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 12/07/01

Transcript No. 2001/093

 

TRANSCRIPT
of
HON PETER COSTELLO MP
Treasurer

Interview with Neil Mitchell
3AW
Thursday, 12 July 2001
9.00 am

 

SUBJECTS: Income tax, contractors, leadership, fuel prices, GST, Aston by-election, Scoresby Freeway,

MITCHELL:

And as the Opposition Leader leaves beseiged by Koalas and cameras, Im joined by the Federal Treasurer, Mr Peter Costello. Good morning.

TREASURER:

Good morning Neil. How are you?

MITCHELL:

Okay. Now Ive asked Kim Beazley this question, are the people of Aston, are the people of Australia paying too much income tax?

TREASURER:

Ah, well, weve cut income taxes on 1 July last year and that means that if youre on average wages today, your top marginal income tax rate is 30 per cent. If Labor, under Labors tax system it would have been 43. So weve brought it down from 43 to 30 and I think Neil, the Coalition Government believe you should always keep income taxes as low as possible. Thats one of the reasons why we reformed the tax system.

MITCHELL:

So are they paying too much income tax?

TREASURER:

Well, at the moment theyre paying less than they would have been, 43 down to 30. Biggest tax cuts in Australian history. Now Mr Beazley said a very interesting thing when you spoke to him. He said he thinks income tax is about right but that the tax mix is wrong. That is you should take more money off indirect tax - where would you shift it to? You have to shift it to income tax. Youve got a very clear admission from Mr Beazley today that the Labor Party supports higher income taxes. Ill make this point Neil, if you are going to rollback GST, if youre going to get less money from GST and you want the same tax, you got to take it out of income tax. And thats why he said the tax mix is wrong. Rollback of GST means one thing, higher income tax under Labor.

MITCHELL:

So if he changed the mix it would have to mean higher income tax?

TREASURER:

It would have to. The mix of tax, when you talk about the mix of tax, its a technical point. Its the mix that comes out of the direct tax system, income tax, as opposed to what comes out of the indirect tax system, that is taxes on goods and services. He says the mix is wrong. We should take less out of goods and services. Where does he shift his mix? On to the income tax. He is in favour of higher income taxes. Thats why the Labor Party opposed our tax plan. Because what it did was reduce income taxes. And you had a very clear admission from Mr Beazley that he is in favour of higher income taxes today. It can only mean that Neil. It cant be understood any other way.

MITCHELL:

Okay well take calls for the Treasurer in a moment and also face to face talkback here at Knox City. If youd like to speak to the Treasurer raise your hand and we will have our, and no candidates please, and we will have our mobile microphone come to you. No candidates. Mr Costello if you lose this by-election on Saturday, is there any chance of a leadership change before the next election?

TREASURER:

In the Liberal Party no, I dont know about the Labor Party.

MITCHELL:

Well if they win there wouldnt be a leadership change. I put to you, if you...

TREASURER:

If they lose, I thought you were asking me. I dont know.

MITCHELL:

No Im asking you...

TREASURER:

No there wont be in the Liberal Party.

MITCHELL:

Okay, would the pressure would be on for that wouldnt it? To do a Keating, as Keating did to Hawke. If this election is lost, the only hope would be argued for your party to win the Federal Election would be a leadership change and the pressure would be on you.

TREASURER:

No, I dont think so Neil because look Labors the favourite in this by-election and they know that. Because a by-election swing is normally 5 per cent. And if you got a 5 per cent swing that would be the standard by-election swing and its enough to put the seat into the hands of Labor. What concerns me about it, and I think what concerns Chris Pearce the Liberal candidate, about that, if you get a Labor outcome here, there is no guarantee that the Scoresby Freeway will be built. The only candidate supporting the Scoresby Freeway in this election is Chris Pearce. The people of Aston know that.

