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 22/05/01

Transcript No. 2001/060

TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

7.30 Report with Kerry OBrien

Tuesday, 22 May 2001

8.10 pm

 

SUBJECTS: Older Australians, Budget Surplus, Growth Forecasts, Welfare Reform

OBRIEN:

Peter Costello you did go into this Budget process staring defeat in the face, with an electorate howling for blood, and I dont think thats an exaggeration, going on what happened in various State elections and so on, by-election. Why shouldnt this Budget be seen as a rather cynical document that seeks to buy them out?

TREASURER:

This is a Budget Kerry which is in surplus for the fifth consecutive year. And thats not something thats been done in Australia since pre-Whitlam. Its also a Budget, Kerry which pays back more of Labors debt. Weve now repaid $60 billion of Labors $80 billion debt spree and the saving that we get because we pay less interest, weve re-invested back in the community with new health programs, with tax cuts for older Australians and with tax cuts for business. I think its a Budget which is from a prudent Government, responsible economic management and I think a lot of justice for some of the groups in our society who because the Budget could afford it, deserve more.

OBRIEN:

Well for instance in terms of the issue of buying favour, buying people back that you had lost. When the tax cut to, with the tax cut to self-funded retirees, can you remember the last time there was a retrospective tax cut by any Government?

TREASURER:

It would be a long time ago Kerry. I cant recall one. I can remember, you can too, when the Labor Party promised them and never delivered them. That used to be what Governments did. But I cant remember an example of a Government actually delivering a tax cut and back dating it.

OBRIEN:

Well, of course the cynical reason for that as some would very quickly point out, is to make sure that the self-funded retirees actually get the money in their pocket before they have to go to the election.

TREASURER:

But dont you think its a good thing?

OBRIEN:

Well I am sure that self-funded retirees will see its a good thing.

TREASURER:

Yeah, I think it is a good thing.

OBRIEN:

But some of them may yet also see it under the heading of tricky.

TREASURER:

Well tricky to give people a tax cut and to actually make it apply from 1 July last year that is in relation to the current income, the normal trick on tax cuts Kerry is the L-A-W trick. You promise them a tax cut in five years time and you never deliver it. This is

OBRIEN:

And your generosity

TREASURER:

This is an example of where the Government has cut tax rates this year, beginning on the first day of this financial year.

OBRIEN:

But the question was why

TREASURER:

(inaudible)it is just, and its right for self-funded retirees. When we came to office, under the Labor Party regime, a self-funded retiree had a tax-free threshold of $5,400 and after tonight its $20,000. So if you happen to be someone living on your savings, you dont pay any income tax or any Medicare levy until $20,000.

OBRIEN:

But prior to tonight the self-funded retirees werent angry with the previous Labor Government they were angry with you.

TREASURER:

No wed actually increased from the previous Labor Government was $5,400, wed increased it to $11,000 and then wed increased it again under the New Tax System and tonight we take it to $20,000. And it think its

OBRIEN:

But its the New Tax System that had them angry. Suddenly you can find $300 cash for 2 million angry pensioners who had felt diddled or dudded by the GST and your promises about that.

TREASURER:

In relation to pensioners, we thought it wouldnt be fair to cut tax rates for the self-funded retiree and not have benefits for pensioners. Weve introduced the legislation tonight, if its supported by the Labor Party, the money can be paid next month. Its $300 to each pensioner and each part-pensioner. This is not a Budget that promises benefits in five years time. That legislation is being debated in the House of Representatives tonight and can be passed tonight and paid in June. I hope thats what happens.

OBRIEN:

Youve got an election coming up. Are you, do you see any reason why you cant spend more of this surplus in election promises for next year?

TREASURER:

Well the surplus is about $1.5 billion. I think thats a responsible surplus. Youve got to remember that before we came to office the big argument in Australia was how big your deficit should be. Weve put the Budget back into balance. Weve paid down $60 billion worth of debt. We have tax cuts in this Budget like Financial Institutions Duty which is abolished and tax cuts for business on their vehicles and at the end of that, and tax cuts for self-funded retirees and at the end of that theres still a surplus of $1.5 billion. I think thats responsible economic policy management.

OBRIEN:

Yes but my question is whether you will feel justified in dipping into that surplus and the following years surplus to pay for election promises.

TREASURER:

Well I think that this is a responsible outcome. Thats why were targeting this particular outcome

OBRIEN:

I dont think you answered the question then.

TREASURER:

this particular year.

OBRIEN:

Your boast that this is your fifth consecutive surplus. In fact that surplus would be a deficit without the $2.8 billion that youre chalking up from the Reserve Bank which basically theyve gained by playing, if you like, on the foreign currency markets to boost the Australian dollar.

