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 23/05/01

Transcript No. 2001/066

TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

Today Show with Tracey Grimshaw

Wednesday, 23 May 2001

7.10 am

 

SUBJECTS: Budget, Older Australians, Pensioners, Self-Funded Retirees, Roll-Back, Election

GRIMSHAW:

Well the talk of the town today is the Federal Budget - who wins, who loses, who falls through the cracks. We have promised you that we will speak with the Treasurer Peter Costello this morning. He is just arriving now but I think that he may take a couple of minutes to get ready, in miking him up, theyre putting his earpiece in. Hes obviously a very busy man. Treasurer can you hear me yet? Good morning Treasurer. Can you hear me?

TREASURER:

Hello. Yes.

GRIMSHAW:

Okay, youre on air. I just want you to know that.

TREASURER:

Oh am I?

GRIMSHAW:

I just want you to know that, yes.

TREASURER:

Oh really! Am I on air?

GRIMSHAW:

Good morning. We were just cutting it a little bit fine. We thought you were running so late we were going to have to go to the break, but there you are.

TREASURER:

Im terribly sorry about that Tracey, I apologise. I didnt know I was on air. My profoundest apologies. How are you this morning?

GRIMSHAW:

Dont you worry about that. I am very well thank you. This is indeed live television just in case our viewers had forgotten it. Thank you for being with us this morning. Lets get underway. You have probably won self-funded retirees with this Budget. But why shouldnt other Australians, average Australians feel like theyve been left out?

TREASURER:

Well for the average working family the income tax rate today is 30 per cent, top income tax rate, it used to be 43 per cent. If we hadnt have reformed the taxation system youd be paying 43 cents in the dollar instead of the 30 cents today and thats been a very dramatic cut in income tax for average working families.

GRIMSHAW:

But that was last years reform. Im talking about this year. Im talking about

TREASURER:

No thats going on right now. Its brought in on 1 July, we havent even had a full year of those income tax cuts and as people go through the year theyre getting a much, much reduced income tax position. In addition to that, on 1 July this year, were abolishing Financial Institutions Duty. Financial Institutions Duty is a tax you paying when you put money in a bank account, when you pay off your credit card, when you pay your mortgage and all of thats being abolished on 1 July and in addition to that, if you happen to own shares and there are 5.7 million Australians who do, you wont be paying any stamp duties for those and your superannuation fund wont be paying them. So there are dramatic tax cuts there for working Australian families.

GRIMSHAW:

Will retirees, your measure will probably be incredibly popular with self-funded retirees, but is there a danger that they will feel that they have been bought, and in a sense havent they?

TREASURER:

Oh well, I think for self-funded retirees this is a very big tax cut. Theres no doubt about that. But I think that the self-funded retirees whove saved through their lives, who are now living off their savings, who probably arent getting much by way of pension, if anything at all, I think that they deserve a tax cut, the economy can afford it and I think it will be good for the economy.

GRIMSHAW:

Have you done enough to win back small business? They are still trying to cope with the GST and the signs are that they havent come to terms with that. It would seem that in last nights Budget, if theyre not about to buy a car, theres not much in it for them.

TREASURER:

Well small business had their company tax rate cut from 34 to 30 per cent in last nights Budget.

GRIMSHAW:

But theres only something like 14 per cent of small businesses that operate as companies, arent there?

TREASURER:

Oh no, well I dont know where you get that figure from. I think there were a million companies in Australia something like that. Most of them are small business. And those people were paying 36 per cent on their tax rate, thats cut to 30 per cent. This is one of the lowest company tax rates in the region and one of the lower ones in the world now. If they buy a vehicle then they dont have to pay any tax. And most small businesses do have vehicles, not just trucks, they might just have a car to make the deliveries. They dont pay any tax in relation to that now. And thats a saving of about $3,500.

GRIMSHAW:

Theyre paying on average, they say, if you read some of the analyses around today, something like $3,000 a year in accounting fees. Thats an impost imposed upon them as a result of the GST. They are not compensated for that are they, unless theyre about to buy a car?

TREASURER:

Well small businesses always have accounting fees because theyve got to lodge annual returns, theyve got to lodge tax returns and all of those things. And as weve said when we introduced some of the right-off measures for new software there would be additional software required for small business. But in relation to small business, I think some of the other things that small businesses are interested in is good economic management. The biggest cost for a small business is their interest rate. And I can remember when I was self-employed, back in the 1980s, we were paying overdraft rates of 22 per cent. Keeping interest rates low, now you can get an overdraft rate or a small business loan rate of 11 or 12 per cent, is one of the biggest benefits that you can have for small business. And I think small business is very keyed into keeping our economy strong and our interest rates low.

