The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Speech of 17/05/2007

ADDRESS TO THE BREAKFAST FOR BOB DAY CANDIDATE FOR MAKIN

SFERAS ON THE PARK
ADELAIDE

THURSDAY, 17 MAY 2007

Well, thank you very much Robin, my team may in fact not be going well but it did win the first game of the season against the Adelaide Crows … hasn’t won many since.  Bob, thank you for your welcome here today, and can I say how much I hope you are able to win the trust and the support of the people here in the Federal Electorate of Makin.  It’s going to be a tough electoral fight, and you are following in the footsteps of a very distinguished member in Trish Draper.  Trish has been a wonderful fighter for this area, she’s been a great personality – the fact that she has won and held this seat for so many elections is a great tribute to her and to her campaign team.  I want to thank you, Trish, for everything that you have done, on behalf of the people.

But I can’t think of a better person to become the candidate here.  I’ve known Bob for a long time, longer than either of us care to remember, he has been an extraordinarily successful businessman with his home building business and has created jobs for tens of thousands of Australians.  That’s the reality – tens of thousands of Australians got started in life, got a job, got the ability to support a family because of your entrepreneurial efforts.  And aside from your success in business Bob, you’ve been a great thinker and a great contributor to Australian political debate and we don’t take anything for granted in politics, it’s a tough business and not everybody is rational – as you saw from the welcoming committee that was here this morning to welcome me in.  I understand they’ve all gone, apart from the State Labor member who’s still out there and has nothing else to do for the rest of the day.  But, he must wonder how to fill in 364 other days here in this year; but, it’s not entirely rational and we hope, Bob, that you are elected.

To of my other friends who are here: Senator Cory Bernardi great to see you, Madam Mayor from Tea Tree Gully, thank you for having me back here again, Rod Denton from the Clovercrest Baptist Church great to see you and thank you all very much for your welcome.  Well, what a welcome – I was educated at a Baptist school but they never wore uniforms like that.  Things have improved over the last.  Think I might go back to school having seen what is now going on.  But the funny thing, I just want to say to you, I said to my staff before coming here this morning, I said ‘I want to do something different, I don’t to give a speech about the Budget’, they said ‘what do you want to do Treasurer?’, I said ‘look, I think I might get up and sing a few Buddy Holly numbers’.  But it’s been done so I’ll just have to go back to speaking about the Budget now.  You could have seen something really, really special.  But I’ll stick to the post. 

Well done to the Kings Baptist Grammer School for that performance.  Whenever I see young people around Australia these days I’m always impressed by their talent and their vitality.  I go into schools a lot to speak to students and I often speak to them about economic policy and take questions.  The questions are always of a very, very high standard – in fact I frequently say ‘I am lucky that I don’t get asked the standard of question that I get from school students from the national press in Canberra.  Because they’re invariably much better than the national press gallery.  They are young, they are vital, they are very switched on, and this gives me great hope for the future of our country actually.  I also think to myself I better get on and do everything that I have to do because this is a very intelligent generation coming behind me.  But wasn’t it wonderful to see them. 

In fact, I will tell you a funny story.  Every year one of the local economics teachers in one of the schools in my electorate sends me the year 12 economics exam to do.  Here’s what our students have to do, see if you can do it.  And I do it and I send it back to her for marking.  And there was one year there where I got 90 per cent – I was quite pleased with it actually.  I got 90 per cent because they had multiple choice questions which was worth 80 per cent; and I got 80 per cent.  And then they had essay question which was worth 20 marks; the essay question was: give two arguments for GST and two against.  And I said there are no arguments against.  And got 10 out of 20 – I don’t know what went wrong there, but I finished up with 90 marks out of 100 which wasn’t too bad. 

How would you score the Budget – well my opponent in the Labor Party gave it quite a high score and I actually read in the paper today that he’s announced that the Labor Party will not be taking a tax policy to the next election because he says they think that the tax system is not that bad and so they are not going to take a tax policy to the next election.  After 11 years in opposition, apparently can’t find anything wrong with the Australian tax system.  A political party without a tax policy is like Buddy Holly without his microphone – it’s like turning up to It Takes Two and singing a solo.  It just doesn’t happen. 

