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 19/05/2005

Interview with Sally Loane
ABC 702

Wednesday, 18 May 2005
9.00 am

SUBJECTS: Budget

LOANE:

Peter Costello good morning and welcome.

TREASURER:

Great to be with you, what an introduction.

LOANE:

This was to prepare you for your afternoon tea at the Blacktown Workers Club this afternoon.

TREASURER:

Yes, yes it is, going out to Blacktown, looking forward to it very much but that was a good intro. I like the Boss.

LOANE:

You like, that was actually Jimmy Barnes.

TREASURER:

Oh really, oh my goodness.

LOANE:

The Boss is…

TREASURER:

Well I still like the Boss.

LOANE:

…you don’t really consider yourself part of the working class do you?

TREASURER:

Look, I don’t think we have classes in Australia, that is my whole point. This idea that you know, there is the working class and the middle class and the upper class, I think that is very much a British thing, nobody is born with a title in our society. In Australia today, the reality is if you work hard you can get ahead and it doesn’t matter whether you do manual work or whether you do desk work. I regard those people as working for their living and when I was asked about giving them tax cuts, I think they all deserve tax cuts, that is my view.

LOANE:

There are going to be quite a few people out at the Blacktown Worker’s Club who think that they deserve more than $6 a week. This group of Australians earning less than $58,000 a year, they say look, this is totally unfair, you are giving people like you and I substantially more tax cuts, and they are the people that are really struggling, particularly in Sydney.

TREASURER:

Well, I would make two points. First of all of course for families, we have a system of family assistance which was actually widened in this Budget and built upon the additional $600 per child per annum which was put down in last year’s Budget.

LOANE:

So it is not all about tax cuts…

TREASURER:

Oh no, family assistance…

LOANE:

…other money as well?

TREASURER:

…and let me make this point, if you are a family with two children, you don’t even pay tax until you go above $40,000, they are paying nothing. You can’t actually cut tax for families any further because when you take into account the Family Tax Benefit, they are not paying any tax, that is the first point. And I make the point that yes, I think a lot of these families are doing it tough, that is why we have Family Tax Benefits. We can’t cut their tax anymore, we are actually paying them money for the expenses of children. But the second thing is, and this is the point I have been trying to make all they way through this debate, there are a lot of people, by the way, who are in traditional trade occupations, who are working overtime and working weekends who are earning decent money these days and many of them coming into the top tax brackets and I want to take them out of the top tax brackets.

LOANE:

What do you call ‘decent money,’ what is your kind of benchmark for that…

TREASURER:

Well look…

LOANE:

…if you are a family, particularly living in Sydney?

TREASURER:

…you always compare yourself to other people, but at the moment when you get up around $60,000 or $70,000 you can go on the top tax rates. There would be a lot of electricians, there would be a lot of plumbers, auto-electricians, people like that who are earning up around those amounts, they are not the richest people in our society, I don’t think they should be on the top tax rate. I want a situation where you don’t go on the top tax rate until you earn above $125,000 and that would mean only 3 per cent of Australians would be on that top tax rate. There is just no place for the envy politics that I think some of our opponents are getting around, “oh this is just for the rich.” No, this is for a lot of hard working people who work weekends, who work overtime, who don’t deserve to be in the top marginal tax rate.

LOANE:

Is there room in Budgets down the track for more reform on tax? A lot of people said, look, he didn’t grasp the nettle, you could have and should have, you have had ten years in Government, ten Budgets Treasurer, you should have actually started at the bottom and reformed everything about the tax system not just continually you know, whittling and changing it at the margins?

TREASURER:

Well look, when I first became Treasurer, people on the lowest incomes paid 20 cents in the dollar, we’ll have that down to 15 cents. People on middle incomes paid 34 cents and 43 cents and we will have that down to 30 cents. You went on the top tax rate at $50,000, you won’t go on it until $125,000. They are pretty significant changes. Now, there are some people Sally that say, oh, you ought to cut the top tax rates and don’t just move the threshold, cut the top tax rates.

LOANE:

Which sounds high, I mean it almost 50 cents in the dollar.

TREASURER:

47 cents, yes, plus the Medicare levy. Can you imagine how, not you, but other radio commentators would then have a field day with me saying the poor workers at the Blacktown Workers Club who were never on that rate anyway, got nothing because what you did is you cut the top rate, a rate that after we have finished with it will only apply over $125,000. Can you imagine the way in which the commentators would have a field day there.

LOANE:

But you are not frightened of commentators, are you?

