Peter Costello

Media Transcripts

ALP Advertisements; The Greens; Interest Rates; The Economy; Childcare; Taxation; Private Health Insurance - Interview with Liam Bartlett, ABC Radio 720

TRANSCRIPT

THE HON PETER COSTELLO MP
TREASURER

Interview with Liam Bartlett
720 ABC Perth

Tuesday, 28 September 2004
8.30 am

 

SUBJECTS: ALP Advertisements; The Greens; Interest Rates; The Economy; Childcare; Taxation; Private Health Insurance

BARTLETT:

Treasurer, good morning to you.

TREASURER:

Great to be with you Liam. Thanks very much.

BARTLETT:

Good to see you here in Perth.

TREASURER:

It is always a pleasure. Beautiful day.

BARTLETT:

Well, we turn it on for you. I was just wondering, you know, when we talk about caretaker governments and calling you Treasurer, or maybe I should call you a caretaker Minister or maybe Prime Minister in waiting would be more appropriate. Have you seen Labor's TV ad?

TREASURER:

The, which one is that?

BARTLETT:

You know, the one where John Howard's head is rubbed out.

TREASURER:

Oh yes, yes, I have seen that, yes.

BARTLETT:

And yours appears as the replacement.

TREASURER:

Yes.

BARTLETT:

Tony Abbott's quite candid in that ad isn't he?

TREASURER:

Well I think that was footage that was taken from some time ago. I don't think Tony actually filmed for the ad.

BARTLETT:

Oh, but it is interesting to hear his comments. I mean I take it they are not putting words in his mouth. 'Cause he is saying well you know Costello for two years, Howard for one year or maybe Howard for two years, Costello for one. What was he thinking?

TREASURER:

Oh well, as I say, I think it was an interview which was given some time ago. But I saw the ads they were running during the Grand Final. I was quite amused by them. I thought that they were particularly perplexing actually. And very ineffective. And I thought to myself, the good thing about it is that running them during the Grand Final, the Labor Party would be paying an awful lot for them and getting very little value out of them.

BARTLETT:

That's an interesting way to think of your position relative to the PM's though isn't it? Scratch and match?

TREASURER:

Oh well, it is a bit of a gag. I think the Labor Party produced these tickets a long time ago and you know, I can imagine them all sitting down there in their little tactics meeting saying, what are we going to do with these tickets? We had better do something. We had better cut an ad. Oh we had better put it on in the Grand Final. But I must say, if that is the best they have got, you know, waste your money on it by all means fellas.

BARTLETT:

I tell you what, you will certainly be Liberal leader if today's polls are right and you lose the election, won't you?

TREASURER:

Well the polls are very close Liam. The reality is that Mark Latham could be elected. And that is enough to send a shiver down anybody's spine I think. You want to trust your mortgage to Mark Latham, your business, your job? As at today, either side could win the election. And there is no room for margin or protest here. It is very, very close.

BARTLETT:

The polls are interesting aren't they? You're ahead on the primary but you're four points behind overall thanks to preferences.

TREASURER:

Yes.

BARTLETT:

Primarily from the Greens who are polling seven per cent.

TREASURER:

Yes.

BARTLETT:

Do you believe that?

TREASURER:

Oh yes, yes I would. What happens is that essentially most of the minor Parties preference against us. So, we nearly have to win it on our own. If we can't get to 50 per cent or close to 50 per cent we don't get preferences from other people. And the Greens are polling well, and at the end of the day the Greens won't win seats in the House of Representatives but a vote for the Greens will deliver a vote to the Labor Party.

BARTLETT:

Why are they so strong?

TREASURER:

There, look there is always I think room for a third Party. With the demise of the Democrats I think they have picked up a lot of that third Party type vote. And it looks in this election as if the Democrats are not going to do well. I think they are down at about 1 per cent. So a lot of that has just moved across to the Greens. The difference is, with the Democrats, they used to split their preferences about 40/60. With the Greens, they split them about 75/25 or 80/20. So that has been a huge benefit to the Labor Party because as I say, when you vote, people should remember, you have got to do 1, 2, 3, 4, 5 if you vote 1 Green and follow their ticket which goes to Labor, that vote ends up with the Labor Party.

