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 11/05/2005

Interview with Paul Murray
6PR

Wednesday, 11 May 2005
10.35 am

SUBJECTS: Budget

MURRAY:

Good morning Treasurer.

TREASURER:

Good morning Paul, good to be with you.

MURRAY:

Yes, it is nice to talk to you again Peter. How big was the tax cut that you gave yourself yesterday?

TREASURER:

Paul, we cut taxes for all Australians and for lower income earners we have cut the rate from 17 per cent to 15 per cent, the lowest it has ever been in Australian history. In relation to thresholds, what we have done is we have pushed the thresholds up so that the top marginal tax rate will only apply to 3 per cent of Australian tax payers and 80 per cent of Australian taxpayers will have a tax rate of 30 cents or less. Paul, this makes Australia’s income tax system competitive and it cuts taxes by $21 billion.

MURRAY:

Those 3 per cent on the top tax rate, and I think you are probably there, get $41.58 don’t they, in tax cuts, that is the cut you gave yourself yesterday?

TREASURER:

But hang on Paul, people who pay higher tax get a smaller percentage tax cut. The people who are paying lower tax get a bigger percentage. If you are not paying much tax it is hard to cut it Paul.

MURRAY:

Yes but $1 buys the same thing Peter, depending on how rich or poor you are, $1 still buys the same amount of stuff.

TREASURER:

Yes but Paul, some people say to me that some people don’t get tax cuts at all because they are not paying tax. That is true. If you are not paying tax you can’t cut it and this argument that people at lower incomes, some of whom who are paying very little tax, didn’t get much of a tax cut. They got a 20 per cent tax cut but if you are not paying much tax it is hard to cut it. It really does get hard to cut tax if taxes are really low Paul…

MURRAY:

I will tell you where…

TREASURER:

…and we are at this point you know, you don’t want to be sucked in by this old envy argument that even though I am better off, somebody might be as better off or more better off than me. The fact of the matter is every Australian is better off. Every Australian is better off…

MURRAY

I am not (inaudible)…

TREASURER:

…the Government is taking lower tax.

MURRAY:

…I am not interested in envy, but I am interested in equity.

TREASURER:

Well, I will tell you, you know, Kim Beazley is interested in envy. He...

MURRAY:

Alright, well…

TREASURER:

…he is going to vote against tax cuts for Australians because he wants to run an envy argument. Let me tell you, we have cut tax by $21 billion for all Australians and you said in your introduction - I think you are quite right - this is the kind of thing you normally do before an election. This is not to win votes. This is to give Australia the kind of tax system which will set it up for opportunities into the future.

MURRAY:

Let me put an equity argument to you. If you get $40 a week extra in your pocket, a disabled person who gets pushed onto a work start allowance but can’t find a job stands to get $40 a week less income than they would under the disability pension. Where is the equity in that?

TREASURER:

Well can I say Paul, nobody who is on a disability pension is pushed off it.

MURRAY:

No, I know that, but somebody to come in…

TREASURER:

I want to be very clear about this point…

MURRAY:

…that is why I worded that question as I did.

TREASURER:

…yes, well, your listeners might not have picked up the nuance because nobody on a disability pension loses it. I want to say that again for your listeners. Nobody on a disability pension has a change.

MURRAY:

Yes but after July 1 if you get disabled…

TREASURER:

No, after 1 July 2006, people who are applying for the disability pension will be assessed on the basis of whether they are capable of part-time work and if you are capable of part-time work you are not disabled. Now I think that is entirely fair. Let me say this to you Paul…

MURRAY:

I don’t think that is right, but you might be able to do some work, it doesn’t make you any less disabled.

TREASURER:

…hang on, hang on, if you are capable of doing work, part-time work, why shouldn’t you?

MURRAY:

Oh I agree with you, I think they should, it is just a matter of whether they should get $40 less on a Newstart Allowance than they would be entitled to under a Disability Pension.

TREASURER:

No, no, that is not the point. The point is, as you just said, if they are capable of working – why shouldn’t they? And you know, it is not as if work is some hardship by the way. Work gets you into the mainstream of economic life.

MURRAY:

Peter I don’t have a problem with this…

TREASURER:

It increases your income.

MURRAY:

…the problem…

TREASURER:

And let me just make this one last point – you know, somebody’s benefit is somebody else’s tax. If we can get more people into the workforce all of those hardworking taxpayers who are going to work every day can pay less tax.

MURRAY:

But see you give the impression that all these disabled people are going to be able to get jobs. The thing is, if they get put onto a Newstart allowance and then can’t find a job, they have done in the eye for $40.