TREASURER:

Oh I always respect them Sally.

LOANE:

Peter Costello what about, I mean…

TREASURER:

Particularly good ones.

LOANE:

The Economist and magazines, you know, respected magazines have been re-visiting the issue of a flat tax, have you ever given that any consideration, it keeps coming up here. There are tax lawyers in Sydney and in Melbourne who have never really given it up, they still talk about it, they…

TREASURER:

Flat tax.

LOANE:

…yes, a flat tax.

TREASURER:

Well sure, well it depends what the rate of flat tax was of course…

LOANE:

Is it on your radar at all or…?

TREASURER:

…well, let’s suppose you had a flat tax rate, say 30 cents in the dollar, of course I have looked at this. Then everybody below you know, about $40,000 or $50,000 or $60,000 in Australia would be worse off, and people above it would be better off.

LOANE:

So it is not fair in your view?

TREASURER:

Well most Australians are down around $40,000 and $50,000 and $60,000. Anyone want to go out there and say they should be paying more tax? Now, you will find the people who push that idea generally tend to be the higher income earners and you can see why, I am not against that, but you have got to remember that middle and lower income earners don’t pay anything like a 30 cent flat tax at the moment, nothing like it. They have a tax free threshold and then they pay, they are going to be paying 15 cents in the dollar and then they have their Family Tax Benefits. They don’t pay anything like 30 cents flat tax from dollar one, nothing like it.

LOANE:

It is a quarter past nine, I am with the Federal Treasurer, Peter Costello. New South Wales people when they go travelling up into Queensland Mr Costello, get very tired of seeing that subsidised petrol. When are you going to give us our fair share of GST and stop Peter Beattie crying about how he can afford to subsidise petrol with our tax money?

TREASURER:

Well, New South Wales is getting more money from GST than ever before.

LOANE:

But we are not getting our fair share though.

TREASURER:

Well no, well hang on, more money then ever before and more money than it was ever promised, alright?

LOANE:

Bob Carr says that we are $3 billion short.

TREASURER:

Yeah, yeah and Bob Carr is not responsible for any of his new taxes or his trains being in chaos or any of his other problems, let me just give you…

LOANE:

But the business community is standing behind him saying…

TREASURER:

…well…

LOANE:

…we want more.

TREASURER:

…well, there was one organisation that did. Let me give you the amounts. This year New South Wales will receive $9.9 billion, next year $10.4 billion, the year after $11.1 billion, the year after $11.7 billion, the year after $12.5 billion. This year it will have a wind-fall over what it was promised, $257 million, the next year $60 million, the next year $206 million, the year after $513 million, the year after $794 million. Now, Bob Carr is incomparably better off. His big complaint is oh, everybody else is better off too and some are more better off than I am better off.

LOANE:

Thanks to New South Wales. But don’t you think that it is unfair that Queensland can continue to subsidise its petrol and make great hay of that when it is our tax money?

TREASURER:

You know why, when you say Queensland subsidises its petrol, Queensland never put a state tax on petrol, ever and New South Wales did. That was, I would say, back in the eighties, maybe 20 years ago, maybe 15, long before GST came in.

LOANE:

But has continued to offer all sorts of other subsidies.

TREASURER:

No, no, when you say subsidy, it never had a tax on petrol which New South Wales did, that is what he means by a subsidy and even today there is no Queensland tax on petrol which is the successor arrangement and there is in New South Wales.

LOANE:

But they can afford to do that because they get subsidised by our extra money.

TREASURER:

No, well hang on, that is my point. It came in long before the GST, it has nothing to do with GST, the New South Wales petrol tax was introduced long before 2000…

LOANE:

But Queensland can continue to do well…

TREASURER:

…no, the difference is…

LOANE:

…and do better because of that tax.

TREASURER:

…no, no I am sorry, it has got nothing to do with GST. New South Wales has always been a higher tax State and Queensland has always been a low tax State. The flip side of that is that services have generally been better in New South Wales than they are in Queensland although I know services are breaking down now under the Carr Government, but generally they were better.

LOANE:

Is there any indication at all on the horizon, that the Commonwealth Grants Commission formulas will change in the near future?

TREASURER:

Well let me tell you something Sally. There is a meeting of all the State Treasurers, they come to Canberra and they discuss the allocation between themselves. None of this money goes to Canberra.

LOANE:

But it is spent by this Commonwealth Grants Commission?

