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 07/03/2005

Interview with Neil Mitchell
3AW

Monday, 7 March 2005
10.05 am

 

SUBJECTS: GST, State Taxes, Interest Rates, Leadership

MITCHELL:

Mr Costello good morning.

TREASURER:

Good morning Neil, good to be with you.

MITCHELL:

Thank you. Well, you say it is not working, John Brumby says it is not working, New South Wales says it is not working, is the GST broken?

TREASURER:

Oh no, it is working. It is delivering…

MITCHELL:

Not for us it is not if you say we are not getting the tax cuts passed on.

TREASURER:

…well, it is working, it is raising $35 billion this year, so it is working, there is no doubt about that.

MITCHELL:

But we are not getting the benefit of it you say we should.

TREASURER:

Well I am working to ensure that consumers and businesses do get the benefit, that is what this is all about. I have pointed out to the States that the GST is working, they have got more revenue than ever before and they agreed to cut their other taxes as the revenue increased and all they have got to do is abide by the agreement.

MITCHELL:

What has Victoria not cut that it should have because John Brumby again says they have met all their obligations?

TREASURER:

Well the one that Victoria still has to deal with is stamp duty on business conveyances, which includes things like goodwill, trading stock, chattels and licenses and you know the whole range of things in that area which…

MITCHELL:

And when should that come off?

TREASURER:

Pardon?

MITCHELL:

When should that come off?

TREASURER:

Well my point is that these should start coming off from 1 July 2005. That is the start of the next financial year and it is also on 1 July of 2005 that the Bank Account Debits tax which Victorians are still paying should also be abolished. Now I have got the Victorian Government’s agreement to that so they have got to deliver on that agreement from 1 July and then they have got to keep going with the other State tax abolitions.

MITCHELL:

So Victoria has performed better than most, has it?

TREASURER:

Well when you say better than most, some are notorious laggers and some are just laggers. This was all agreed back in 1999. Look, it shouldn’t come as any surprise to anybody Neil, this was all agreed in 1999. Everybody who was alive in 1999 knew that the GST was introduced to replace other taxes, the GST has been introduced, it shouldn’t come as any surprise to anybody that the other taxes have got to be replaced. If I were a State Government I would seize this and say, yes, this is great, we want to actually reduce taxes for our people. I mean I don’t understand why you have got to be dragged kicking and screaming, the State Government should make this a plus. We want to reduce taxes for Victorians, what is wrong with saying that and what’s more it now has the capacity to do so. So, I don’t understand really when I just remind the States that this is an agreement which is now six years old and it should be observed and when I remind them that it is in their interest and it is in the interests of Victoria and it is in the interests of all Victorian taxpayers, I don’t really understand why it should be an argument.

MITCHELL:

But it hasn’t (inaudible)?

TREASURER:

Well I think it has been slower than it should have been, yes, yes it has.

MITCHELL:

So what has that cost us?

TREASURER:

Well I will tell you. The Victorian Government for example has a windfall of $285 million in this financial year, that could have been used to reduced some of these taxes.

MITCHELL:

Well, this $285 million that we are paying that we shouldn’t be you are saying…

TREASURER:

Yes…

MITCHELL:

…and we are also paying the GST.

TREASURER:

No, (inaudible). The Victorian Government is getting $285 million more than it would have under the old system.

MITCHELL:

Yes but you are saying they should have used that to cut…

TREASURER:

And what that means is that they now have the capacity to bring forth the abolition of the taxes that they promised.

MITCHELL:

Well we are the ones stuck in the middle of that, we are paying those taxes and they are not abolishing them. They are also paying the GST so we are being double hit…

TREASURER:

Yes.

MITCHELL:

…so how can you say the GST isn’t broken?

TREASURER:

Well, the GST is working, what is not working is the abolition of the other taxes.

MITCHELL:

(inaudible) for us, it is not working for us.

TREASURER:

Well hang on, yes, so what have we got to do? We have got to make sure that those other taxes are abolished. That is the whole point.

MITCHELL:

But how are you going to do that?

TREASURER:

Well, this is the, did I not say, the first thing we would do is we would let the public know what the facts were, the facts are out there now, you have had Mr Brumby on your programme, you have put pressure on him, the more that you and other fellow Victorians like me out pressure on him the sooner we are going to get this fixed.

MITCHELL:

What about pressure on you? We are paying $9.4 billion in GST and we are getting $7.4 billion back, what about giving it all back to us?

TREASURER:

Well I do, every last dollar is given back, every single last dollar.

MITCHELL:

To Victoria?

TREASURER:

No, no, no, the States collectively. Hang on, let’s go through this.

MITCHELL:

Yes, well let’s worry about Victoria.

TREASURER:

Collectively, every last dollar is given to the States. Now, the States have a formula which they have agreed to, to divide it between themselves and that formula ensures the bigger States that have to build more roads get some kind of weighting. But let’s be entirely clear about this point – none of that comes to Canberra.

MITCHELL:

Alright, alright, but if we were getting all of the $9.4 billion that Victoria pays in GST, if we were getting all of that back we wouldn’t have things like this rotten land tax.

TREASURER:

Oh yes you would. Because it, land tax has actually increased I think was it 148 per cent. Let me tell you Neil, the increase in land tax has got nothing to do with Victoria’s share of GST. The increase in land tax, let’s be frank about this, we all know, is because you have had the biggest increase in house values and land values in Australian history and the scale which was put in place which is suppose to only tax luxury, now taxes ordinary property. Let’s be honest about that, we know why our land tax has gone up in Victoria.