And I think that this illustrates one of the things coming out of this Budget that the Government has been working very hard on economic reform, very hard on economic reform.  And I think some of the results are now in after a decade of economic reform.  Some of the results are now in.  We now have the lowest unemployment since 1974, at 4.4 per cent, since Gough Whitlam was elected.  The lowest unemployment since 1974.  When I first became Treasurer one of the big complaints that I used to hear from business and from parents and from schools was unemployment.  What are you going to do to get more people into work? 

You know the complaint that I’m much more likely to get these days is labour shortage – where can we find people to take up these jobs?  And as far as problems go labour shortage is a problem – and it’s a good problem – it’s much better to have more jobs for people than more people than you’ve got jobs.  And this is a good problem to have frankly – with unemployment now at 4.4 per cent.  But we have to grow our labour market to take some of those jobs so we can increase the size of the economy.  Some of the results are starting to come in after 10 years of strong economic management. 

Leading up to this Budget there is a lot of speculation in the papers – what will be the size of the Budget surplus.  A lot of speculation.  And that’s very different to when I first became Treasurer, all the speculation was – what will be the size of the deficit?  Nobody used to speculate about surplus Budgets, it just didn’t exist.  It was a different world back in 1996.  Yesterday the Westpac Melbourne University Index came out on consumer sentiment – the highest ever measured in Australia.  The highest ever measured.  They’re more confident about their employment prospects, they’re confident about interest rates, they’re confident about the economy.  I think these days we all say ‘that’s Australia, that’s good’.  And it is good.  But it didn’t just happen.  It wasn’t an accident.  Wasn’t some fluke of nature.  Doesn’t just run itself. 

Those of you who are in business know you couldn’t just sit by and do nothing for several years and let the business run itself.  Let the customers just walk in the door.  Make sure the competitors didn’t steal your markets.  You’ve actually got to work at it.  And working at economic management and Government over the last 10 years is now yielding some results.  The Australian economy, the GDP, the output of the Australian economy on a yearly basis is now a little over a trillion dollars.  A thousand billion dollars.  It’s nearly 50 per cent bigger than when I became Treasurer.  We’ve taken that economy and grown it by nearly 50 per cent in the last 10 years or so.  That doesn’t just manage itself.  It does take a little bit of work putting together a Budget, and a Budget is about $240 billion.  These numbers roll off the tongue, don’t’ they?  But they’re quite large when you think about it.  Quite large.  And it takes a lot of management and if you get it wrong then people lose their jobs, they lose their houses, they lose their businesses.  And that begins to spiral down on itself.  And that’s why we take economic management seriously. 

Now, Mr Rudd is now claiming that he’s a economic conservative – and why would he claim that he’s an economic conservative?  Because he wants to be like us.  Wouldn’t you?  The results are now coming in so rather than saying ‘well it’s all terrible, that’s shocking, what we need is a good socialist Government’, it’s ‘I’m an economic conservative’. 

You’ve probably seen his advertisements on TV – he sits in front of a window and he says ‘I’m an economic conservative’.  Well, you could have fooled me for the last 10 years or so.  Could have fooled me because when we were putting all of these things in place we weren’t getting any help from him.  We weren’t getting any help from him.  It took a lot work to get where we are.

Imagine if you bought a block of land and you wanted to build your dream home on it and you lodged your plans with the council and your neighbour opposed it.  And when you dug the foundation your neighbour came around in the middle of the night and kicked them in.  And when you had a pile of timber delivered the neighbour got a truck and took it away.  And when you put in the wiring your neighbour came and short circuited it.  And when the painters came around they put turps in the paint.  Imagine if you had to struggle and struggle and struggle to build that house and you finally prevailed against all of the odds and you had a big, new gleaming house and you got ready to move in and your neighbour said ‘I’ll move into that house, thank you very much’. 

How would you feel?  Well, imagine if you balanced the Budget and paid off debt and reformed the waterfront, improved industrial relations and introduced the GST and reformed the taxation system and somebody said ‘well I’m an economic conservative too’.  I’d like to move into that body.  Imagine how you’d feel?  But you see, it’s not just a question really of branding or badging.  It’s a question of doing the hard work.  And we’ve been doing the hard work here in Australia for a very long time.  