MITCHELL:

(inaudible)

TREASURER:

And that is what I would say to the people of Aston. There are a lot of candidates here that arent committed to Scoresby. Chris Pearce is. Chris Pearce is the candidate committed to the Scoresby Freeway. And if you want the Scoresby Freeway dont vote Labor because theres no guarantee therell be a freeway if Chris Pearce is defeated.

MITCHELL:

That is another issue. Would you deny there would be pressure on John Howards leadership if this election is lost by the Coalition?

TREASURER:

Yes, I do deny that. And I certainly wont be increasing it. Absolutely.

MITCHELL:

Youre talking about the income tax, and Labors tax policy. The tax policy I put to you from the Coalition has been very messy, very confused and spectacularly marked by backdowns and backflips. How can we get any certainty from your Government on tax?

TREASURER:

Well weve done the biggest tax change in Australian history. And we have reduced income taxes. And I make this point again Neil, if we hadnt changed tax on 1 July last year, average earners here in Aston would be paying 43 cents in the dollar as their marginal rate. But they are paying 30 cents. What we did is we changed the mix. We took tax off income and we cut taxes. Beazley says well he wants to change the mix back the other way. He wants higher income taxes. Now a big change like that, youre always going to have teething problems. But I must say, if you are a Coalition supporter, if you want lower income taxes, the Coalition is the party that delivered them. The other thing is that Beazley said...

MITCHELL:

When?

TREASURER:

1 July last year.

MITCHELL:

Next term in Government...

TREASURER:

...in the bag.

MITCHELL:

Next term, would you have further tax cuts?

TREASURER:

Neil what you know about the Coalition is this, that as the economy grows and the position of the Government strengthens, we believe in returning to the taxpayer some of the benefits.

MITCHELL:

So if the economy grows, there will be tax cuts in the next term?

TREASURER:

All I would say is that as the economy grows, if the Budget is strong, we would always try and return some of the benefits to the taxpayer. And youve got to remember this, when we were first elected, Mr Beazley talked about the state of the Budget, when we were first elected the total Budget wasnt balanced. It was $10 billion in the red. So what is the first thing we did? We put the Budget back into the balance. The second thing is, as the economy grew and became stronger, we started returning the benefits to the taxpayer. And today your average, your marginal tax rate for an average earner is 30 cents. Under Mr Beazley it would have been 43.

MITCHELL:

You told me on Tuesday thered be no more changes to the law affecting, tax changes affecting contractors. The Prime Minister contradicted you within hours. Are there more changes to come?

TREASURER:

No, the substantive law is clear and it means that independent contractors are not covered. What the Prime Minister said that day, and I discussed it with him beforehand, is we are always going to ensure that we have the best tax system. But what we need now is certainty.

MITCHELL:

Is the Tax Office changing the way it implements it?

TREASURER:

The Tax Office has said today, and this has always been the case that where people make innocent mistakes its not going to be applying punitive penalties to them. I think thats right. Where you make an innocent mistake you shouldnt get a big penalty. I think thats absolutely right.

MITCHELL:

Theres a debate about penalties. Is there in fact an amnesty then?

TREASURER:

No. No. Independent contractors, and weve been over this, are not covered by these measures. People who are not independent contractors can be. If they make an innocent mistake they wont be subject to those...

MITCHELL:

Are there any further coming changes or adjustments coming...

TREASURER:

Can I just make this point? I think its very important. I know youre interested in this. And I dont want to spend the whole of our time on it.

MITCHELL:

No, youre right.

TREASURER:

We are here to support Chris Pearce the Liberal candidate here in Aston.

MITCHELL:

Well you might be.

TREASURER:

Well I am.

MITCHELL:

Dont use the we please.

TREASURER:

Well, well, okay. Perhaps I used the "Royal" we. Sorry for that, but we are here to support Chris Pearce who is the local...

MITCHELL:

Are there any...

TREASURER:

But in relation to those matters, the substantive law is if youre an independent contractor youre not covered. If you are somebody who is not really an independent contractor youre not entitled to claim youre a business. If you make an innocent mistake the Tax Office (inaudible)...

