:

So will that have more to do with the reduction in volume of the Tax Act?

TREASURER:

This is the announcement that we have made on the Tax Act, 4,100 pages. The Banks Report won’t return to that subject but it will return to other areas where we can reduce regulation and this will be in some business areas but it will also be in areas like the environment, it will also be in areas like Occupational Health and Safety. It will be a much broader class of topic, this is a very, very specific downpayment in the tax area.

JOURNALIST:

Will then it be one in, one out type of legislation and regulation that I think Gary Banks has spoken about before?

TREASURER:

I am not quite sure what one in, one out is?

JOURNALIST:

One law in, one law out.

TREASURER:

Well no, let’s see if we can do better than that, let’s see if we can just get some laws out. I am not restricting the agenda here, there is 4,100 pages we got out, you wouldn’t think it was, that would enable more laws to come back in, it is just cleaning the stables out a little bit, let’s see if we can do it on other areas as well.

JOURNALIST:

Labor is saying that consumers should get a say about the sale of Medibank Private, what do you say to them about the merits of the sale?

TREASURER:

Look, most of our medical insurers are private operations of one kind or another. Some of them are companies, some of them are mutuals, some of them are based on the old friendly societies and I think as long as you have got a number of organisations out there competing, offering different services, the consumer gets their say by going to the health fund that gives them the best deal. That is how I think the consumer gets the best say and I think the most important thing here is not so much the nature of the ownership, the most important thing here is the competition and the service. I think people justly want to know that there are, if their health fund is not giving them a good service they can go somewhere else and they ought to have that right, that is that consumer power is all about.

JOURNALIST:

Mr Costello, how damaging do you think the rift with Indonesia is for Australian interests after the West Papuans were granted temporary protection visas and what can be done about it?

TREASURER:

Well, let me put it this way. The Indonesian relationship is extremely important for Australia. Extremely important. They are one of our nearest neighbours, they are a very large country, our futures are intertwined, and it is in both our countries’ interests to have a good strong reliable and healthy relationship and that is what we want. Now, I notice the comments that have been made recently in Indonesia. They have made those in relation to the Papuan refugees. The point about those refugees is this is not a decision of the Government. This was the operation of Australia’s refugee laws as found by an independent decision maker. It has no implications whatsoever for Indonesian sovereignty in Papua, and I would just hope that the Indonesian Government understands that. There are occasions when the Indonesian courts make decisions which Australians do not like. We recognise that that is their legal system and we do not let that come in the way of a good relationship and we should not let this issue come in the way of a good relationship. This relationship is too important for anything like that to knock it off course and I look forward to continuing dialogue and for the parties being able to take this in their stride and move productively on.

JOURNALIST:

Treasurer, does Matthew Lloyd’s performance on the weekend suggest to you that 2006 is truly the year when goal-kicking full-forwards should take on captaincy roles?

TREASURER:

Well look, it was a great performance wasn’t it. Eight goals in his first outing as Captain and they downed the reigning premiers. What more can one ask? Certainly cheered my Saturday night up a lot, I can tell you.

JOURNALIST:

Treasurer, Mr Costa’s saying this morning that New South Wales will remove those Stamp Duties only if the compensation for the Commonwealth means there is no net loss of revenue to New South Wales. Is that the basis on which you and he reached an agreement on last Friday?

TREASURER:

The position is this, that the GST was introduced to replace other taxes. Seven States and Territories have agreed on a timetable to replace those other taxes and New South Wales has indicated that it too intends to abolish those other taxes. We want to be able in negotiations to come to an agreement on a timetable with New South Wales. We are very flexible in relation to the timetable, but we want a timetable for the abolition of those taxes.

JOURNALIST:

And will you compensate them for the cost to their Budget….

TREASURER:

The GST compensates them. The taxes are abolished out of the GST windfalls.

JOURNALIST:

There is some pressure on fuel prices at the moment, (inaudible) do you have any fears that may feed into inflation, Mr Costello?

TREASURER:

Look, nobody welcomes high fuel prices.  They are bad for consumers, they are bad for business, they are bad for the economy.  The best we can do is try and prevent second round effects, try and prevent those prices getting into the economy generally.  To date, we’ve been successful in doing that and I remain confident that if we continue being vigilant we can restrain inflation to our target.  We’ve got a target out there and we want to make sure that we stay within it.  Challenges keep coming.  This is just the most recent but we want to stay within it.

JOURNALIST:

Treasurer, do you think that we should or that the Commonwealth should allow therapeutic cloning in Australia, is the first question?  And the next question is, would you support a conscience vote in order to allow parliamentarians to express their own views on that subject?

TREASURER:

Well, look, here’s my view.  I don’t believe we should create embryos for the purposes of experimentation.  That’s my view.  There were embryos that were created in times past that for one reason or another were not used by the parents.  And in circumstances where they were going to be destroyed I thought it was reasonable to allow them to be available for scientific test.  But I don’t think we should go around creating embryos for the purposes of testing and I do believe that in this area there does have to be some moral restrictions.  When the last piece of legislation came up it was a conscience vote and if another piece of legislation came up that travelled the similar ground you would expect it to be a conscience vote.  But you can’t really tell until you know the nature of the legislation.

JOURNALIST:

Treasurer, can I just go back to my previous question.  Do you concede…

TREASURER:

Last two questions.  One and two.

JOURNALIST:

Do you concede that if you do make the Family Tax Benefit more generous that it can have a flow-on effect on the eligibility to the Health Care card and if you do concede that, which I think you would, how can you make sure that making FTB more generous doesn’t overly impact on the Budget?

TREASURER:

I don’t think that’s necessarily the case, I must say to you, because it’s just not necessarily the case. 

JOURNALIST:

(Inaudible).

TREASURER:

I know where you want to speculate but I’m just kind of saying to you that I don’t think it’s a fruitful area of speculation.

JOURNALIST:

Treasurer, the recent decline in the Australian dollar, how does that, how is that translated into the economy?  And what do you think the outlook is for the currency?

TREASURER:

Look, the recent adjustment in relation to the Australian dollar has undoubtedly helped exporters.  That’s the case.  And exporters have had, as one of their difficulties, a pretty high exchange rate over some time.  And they won’t be at all sorry to have seen recent developments.  You don’t want to overstate recent developments however, and you’ve got to always bear in mind that there are movements both ways.  But I am sure Australian exporters will be thinking to themselves that this has not been altogether unwelcome.  Thank you all for your time.  Thank you.