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. 2001/074

TRANSCRIPT
of
HON. PETER COSTELLO MP
Treasurer

Radio 3LO - Interview with Jon Faine
Wednesday, 23 May 2001
8.30am

E&OE

SUBJECTS: Budget

FAINE:

...and I think I'll call this morning the de facto Prime Minister, because it is Peter Costello's agenda for the next term of the Liberal Government that will determine whether or not they are re-elected. Peter Costello good morning to you.

TREASURER:

Good morning Jon.

FAINE:

In your Budget speech last night I don't think I heard you mention the word family, for most of the Budgets you have delivered that has been the central focus of your economic settings. I don't think it got a mention last night at all?

TREASURER:

It did in the context of our health programmes. I said that last night we are delivering five new programmes, health programmes for Australian families, in asthma, preventative for kids to try and prevent hospitalisation, in diabetes, in cervical cancer in relation to mental health and also alcohol.

FAINE:

And outside the health portfolio in the context of tax, in the context of welfare, in the context of economic assistance, nothing?

TREASURER:

Oh, well, the other thing, point that I made last night, Jon, was the best thing you can do for Australian families is reduce their biggest bill and their biggest bill is their mortgage.

FAINE:

Do you claim credit for doing that? For keeping interest rates down?

TREASURER:

Oh yes, if we had not have balanced the Budget, if we had not have paid off $60 billion of Labor's debt interest rates would not be as low today as they are. Remember they were 10.5 per cent when we came to office.

FAINE:

But interest rates reflect global movements, American interest rates, our trading partners interest rates were all even lower than ours, that is what determines interest rates here surely?

TREASURER:

I don't think they are, I don't think mortgage rates are. The US official rate is but I am not sure that its mortgage rate is. Interest rates are influenced by global factors, that is true, and they are influenced by domestic factors. Not much you can do about the global factors, but if you want to work on the domestic factors you can always take some cut off interest rates and that is one of the reasons why we have had a balanced Budget, we have paid down Labor's debt, is to keep interest rates low - they are at 6.8 per cent - and I think you have to go...look, it could have been about 0.25 per cent a year or so ago but you would have to go back to the 1960s to have an interest rate like that in Australia.

FAINE:

$300, one-off, to pensioners, talk back callers will tell us this morning whether that is going to be enough or not, but who gets the $300? It's aged pensioners...?

TREASURER:

Anyone on income support who is of aged pension age, so, if you are over 65 as a man or 61 and a half as a woman, you are either on the aged pension, you could be on a veterans' pension or a service pension. It's a bonus for anybody over aged pension age who is a part or full pensioner, even if you are a part pensioner you get it.

FAINE:

So, no sole parent pension bonus, no disability pension bonus, where did the $300 figure come from?

TREASURER:

Well, $300 figure came from the fact that the Budget this year was stronger than expected and because the Budget was stronger than expected the economy could do with additional stimulation and older Australians deserved it. The three factors came together.

FAINE:

They deserved it last year, they deserved it the year before, but you are only giving it to them now?

TREASURER:

Well, Jon, you know, if you could give pensioners a bonus of $50,000 or $100,000 they might deserve it. It is a question of what we, as a society, can afford, and we put the pension up last year as you know.

FAINE:

Yes.

TREASURER:

We had a better than expected year, what could we do with that we could have paid off more Labor debt, but we have already paid off $60 billion of Labor's debt so we decided it was time for a bonus and we are paying it to pensioners.

FAINE:

So, it's like a dividend to the shareholders, so to speak? But...

TREASURER:

It is, it is really, it is, it is a dividend. It could have been paid by more expenses on something, we could have paid down the bank account more, we decided to make a payment to pensioners.

FAINE:

The older unemployed, though, are also being hit because there is tougher Work for the Dole guidelines, so, you are not being uniformly generous to older Australians.

TREASURER:

Well, the Work For The Dole applies to people up to the age of 39. I don't know if you or I regard those as older Australians these days Jon?

FAINE:

No, I understood that there was (inaudible) Work for the Dole guidelines up to the pension age?

TREASURER:

No, if you are unemployed and after 3 months you get training, and if you are still unemployed after 6 months then you have to do an activity, which will be community work, part-time paid work, education, or if you are aged up to 39 - Work for the Dole. But you don't have to do Work for the Dole over 39. Over 39 you can be asked to do part-time paid work, can be asked to do some training you can be asked to do some study, but not Work for the Dole.

FAINE:

The actual surplus, Peter Costello, you told us last night is $1.5 billion...

TREASURER:

Ummm.

FAINE:

Just a little while ago the forecast surplus was over $4.5 billion. Where has it all gone?