Just very briefly I’ll just show you some of the tax changes that we introduced at Budget, work incentives from income tax reform and I’ll flash up for you if I can, the way in which the current tax thresholds, if you can see that, I’ll read it if you can’t, will change from 1 July 2007.  After cutting tax in 2003, 2004, 2005 and 2006 we announced further tax changes to take effect on the 1st of July 2007.  The tax rate for every person’s first $6,000 is $0.  The tax rate between $6,000 and $30,000 will be 15 per cent.  The tax rate between $30,000 and $75,000 will be 30 cents.  The tax rate between $75,000 and $150,000 will be 40 cents.  And the top marginal tax rate of 45 cent will only apply to each dollar over $150,000. 

But from 1 July 2008 we’ll take that further so that the 30 cent rate will apply to all income between $30,000 and $80,000.  The 40 cent marginal rate between $80,000 and $180,000 on the top marginal rate will only apply to each dollar over $180,000.  Now, why we changed the tax rates like this, we have been progressively cutting tax in that $30,000, $40,000, $50,000 area.  Because that’s where most Australians are.  The average wage in Australia is about $47,000; about $47,000.  And by cutting the tax very heavily in that area of $30,000, $40,000 and $50,000 we are cutting taxes very heavily from middle income earners. 

We’re also encouraging people to do more work and to come into the workforce because in Australia these days it’s all about growing the size of the economy.  More people in work.  Those areas which have been traditionally under-represented in the workforce – older workers, maybe married women that want to come back into the workforce.  To try and get them to do an extra shift or an extra day or to participate in the workforce. 

It’s a better time to get a job in Australia now than at any time for 32 years.  And so we want to say to those people ‘come and have a go in the workforce’.  It’s good for you, it’s good for the economy, it’s going to make a difference.  Three years ago people on various incomes of $15,000, $20,000, $25,000, $30,000, $40,000, $50,000 were paying the tax burden that you see there in red.  On 1 July they will be paying the tax burden you see there in blue.

On 1 July they will be paying the tax burden you see there in blue.  So if you take somebody on $30,000, three years ago they were paying $5,172 in tax on $30,000.  On 1 July 2007 they will be paying $2,850; they will have had their tax cut by 45 per cent in three years – 45 per cent in three years.  That is the accumulation of tax cuts in 2003, 2004, 2005, 2006, 2007.  Somebody on $25,000 will have had a 41 per cent tax cut.  Now if you compare this, if you want to compare this, to the record of State Governments, did you ever hear of a State Government cutting a tax?  I read the Advertiser this morning, a great front page.  Business saying ‘well what about doing something for business in South Australia?’  There is an old expression in Australian politics, never stand between a State Premier and a pot of money; you will be run down in the rush. 

The Commonwealth Government has been cutting taxes in 2003, 2004, 2005, 2006, 2007 to heighten work incentives.  That is where the tax scales stood, this is interesting, when our Government was elected you paid 20 cents in the dollar between $5,000 and $20,000, 34 cents between $20,000 and $38,000, 43 cents between $38,000 and $50,000 and you paid 47 cents in the dollar for each dollar over $50,000, that was the Keating tax scale. 

Well we cut that 20 per cent rate to 15.  For middle income earners between $20,000 and $80,000 instead of paying 34, 43 and 47 cents in the dollar they only pay 30 cents in the dollar.  That is where Australia is by the way, between 30 and 80.  We cut the top rate, instead of cutting in on each dollar over $50,000 it cuts in on each dollar over $180,000.  Only 2 per cent of Australians are now on the top rate - 2 per cent of Australians. 

You see a graph like that you see how far the tax scales have moved to give people more incentive to work.  And of course people say ‘well how to are you able to cut tax?’  Well the truth of the matter is the more people who get into work the less you pay in unemployment benefits and the more revenue you raise in income tax.  And so what has been happening is if you put 2 million new people into the workforce as we have over the last ten years.  Let me say that again, 2 million more Australian in work today than 10 years ago, 2 million.  You know, think of the MCG on Grand Final Day, 100,000, 10 of them is a million, 20 of them, 20 Grand Final crowds of additional Australians into the workforce over the last 10 years.  If there are more of them coming into the workforce you are able to cut tax and that draws more into the workforce, you are able to cut tax and that draws more of them into the workforce. 