MITCHELL:

Would you put land tax on the agenda for GST discussion? (inaudible) GST negotiating you take off land tax.

TREASURER:

Well to be frank with you Neil, I am having such an incredible time to get them to implement what they have already agreed, that I will try and hold them to what they have already agreed before I go the next step. Now, you know, here is an agreement, it is in black and white, I have got it here, the clause where they have agreed it, they signed it in 1999, Clause 5-7, and you know, I had to go through all of this rigmarole. As I said, I can’t really understand why this should be an argument, it was agreed in 1999, they got the GST revenue, they should actually make this a welcome thing.

MITCHELL:

Yes but you see John Brumby is saying that he has met all of his obligations. This stamp duty on conveyancing which had to come off or is due to come off on July 1, he won’t commit to whether he will do that or not…

TREASURER:

Well that is what we, that is what we should be holding him to. As with the Bank Account Debits tax. I went through this huge argument with John Brumby last year over Bank Account Debits tax. You know, I said that they had to abolish that, we went through this huge argument, he has now said he will do it from 1 July, he has got to do it from 1 July, we have got to hold him to that agreement and we have got to start working on the next one. But I keep on saying to you Neil, why should this be an argument, we have signed the agreement, the GST was introduced, it was introduced to get rid of these other taxes, if I were Mr Bracks, I would say, yes, we are delighted to be able to be able to fulfil our end of the bargain and (inaudible) taxes to Victorians. Why do they always have to argue?

MITCHELL:

Well because no Government wants to give up tax dollars because you all want to keep to buy elections, that is why.

TREASURER:

Well that is why we have got an agreement and I think we were quite right to get it in writing back in 1999.

MITCHELL:

What if they don’t follow the agreement, what if they breach it, what happens then?

TREASURER:

Well look, I am not going to go down that path because I think it is such eminent common sense that they would be mad to breach it.

MITCHELL:

Okay, well you are described by John Brumby as arrogant and undemocratic, what do you say to that?

TREASURER:

Why because I insist on Victoria honouring its agreement?

MITCHELL:

Arrogant and undemocratic.

TREASURER:

Because I insist on Victoria honouring its agreements?

MITCHELL:

And it is a smokescreen because you have got to admit with interest rates, with the interest rate rises?

TREASURER:

Well interest rates today are very low by historical standards.

MITCHELL:

No smokescreen?

TREASURER:

If you go back to crook interest rates, John Brumby was the Federal Member for Bendigo, you will recall, he served in the Commonwealth Parliament, ask John Brumby what the interest rates were when he was the Federal Labor Member for Bendigo.

MITCHELL:

Well he could hardly be blamed for that, he was a backbencher.

TREASURER:

Well no, it might just give you some perspective on interest rates. I think at the time they were 17 per cent when Mr Brumby was a Member of the Federal Labor Government so if the interest rate when Mr Brumby was a Member of the Federal Labor Government was 17 per cent, I think it is quite low by historical standards at 7.3 per cent.

MITCHELL:

Okay, just finally (inaudible) point that you argued that we are not getting the money given back to us, that the States are, Victoria and New South Wales are arguing that we are not getting the money given back to us out of the GST that we pay…

TREASURER:

No, no…

MITCHELL:

…are we the bunnies in the middle?

TREASURER:

…no, no, that is really a red herring and…

MITCHELL:

Well it is true though…

TREASURER:

…no, no.

MITCHELL:

…we pay (inaudible) billion and we get $7.8 back.

TREASURER:

No, that is really a red herring Neil and I think it is worthwhile thinking about that issue and clarifying it. All GST money goes to the States, there is a formula which divides it between the States which the States all signed up to respect. Every one of the States under that formula whatever criticism they have of the formula are better that they were under the old system. They signed an agreement in 1999 when they got better then under the old system which also divvied it up in that way, they would reduce state taxes. And I must say they pull that red herring across the debate over and over again but it is totally irrelevant to their obligation to use the GST revenue to abolish their State taxes. Don’t fall for it.

MITCHELL:

Okay, look thank you for talking to us, I have got something to ask you, The Age, The Sunday Age ran a report of, it was on Page 1 yesterday, and even then they had their little cartoon there, Costello and the leadership, where have all of these stories come from the past few weeks? Why are we suddenly reading all about you and leadership?

TREASURER:

You know, you have probably been reading it for the last ten years Neil.

MITCHELL:

Well it has wound up the past weeks.

TREASURER:

It comes and it goes, there are bursts, but I think you know, the papers, it depends whether it is a slow news day or a fast news day.

MITCHELL:

Ninth Budget, how is it going?

TREASURER:

This Budget is going according to timetable.

MITCHELL:

Is this the last Budget?

TREASURER:

I get asked that every year Neil and you know, every year you know I come back for more don’t I?

MITCHELL:

Well you did say a couple, I mean have you had enough yet?

TREASURER:

Look, I think I said seven Budgets ago that I only had two more left in me so there you go.

MITCHELL:

Is this your last?

TREASURER:

Look, this is a Budget that I am absolutely focused on Neil and we just go down and we do our work and then we let legislate them and then we get on (inaudible).

MITCHELL:

You are not going to lock yourself in either way?

TREASURER:

Neil you know, to be frank you know, this is just pointless speculation and linguistic analysis. I don’t go into any of that kind of thing, I am doing a Budget and I am focused on it and you will see the outcome of that on the 10th of May.

MITCHELL:

Thank you very much.

TREASURER:

Good to be with you, thanks.