TREASURER:

Well hang on, unemployment today Paul is the lowest it has been in 28 years. You know, unemployment was currently at this rate when I was leaving school. If we are ever going to encourage people to get jobs, now surely is the time to try and encourage them to do so. Our unemployment rate has been falling, people on the unemployment benefit has been falling and people on Disability Pension has been rising. Now do you think that over the last five years there has been a mass outbreak of disability in Australia?

MURRAY:

Well yeah, you say so in your speech. You give the numbers of people how it…

TREASURER:

21 per cent.

MURRAY:

Yeah.

TREASURER:

Do you think that 6.5 per cent of the Australian workforce is disabled?

MURRAY:

I am not opposed to you pushing them back to work. I think that is right.

TREASURER:

Yes.

MURRAY:

I just don’t understand why you make it a $40 less when they go onto the Newstart allowance.

TREASURER:

No, because they, Paul, because if there are people that are capable of work they should not be treated as disabled they should be treated as unemployed. This is the whole reform. In the past what we have said is…

MURRAY:

But they will still be disabled workers Peter.

TREASURER:

Well no, no, no, only if you are assessed of being incapable of work you will still be on the disability pension. If you are assessed of being capable of work, capable of work, including part-time work, you are not disabled you are unemployed. And what has been happening in the past is many of these people have been characterised as disabled and not required to look for work. We have got 6.5 per cent of the Australian workforce that are now treated as disabled. That cannot be right! And what we are saying in the future is if they are not disabled, if they are really unemployed then they should be encouraged to look for work. I think it is fair reform. It is the kind of thing, by the way, that the previous Labor Party Leader Mr Latham was demanding should be done. And I will say this…

MURRAY:

Look what happened to him.

TREASURER:

…hey?

MURRAY:

Look what happened to him.

TREASURER:

Well that is right. And I will say this to a lot of your listeners that are going off to work today, paying taxes which are going in income support, they should be sure that the taxes they pay for income support are going to the genuinely disabled and they should be assured that when they go to work and they pay their taxes and their taxes are used for other people’s benefits that the other people if they are able bodied are looking for work too. There is a lot of people that will be in cars or in the workplace today earning money and paying tax who want to know that their taxes are being wisely used Paul. And they do not want to know that they are paying high levels of tax to people who do not have to work if they are able bodied.

MURRAY:

Now Peter you might have thought these tax cuts were all your own work. But there is a bloke here in Western Australia today who is taking credit for them. I just want you to have a listen to this, I would be interested in your comment:

GALLOP:

Well we welcome the tax cuts. We have been calling for those for some time but we would point out that Peter Costello’s ability to deliver those tax cuts is based upon the strength of the Western Australian economy and the hard work of the Western Australian people. So I think Peter Costello should be thanking Western Australia tonight because our people have made it possible for him to deliver those tax cuts. So well done to the people of Western Australia. As a result of your hard work and the strength of our economy we have been able to deliver tax cuts for all Australians.

That bloke’s name is Gallop by the way, yeah.

TREASURER:

Yes I know. Well you cannot stop them can you. I mean, I do not think anyone takes that kind of thing seriously.

MURRAY:

Okay look, in handing out these tax cuts you have passed up an opportunity to spend those dollars on nation building projects, solving some of our intractable problems – like the health system, hospitals, deteriorating public infrastructure, salinity, water – all those sort of issues. Isn’t this a wasted opportunity in good economic times?

TREASURER:

Well look, the people of Australia and Western Australia, who work hard and pay taxes deserve to know that their taxes will be as low as they can be, consistent with good services and a balanced Budget. That is my attitude. And if you can give them some tax relief, you should try and do so.

MURRAY:

Yeah but Peter we don’t have the ability to solve these problems with the dollars you give us. If you are keeping them all in Canberra you do have the ability to solve the problems.

TREASURER:

Well hang on, I do not want to get back into this old argument but can I just remind you that when I put in place GST, every last dollar of that goes to the Western Australian Government. So I would just remind you of that, $34 billion per annum divided between the States of which Western Australia gets its share. So you do not want to be taken in by the kind of comment from the fella you just played earlier. That all goes to State Governments and as you know, because we have discussed this before, more than was ever anticipated. Now, in relation to Commonwealth Government responsibilities, the Commonwealth Government this year will spend more on health than has ever been spent before in Australian history. We will spend more on national security this year. We have announced a huge road funding programme. But if at the end of the day you can balance your Budget and pay for those services, then people should not have to pay more taxes than is necessary. That is my view. People should not, you know, this is what a Liberal Government believes in. You should not have higher taxes than is necessary. People should be rewarded for their effort. These are the values of Australia. These are the values of the Liberal Party. You should not have to pay higher taxes than is necessary to balance your Budget and fund your services.