TREASURER:

Yes, they discuss the allocation between the States. When the allocation was raised and I said, at the meeting, does anyone have any objection, New South Wales raised no objection. And then I was surprised by that, I said, does anyone want to raise any objection in the presence of the other States, New South Wales raised no objection. They raised no objection whatsoever and hot footed it back to the local media and pumped the local media up with their case, you know, if the New South Wales Government has a legitimate objection, they ought to have the courage to raise it with the other States, don’t you think, because that is the only way it can be changed. If New South Wales has to get more, some other State has to get less, you would think they would raise it with the other States, didn’t even raise the issue. That is amazing.

LOANE:

Treasurer, yesterday the 2,000 farmers meeting in Parkes, hurting very, very badly, as you know 90 per cent of this State is in drought, this Budget actually cut money for drought allocation because there wasn’t a high enough take up rate, farmers tell me all the time that the red tape trying to get any drought assistance is just dreadful and they are too busy trying to run their farms often to get through this, I mean a lot of them actually try to do it. Are you going to try and do something about that process of making it just a bit easier, freeing a bit of money?

TREASURER:

Well let me say obviously that the Government is very concerned, like all Australians are, about the drought which is still gripping much of the country and a large part of New South Wales and the Federal Government operates schemes to subsidise interest rates and to provide income support, really a bit like Newstart the unemployment benefit to farmers who haven’t got any income and nothing has been cut. Just let me make this point, nothing…

LOANE:

The New South Wales Farmers Federation said there was a smaller allocation this Budget.

TREASURER:

…nothing has been cut because if you are in a drought declared area you get that unemployment benefit from Newstart right, you just get it automatically and it doesn’t matter how many people apply for it, they just get it by operation of the law…

LOANE:

So you are saying, we are being as generous as we possibly can…?

TREASURER:

…it is a demand driven programme. All the Budget tries to do is estimate the number that will take it up, but if the number that take it up is greater than that, more money is spent. If the number that take it up is less, less money is spent…

LOANE:

So it is not capped?

TREASURER:

…it is not capped, it is not capped, nothing, absolutely nothing has been cut, it is a demand driven programme. I want to make that absolutely clear because you know, I have seen some of the media saying something got cut, nothing got cut. Any farmer in an Exceptional Circumstances declared area who is eligible for that payment, which as I said is like the unemployment benefit payment, will receive it and you are also eligible for interest rate subsidies. Can I also say that we estimate that the Commonwealth Government will spend about $1 billion in drought relief. Now, if the drought is worse, we will spent $1 billion and a half, if it is better we will spend $600 million, but it just all depends on the extent of the drought.

LOANE:

Can I ask you Treasurer, and we have had so many questions of course on our economy, I don’t know whether this is your last round of speaking about the economy in your capacity as Treasurer, one more question on leadership…

TREASURER:

I thought you were going to ask about the economy.

LOANE:

…would you like to stop talking about it just once…

TREASURER:

Sure…

LOANE:

…and talk about something else like…

TREASURER:

…I thought you were going to ask me about the economy, yes.

LOANE:

…well that and everything else too. Drugs in sport and what do you tell your kids when you see pictures of heroes taking illegal and legal drugs?

TREASURER:

Well, I think it is terrible, I am just, I am pretty shocked that players can use drugs like ecstasy or cocaine, that really shocks me, I can’t imagine…

LOANE:

(inaudible) your game.

TREASURER:

…well, I can’t imagine how you can probably improve over the medium term your performance by taking ecstasy and cocaine and it does worry me actually because a lot of 18 year old kids, a lot of these players by the way are 19, 20, they are just kids and they are probably doing what other kids do but other kids shouldn’t be doing it and they shouldn’t be doing it.

LOANE:

Do you have these conversations with your kids?

TREASURER:

Oh sure, I think it worries every parent and I think every parent’s greatest fear is that their kids will get onto drugs, it certainly worries me, absolutely. Caffeine tablets is a harder one and you and I drink caffeine in coffee but I can’t understand how the clubs would allow it myself, you know, they might say well it is a legal drug and there is nothing wrong with taking it but gee, it sends a bad example doesn’t it when you are downing tools like that.

LOANE:

Yes, another issue that the country has been divided on is the issue of Shappelle Corby, that letter from the Department of Foreign Affairs and Trade to her lawyers, was that appropriate in your view?

