Peter Costello

Media Transcripts

Ministerial Council Meeting; fuel prices; tax reform

 

Transcript No. 2000/64

TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

ABC AM

Full transcript of interview with Michael Brissenden

Sunday, 25 June 2000

Recorded at 3.15 pm

Paris

E&OE

SUBJECTS: OECD Ministerial Council Meeting; fuel prices; tax reform

JOURNALIST:

Mr Costello, less than a week to go now until the biggest change to the tax system since Federation, as its often said. Is it appropriate do you think for the Treasurer to be out of the country at a time like this?

TREASURER:

Oh yes. Im chairing the OECD meeting which of course is an opportunity to showcase Australia and its performance over the last couple of years. Weve been recognised amongst the nations of the world as one of the six economies of the world which has been able to harness higher growth and higher productivity. And weve also been recognised as world leaders in many areas of Budget policy. And we are here to share some of those experiences but also to capitalise on them and to use that as a platform to sell Australia - its trade, its opportunities for investment, its opportunities for growth - to the rest of the world.

JOURNALIST:

Youve got a tax to sell at home, though, havent you? There are still some significant problems doing that. One of those, the most thorny issue perhaps, is this question of how much petrols going to go up or down. Now you say the oil companies can reduce prices at the pump by 1 cents. They say half a cent is the maximum. Are they wrong?

TREASURER:

What we say, is that the oil companies, like every other company in Australia, have to pass on the savings that theyre getting from the abolition of wholesale sales taxes, from the abolition of excise on diesel which is in their transport costs, and from the reduction in the costs in producing their product. The argument in relation to the oil companies is no different to the argument in relation to every other company in Australia. We are not going to single out the oil companies and say they alone dont have to pass on reduced costs of production. They do ...

JOURNALIST:

But they say its not possible.

TREASURER:

every other company has to do the same. And when their tankers start rolling out of their factories on 1 July, theyre going to be rolling out with a 24 cent a litre reduction in the excise on diesel. Theyre going to have opportunities in relation to all of their inputs to recover direct and embedded wholesale sales taxes and we dont think oil companies ought to be keeping that benefit. We think it ought to go to consumers.

JOURNALIST:

Do you have any Treasury models or anything to suggest that they can do it?

TREASURER:

Oh well, the Treasury has looked at this as it has in relation to all other industries as well, under its Prismod modelling. And as weve published in our policy when it was released back in 1998, there are savings in relation to oil, production of oil and petrol, just as there are savings in relation to the production of all sorts of other goods. And to single out this industry and say oh well, it doesnt have to pass on cost savings would be to give it a benefit which no other company is to enjoy.

JOURNALIST:

So you dont accept that petrol will have to rise as a result?

TREASURER:

With the savings passed on to the consumer, with the reduction in the excise on petrol and with the grants scheme which is put in place in relation to non-metropolitan and remote Australia, consumers are being protected by all of those decisions in relation to the price of petrol.

JOURNALIST:

Can you guarantee that it wont rise and what will you do if it does?

TREASURER:

We will have the Australian Competition and Consumer Commission looking at those oil companies just as theyll be looking at every other company in the economy, making sure that the benefit is passed on to the consumer. Look, were not putting in place reductions in excise and wholesale sales taxes and grants schemes for the benefit of the oil companies. Theyve been put in place for the benefit of consumers and theyll be passed on.

JOURNALIST:

But will petrol rise or will it not rise?

TREASURER:

Well as I said, by passing on the cost savings, by passing on the reduction in the fuel excise, the petrol excise, by passing on the advantage of the grants scheme, then consumers are going to be protected as we have put our policy and directed our policy at doing.

JOURNALIST:

Does that mean petrol wont rise?

TREASURER:

Petrol moves for all sorts of reasons. Petrol moves because

JOURNALIST:

It wont rise as a result of the GST?

TREASURER:

Petrol moves because the oil price moves, petrol moves because the exchange rate moves, petrol moves because theres competition in the market, petrol moves, weve noticed, if theres a long weekend. And you cant sit down and say were going to abolish long weekends or a floating exchange rate or a world oil price or lack of competition. But what I can say is this. By passing on the cost savings, by reducing the petrol excise, by making sure that the grants scheme goes to the consumers, consumers are going to be protected.

JOURNALIST:

Right so it wont rise as a result of the GST?

TREASURER:

As a result of the whole tax changes that have been put in place, consumers are going to be protected.

JOURNALIST:

Okay. Theres a number of other little spot fires around as well, of course, about this tax. One of them is I noticed this weekend mobile phones are going to increase, the charges on mobile phones are going to increase by 10%. Is that an unnecessary burden for business at this point?

TREASURER:

Well of course for business, if youre actually paying GST you can claim it all back. So for a business, all GST is reclaimable. Business doesnt pay GST, so it couldnt be a burden, whatever it is. I havent seen the clipping which you refer to. Whatever it is, the business would get it back in its entirety. Its only wholesale sales taxes that you cant get back. But for GST, any business that pays GST on a business input, it claims the whole of it back.

