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

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 17/03/1999

Transcript No. 99/19
Treasurer
Hon Peter Costello MP

Interview with Student Talkback Classroom - Triple J

Wednesday, 17 March 1999

10am

E&EO

SUBJECTS: Interview with Student Talkback Classroom - Triple J

STUDENTS:

David Watson, Year 11, Marcellin College, Bulleen

Paulo Damante, Year 12, Marcellin College, Bulleen

Aaron Auty, Year 12, Thornbury Darebin Secondary College

INTERVIEWER:

Mr Costello, last week I attended The Age’s 2001 Vision Forum. The speakers were Tan Le the Young Australian of the Year, our Premier, Jeff Kennett, and President of the Labor Party, Barry Jones.

There was a lot of talk about the future of Australia. Very briefly, could you give us a precis of your vision for Australia’s future.

TREASURER:

Well, I guess the first thing I’d like to say is as Treasurer, and I talk about the economy a lot, is I’d like to see a strong and a prosperous Australia. We’re living in a time where in our region, in the Asian-Pacific region, country after country has fallen into recession. Huge unemployment rises have occurred in the last couple of years, and what was once a strong region is now an incredibly fragile region. And I’d like to see a strong Australia.

INTERVIEWER:

Well the question that occurred to me listening to the speakers is that we’re putting too much emphasis on our country’s economic growth, and it seems to be at the expense of our social problems.

TREASURER:

I don’t think so. When you say you want to put emphasis on economic growth, at the end of the day what does that mean? That means getting more people jobs. It means making sure people have higher standards of living to be able to afford education and health care, a society which has enough to be able to look after its aged. And all those things don’t come out of mid-air you know. You’ve got to keep working on putting together a society which has the capacity to look after people who can’t look after themselves.

INTERVIEWER:

Well, what about the youth? Tan Le said that at the moment the world is handed to young people like a straight jacket, it is a very narrow place where the economic is the measure of success. Do you think she is wrong?

TREASURER:

Yeah, I do, mm. I think for young people in today’s society, they have more opportunities than any other generation in world history. I know in my own family, to be able to call up information from anywhere in the world on an Internet, to be able to travel and to see places in moving footage, to be able to overcome any social barrier and to take part in any occupation, I think there’s opportunity in the modern world that no other civilisation has had in 2 or 3 or 4 thousand years.

INTERVIEWER:

But it still seems to me that the Liberal ethic is to put profits before people. John Elliott seems to be expressing what the Liberals truly believe and what they say off the record.

TREASURER:

Well I don’t think anyone would say he’s a spokesman for the Liberal Party. He doesn’t hold any position in Parliament or indeed in the organisation. He has his views…

INTERVIEWER:

Did he reflect Liberal Party thinking when he was the President? Now he’s not in power he’s dismissed. Has he changed, or do you think it’s the Liberal Party that has changed?

TREASURER:

No, I think when John speaks he’s probably more reflecting the views of the Carlton Football Club. And you know you might as well say that these are the views of everyone who supports Carlton. There might be some people down at Carlton, of course you know, I know it’s not the best footy club in the country, but not everyone would have that view.

INTERVIEWER:

Well Jeff Kennett seems to be tackling a lot of these social issues. He was rated in recent polls as stated by Barry Jones at the Forum as being Australia’s most recognised political leader by 44 %, followed by John Howard at 14%. Does this say how important Australia's social issues seem to be to the people?

TREASURER:

Well don’t get me wrong, I mean, I don’t underestimate social issues, and I think they’re absolutely important. The point I was making earlier was if you want to be able to run a health care system, to treat the sick, you’ve got to have a society which is economically strong.

INTERVIEWER:

So to have a healthy balance in one, you need a healthy balance in the other?

TREASURER:

Quite right. If you were to go north of Australia into Indonesia, in Indonesia they don’t have hospitals that are caring for the sick, nor do they have age pensions that are looking after people in their old age. Why? Because they don’t have an economy which can support those things. Now, I’m not saying that the economy is the only thing, I’m just saying that if you want people to lead healthy, educated, cared-for lives, it’s a base. But these social issues are incredibly important and I think the drugs issue which has come to prominence the last couple of weeks is something that’s of concern to all young people and their parents and society generally. And it’s an area where frankly we, in government, have got to do better.