MITCHELL:

(inaudible)

TREASURER:

I was going to go on to make this point. I was going to go on to make this point. In all of this youve got to remember one thing. Beazley said these laws are too soft. So you say to me oh well I think theyre too harsh. Thats your view.

MITCHELL:

No I think (inaudible)...

TREASURER:

But Mr Beazley says theyre too soft. The Labor Party condemned them at the time for being too soft. So we ought to remember that.

MITCHELL:

Are there any more, are there any more changes coming in tax policy?

TREASURER:

Oh well look there are big changes in the Australian taxation system have been implemented.

MITCHELL:

I understand that.

TREASURER:

Well let me tell you what they are.

MITCHELL:

No but youve told me three times.

TREASURER:

No, no, no. Well I havent.

MITCHELL:

(inaudible)

TREASURER:

Apart from the abolition of...

MITCHELL:

(inaudible) look I dont want to hear all that.

TREASURER:

Not the abolition the reduction of...

MITCHELL:

Abolition of income tax.

TREASURER:

A reduction...

MITCHELL:

Youve just been elected, Ill vote for you...

TREASURER:

(inaudible) I just picked myself up. Neil you are too quick for me.

MITCHELL:

Look at the crowd they are surging forward.

TREASURER:

The reduction, I just got there in time. The reduction in marginal income tax rate for average earners, the abolition of Financial Institutions Duty. There are further changes coming in. Were abolishing Bank Account Debit tax. Thats the tax you pay when you take money out of your bank account.

MITCHELL:

Any further...

TREASURER:

And we are abolishing in the future stamp duties on mortgages. So people wont have to pay stamp duties on the mortgage which they take out. So there are further changes.

MITCHELL:

So are there any changes to taxes or the situation as already implemented?

TREASURER:

No changes to the substantive law on independent contractors...

MITCHELL:

Anything else?

TREASURER:

...or on GST.

MITCHELL:

...caravan parks, is there anything else?

TREASURER:

...that have been done. That we have a program for ongoing tax abolitions. We abolished Financial Institutions Duty 13 days ago...

MITCHELL:

Are you looking at the caravan parks issue?

TREASURER:

...were going to move on to Bank Accounts Debits tax. Were going to then move on to stamp duties and were going to make sure that we have a much lower taxation...

MITCHELL:

Are you looking at the caravan park issue again?

TREASURER:

No, look I think thats been well and truly debated and...

MITCHELL:

No change coming then?

TREASURER:

I think the situations pretty well known there.

MITCHELL:

With no change coming then?

TREASURER:

No, weve been through that.

MITCHELL:

Well take a break and come back with face to face and calls for the Treasurer Mr Peter Costello.

MITCHELL:

The Federal Treasurer, Mr Costello, do you agree its disgraceful that Andrew Thomson one of your members is having a trip overseas and that hes about to leave Parliament?

TREASURER:

No I dont think he should do it no. And I think the Prime Minister has indicated to him that he should come back.

MITCHELL:

David go ahead please.

QUESTION:

Yeah its David here. Id like to ask Mr Costello why doesnt he give the people of Knox, Im a resident of Knox, a pure straight clean yes or no with his damn answers to what youre asking him. Youre asking him five or six damn times. And tell him to take the smirk off his face. I can hear it over the damn radio.

MITCHELL:

Is there a question David? Or what...

QUESTION:

Yes I have a question. Give us straight answers mate. Give a straight answer. A yes or a no. Dont go off with your babble.

MITCHELL:

Right oh thanks David.

TREASURER:

Thanks David.

MITCHELL:

I think it was probably more of a statement. Now on that line though, the Opposition Leader has accused the Government of lying over Scoresby. Whats your response?

TREASURER:

The only Candidate that supports the Scoresby freeway unequivocally in this election is Chris Pearce. Now Ive got here the letter from Peter Batchelor dated 17 November 1999, hes the Minister for Transport.

MITCHELL:

Yes.