BARTLETT:

Do you think the Democrats are rueing the day that they jumped into bed with your Party and did the GST deals? That was the beginning of the end for them wasn't it?

TREASURER:

Oh not really. I think the Democrats have been on the slide for a while. They have had, how many leaders have they had? They have had four leaders I think in the last four years. They had Lees and Despoja and Bartlett and Greig. And they, I think there are only, what are there seven of them? I think seven or is it nine? I forget. But nearly everyone has been a leader at one time or another in the last four years. They have got a lot of chiefs but no Indians. And I think that has been a big problem for them and the Greens have swooped on them. But as I keep on saying, if you vote 1 for the Greens and you follow their ticket it ends up voting for the Labor Party.

BARTLETT:

Where's the heart and soul in this election though Treasurer? Is it in the sand pits of childcare centres?

TREASURER:

Well I think childcare is an important issue. I think education is an important issue. But I think at the end of the day the biggest issue is going to be, who do you trust with your mortgage? Who do you trust with your business? Who do you trust with your job? Because at the end of the day, if you can't service the mortgage, pay the interest payments, if the business can't make a profit, if you can't keep your job then not much else is going to count. And I think that is going to be the heart and soul of this campaign in the next ten days.

BARTLETT:

Well, there is a not a lot of science in the childcare dutch auction is there? You have got a billion dollars for childcare, Labor bids it up to $1.6 billion.

TREASURER:

Well…

BARTLETT:

You are going mad with money.

TREASURER:

…there are important differences I think. The Government's proposal is that 30 per cent of your costs you can claim back as a tax rebate. Labor says, well if you have got a four or a five year old you can have a subsidised day. Well that is all very well if you have got a three or a four year old sorry. That is all very well if you have got a three or a four year old but if you have got a one year old, a two year old or a five year old it is not much use to you.

BARTLETT:

But it is all pretty cynical stuff isn't it? I mean, it's all back pocket vote grabbing. You know, all these billions your Government has managed to find over the past four and a half weeks, billions of dollars, your side says it's the sign of a strong economy but it's simpler than that isn't it? Doesn't it just mean that we have been overtaxed?

TREASURER:

Oh no, it is the strong economy. We have actually cut taxes. But revenues are strong.

BARTLETT:

Well you have cut some taxes.

TREASURER:

Why, why are revenues strong? Well the biggest reason is that there are now 1.3 million people more in work. If you have got 1.3 million more people in work instead of drawing down for unemployment benefits, you save all of those unemployment benefits and then they go into the workforce and they pay tax.

BARTLETT:

But your maths still doesn't add up. That doesn't fully explain the billions you have been dishing out.

TREASURER:

Oh that is the biggest part of it. There are two really big parts of this, one is we have 1.3 million people more in work, and that in the biggest part, who are not drawing unemployment benefits but are actually paying taxes. The second big part of it Liam is company profits are strong. The business sector has been profitable and when you tax company profits that has also added to the revenues. So strong company profits give you strong revenues but they also give you jobs and those jobs give you revenues as well. So this is the benefit of a strong economy.

BARTLETT:

But you dish out these feel good rebates to target votes. With all this extra money, wouldn't it have been fairer, more equitable, to give it back via the general tax system to all workers?

TREASURER:

Well we have cut taxes. We have also increased payments to families. And with a rebate for childcare, the way I look at it, if Mum is going to go into the workforce and one of the expenses of going into the workforce is childcare, then it is fair that she get a rebate. It is almost, for most people it is tax deductibility. For low incomes it is tax deductibility, for higher income earners it is a little less than tax deductibility because it is 30 per cent. But if your tax rate were 30 per cent, a 30 per cent rebate is as good as tax deductibility.

BARTLETT:

It must be wonderful to play with taxpayer's money in such a way that it makes them feel honoured to be getting back what was already theirs?