INTERVIEWER:

Treasurer, let’s talk about youth wages. At the moment you’re expecting 18 and 19, even 21-year-old people to accept junior wage rates. But don’t we define as a country, an 18 year old person as an adult?

TREASURER:

We do, and we do for voting reasons and we also do for military reasons. What the government is saying is there are some areas, not all areas, but there are some areas where it’s better to have young people who are coming in and getting training on a lower wage whilst they are learning skills. Now, turn it around the other way. If an employer has to pay an 18 year old the same as a 48 year old, and the 48 year old’s got more experience and maturity, the 18 year old will lose the job every time. So in some of those areas, it’s better to have young people in work. McDonald’s is a classic example. I think McDonalds, correct me if I’m wrong, but I’m pretty sure they pay youth wages. They must, looking at all the young people on the counters. But that’s provided a pretty good opportunity for young people to get into the workforce.

INTERVIEWER:

Okay, well you say that older people have got more experience and maturity. What about if they’re doing the same job as the older person. I mean, anyone can flip a hamburger supposedly, so whether a 17-year-old’s flipping a hamburger or a 34-year old’s flipping a hamburger, doesn’t it rest upon who can do the job better?

TREASURER:

Well that’s really my example. I think the youth wage has given opportunities to young people in McDonald’s. And nobody’s saying at 18 or 19 that’ll be your final job, but it’s the foot in the door. As we all know the hardest job’s the first one, and after that as you develop skills and maturity they get easier. Although you get to a certain point where they get harder again.

INTERVIEWER:

What about equal pay for work of equal value?

TREASURER:

I think that’s an important principle, but there’s another principle, and I agree with that by the way. But there is another principle which is giving younger people who are going to have to learn skills on the job the opportunity to get a foot in the door. Look, the truth is, if you said every young person had to be paid an adult’s wage, it might sound a great principle but at the end of the day…

INTERVIEWER:

I didn’t say that every person had to be paid an adult wage, I’m talking about people who are experienced at their job and can do it just as well as anyone else can.

TREASURER:

Sure, but if that principle were applied across the board, at the end of the day, all that would happen is there’d be fewer jobs for young people, and it wouldn’t actually have the desired outcome.

INTERVIEWER:

Why is there going to be fewer jobs?

TREASURER:

Because where an employer has to pay the same wage to a young person competing for the job with an older person, they are naturally going to prefer the older person in the job. That’s been the experience.

INTERVIEWER:

Why?

TREASURER:

Because the older person will have more maturity, they might think that they…

INTERVIEWER:

I just said that if the young person can do the job just the same, why would they employ them?

TREASURER:

Well experience shows us that they do.

INTERVIEWER:

Or better.

TREASURER:

They, if the employer who doesn’t know the young person just sees an 18-year-old come in and a 48-year-old come in, experience tells us that for whatever reason - maybe it’s only because the employer’s an older person - they tend to think the older person will be more reliable.

INTERVIEWER:

Are you saying that employers won’t be able to afford to employ young people if this non-discriminatory youth wage legislation goes about?

TREASURER:

I’m saying it really is a leg-up for young people to give them the opportunity to prove their skills and get a foothold and an advantage in the jobs market.

INTERVIEWER:

Wouldn’t a non-discriminatory youth wages encourage the young employed to go out and find work?

TREASURER:

I think we’ve got to do everything we can to encourage young people to find work. Look, we know that the best thing that the young can do to find work is to get a good education. You know, if you study who gets work and who doesn’t, the people, the young people that have the best advantage in the job market are the young people with the best education. And I guess my advice, you’ve probably heard it from your school teachers, but this is one occasion in which the school teachers are actually telling the truth. My best advice is, try and get the best education you can because that will give you the best opportunity in the workforce.

INTERVIEWER:

Right, what about the 17-year-old girl who isn’t studying and who’s living away from home and relies on her job to live. How can a discriminatory youth wage policy possibly benefit young Australians in this situation?

