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 10/05/2005

Interview with Laurie Oakes
Channel 9

Tuesday, 10 May 2005
Pre Record

SUBJECTS: Budget

OAKES:

Mr Costello, welcome to Nightline.

TREASURER:

Thanks Laurie.

OAKES:

After your speech tonight the Prime Minister shook your hand, in Question Time he called you the best Treasurer this country has ever had, does that mean you’ve buried the hatchet?

TREASURER:

Well we work together on things that are important for the Australian people and tonight it is the Budget. This is a Budget which reforms welfare, invests for the future, cuts tax and puts Australia at the forefront of the world. That is my job as part of the Government to produce those kind of economic outcomes for Australians. That is what I focus on.

OAKES:

Can you keep working together?

TREASURER:

Well of course we keep working on the things that are important and tonight is an example of what I hope will be received as a very good Budget.

OAKES:

Well, $21.7 billion in tax cuts, it’s not going to offend too many people. It looks like a pre-election Budget delivered after the election.

TREASURER:

Yes, well it is not a pre-election Budget that is the whole point. This has not been brought down because there is an election in the offing. And I hope people will see that as evidence of the fact that we really think this is important reform for Australia and what we have done is because we have got more people in work, lowest unemployment in 28 years, more people working can pay less tax to raise the same amount as fewer people paying more. So when you get more people in work you can level the tax burden and that is what we are taking the opportunity to do. If we can reform welfare, we can get even more people in, and these are the kinds of results that you would expect.

OAKES:

The Labor Party is criticising the tax cuts, now how will you feel if they vote against them?

TREASURER:

Well, we will give them the chance to vote against them. If Labor is so outraged by cutting taxes in this country we will give them the chance to vote against that in the Senate.

OAKES:

Is it the case of “Kim Beazley make my day”?

TREASURER:

Well, Kim Beazley opposing lower taxes! Let us think about this, Kim Beazley opposing lower taxes. That just about tells you all you need to know.

OAKES:

Well, it’s the high income earners though who benefit the most isn’t it? The low income earners don’t score nearly as well?

TREASURER:

Well low income earners have a tax cut, the 17 cent rate goes down to 15. If you are a low income earner you are already paying much less tax so that cut gives you a bigger percentage tax cut.

OAKES:

But in cash terms, someone earning up to $55,000 or anything below that, gets only $312 a year. If you earn $130,000 you’re getting what? $4,500?

TREASURER:

Well, many of those people get more than that because there are actually increases in family benefits and increases in tapers. So, people earning up to $50,000, many of them, a very large proportion of them, will get actually more than just the tax cut itself.

OAKES:

And how do you think the Reserve Bank will react? Are there implications in this for interest rates?

TREASURER:

I don’t think so. It is a surplus Budget. It is about one per cent of GDP like it was this year and like it will be the year after. So it is not a question of the Budget position deteriorating, if anything, with the Future Fund, the Budget position will strengthen over the years which lie ahead.

OAKES:

The attempt to get people off welfare and into work is, apart from the tax cuts, I guess the centrepiece of the Budget. How many people do you expect to shift into jobs as a result of the measures in the Budget?

TREASURER:

We think about 190,000 people by 2008, remember this only starts in 2006.

OAKES:

So in two years?

TREASURER:

By 2008-09 we are expecting, we are projecting, about 190,000 people.

OAKES:

Labor says that part of what you are doing is cutting the benefits of some of the most vulnerable people in the community by $77 a fortnight. Is that true?

TREASURER:

No. Nobody on a current entitlement loses a thing. Let us be very clear about this, nobody has a cut. Every person that is currently on a pension keeps it. What we are talking about is we are talking about in the future where new people are applying for benefits, if they are capable of work they go on Unemployment Benefit they do not go on Disability Support Pension.

OAKES:

The fact that you can give these huge tax cuts and at the same time have a Budget surplus of what $8.9 billion isn’t it? Doesn’t that indicate that you didn’t need to break the promise on Medicare thresholds…

TREASURER:

The thing about…

OAKES:

Medicare Safety Net?

TREASURER:

...the Medicare Safety Net is this, that no area of the Budget in 40 years time over 10, 20, 30, 40 years is going to grow faster. And what we have to do Laurie is you have got to put measures in place now which will get it on to a sustainable footing. You know I have got projections which will show we won’t afford our health system in 40 years time. So we have got to start putting in place small measures now to cope for the big costs to come. And my message to the Australian public is this, small measures early or drastic measures late. Now let us take the small measures early because that is going to adjust us quicker.

OAKES:

Now tell me about the Future Fund. What’s it going to do? How’s it going to work?

TREASURER:

The Future Fund is going to be an independent fund with a statutory board of eminent people who are going to make an investment on behalf of the future. It will be a large fund and it will, we hope, accumulate earnings over a period of time which will mean that the Government can fund its liabilities and relieve future generations of the costs of the ageing of the population which we know are going to be very, very great costs in the years which lie ahead.

OAKES:

But you’re only talking about the Public Service Superannuation, is that the only liability you’re talking about?

TREASURER:

Well, when you say the only liability it is about $90 billion.

OAKES:

It’s a big one yeah.

TREASURER:

It’s a big one, it is a lot of money which the Government at the moment has no provision for. And we are trying to get a provision in there by 2020.

OAKES:

Now as I understand it Budget surpluses will go into the Fund?

TREASURER:

Yes.

OAKES:

The proceeds of the Telstra sale, assuming it goes ahead, will go into the Fund? So how much money is it going to end up with?

TREASURER:

Well the object is that it grows to meet the liability, that liability is now $90 billion, we are forecasting by 2020 it could be $120 billion so…

OAKES:

Any way it can become a political slush fund?

TREASURER:

No. It is going to be by statute separate from the Government with an independent board and you won’t be able to draw money out of it until such time as it has got sufficient funds to meet those liabilities.

OAKES:

Now when the Howard Government was elected in 1996 it promised no new taxes. You immediately imposed the superannuation surcharge which was a huge breach of a promise. Tonight you are wiping that out again. Does that mean that you admit that you made a mistake?

TREASURER:

Well when the Budget was deeply in deficit, it was important to have measures to get it into balance. I said that at the time. This was one of them. Now that the Budget is in balance, or in fact in surplus, we do not need that surcharge any more so it is abolished. Totally abolished. We have tried to reduce it in the past, bear in mind we have been trying to reduce it for several years. Labor has been blocking it. So tonight I said, we will just abolish it.

OAKES:

Mr Costello we thank you.

TREASURER:

Great to be with you Laurie.