Peter Costello

Media Transcripts

13 May, Budget

Transcript No. 15
Hon Peter Costello MP

Radio Interview - ‘5DN’ with Jeremy Cordeaux

Wednesday, 13 May 1998
9.35 am


SUBJECTS: Budget


TREASURER:

 

Jeremy, how are you?

 

CORDEAUX:

 

Oh well, I’m fine. I guess you must be happy with the reaction and the response?

 

TREASURER:

 

Look, I think so. This has been a great achievement for the country to get us back on track and to have set down the goals that we did two years ago and to now be able to realise them, to go further and to get Australia back into a strong position and all of the opportunities that it’s going to give future generations of Australians.

 

CORDEAUX:

 

Well I even heard the ABC this morning, albeit perhaps grudgingly, saying it was pretty darn good.

 

 

TREASURER:

 

Even the ABC, Jeremy.

 

CORDEAUX:

 

Can you believe it? Can you believe it?

 

TREASURER:

 

Hard to believe. But look, what we’re doing here is we’re being careful with the taxpayers’ money. There are no increases in income tax, no increases in company tax, no increases in the wholesale sales tax, no increase in the petrol excise and yet we’ve taken Australia out of the red and put it back into the black. That means for the first time since the last eight years we are paying our way, we are getting our debts down, we’re not putting them up, and that gives us the opportunity in the future to use taxes for new and better services and give taxpayers a better go.

 

CORDEAUX:

 

Now I put that to Gareth Evans. He said that he could be there with exactly the same result but without the pain that people have been subjected to. The line, I guess, the one that is going to be used over and over again, is that all of these gains and I quote, "have been on the backs of ordinary struggling Australians". That’s going to be the line, I guess.

 

TREASURER:

 

Well, they’ve got to say something, don’t they? If you went out of office and you were running the country losing $10,000 million a year and somebody comes in and, without putting up taxes, turns the place around, you’d want to be able to try and for propaganda reasons make some point, wouldn’t you? But this has been an achievement which all Australians can be proud of because all Australians have contributed. We took a tough line on people that were avoiding taxes when we wiped out R&D syndicates, when we dealt with infrastructure bonds, we made sure that social security wastage was eliminated. And I pay tribute to Jocelyn Newman for this. Do you know when we came into office we said we were going to have a strong attack on people who were receiving benefits when they weren’t entitled to them? We would follow up leads from the public and we would enforce the laws. Do you know, Jeremy, we saved the taxpayer $28 million a week - a week - of people who were receiving benefits that they weren’t entitled to. And so we made sure that we were careful with taxpayers’ money across the board, we put Australia back into the black and, as a result, everyone can share the benefits. And the best benefit for homebuyers and young couples is in relation to interest rates. They are now paying $4,000 a year less on their home mortgages.

 

CORDEAUX:

 

And in terms of not handing out money or throwing money around, I take it you won’t be handing out any more Reg Livermore $150,000 packages so he can write his autobiography?

 

TREASURER:

 

Well, things had just got out of control.

 

CORDEAUX:

 

It seems a bit strange to me.

 

TREASURER:

 

Well, here was sort of honest, decent taxpayers collecting … paying their taxes and $28 million a week was going out to people who weren’t entitled to benefits. And all you had to do was follow it up and crack down on it and you saved the taxpayers that kind of money. Now because we were able to get the budget back into the black and keep inflation low at the same time, interest rates are now as low as they’ve been since 1969, since man walked on the moon. And over the last two years, the average family in Australia’s mortgage has reduced by $4,000 a year. That’s $4,000 back into the pocket of homebuyers and, for young Australian couples with home affordability now 24 per cent better than it was two years ago, that means more young people able to buy a house, get a start in life. And that’s what it’s all about – delivering benefits to those kinds of people.

 

CORDEAUX:

 

Now on the back of what has broadly been accepted as a good budget, a responsible budget, a sound budget, the Australian dollar slips. It’s back to where it was in ’86, isn’t it?

 

TREASURER:

 

Well, one of the reasons why we had to have a strong budget is that we are living through a climate in the Asian region of turbulence which that region has never seen and, although Asia was an area that was growing strongly right through the ‘80s and the ‘90s, Asia probably won’t grow at all. The Japanese economy is not growing.

 

CORDEAUX:

 

How bad do you think it is going to get here in Australia? I mean popular opinion is now that it is going to be worse than we anticipated.

 

TREASURER:

 

Well, it’s going to be severe. This is the worst downturn in Asia in … since the oil price shocks.

 

CORDEAUX:

 

How much of a bearing will that have on the timing of the election, do you think?