TREASURER:

Well, if it gives her a job, it does. If you had a policy which alternatively put the price of her wage up and forbade her from getting a job she wouldn’t be any better off. People are never better off to be priced out of jobs. I mean, the bottom line, it’s better to be in work, earning a wage, even if it is a youth wage, than out of work and living on the dole.

INTERVIEWER:

But as soon as they become adults they’ll just be sacked won’t they?

TREASURER:

I don’t think so. The experience also shows that as you come in and you develop your skills and you develop maturity and you get the opportunity to move on, a lot of these people do move on. As I said, when you go for further jobs it’s always great, you know it yourself, to have on your CV, I had a job at such-and-such a place. And employers say: Oh well, there’s somebody who in the labour market had the experience of work, and the first one’s always the hardest, what is it – the longest journey begins with the first step.

INTERVIEWER:

Could I just use an example here? I myself had a job in the hospitality industry earning $9 an hour. That was changed to commission rates where I ended up. I kept books and added up the figures myself. I ended up earning around $5 an hour, which would be about the same cut under this new legislation. And that just wasn’t enough, because I had to support myself when it comes to school and the like, so I ended up going out and looking for new work and ended up getting a cash-in-hand job earning about $8 an hour. A cash-in-hand job. Don’t you think that there will be an increase in cash-in-hand jobs under this new legislation?

TREASURER:

Well, you shouldn’t tell the Treasurer about cash-in-hand jobs, because it’s the Treasurer’s job to actually collect the tax. By cash in hand, I mean, you weren’t paying any tax on that? Well, luckily I don’t know your address, so don’t tell me.

INTERVIEWER:

But do you not think that under this legislation there will be an increase in this sort of activity?

TREASURER:

I don’t think so. What the law says is that an employer is obliged to take tax out, if they’re paying wages. And if it’s not an employment situation, if you were really an independent contractor, then you’re obliged to pay the tax on the money that you’re actually paid. And regardless of the level of pay or the employment arrangement it’s up to the Tax Office to collect those taxes, and I don’t think it varies according to the rates.

INTERVIEWER:

Treasurer, if employers want to be able to afford to pay non-discriminatory youth wages, why don’t the employers take a pay cut? I mean why do young people have to suffer under your legislation? It’s a democratic society. If employers are going to be better off by cutting youth wages why don’t they cut their own wages? Why don’t you take a pay cut for the economy?

TREASURER:

Well employers do take a pay cut if their business goes, and if business turns down, and at the end of the day if the business is unprofitable they go out of business. But that doesn’t help people if the employer goes out of business that just means that there are less wages around. So I think it’s important that employers who are working for public companies show wage restraint, a point I’ve always made incidentally. Some of those chief executive salaries, it’s hard to believe that it could be in the interests of the public company to be paying them such high salaries. But in the small business sector in particular, you don’t want to see the employers’ interests and the employees’ interests opposed to each other. At the end of the day they need each other, and they both need to be profitable in order to preserve the work and the business.

INTERVIEWER:

Okay.

INTERVIEWER:

Treasurer, I’d like to talk GST. I myself am in favour of it, but will we, the young people, be winners or losers?

TREASURER:

I think young people will be the big winners. Part of introducing Goods and Services Tax is to re-weight our tax system so that you get more tax paid when people spend and less tax paid when they earn. A big part of this is to cut income tax. For young people who are going into the workforce and have got a lifetime of earning before them, it’s much better to have lower tax when you’re earning and pick up more of your tax as you’re spending. It gives you the opportunity to earn and young people starting from nothing, they’re going to be the earners of the future. To earn and to save and to pay less tax as long as you earn and you save. So I think this is a very pro-youth tax policy myself.

INTERVIEWER:

Can I point something out to you there? People our age are under the tax threshold for income tax. We get no compensation like social service recipients. However, I myself would have to pay for my own way for certain items which will be taxed under GST, like food when I go to a trip to McDonald’s. There will be 10% extra tax on that. Transport, going to and from school, buying a bus ticket every morning and evening as well to go on the tram and train, an extra 10% on that. And this is all coming out of my pocket at the moment. And then for books as well for school and education I’m intending to go on to university as well, and there’ll be 10% extra tax on those books and well. Plus, I’m also a person, a big literature fan and I love to read. And when I go out to purchase a book that is not available in the library maybe, if I go out to purchase that book there’s an extra 10% there. On entertainments, when I go out to nightclubs or to go to a cinema to see a movie at the cinema, there’s an extra 10% on top of that as well, to go to those places. And for clothing, footwear and shoes like that, and clothing are up 10%. And this is all the stuff that I would spend myself.