TREASURER:

Well I think you have raised a fair point Liam which is this, at the end of the day Governments don't create jobs or generate income. What Governments do is they create an economic climate in which businesses can create jobs and generate income. Now I don't go around saying that the Government created 1.3 million jobs but what I do say is the Government created a low interest rate, low inflation, growing economy, the climate in which business was able to prosper and create jobs. And because people were able to get jobs and pay taxes, the Budget has been strengthened. Look I have done nine Budgets now, seven surplus Budgets. That is a very, very strong record. And I can tell you, when I started, there weren't surplus Budgets Liam. My first Budget I was confronted with a $10 billion deficit. And it has taken us a while to get to where we are but the benefit of good economic policy is, if you get people in work, that is what it is all about, if you get people in work…

BARTLETT:

How is it good economic policy to build up this mountain of money and you know, just coincide with the last (inaudible) four or five months that you were heading into an election, this mountain of money, how is that good economic policy? And then sort of turn around and say publicly, well you know, we're good economic managers and we have fantastic largesse and we are going to give it all back to you now in various ways and target various marginal seats and various sections, demographs of the population so that we ensure we are re-elected. How is that good economic policy?

TREASURER:

Well Liam I don't actually see it as a mountain of money. I see it the reverse. We had a big crater of debt and we have managed to fill in the crater. When we were elected the Commonwealth debt was $96 billion. We have now filled in the crater and reduced it by $73 billion.

BARTLETT:

Simon Crean says you have spent $66 billion in just six months. Is that right?

TREASURER:

No. Because you see, Mr Crean has this funny attitude that if you cut taxes it is actually spending. Cutting taxes isn't spending money. It is cutting taxes. It is reducing the amount of money. He says, oh well, if you cut people's taxes that is an expenditure. No, no, no if you cut people's taxes it is not actually it is a reduction in the amount that you take. And you know, just to finish that last point I was making, your $96 billion of Commonwealth debt, a big crater of debt, we have now filled it in, $73 billion we have reduced that by in net terms and we don't have to pay as much interest anymore. That's where you get your saving. You have reduced your mortgage, your interest payments have come down, you have got a saving, you can spend that money on things like health and education.

BARTLETT:

Okay.

TREASURER:

(inaudible)

BARTLETT:

We will go to the phones in just a second. We are talking to Treasurer, Peter Costello. If you would like to give him a call 9484 1720 or 1800 626 720. On that subject of interest rates, the claim that interest rates will go up under Labor. Are you embarrassed by that?

TREASURER:

Well interest rates always have been higher under Labor. I just put the record out there Liam. I say…

BARTLETT:

Let's look at it scientifically.

TREASURER:

Yes.

BARTLETT:

You deal with numbers all the time.

TREASURER:

Yes.

BARTLETT:

You are still struggling to find one single analyst who agrees with that comment.

TREASURER:

Well this is the way I put it. You can compare Labor's record and our record. Let's not go into the argy-bargy. It is a very simple thing. Labor was in Government, were they aiming for high interest rates? No. They had every opportunity to get them low and they averaged 12 ¾ per cent.

BARTLETT:

But how far do you want to go back?

TREASURER:

Were we aiming for high interest rates? No. We had every opportunity to keep them low. And what have they averaged? 7.15 per cent. There is the record. You know, the record is there, I just think it is an incontrovertible record myself.

BARTLETT:

Just give me the name of one decent analyst, one respected analyst who agrees with your opinion.

TREASURER:

Oh there are numbers. There are numbers.

BARTLETT:

Just give me one.

TREASURER:

But well I could give you all sorts of people but you know, I am not here in the business of giving publicity to particular analysts who are quite capable of getting publicity for themselves. I will put my record out there. Liam I have been the Treasurer for nine Budgets, I have brought down seven surpluses. I may know a little bit about economic policy by now. I put in the place the current interest rate policy. I entered into the agreement with the Governor of the Reserve Bank. I appointed the Governor of the Reserve Bank after, and then we entered into this agreement. The agreement has been spectacularly successful at keeping interest rates low. When I announced this agreement the Labor Party said they would sue me. They said it was an illegal agreement and that they would sue me. And now fortunately for me the writ never arrived. But these are the arrangements that have delivered us low interest rates. And the record is there for everybody to see. I just say, judge the record. That is what I say.

BARTLETT:

Let's take some calls Treasurer. Graham is first up. Hello Graham.

CALLER:

Hello. How are you?

BARTLETT:

Good morning.