TREASURER:

And I want to read out what he says. "I can advise that the Government" this is the Bracks Labor Government, "has made clear its decision with regard to Scoresby. Construction of the Scoresby Freeway will not occur during the next four years because no provision has been made for it in any current or past Government funding". Right. We do Budgets over four years. Mr Batchelor says no money over the next four years. Thats what he says in November 1999. He goes to a May 2000 Budget, no funding for Scoresby. He goes to a May 2001, no funding for Scoresby. Now remember when you do Budgets you set down funding over four years. So even if, in his next Budget, he decided to change his mind, no funding over four years. So what he did do is this. This is very, very interesting. When he came to his May 2001 Budget, this is what he says "Bracks Government announces $2 million public transport study in Scoresby territory". In other words, he says in November 1999, no money for 4 years. He puts no money down in May 2000, and in May 2001 he doesnt put $220 million down over 4 years. He puts...

MITCHELL:

Could I just ask...

TREASURER:

...$2 million for another study...

MITCHELL:

...is the Scoresby Freeway an issue for you in how you vote?

TREASURER:

Oh yes, absolutely. Now...

MITCHELL:

Public transport theyre saying to you.

TREASURER:

Okay, thats fine. If you want to vote for, against the Scoresby Freeway then a Labor vote no doubt will do it. But what I am saying is those people that do want the Scoresby Freeway, the only candidate in this election that is unequivocally committed to the Scoresby Freeway is Chris Pearce. The money has been put down in the Federal Budget - $220 million over 4 years - and all you have got from the State Labor government in their May budget, May 2001, is $2 million for a study.

MITCHELL:

Okay.

 

TREASURER:

Not the building, a study. We dont need more studies into the Scoresby Freeway, they have been going on for 30 or 40 years.

MITCHELL:

Okay, well take a question from the floor. Yes, thank you.

QUESTION:

Mr Costello, I just wanted to know, my husband has a small business and he works 17 to 20 hours a day, and I was wondering what your Government is going to do to lessen the burden of GST and that so that he can spend some time with his family.

TREASURER:

Sure. Well, one of the options that we have introduced now is that you dont have to do a quarterly return in relation to that. You can do an annual return, so you dont have to do a quarterly return you just take the payment that was made in relation to December. The other thing that we are doing in relation to small business is we have cut the company tax on 1 July so that you will be facing a lower tax rate. And the final thing I would say is if anybody is in small business and worried about GST the best thing that could happen is no changes. Now, you heard Mr Beazley say before if he gets elected he is going to change it. You will have to get a whole new system.

MITCHELL:

So does this mean, does this mean you would block Rollback in Opposition?

TREASURER:

What it means is I would block Beazley becoming Prime Minister...

MITCHELL:

But if he does become Prime Minister would you block Rollback?

TREASURER:

He wouldnt have a clue what to do, you and I know that.

MITCHELL:

Would you? Would you block Rollback?

TREASURER:

I am not going to get into what might happen...

MITCHELL:

(inaudible)

TREASURER:

Hang on, hang on youre going into...

MITCHELL:

Beazley and Keating have made it clear before elections, what they would do with your policies. Isnt it fair to say would you block Rollback?

TREASURER:

Neil, I am not going to get into what would happen in relation to a Beazley win with an Opposition responding to legislation which we dont know.

MITCHELL:

You said the best thing is no change, that is what you are saying...

TREASURER:

...what I am also saying is he wouldnt have a clue what to do. You know that.

MITCHELL:

Oh...

TREASURER:

No, hang on. You tell me what Kim Beazley is going to do and Ill tell you...

MITCHELL:

Im not going to tell you. I dont know what, I am asking what you would do...

TREASURER:

Kim Beazley has been Opposition leader for five and a half years and he still cant tell you what he is going to do with Rollback. I am not an opposition leader and you tell me what I have to do in relation to his policy which he is yet to announce.

MITCHELL:

We have got another question from the floor, in the crowd.

QUESTION:

Mr Costello, I am an undecided voter. I was wondering if you have any policies to curb the rising debt per capita and credit card debt per capita?