TREASURER:

Well, let me make two points. If you’re spending all that money on everything, the money must be coming from somewhere. If you’re earning it you’ll be paying less income tax. If you are being supported by your parents, they’ll be paying less income tax. You couldn’t be going to nightclubs, and buying books and paying for tram fares without any income whatsoever. And from your parents point of view, not only paying lower income taxes, but the family allowances which are allowances paid by the government to raise and look after children are all going to be increased. So your parents, if they are supporting you would be better off.

The second point I make is, people say; oh well, 10%. Practically nothing increases by 10%. When you do most of those activities at the moment you’re being taxed. In one way or another. You’re paying embedded taxes on all of those things and all of the transport for all of those things. You know, in the cinemas, all of the machinery and the furniture that’s going into the cinemas is all being taxed, and…

INTERVIEWER:

What about food?

TREASURER:

..and there are quite a deal of embedded taxes in food at the moment as well. And all of those taxes are being abolished. At the end of the day the Government’s tax reform programme collects less tax. When you re-weight it, it collects less tax. So you know, you get the political points, 10% here or 10% there, straight politics really. I mean the reality is that we are changing the taxation weighting and bringing tax collection up front.

INTERVIEWER:

Well, the next question I’d like to ask you. Has there been a particular investigation to research living costs of youth and to find the impact of a GST on the youth of Australia?

TREASURER:

We actually have a thing called Household Expenditures which talks about different households and different incomes and the kinds of things they expend and we’ve looked at all of this very carefully. And we’ve made sure that the tax changes overall don’t disadvantage any of those households. We also…

INTERVIEWER:

Has there been an investigation in particular on the young people, from what they’re earning, to what they’re spending, to the way they live, in particular…

TREASURER:

Sure to the degree that they are part of households, they are part of that as well. And we’ve also done it another way, is by examining the effect on prices, the prices that are paid by all sectors of society and again made sure that all people are advantaged by that.

INTERVIEWER:

But then, what as in our case of the 17-year-old girl, the one we proposed before, what in the cases like her, when they’re living independently?

TREASURER:

Yeah well, if they’re single-income households they can also be modelled, and they have been modelled, and we’ve looked at it. You’re only as good as your data on these sorts of things, but insofar as you can rely on the data and this is Australian Bureau of Statistics data we’ve had a look at it very carefully and made sure that we can bring taxation benefits to all of them.

 

INTERVIEWER:

Could you tell me the benefits to a young girl who last year used to get a $200 tax return and next year has to pay that extra $200, added to the 10% onto everything she buys, so instead of getting a $200 tax return, that $200 is actually being taxed.

TREASURER:

Well if you mean she got a refund on the tax she paid of $200…

INTERVIEWER:

Because she was under the threshold now this $200 is, she is actually paying tax, whereas last year she used to not pay tax. Where’s the benefits?

TREASURER:

Well if she was getting a refund of $200 last year, that is, that the tax that was being taken out was $200 more, then under lower tax her refunds would be greater, would actually be greater under income tax reductions. And of course in relation to some of the allowances that she might be qualified for or her parents would be qualified for, they would also be increasing. At the end of the day, it’s no surprise that the following countries have a GST: France, Germany, Italy, Canada, New Zealand, Japan, Hong Kong, Singapore, every country in the world. I know a lot of political heat has been generated on this, but the truth of the matter is, Australia is the odd one out here, and to have a global perspective, to look wider than our borders, to say that the rest of the world hasn’t got it wrong and we’re the only ones right. But to say that we can learn from other peoples’ experiences and modernise our tax system, I would encourage you to look wider than just our country and to see a future and to see the lessons that we can draw on and to see how we can build things for the better.

INTERVIEWER:

Treasurer we are out of time, thanks for being here with us today. Thank you.

TREASURER:

Great pleasure, thanks very much.

INTERVIEWER:

Thanks.