JOURNALIST:

Well a lot of people use mobile phones, too. Is it an unnecessary burden on ordinary phone users?

TREASURER:

Well youre going to have some prices that go up, some prices will go down, some will be the same. But for the consumer, the consumer has more money to spend. The consumer is getting more money to spend as a result of income tax cuts and increases in family benefits. So consumers, after they have more money to spend, will be able to not only pay for such price rises but will be in a net better off position.

JOURNALIST:

Im sure it wont come as any surprise that the unions have already called for wage increases as a result to offset the costs that they say people are going, ordinary workers are going to incur under the GST. Do you expect that therell be more of this sort of wages pressure in the next few months?

TREASURER:

Well there shouldnt be because if youve got more money to spend on the same wage, theres no grounds to therefore seek a wage increase. Now lets go back to 1985. Youll recall that the Labor Party wanted in 1985 to introduce a broad based consumption tax of 12%. 12 all right? And the ACTU at the time led by ACTU President, Simon Crean, said that if there were income tax cuts they wouldnt be seeking wage rises. That was their position when Labor had the plan for a broad based consumption tax. We now have a GST not at 12 but at 10 larger income tax cuts. What basis would there be for wage claims? Now I know therell be some unions thatll want to do their best to try and help the Labor Party by creating dislocation around the place, but there is no economic case for any wage increase. And if you want proof of that, go back to 1985. Here we are in the year 2000, 15 years after that 15 years after the Labor Party tried to introduce a broad based consumption tax. Weve finally got around to it. Were finally catching up with the rest of the world and there are some people in Australia led by the Labor Party wholl try and pretend that you can ignore the economic developments and the need for taxation reform but you cant. You wont keep wholesale sales tax in Australia. Today Australia and Swaziland are the two countries of the world that have a wholesale sales tax. After 1 July itll just be Swaziland. Now here is the complete hypocrisy of Labor. If wholesale sales tax is so preferable to a goods and services tax, why wont they abolish it and bring back the wholesale sales tax, rejoin Swaziland, if theyre ever elected? Because they know, like we know, that Australia needs a modern taxation system. They just havent got the courage to do it. Thats the difference.

JOURNALIST:

Are you convinced that the people are with you on this? The Prime Minister says the electorates made up its mind, its made its choice and hes prepared to lose an election on this issue alone. Are you?

TREASURER:

Im never prepared to lose any elections and Im sure the Prime Minister doesnt have in mind losing any elections. Look, we are going to be part of the modern world with a new taxation system. This idea that we would go it alone, that Australia and Swaziland are the only two countries in the world that have it right. I made the point earlier. Not even the Labor Party believes that. The Labor Partys deepest, most choice wish is this: that we should introduce a new taxation system so they can take the benefit of it. Now Labors had an incredibly easy run, havent they? Here they are, theyve been campaigning against something they want to keep, they are desperate to keep, they are desperate to take advantage from. Because they know, like we know, that Australias got to be part of the modern world. And I think once we do modernise our taxation arrangements, we see benefits flowing from it, people will be glad that the Government was prepare to lead.

JOURNALIST:

Even if it costs you politically? If you do lose on this issue?

TREASURER:

Look, were in July of 2000 with the largest income tax cuts in Australias history about to come into effect, increases in family benefits, reductions in company tax and capital gains tax, abolition of wholesale sales tax, and its replacement with a goods and services tax. Australia meets the modern world. We know it had to be done. Labor, as long ago as 1985, were talking about doing this. Finally the times come and I think Australia will be a better country for tax reform.

JOURNALIST:

And if costs you government, will you lead an Opposition?

TREASURER:

Well as I say, its July of 2000. I dont concede for a moment that we should be calling the next election. And I make this point. If this is an issue for the next election, Kim Beazley should pledge today that if hes elected Prime Minister, he will repeal the goods and services tax. That would really make this an issue at the next election. Kim Beazley pledges the repeal of goods and services tax and a vote for Labor is a vote for the wholesale sales tax. To re-modernise Australia back to Swaziland standards ...

JOURNALIST:

And would you lead an Opposition ?

TREASURER:

and Id be happy to fight him on that issue. Absolutely happy to fight him on this issue. But I dont want this complete hypocrisy from the Labor Party to say were so opposed to goods and services tax we want to get elected and take advantage of it. That would be the most patently false position thats been put in relation to taxation policy. If Beazley really believes what hes been saying for the last couple of years, he will pledge now to repeal goods and services tax and introduce wholesale sales tax. If he cant do that, it shows that his campaign is essentially, as we all know, a fraud.

JOURNALIST:

Treasurer, thanks very much.

TREASURER:

Thanks.

 

25 Jun 2000

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