CALLER:

I would like to talk about the childcare rebate. When we had the health, private health care rebate of 30 per cent, then private health fees all went up, you know greater than the CPI or whatever it is, you know. So I was wondering how can he stop the same thing with this childcare?

TREASURER:

Well I don’t agree that it was the rebate that was responsible for price rises. In fact I would say if it wasn’t for the rebate the price of private health insurance would be very much greater than it is today. And similarly, in relation to childcare, if you get a 30 per cent rebate you are going to be paying less than you will if you don’t get that rebate. Now, there will be all sorts of things will go into the cost of childcare. All sorts of things. And there will be competition in the sector. But at the end of the day if you are getting a 30 per cent rebate you will be paying less than you are without that 30 per cent rebate.

BARTLETT:

You don’t think it will push up prices?

TREASURER:

No.

CALLER:

But if the prices go up then instead of getting a 30 per cent rebate you only get a 20 per cent?

TREASURER:

Well you always get 30 per cent of whatever you have paid.

CALLER:

Yeah.

TREASURER:

Now, as I pointed out earlier, I think if there is anybody in this industry that decides to try and price take I think they will be knocked around by their competitors quite quickly. And of course, as in most things, it is competition that drives prices down. And if you are getting a 30 per cent rebate you will actually be only paying, what, 70 per cent of the costs that you are currently paying.

BARTLETT:

Graham, thanks for calling. Hello Howard.

CALLER:

Hello.

BARTLETT:

Good morning.

CALLER:

Yeah good morning. Treasurer up front I am a Liberal voter. I employ 46 people and in my business I ask my staff what issues concern them. It is not child rebates, it is not university costs, it is not those things. It is the fact that if I offer them a pay rise they understand they only get about, in real terms only about 30 per cent of the pay rise. What they actually ask is if they could be paid and take the money home. They will make the decisions about what they will buy with that money. They will make the decisions about childcare or health care. They will make those decisions. What we see happening today is that you’re making all those decisions and dispersing this money where you see fit, albeit in marginal seats where you can win an election. Don’t you think it is time you gave the right back to individuals who earn the money to spend the money in the way they see fit and take care of themselves. Are we getting too close to the ‘nanny state’ is what I am saying?

TREASURER:

Well look I think you make a fair point. And what we have done is we have ensured that most people in Australia only have a 30 per cent tax rate. People earning average wages now face a top rate, and that is only their top rate by the way, of 30 per cent. Before we started reforming the tax system you were paying 48 ½ cents in the dollar at $50,000. Now we have got that down and for most Australians, over 80 per cent of Australians, the top tax rate that they will face is 30 cents in the dollar. I agree with your call. I think we have got to keep those rates low so that people can enjoy the fruits of their labour.

CALLER:

Just on that point, you say 30 per cent, but you have other taxes in place that are called levies now. We have got rid of the word tax. We have a Medicare levy, we have a gun buy-back levy, which is a tax. You know, what I am physically saying is these people that work for me, and they are low, they are not the highest paid in society, you know they are on $30,000 a year. What they would like to see is the $120 - $140 every fortnight that is taken out of their pay put back in their pocket rather than you deciding, you know, in your wisdom what to do with that money. They would like to take on board their own private health care, their own child education, their own childcare, they would like to spend the money and make the choices.

TREASURER:

No it is a fair point…

CALLER:

(inaudible)

TREASURER:

…if your employees are earning $30,000 then the top tax rate that they would be facing is 30 cents in the dollar. It is true that there is a Medicare levy, always has been at 1 ½ per cent. But they don’t pay things like gun levies. I mean, there was a one-off gun levy back in 1996 to get guns out of the community. Nobody is paying a gun levy anymore.

BARTLETT:

All right, thanks Howard for your call this morning. Good morning Anthony.

CALLER:

Yeah. Hi there. Treasurer.

TREASURER:

Hi Anthony.

CALLER:

You may not know that our economy in WA is running at something like over 8 per cent, our unemployment is under 5 per cent (inaudible). Now how important is this WA economy to your economy when that is all we hear about, is how strong your economy is? How important is WA’s economy to you? Like for example, our unemployment is under 5 per cent.