TREASURER:

Well, mainly in tax cuts. We, if we had not have cut taxes we would have had larger surpluses but, as I said, we have now paid off $60 billion of Labor's debt, so I think we have got our debt position on track and we cut taxes from the things we did. As you know we cut petrol excise, we abolished indexation on petrol excise, those were the two largest measures. Excise on beer was cut, and in this Budget new measures include full rebates to business for when they buy a vehicle. When a business buys a vehicle it pays no tax. That will be a saving of $3500 for a business buying a car or about $30,000 for buying a truck. So, we have cut taxes, that is what we have been doing in the course of the Budget.

FAINE:

And the first two of those are measures that you resisted strongly for as long as you possibly could. Do you wish that you still had that money, could you do something better with it if you hadn't been forced to the beer and petrol excise changes? The back-flips as they are called.

TREASURER:

Well, I actually think that the public had as its priority a cut in petrol excise. It's true that if excise were higher you would be able to do something else, but I think in the public mind and in my mind cutting excise is more important. Unfortunately it has not brought the price of petrol down because that is mainly the result of world factors, but I think it was an important measure and the other tax cut, of course, I should have said, one of the reasons why we will have a smaller surplus this year is we cut tax for self-funded retirees, very dramatically. In fact, you don't have to pay any tax at all if you are a self-funded retiree on your first $20,000 of income.

FAINE:

I'll come to that in a moment. Was the petrol excise back-flip a waste of money now? Can you say that?

TREASURER:

No, because I think the public, Jon, look we would have discussed this you and I, over and over again. I have discussed it all around Australia. In the public's mind they thought the priority was cutting petrol excise and that is what they considered to be important, and I agree with them and we cut it.

FAINE:

You didn't agree with them until you were forced to do it?

TREASURER:

Until the public made its view very clear, that they thought the priority was cutting petrol excise and, you know, we are a Government, we have got to accept that, and we did and that was (inaudible) We not only cut petrol excise, by the way, but abolished indexation, that means it will never rise. The petrol excise will never rise even as the consummer price index, and in 4 years time that indexation itself is a billion dollar tax cut. So, you said to me why is the surplus smaller, the surplus is smaller because we cut taxes. We cut taxes on petrol, we cut them on cars in the Budget, we've cut them for self-funded retirees, I think it is responsible to do so because we have now paid off $60 billion worth of Labor's debt. If we had a bigger surplus we would pay off debt. We have paid off $60 billion, I think it was responsible to cut taxes.

FAINE:

Peter Costello this is a Budget that is about repairing damage to core constituents, rather than about economic management, surely that is transparently so?

TREASURER:

Well, can I just say in relation to economic management, this is the fifth consecutive surplus Budget and we haven't had 5 consecutive surplus budgets until you go back to the 1960's. Not since Whitlam and the Labor election in 1972. So it's pretty responsible and I think it's pretty responsible to cut taxes. In this Budget we cut company tax, we abolished Financial Institutions Duty, stamp duties on shares, we give full tax rebates for businesses that buy cars, we cut taxes for self-funded retirees. I think that's pretty economically responsible.

FAINE:

And we still have a surplus. Can you re-invent the image of the Costello Treasurer and the Howard government generally by sloshing money around the way you have overnight? For the last several years I think Shane Stone got it right, mean and tricky was the way people felt about the Government. That it was very hard to get a break out of this particular administration. Suddenly there's money for just about everybody.

TREASURER:


Well you know when you say get a break, on 1 July last year we introduced the largest income tax cut in Australian history and for average workers they were on 43 cents, a top marginal income tax rate of 43 cents. We cut it to 30 cents and that was on 1 July of last year. In fact Jon if you went back to July of last year you'll find everybody, including the Opposition by the way, saying that we were irresponsible, we were cutting income taxes by too much and that was on 1 July of last year. People haven't even yet had a full year of those income tax cuts so they were very, very substantial. Now we say it's the time for the self-funded retiree and we cut their tax rates and there's a dividend, if you like to put it that way, to pensioners and there is cuts for business.

FAINE:

Seventeen minutes to 9. Peter Costello with me. Simon Crean joining us round about 10 minutes to 9. Some confusion about the tax free threshold for self-funded retirees this morning Treasurer. I understand you have to be of pensionable age to access those new tax-free thresholds of $20,000 for an individual or 32 and a bit thousand for a couple. Is that correct?

TREASURER:

Yep. You've got to be. These are benefits for people who are of pensionable age, that is 61 for women and 65, 61 and a half I think it is and 65 for men. As I said in relation to the pensions and in relation to the retirees that's the age at which we determine people are retirees.

FAINE:

And if you're an early retiree then if you have, if you're a self-funded retiree who's taken early retirement you pay tax until you reach those ages. Is that the way it works?