MURRAY:

Peter I have got some listeners who would like to talk to you about the Budget today. The first one is Graham who comes from Armadale. Good morning Graham, Peter Costello is listening.

CALLER:

Oh yeah good morning. I am on a Disability Support Pension. I would like to say congratulations on the changes to work. It is about time.

TREASURER:

Thanks for that Graham

CALLER:

My question is about the HACC scheme. I see the Government has increased funding for it this year but obviously us on Disability Services Pension still have to make some sort of contribution towards the scheme which I don’t have a problem with. I was just wondering if those of us that are with the HACC scheme could have some sort of relief in future Budgets. I mean the contribution that I am making is about $700 a year. I was just wondering if there was any chance of some sort of relief in the air?

TREASURER:

Yes well it is a good scheme. And as you say, we are actually increasing the access. This is what we call the HACC scheme – the Home and Community Care scheme. And we are actually increasing funding in this Budget that enables people to get care in the home rather than have to go into some kind of institution. But let me take up the first thing that was said Paul, by Graham, I think it was Graham…

MURRAY:

Yep.

TREASURER:

…a lot of disabled people want to work you know.

MURRAY:

Yep.

TREASURER:

It is not much fun being at home all day without meaningful work. Now there are some people that cannot do meaningful work but since I raised this issue I have moved around the community a lot and the reaction I get from many people on Disability Pension is do not think we want to stay on a pension, what we really want is work. And what can you do to help us get into the workforce not keep us out of the workforce.

MURRAY:

Yes. I agree. I heard you say yesterday that the best thing you can do for someone who is in impoverished circumstances is give them a job and I agree. Maria, I think it’s you at Tuart Hill wants to talk to you just about that. G’day, Maria. Hello, Maria.

CALLER:

About this 50 year old, that I have to go back to work and the mothers that have children, once they are six years old, they have to go and look for a job. Where can they find one from 9 to 3? Also we have so many unemployed youth who never had a job, they rort the system, they collect benefit all the time. Why don’t you create a department where you have a lot of skills that can be learnt by these young people.

MURRAY:

I think that’s the plan isn’t it, Peter?

TREASURER:

Yes, it is. That’s the absolute plan and we introduced what is called ‘Work for the dole’. And that’s what we’re extending.

CALLER:

Yes. But does everybody, excuse me, but does everybody go to this ‘Work for the dole’. Still, I know lots that receive the dole and get away with it.

TREASURER:

We introduced a program called ‘Work for the dole’ and what it provides is after you’ve been on benefit for a period of time, you are expected to go and do some work. It would not be full-time work but you are receiving income from other taxpayers, you should be contributing something back to the community in return. That’s what these reforms are all about. And I think members of the community will be saying to us, I don’t think people mind paying taxes if they think their taxes are being used well. But they do get frustrated paying their taxes when they see other people receiving them and not even looking for work. At the very least they’ve got to look for work.

MURRAY:

Ben in Bassendeen is on the line for you, Peter. Good morning, Ben.

CALLER:

Hi guys. Hi Peter.

TREASURER:

Hi Ben.

CALLER:

Look I just wanted to thank you. I earn $100,000 a year but live very modestly and after all my bills are paid, I only have $200 a week for my family, you know, eating and that sort of stuff and it makes a huge difference to me to get these tax benefits back in the back pocket and it works out to be about $60 a week better off for myself and it is just a huge incentive when I was thinking, well what’s the incentive to actually go and strive to work harder. So again, thank you.

TREASURER:

Well I think what Ben says is right. You know you can go around and say that somebody who is earning $100,000 is rich, but I’ll say to you that there would be a lot of people doing overtime who are supporting wives and kids that wouldn’t be finding things all that easy. And what we’re saying to those people, previously Paul, they’ve been taxed at the top marginal tax rate which is 48 cents in the dollar, what we’re saying to those people is they don’t have to be on that rate. And after we’ve put in place these changes, 97 per cent of Australians won’t be on that rate. So for 97 per cent of Australians they’ve got much better incentive to work. And can I just say Paul, judging from the reception in today’s press, this has been received very well indeed.

MURRAY:

I must say Peter, for years I’ve chased you about superannuation surcharge and every time you’ve blamed the Senate. So congratulations to you now that you can do it, you are scrapping the surcharge. What about the rest of taxation on super? When are you going to take the heavy load off that?