TREASURER:

Let me say Kerry, nobody should say that the Reserve Bank plays on world currency markets.

OBRIEN:

(inaudible)

TREASURER:

Well it is the terminology you used.

OBRIEN:

(inaudible)

TREASURER:

Can I say the Reserve Bank dividend has been included in the Budget since the Reserve Bank was created. Just as dividends from Telstra have been included in the Budget. You might as well say

OBRIEN:

Its not about (inaudible) the size of the dividend and the fact

TREASURER:

Kerry its the same in relation to Telstra.

OBRIEN:

(inaudible)

TREASURER:

No its the same in relation to Telstra. If you didnt get as big a dividend from Telstra you wouldnt have a Budget surplus. If you didnt get as much out of income tax you wouldnt have a Budget surplus. If you didnt get as much out of company tax you wouldnt have a, now you can go through any line item in a Budget

OBRIEN:

Except that the Reserve Bank one in this case surely can be described as a windfall. Because this year it was $1.3 billion, next year it will be $2.8 billion. That extra $1.5 billion is effectively your whole surplus.

TREASURER:

This is not the biggest dividend that has been received from the Reserve Bank. Its paid bigger dividends in the past. And can I say in relation to that, you know what Mr Keating used to get, dividends in advance. Mr Keating used to make the Reserve Bank pay a dividend before the financial year had ended.

OBRIEN:

I would think from

TREASURER:

And used to take

OBRIEN:

Mr Keating seems a long way away doesnt he?

TREASURER:

Well all Im saying is, used to take dividend in advance. I ended that practice. What we put in our Budget is at the end of the year the dividend. You can take any single item in the Budget and say oh if it wasnt for that, you know, your Budget wouldnt be the outcome that it is. You could say it of Telstra, you could say it of income tax, you could say it of

OBRIEN:

Well speaking of

TREASURER:

You could say it in relation to any particular item. Now you know its a fair thing to try and say well lets isolate one thing out, but the fact is the Budgets in surplus. Its in surplus for the fifth consecutive year in a row and were cutting tax.

OBRIEN:

How much store do we place in your growth forecasts given how badly you got your growth figures wrong just a few months ago?

TREASURER:

I think the 3.25 is considered by the financial markets to be within the range. Some people are predicting more. Were coming through the period when you had the slow down in residential housing construction that is going to come back in. That was a one-off transitional. We now have a $14,000 First Home Owners grant for people who are buying their first new home, weve got interest rates which are as low as theyve been since the 1960s and now that weve moved through that one-off transition, I think youre going to see the economy return to sound solid growth.

 

 

OBRIEN:

Your own Federal President Shane Stone used the term mean and tricky to describe your, the voter perceptions of you and John Howard. Isnt it just a little bit tricky the way you have tried to impress people with your benevolence on welfare spending?

TREASURER:

Well, Kerry, when you say our benevolence on welfare spending, this is the Australians working together, the new program, this is something thats never been done before, we got someone from the sector to look at Australias welfare system and he recommended we should do two things. We should increase incentives and increase obligations. And thats what were doing. This is all very up front. We introduced work for the dole. And I think its been a good system. Before that you didnt have to work for the dole. Now you do. And thats been an obligation and I think its got a lot of people a lot of skills and a lot of opportunities to go back into work.

OBRIEN:

But were not referring to the tricky. What Im referring to is in your Budget speech, just half an hour ago, talking directly to the public, you said the Government is making a substantial investment of $1.7 billion over four years to improve the way our income support system works but in fact the fine print also shows that of that $1.7 billion youre also hoping to claw back $900 million. But in fact in the first year youre only spending $76 million. It doesnt sound all that much when you see it like that does it?

TREASURER:

No, Kerry we will write out cheques for $1.7 billion.

OBRIEN:

But then separately you will try to seek back $900 million in savings.

TREASURER:

But you write out cheques for $1.7 billion and why youre writing out the cheques for $1.7 billion, because hopefully this will get people back into work. Thats why its being done. Thats why its being done. Its not a question of just writing out money for the sake of it. Its being written out so people can get back into work. Why do we want people in work? Well its good for them. But its also good for the taxpayer. The taxpayer doesnt have to pay as much in benefits if people who can work and have a job opportunity, take it up. Thats why you do it.

OBRIEN:

Were out of time. But one word answer, yes or no, does this rule out or leave in play the possibility of an early election?

TREASURER:

Well, I dont think you expect me to give you a one-word answer on that Kerry. Can I say I dont call elections. You know I dont call elections and thats a matter for the Prime Minister. What I do is I lay down economic policy and thats what weve done tonight.

OBRIEN:

Peter Costello were out of time, thanks for talking to us.

TREASURER:

Thanks.