TREASURER:

Well you've had tax cuts on 1 July of last year, don't forget that, and in addition we announced another measure for that group of people. Previously your superannuation assets were taken into account before you could get income support. Now they won't be. You can get income support without having your superannuation taken into account.

FAINE:

Peter Costello as I introduced you I said the de-facto Prime Minister. The man whose vision is going to either make or break the prospects of the Liberal Party being re-elected at the election that will be most likely at the end of this year. What is your vision? What is the Peter Costello version of the future of this nation? We've seen the Prime Minister for the last two terms. What would you do if you got your hands on the levers after the next election?

TREASURER:

Well can I just talk in the context of this Budget. What we've tried to do in this Budget is be economically responsible.

FAINE:

Well I specifically want you to move away from the Budget. I want to know whether you can flesh out a vision beyond that of a Treasurer.

TREASURER:

Well I can. But it's the day after the Budget and what I wanted to do in the Budget was lay down a lot of markers. First of all our biggest defence build up in 25 years, a ten-year program. Second a seven-year investment in the environment with the Natural Heritage Trust, Australia's biggest ever investment in the environment and we are going to attack salinity. Salinity is Australia's biggest environmental problem. Thirdly a package of measures to protect Australia against plant and animal disease because our farmers are the best in the world and we want to keep them that way. Also, an Innovation Statement which we announced last year in relation to increased education and university places and to do that in the context of lowering taxation and doing justice to older Australians and that's the context which we're laying down this economic plan for the future.

FAINE:

But I invite you to speak outside the context of the Budget. For 6 years you've been the loyal Deputy. The next election as much as anything depends on whether or not the people of Australia think that you have a vision to pick up where John Howard concedes he will leave off somewhere in the next term if the Liberal Party are re-elected. It's really your vision versus Kim Beazley's vision that we're being asked to choose between. So enough of the loyal Deputy stuff. What is Peter Costello's version of the future of this nation, the big picture?

TREASURER:

Look Jon I think that Australia's best days are still in front of it. I said that last night. We're still a young nation. I went back and I found the budget speech of my predecessor a hundred years ago and he was giving advice for a young nation. It's good today because we're still a young nation. We've still got so much to do and I think amongst the rank of nations in the world we can make Australia stronger with better living standards and a just provision for our older people and a leadership role in this particular region as we strengthen our economy and we attend to our defence and our security. These are values that I hold dear and I talk about them a lot within the confines of office and I'll continue to do so.

FAINE:

The confines of office though surely have to be put into the context of an election where as I say your vision is critical. Does Peter Costello now feel able to talk about reconciliation and the republic, issues on which I know you privately are passionate, but about which publicly you still feel constrained?

TREASURER:

Well I have spoken about reconciliation and you know that at the time of the...

FAINE:

The walk last year.

TREASURER:

...the march last year.

FAINE:

Yes.

TREASURER:

And I've spoken about our constitutional arrangements at the time of the referendum. I think I played quite a big role in relation to that. The only thing I'd say about that is you've got to make sure your constitutional arrangements are secure. The most important thing about them is that they work. People forget that. That's the most important things is that they work. I want something that works and something that attends to the symbolism and those speeches are all there on the record. I'm happy to talk about those issues. I think my views are well known.

FAINE:

Is it regarded as too much of a risk within the Liberal Party to run a strategy for the next election that is about generational change? It's about John Howard handing over to Peter Costello, about the next step. Is that regarded as too risky or in some way undermining the Prime Minister whose now surely established himself within the Party and the nation as a man of great tenacity?

TREASURER:

Well, but it's not really the case because John Howard as Prime Minister is the head of the Government and John Howard is the person who is taking the overall responsibility for the Government and he's elected to do that and he has done that through very adverse circumstances in a very, very strong and successful way. Look we've come through some very difficult times, let me give you one thing Jon, I mean before we all sort of, sort of forget it. This country sent military force into East Timor to protect the lives of the East Timorese.

FAINE:

Yes.

TREASURER:

And it was John Howard's decision to do that. He broke with an established Labor Party pattern of ignoring East Timor and when the Labor Party was doing everything it could to ingratiate itself with the Suharto regime over a long period of time.

FAINE:

Yes.

TREASURER:

It was John Howard that had the leadership and the foresight to break that and protect East Timor and to engage in our very successful military operation and we are now building Australia's defence forces and he deserves the credit for that.

FAINE:

And very much finally Peter Costello. Paul Keating is quoted saying in the paper "Howard is well past his used by date. If Costello has any bottle he'll knock him off. It's obviously the winter of the Treasurer's discontent but has he got the ticker to get the sword out?".

TREASURER:

Oh boy. You sort of, these blasts from the past. What did Keating say? Keating said John Howard was past his used by date. Look in the mirror Paul.

FAINE:

Peter Costello, thank you for your time this morning.