TREASURER:

Sure.

QUESTION:

I understand under your, (inaudible)

TREASURER:

Well, let me go through it bit by bit. Under the 5 years of Labor government, before we were elected, Commonwealth debt increased $80,000 million dollars. And was increasing $10,000 million a year. We put the Budget into balance and by the end of this year we will have paid back $60,000 million of Labors $80,000 million debt. The biggest debt re-payment we have had and that is because we have had good economic management. In relation to individuals, particularly those that are borrowing, in relation to their house are enjoying lower interest rates. And what my plan is is to get interest rates down so that people who do have debts can service them.

MITCHELL:

You want them down further.

TREASURER:

Neil, I would like to get interest rates as low as they can be consistent with good economic policy.

MITCHELL:

Is there room for...

TREASURER:

Dont take from that that I am saying there is going to be a change in interest rates because I never talk about the future of interest rates.

MITCHELL:

But you are now, you want to get them down. Is there room for them to come down?

TREASURER:

I want to run an economic policy which allows them to be as low as possible. Now, out here in Aston...

MITCHELL:

(inaudible)

TREASURER:

...I remember campaigning out here with Peter Nugent who was the Member for Aston. This is why we are having the by-election because he died. I remember campaigning with Peter, Peter Nugent in March of 1990 when Labor was last here and the interest rate was 17 per cent...

MITCHELL:

Mr Costello...

TREASURER:

...and we have followed a policy of getting those interest rates down. It doesnt happen by accident, it just does not happen. It doesnt happen by a lazy policy.

MITCHELL:

The Prime Minister...

TREASURER:

...it happens by hard work.

MITCHELL:

The Prime Minister has said though that the Government has made a number of mistakes. What are they?

TREASURER:

Oh, we have made, I am sure we have made mistakes on all sorts of things.

MITCHELL:

Just cant think of one?

TREASURER:

Oh, I can think of many. I dont think there is any shortage of...

MITCHELL:

What are they?

TREASURER:

...mistakes.

MITCHELL:

What were they?

TREASURER:

Oh. Neil look. It has taken us a long time to, it probably took us a long time to get the Budget back into balance.

MITCHELL:

Petrol?

TREASURER:

Well, petrol was an error in this sense, that it took us 5 years to abolish indexation. We couldnt have afforded to abolish it earlier.

MITCHELL:

Did you leave the excise there too long?

TREASURER:

But we did, the point is we did abolish indexation. I would have liked to have done it earlier. Yeh, if we had been able to cut petrol excise earlier that would have been good. I dont know if we could have done it any earlier consistent with good economic policy. Just, can I make this point because you and I discuss petrol a lot. You know when the GST came in and Labor of course said it would petrol prices up. The petrol price from 1 July last year was 90 cents a litre, and I (inaudible) down here in Aston today it is 82 cents. Now I am not saying that tax changes have brought it down from 90 cents to 82 cents, but what I am saying is this, that the determinants of the petrol price, things like world oil prices and other things, are the main factors.

MITCHELL:

Well, you are taking credit for the lower petrol price.

TREASURER:

But today they are lower, you know, and the Labor Party used to run around making this point, you know, if they ever went up today they are much lower than they were a year ago. A year ago they were 90 cents. So I think it is a very hard argument for the Labor Party to say that tax changes put petrol prices up.

MITCHELL:

Okay, well take one more call and the Treasurer must leave us.

Danny, go ahead please Danny.

QUESTION:

Morning Neil, morning Mr Treasurer. Ah, my question...

TREASURER:

Morning Danny.

QUESTION:

My question is this, now that we have had the GST for the 12 months is the Government going to release the amount of windfall that it had with the implementation of the (inaudible) tax. As you said the petrol was 90 cents when it was implemented. I dare say that when you did your Budget forecast and your feasibility study for this the petrol probably would have been around about 70 cents. It is probably sold on an average over the last year for somewhere closer to a dollar, and in excess of that in the country areas, and when you talk about an extra 20 cents or something per litre...