GRIMSHAW:

Lets talk about the $300 cash bonus for pensioners. Is that finally an admission that they were not adequately compensated in the wake of the GST?

TREASURER:

No, its a statement that our economy can do with stimulation. Our Budget can afford it and most of all, pensioners deserve it. And I think for pensioners, if the Opposition doesnt try and play tricks with this, for the legislation to go through this week and for the payment to be made next month, I think that will be warmly received by them. Its $300. Its not taxable. Its not taken into account in assessing their income for pensions and I think actually itll be warmly received. Itll be a good initiative for them.

GRIMSHAW:

They wanted $1,000. They said that thats what they were promised and they missed out on that. Or they want $300 in perpetuity. Why didnt you give them either of those options?

TREASURER:

Well, Tracey, in relation to these matters I think there are 2.2 million Australians and the payment of $300 each is a cost of something like $600 million. Thats a very large sum. You have to budget for that. The Budget could afford it. Most of all they deserved it. Im not aware of this ever happening before. Im not aware of pensioners ever being paid bonuses before.

GRIMSHAW:

Mind you a GST has never happened before either.

TREASURER:

Yeah, and when the GST came in the pension was increased 4 per cent. And today it is 2 per cent higher than it would have been. If we didnt have a GST the pension would be lower today than it currently is.

GRIMSHAW:

They keep telling me Treasurer it wasnt enough. What it was raised by was not enough and is still not enough.

TREASURER:

Well when it was raised, when the GST came in, the pension was raised. It wouldnt have been raised otherwise. And that was to make sure that peoples purchasing power was the same. Because the effect of the GST probably be about 2 per cent. We raised the pension initially by 4 per cent and we maintain it 2 per cent above. In addition to that we now introduce the pension bonus. If youre a pensioner and you have additional income, you also get the benefit of the increases in the tax-free threshold, for senior Australians. And I think this will be another thing of real benefit for pensioners, if they have shares, and a lot of them do, they might have a Telstra share or something, they can now get a lower rate. They dont have to actually pay it at the full company tax rate if their tax rate is lower than that, so that will be of enormous benefit to them.

GRIMSHAW:

Does the tax-free threshold make any difference to full welfare pensioners at all? I mean their pensions about what $10,000 odd a year, they can only earn something like $2,700 in addition to that before it affects their pension, thats well under the $20,000 threshold youre talking about.

TREASURER:

Well now, when they used to get extras, they used to start paying tax and Medicare levies so that for a pensioner that now has additional income they get the benefit of those increases in the Medicare levy and in relation to the tax-free threshold. So this is of benefit to all older Australians. Not just people who arent on pensions.

GRIMSHAW:

All right, youve left a surplus of $1.5 billion which is not going to be much to fund election promises and not going to be much as analysts have cannily pointed out to allow Labor to roll-back the GST. Is that clever?

TREASURER:

Well Labor doesnt need a surplus to roll-back GST. Labor can roll-back GST without it costing a dollar. All youve got to do is reverse what we did last July and put up income taxes. What Labor says is, they wont actually come clean. If you roll-back the GST, all youve got to do is put the income tax rate up from its current 30 per cent to 43 per cent and they ought to be honest about that. Its not a question of funding it out of a surplus. Its a question of putting income tax rates back up to where they were. Because the GST brought them down. The Labor Party can put them up. Its just that they dont want to be honest and come clean on that.

GRIMSHAW:

Treasurer, its been suggested that you are tired, burnt out, bored with being Treasurer. Expecting this to be your last Budget? Is that a fair reflection? Do you believe that this will be enough to get you over the line electorally?

TREASURER:

Well, we think this is a Budget which is responsible. For the fifth consecutive time weve balanced the books and that hasnt happened, until, you go back past the Whitlam Government back into the 1960s. Weve repaid $60 billion of Labors debt. Were now investing the money weve saved in health and in education and in older Australians and weve laid out a plan to make a stronger Australia in the next century. And I hope the people of Australia do support that plan. But its up to them whether or not were here after the next election.

GRIMSHAW:

All right. Thank you for your time. It was a scratchy start, but appreciate you being with us.

TREASURER:

Thank you.