TREASURER:

Well the economy of Western Australia is very important to the national economy. It is out of Western Australia that some of our great exporter industries operate. We signed recently one of the largest contracts in Australian history with a 20 year LNG deal up into China. You got companies in the Pilbara that are shipping iron ore out to China and Korea and Japan that are at full production. They are really helping Australia’s export industries and I want to make one point here, for the mining industry, that people who work in the mining industry should know this. That under this Government you get a full rebate of excise paid on diesel in the mining industry. Labor’s policy is to introduce excise on diesel in the mining industry, 4 cents a litre, and it is a very anti-mining policy which will affect big companies in Western Australia that are earning export dollars.

BARTLETT:

Anthony thanks very much for you call. Good morning Lynne.

CALLER:

Good morning. And good morning Treasurer.

TREASURER:

Good morning Lynne.

CALLER:

I wanted to ask you Mr Treasurer what you intend to do for the old age pensioners? I am not talking about self funded retirees, and I know that you are putting money into care homes for the elderly but the ordinary everyday bloke, what are you doing for us?

TREASURER:

Well there was a pension rise this week on the 20th of September, I think it was $5.40 or was it $6.40…

CALLER:

Yes there are two indexations…

TREASURER:

…for a fortnight…

CALLER:

…anyway.

TREASURER:

…for the single person.

BARTLETT:

Don’t spend it all at once Lynne.

TREASURER:

Well there was a rise. And there will be another rise in March of next year.

CALLER:

But they come every year. We get two indexations every year.

TREASURER:

That’s right. And we have legislated so that the indexations are based on wages. Now because wages are running faster than prices that means that the aged pension is going up faster than the Consumer Price Index. So, it is actually increasing in real terms. And we had that increase on the 20th of September and we factored it into the Budget (inaudible) in March of next year.

BARTLETT:

Is there anything else around for pensioners?

TREASURER:

In addition to that we have announced for older Australians, that we are going to increase the private health insurance rebate so that at the moment it is 30 per cent. But if you are over 65, you are going to be eligible for 35 per cent…

CALLER:

(inaudible)

TREASURER:

…and if you are over 70…

CALLER:

…health fund…

TREASURER:

…you will be eligible for 40 per cent. So that older Australians will get a better deal in relation to private health insurance. And they of course are the heavier users of private health insurance.

BARTLETT:

For those people who can, for those pensioners who can afford it.

CALLER:

(inaudible) can’t afford it, can’t afford to be in a health fund.

TREASURER:

Well actually we find that older Australians are the people who take out private health insurance at a much higher rate than anybody else. And the reason for that of course is that towards the, well as you get older you tend to draw down more on health services.

BARTLETT:

Lynne thank you for calling. Hello Bob.

CALLER:

Hi Liam. Hi Mr Costello.

TREASURER:

Hi Bob.

CALLER:

Yes.

BARTLETT:

Yes he is listening.

CALLER:

Can you hear me?

BARTLETT:

Yes we can.

CALLER:

Oh okay. Mr Costello, every time I turn on the radio it frightens me because of the bidding war provoked. And I know your Government’s at least has put us in this position but my concern is whether it is sustainable. And if the economy goes down, what is going to happen? Are taxes going to go up or are interest rates going to skyrocket or services given away?

TREASURER:

Well we have got to make sure that we don’t have an economic downturn. That’s, I have always thought that the principle object of economic policy is to keep an economy growing and to keep it out of recession. Now we haven’t had recession in the last eight and a half years. The last recession we had was the one that Paul Keating said we had to have, remember in 1990. And other countries around the world have gone into recession, the United States has, France, Germany, Japan, they have all been in recession. So the principle objective is to keep the Australian economy out of recession and that is what I focus my efforts on. I am confident that if we can keep the reform programme going in industrial relations, if we can keep it going in other areas as well, particularly business regulation. We can keep our companies profitable, that we can keep the Australian economy out of recession and interest rates low. That is the object of economic policy.

BARTLETT:

Bob thanks for your call. And Treasurer thanks very much for coming in and taking some calls for us this morning.

TREASURER:

It is great to be with you Liam. Thanks very much.

28 Sep 2004

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