Now I don’t have time today to go through all of the things that we announced in our Budget last week.  As I said the Budget is a $240 billion Budget.  It funds everything from Super Hornet aircraft to which I allocated $6 billion, to eradicating the crazy yellow ant on Christmas Island for which I allocated $2 million in the Federal Budget.  It is a big country, there are 20 million people in our country and the Commonwealth Government has responsibilities all over.  But I will say this, it is the biggest investment that we have ever had in health, it is the biggest investment that we have ever had in aged care, it is the biggest investment that we have ever had in defence, it is the biggest investment that we have ever had in road and rail. 

And you say to me ‘well how can you do all of that?’ and the answer is you can do that from a strong economic base.  And that is why we want a strong economic base, because if we do not have a strong economic base you won’t be able to fund your health care and your aged care and your educational reform.  People who say ‘oh well you know I’m not interested in the economy, I’m interested in people, I’m interested in health care and aged care’.  Let me tell you this, if you are interested in people and health care and aged care you will be interested enough to get your economics right.  Because if you do not get your economics right your interest in health care and aged care won’t count for a row of beans.  Look around the world, which countries have the best health care systems?  Angola, Mozambique, the Ivory Coast or Australia, Britain, the United States? 

You know why?  Because you can’t afford a good health system unless you have got a strong economy.  Who has the best aged care systems in the world?  If you are looking for an aged care home would you go to Indonesia or Papua New Guinea?  Not because they are against aged care in Indonesia or Papua New Guinea, it is because if you don’t have a strong economy you can not pay for aged care.  You know ask any Australian who is overseas what is the first thing you do if you get sick overseas?  Get back here.  That is the first thing you do because whatever the weaknesses of the Australian health care system it compares pretty well to all the others in the world. 

If you care about health care and aged care and education you care enough to get the economics of this right.  Now I know that outside of economic policy there are a whole range of issues that are important to our standard of living and what we want to accomplish as individuals, in our families in our communities in our churches, I know that and I don’t for a moment pretend that economics is the be all and the end all.  The only thing I will say is if you get your economics right it is a big start.  It is a big start and the challenges that are going to come to us in the next generation, challenges like the ageing of the population, climate change, defence, instability in our region will be challenges that we can much better face with a strong economy, much better face with a strong economy.

Now you see you would have seen the demonstrators at the front of the entrances today protesting about industrial relations.  They would say ‘oh the Government’s industrial relations laws are no good’ but under the Government’s industrial relations policy more Australians are in work than ever before.  Real wages are 20 per cent higher than they were 10 years ago.  We have managed to grow an economy whilst keeping inflation low. 

Now Australia is not perfect but I’ll tell you this it is better than it was 10 years ago.  You go back to the old industrial relations system that we had 10 years ago when unemployment wasn’t 4.4 per cent, when unemployment 10 years ago was 8 and a half, 9 per cent, when 2 million less Australians were in work, when real wages were 20 per cent lower than they are now - not much of an advertisement. 

Because the results are now starting to come in, it doesn’t happen instantaneously, it has taken a lot of work but we are now starting to see results from 10 years of strong economic management.  And I don’t want to see Australia go back to what it was; we don’t want to go back there to high unemployment and high inflation and high interest rates and deficit Budgets and Commonwealth debt and high tax burdens.  We do not want to go back there; it has taken us a long time to get out of that. 

What we want to do is we want to lock in the progress, we want to go forward, to go forward from here with people in work and businesses that are profitable, and a better industrial relations system, proper investment in the social services that our country needs.  That is what we want to do, we want to lock in the progress and we want to go forward.  If you listen to the critics of the Government they want to go back in one way or another but we want to go forward, we want to go into the future. 

And this is a country which still has fabulous potential.  Let me give you one statistic.  Australia’s population is .3 of 1 percent of the globe’s population .3 of 1 per cent, but we are the 14th largest economy in the world. 

Why?  Because we have got skilled people, we have got good industries, we have got entrepreneurs.  I want to pay tribute to the small business people of Australia who have gone out there and given it a go and got their businesses going, that is what makes a country prosperous and strong.  But we can’t afford to relax with .3 of 1 per cent of the global population, not too much margin for error there and if you get it wrong the world is not going to worry about Australia. 

Nobody is going to worry too much about us, they are going to say ‘if you get things wrong and you get into trouble then that is your problem’.  You get things right and that is what we want to do at the Commonwealth level, get things right.  Make sure we have good Government, strong economic management so that we can take on the challenges of the future, which we can only do if we have good representatives in the Federal Parliament and I wish Bob Day and his team every success. 

Thank you very much.