TREASURER:

Well, we’ve still got to enact it through the Senate, and as you know, Labor is opposing the tax cuts and they are opposing the abolition of the super surcharge, so we won’t get it through before 30June. Labor is opposing tax cuts but I am hopeful with the new Senate after 1 July, I don’t take anything for granted, but I’m hopeful that we’ll get that abolition through. And I’ve said to you previously and I’ve been trying to reduce it, I’ve been blocked from doing that by Labor in the Senate and now that hopefully they’re not going to be able to block after 1 July we’ll get that through.

MURRAY:

Got one last caller for you. Bernard from Bentley. G’day, Bernard.

CALLER:

Good morning, gentlemen. I’m an amputee. About five years ago my leg was whacked off. I used to do a lot of voluntary work and then I sort of thought with all the voluntary work I’m doing, I might as well do something for myself, so I borrowed $17,000 and went into a multi-purpose taxi with a friend of mine and sort of bought into that on the never never. But I’ve showed in the first eight weeks, I think it’s about a $500,000 or $600,000 book loss and Homeswest have put my rent up because I’m earning another $55 a week. I just find it a bit unjust because I’m just battling to get there and all I did it for was to just to get out and feel a little bit proud of myself, of being able to do something. And this is at the age of 66 years old. But after you pay another $100 a fortnight or $110 a fortnight rental, it makes you wonder, I would have been better off just sitting on the dole or whatever the benefit is.

TREASURER:

Well, it’s one of the problems I think. The real problem is going onto this pension gives them more money than engaging in work and that’s not good for them and it is not good for society, it is not good for other taxpayers. That’s why we’ve got all of these incentives including tax cuts for the low-income workers to get them back to work and if we spread that tax burden across more people in the workforce, you’ll find that the tax burden for everybody will decrease.

MURRAY:

Peter, just finally, you’ve said that after the budget you’ll deal with your problems with the Premier of WA and your problems with the Prime Minister. Let’s start with the Premier. What have you got in store for him now?

TREASURER:

Well, you know, I heard that grab you had earlier and I think people who listen to radio will see really that’s not a serious contribution, is it, to political debate?

MURRAY:

It’s grandstanding.

TREASURER:

You know, here we are, we’ve cut the federal income tax rates and he’s said oh, this is all the good work of the Western Australian Government. Now, you know, there might be some people who are taken in by that kind of thing if he can sort of try and get this Perth versus the rest of Australia line going, but I don’t think serious people will. To be frank with you, you know, you ought to expect better. And in relation to the GST, every dollar of which goes to the state governments and the West Australian Government gets its full share, you can either use that GST to abolish the other taxes which is why it was introduced or you’ll double tax people.

MURRAY:

The serious people in this state are wondering how much you are going to punish Western Australian because of his intransigency?

TREASURER:

Well, it wouldn’t be me punishing Western Australia. Let me tell you this, who’s punishing Western Australia – Geoff Gallop. Let me tell you why, because every other Australian will pay GST and they would have had their state taxes abolished but in Western Australia you’ll pay GST and he’ll keep state taxes on you. It’s double tax.

MURRAY:

So when are you going to deal with him?

TREASURER:

Well I think he’s dealing with himself actually. This idea that in every other state of Australia you don’t pay stamp duty on mortgage but in Western Australia you do. That in Western Australia because of the state government you have the highest increases in taxes compared to any other state. In Western Australia you’ve got the GST and the state taxes. I think when people think about this pretty carefully, they’ll realise the Premier of the State might have a bit to answer for. And businesses by the way, businesses, you know, that are mobile, they can restructure transactions to get out of high taxed jurisdictions.

MURRAY:

Okay, about the Prime Minister. Is his time up?

TREASURER:

Well look, I brought down a Budget which I think is a Budget for Australia’s future in which I hope in 20 or 30 years time will be looked back at as the day we began to fund the future of Australia. And he and I are working absolutely flat-out together to produce these good economic outcomes and we’re going to everything we can to enact it. Working together to produce good economic outcomes for Australia.

MURRAY:

Will you go to the backbench if he doesn’t give you some sort of succession plan in the short-term?

TREASURER:

Paul, I’m not speculating on any of those issues. I’ve got work which is too important, the Budget work to accomplish.

MURRAY:

Just let me ask you one more question. Are there any of your colleagues you’d trust to be the Treasurer of Australia?

TREASURER:

Well, again I’m not going to speculate on any those matters.

MURRAY:

Alright Peter, great to talk to you. Thanks for your time this morning.

TREASURER:

Great to see you. Thanks very much, Paul.