 

TREASURER:

 

Ah well, the important thing is this. That we don’t control the Asian financial crisis. We didn’t create it, we can’t stop it.

 

CORDEAUX:

 

No, but you don’t want to be caught in the wash of it at the time of an election, do you?

 

 

TREASURER:

 

Well, it is washing now. We reckon the Australian economy will grow 3 per cent in the forthcoming year.

 

CORDEAUX:

 

Is that enough to do anything for unemployment?

 

TREASURER:

 

Well, if it wasn’t for Asia, it would be growing much more strongly than that. But let me put the 3 per cent in context. 3 per cent will be the highest growth rate in Asia and possibly the highest growth rate in the developed world. It’ll be higher than Britain and the United States and all those economies as well.

 

CORDEAUX:

 

Do you remember Mr Keating saying that if you couldn’t get 4 per cent you should get out of the business?

 

TREASURER:

 

Well, that’s right. Well, because of the Asian crisis we won’t break records this year. But the point I make is this. If we hadn’t two years ago started to strengthen the Australian economy, not knowing then what was going to happen in Asia, where would we have been now? There were a lot of critics around that were saying, "Oh well, you can run a country in deficit, you can build up debts, don’t worry about it. It will all be okay." Where would we have been today if this Government hadn’t decided to turn the country around, starting two years ago?

 

CORDEAUX:

 

There’s a bit of disappointment in South Australia that there wasn’t something specifically said about the Alice Springs-Darwin railway.

 

TREASURER:

 

Well, we have allocated $100 million to build the Darwin …

 

CORDEAUX:

 

We need three.

 

TREASURER:

 

Pardon?

 

CORDEAUX:

 

We need 300 million.

 

TREASURER:

 

Well, 100 million is a pretty good start and from what I hear most people seem to think that with private sector involvement a lot of it can be handled by the private sector. But it’s $100 million, it’s in the budget, it’s allocated, it’s there, it’s ready to go as soon as the projects are ready. And that’s going to take a private consortium, as I believe, to get it up and going. But the $100 million there, I’m ready to write a cheque as soon as …

 

CORDEAUX:

 

We’ll take it. We’ll take it.

 

TREASURER:

 

… as soon as the consortium’s agreed on it.

 

CORDEAUX:

 

A surprise critic, the NRMA, this morning says that road funding in the federal budget is totally inadequate and could harm Australia’s economic competitiveness and growth.

 

TREASURER:

 

Well, road funding in this budget is maintained and the Commonwealth maintains its funding. The Commonwealth’s not the only road builder in the country. In fact, most of the roads are built by State governments but the Commonwealth builds roads of national importance and we run a black spots programme. This is a new programme which we introduced to try and get rid of traffic black spots that cause accidents and that programme continues. I think there’s good funding for roads in this particular budget.

 

CORDEAUX:

 

Now you vowed to continue pursuing tax avoiders. I can’t imagine what loopholes there would possibly be left? What are you talking about?

 

TREASURER:

 

Well, I’m pleased to hear you say that, Jeremy, because I don’t want any loopholes left and if there aren’t any left we’re doing a pretty good job on it. And the reason we try and close down loopholes is you can’t ask average wage and salary earners to pay tax out of their income if they think richer people are exploiting loopholes.

 

CORDEAUX:

 

Even if people are getting away with paying no tax, surely it’s merely companies who are choosing to pay their company tax in the most favourable environment? They just move their money around the world. There’s not much you can do about that and remain in the real world.

 

 

TREASURER:

 

Yeah, well we have actually introduced some measures to deal with that. There are measures, I don’t know if I’ll go into the technical detail, called thin capitalisation and transfer pricing measures. These are some of the measures that we are taking to try and make sure that companies can’t use international tax havens and …

 

CORDEAUX:

 

Well, without going into that, I mean, what would you be zeroing in on? What do you see as the major tax avoidance loophole left?

 

TREASURER:

 

We’re not sure that it’s necessarily loopholes that we’re looking for with this crackdown but it’s a question of audit activity in relation to what are called high wealth individuals. The Commissioner of Taxation, he’s the only person who knows about a person’s tax affairs. I’m never told about the tax affairs of anybody. In fact it would be an offence for the Commissioner of Taxation to tell me. But he has advised me that he believes that amongst what he calls some high wealth individuals there should be stronger compliance. We’ve set aside an $18 million programme in the Tax Office for him to go and ensure there is compliance with the current law and to test it in the courts. And he says that as a result of that we can expect increased tax compliance of $100 million.