TREASURER:

Yes I think it was, you know, I think I am like most Australians that believe that everything that can be done to put evidence that would help her trial should be done. Everybody is entitled to have all of the evidence that helps them brought forward at their trial and you feel that here is young Australian in a Balinese court, you know, let’s get all the evidence into the court. Having said that, some people say well, you are the Government, you should be able to pressure this court into a particular verdict. And you have got to keep reminding people, Bali is not Australia, we couldn’t even pressure an Australian court by the way…

LOANE:

You couldn’t write a letter like that, could you?

TREASURER:

…well the Government couldn’t pressure a judge or a jury in an Australian court. This idea that somehow the Government can pressure an Indonesian court, you have got to remember Bali is Indonesia, the idea that the Australian Government can somehow pressure the Indonesian Government or ought to pressure the Indonesian Government, they have got their own justice system and I must say to you if, can you imagine if there was a trial going on in Australia and the Indonesian Government tried to direct an Australian court as to the outcome, I think it wouldn’t work and it might well backfire and you have got to be very careful here, if you put too much pressure, it won’t work and it could backfire.

LOANE:

Peter Costello, you come to Sydney often, you understand Sydney I think as a Melbournite, I don’t know what you thought about the news this morning, this seems quintessentially Sydney to a lot of people, the millionaire factory, you know which bank I am talking about, Macquarie Bank, nine executives…

TREASURER:

It is not ‘which bank,’ by the way.

LOANE:

…nine executives, salaries of $92 million, what does that say about the economy, about our system, about Sydney to you, Treasurer?

TREASURER:

Well, like any person, you do find it hard to think that one individual could be worth so much as to be paid, was it $18 million?

LOANE:

You have been very strong on this kind of thing before.

TREASURER:

You know, you do ask yourself how is it that one person’s worth to a company could be worth $18 million, but then you have got to remember it is a publicly listed company, people don’t have to invest in it, if they don’t like it they shouldn’t invest in it, if they want to invest in it and they don’t like the salaries they can vote against it at General Meetings…

LOANE:

You don’t think it is way out of whack, way out of kilter…?

TREASURER:

…well as I said, I can’t understand how one person can be worth $18 million, but the only thing I can say to the shareholders is it is a matter for them. If they think he is, well it is their money, I suppose they can vote for him, but if they take a contrary view, they can vote against it. These things have to be disclosed you know, they have to be disclosed to the Annual General Meetings, the shareholders have a vote, if the shareholders don’t like it they can vote it down, I assume they won’t so therefore I assume they like it. But it is hard for an outsider to understand it.

LOANE:

Outsider, do you understand Sydney, do you like Sydney?

TREASURER:

Absolutely.

LOANE:

Do you think it is a performance town, not a town where you went to school, I am just interested in your view, just in a nutshell on this?

TREASURER:

I think it is very much a go-getter type of place and I think that it gives a certain and livens, it livens people, I think it is probably the closest thing that we have to an international city in Australia and I always feel enthused and livened when I am here, yes.

LOANE:

Not relaxed and comfortable?

TREASURER:

No, not relaxed and comfortable, I think if I was looking for relaxed and comfortable I would be heading off to a smaller town somewhere, no, no, you wouldn’t come to Sydney to be relaxed and comfortable, you would come to Sydney for a little bit of excitement.

LOANE:

Excitement that you like, you understand?

TREASURER:

Oh sure, absolutely. You know it’s, as I said, the closest think we have in Australian to an international city, it is Australia’s answer to New York, I wouldn’t call it New York but it is Australia’s answer to New York.

LOANE:

I have to, I have to ask you the leadership question and I will relate this to your beloved team Essendon, I think Kevin Sheedy has just celebrated 25 years as coach, that is a long time in a job, would you look to him as a role model Treasurer, at all?

TREASURER:

For myself, no one could ever compare themselves to the incomparable Sheedy.

LOANE:

Is ten years long enough though?

TREASURER:

Oh look, it has been a great privilege to be in Government…

LOANE:

In your job?

TREASURER:

…and to be the Treasurer and I think Australia is a much stronger place today than it was in 1996 and you can measure it in all sorts of ways.

LOANE:

You just spoke in the past tense then…

TREASURER:

Well, you have asked me…

LOANE:

…you want to move on.

TREASURER:

…no, you have asked me, you know, whether it has been, I think your question was you know, ten or whatever and I think it has been ten years of achievement and I want to continue to deliver to the Australian public. There are crisis that are coming at us from all directions all the time, and I see it as my job to keep on delivering to the Australian public and I work very hard at it, I can assure you of that.

LOANE:

We will let you go, thank you very much for your time.

TREASURER:

It is great to be with you Sally, thanks.