MITCHELL:

Okay.

QUESTION:

...of which you get 2 cents a litre for extra, over and above your forecast, everything else in the market place has increased in price, therefore your share of the tax has increased and you talk about 4 year plan. You must be looking at a good windfall in a few years time?

MITCHELL:

Okay, thanks Danny. Treasurer?

TREASURER:

Can I just say on petrol, the Government calculations are done on a petrol price of 90 cents and today its, well, its 82 cents I think, I saw out, so it hasnt gone up it has actually gone down. But, yes, of course we are prepared to release all of the taxation details.

MITCHELL:

What is the windfall? How much?

TREASURER:

Well, there is two aspects. There is GST. GST revenue was as forecast, and every single dollar of that has gone to Premier Bracks and Premier Carr. You know Premier Bracks gets all GST revenue.

MITCHELL:

Yes, we have been through this...(inaudible)

TREASURER:

(inaudible)...well...

MITCHELL:

Well, lets not debate it.

TREASURER:

I dont think...

MITCHELL:

Are you aware...

TREASURER:

He cashes the cheque every month...

MITCHELL:

Is there a windfall?

TREASURER:

And he, so he got, we said that Premier Bracks and all the other Premiers get $24 billion and they got $24 billion.

MITCHELL:

Right.

TREASURER:

So we were on the mark. What we also noticed is that the GST system led to pulling people out of the black economy on income tax. And we think that the collections were about $2 billion higher in relation to income tax. The GST has clamped down on the black market on income tax.

MITCHELL:

So, what happened to the $2 billion?

TREASURER:

The $2 billion? Well, some of it was used to give a $300 bonus to pensioners who all got a $300 bonus before the 30 June. Some of it will pay the abolition of indexation on petrol. Some of it went to the POWs who were paid a $25,000, POWs of the Japanese...

MITCHELL:

Is there any of it left?

TREASURER:

...most of that $2 billion, well yeah, not all of it, was...

MITCHELL:

How much left?

TREASURER:

Not all of it. The pensioner measure was about $700 million. The abolition of indexation was about $500 million...

MITCHELL:

Well, theres about $800 million left, what are you going to do with it?

TREASURER:

Oh, no well, the Prisoners of War of the Japanese...

MITCHELL:

Alright, well well round it down to $700 million. What are you going to do with it?

TREASURER:

And the remainder will be used to pay off Labor debt. (inaudible)

MITCHELL:

Just a couple of very quick questions; is poverty the fault of the poor?

TREASURER:

Look, Neil some people are poor and it is not their fault. There is no doubt about that. They have been stricken by bad circumstances.

MITCHELL:

Does Tony Abbott need some advice?

TREASURER:

Some people are poor, because as he says, they might be addicted to drugs or gambling, and it would be better if you could help the underlying problem which is drug addiction or gambling, but not everybody is poor because of their own fault. No, of course not.

MITCHELL:

Win Aston, win Government, is that a fair comment?

TREASURER:

Look this is a by-election. If Peter Nugent hadnt had a heart attack we wouldnt be in this. And I know Chris Pearce wants to take up his work but you dont want to say that a by-election is going to decide the future. Labors the favourite in the by-election, we know that.

MITCHELL:

Well finally...

TREASURER:

But you dont want to say just because there is a favourite in the by-election (inaudible)...

MITCHELL:

Why shouldnt they punish your Government?

TREASURER:

Well look, I think our Government over the last 5 years, we havent got everything right, but if you compare it to the record of the previous government there are 800,000 more people in work. Their mortgage interest rates which under Labor were 10.5 per cent, are 6.8 per cent today. Their income tax rate on average wages is 30 per cent and the final reason why I say dont have a protest vote here is, if you dont vote for Chris Pearce in the Liberal Party, the Labor Party will find some reason not to go ahead with the Scoresby Freeway. Punishing the Government would be punishing the opportunity to build that freeway.

MITCHELL:

Thank you for your time.

TREASURER:

Thanks very much Neil.