 

CORDEAUX:

 

Can we look forward to – and I’ve seen this 30-30-10 tax revolution being talked about – can we look forward to a system after your tax package that puts incentive back in the whole system?

 

TREASURER:

 

Oh look, that’s the whole idea. What’s wrong with the Australian tax system is that people on average incomes, if they get a part-time job or they do overtime, they can lose a dollar in every two that they earn. You earn $2, you pay one in tax. Now that’s wrong. You shouldn’t have average income earners paying rates like that.

 

CORDEAUX:

 

Well, what do you think you can get it down to? They say 30 per cent corporate, 30 per cent personal and a 10 per cent GST.

 

TREASURER:

 

Well, we’ve got to kick those people out of high marginal tax rates, we’ve got to reform the indirect tax system. We’ve got a silly indirect tax system which applies to nearly all goods, levying rates of 22 and 32 per cent. If we have a broader base and include services, we can get those rates down quite dramatically as well. And then we can look at improving the company tax system as well. But the important thing here is that we make the effort. We know that Labor is going to come out and try and engage in a fear and smear campaign and try and stop tax reform again but I just say to people, look, we’ve got to do this for the country. We’ve got to fix this tax system once and for all and if we don’t do it we’ll just sort of muddle through with a tax system that was designed in the 1930s and is just crumbling at the edges.

 

CORDEAUX:

 

Well, if you tax consumption instead of effort and enterprise, I mean I can’t understand anybody arguing about that but obviously people will.

 

TREASURER:

 

People do. I can’t either. If you want to encourage people to save, which we do, why would you tax their income rather than their spending?

 

CORDEAUX:

 

Yeah. It’s crazy.

 

TREASURER:

 

Crazy.

 

CORDEAUX:

 

And if you fix up the waterfront at the same time and you can put some incentive back in the tax system, I think that there’s no holding this country.

 

TREASURER:

 

Well I do, too. You see, let’s look at this. In the Asian region, enormous turbulence right through the region. It doesn’t matter where you want to look – Indonesia, Malaysia, Japan, Korea. Right through the whole region. What’s been the strong economy of the Asian region? Australia. Strong economy, growth, low inflation, low interest rates, good legal system, a financial system which we are going to make the best in the world. The best place to do business in this region. And if we fix our tax system and we fix the arteries – you know, the wharves and the ports where all of our imports and our exports move – there will be no stopping this country. And that’s the great challenge that lies in front of us.

 

CORDEAUX:

 

Treasurer, just one question from Julie. And I know you’ve got to go but just quickly from Julie. What’s the question, Julie?

 

JULIE:

 

Yes, good morning, Treasurer.

 

TREASURER:

 

Good morning, Julie.

 

 

JULIE:

 

There’s just a small piece in The Advertiser this morning saying 50 million to help with the tourism … the tourism industry cope with the decline in Asian travellers. Can you elaborate a little bit on that 50 million as to what it’s going to do?

 

CORDEAUX:

 

Well, I don’t know how much time the Treasurer has.

 

TREASURER:

 

Sure. Well, just very briefly that 50 million is the funding to the Australian Tourist Commission to increase over and above what it’s currently got, to increase advertising overseas in those markets where we can expect tourism to pick up. Look, Asia’s dropped off the map. We’re getting hardly any tourism out of Asia. But, what we’ve now got to do is we’ve got to go and go back into different markets, like the US market, like the European markets. The $50 million is to start advertising over there for tourism packages and then …

 

CORDEAUX:

 

You’re not going to go back into industry welfare, are you?

 

TREASURER:

 

No, no, no, no, no. Nobody gets this money. This is just advertising Australia as a tourist destination.

 

CORDEAUX:

 

Ah ha.

 

TREASURER:

 

And then there’s another $8 million to promote regional tourism. We don’t want to just go overseas and say, you know, put up pictures of the Sydney Harbour, Opera House and say, "Come to Australia" so all they want to do is go to Sydney. We want to promote regional tourism as well so you might get a package promoting the Barossa, you might get a package promoting the Flinders Ranges, so that people overseas know, one, Australia is a good tourist destination and, two, that there’s more to Australia than the Sydney Opera House, that they ought to get out and spend some money all over the country so that they can help Australian business.

 

CORDEAUX:

 

You’ve got to run, Treasurer. You’re not going back into the House to announce a snap poll, are you?

 

TREASURER:

 

Pretty sure we won’t be, Jeremy.

 

CORDEAUX:

 

All right. Thanks for your time.

 

TREASURER:

 

Thanks very much.

 

13 May 1998

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