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 Alan Jones
2GB

Thursday, 19 May 2005
7.15 am

 

SUBJECTS: Budget, tax cuts, National Water Initiative, drought

JONES:

Good morning.

TREASURER:

It is a great pleasure to be with you Alan.

JONES:

Thank you, congratulations, but it is never as simple as that, is it?

TREASURER:

Look, you never stop working because the moment you do, that is when the challenges come to you from outside and inside as well. We have made great strides over the last nine years but there will be challenges that will confront Australia over (inaudible).

JONES:

Well, your first one is the tax cut delivery, isn’t it? It was to commence from July 1, Kim Beazley is now saying that the Howard Government could deliver the tax cuts through retrospective legislation, and if they are not delivered, it will be your fault.

TREASURER:

Well, Kim Beazley is talking nonsense, complete and utter nonsense. We announced tax cuts last Tuesday. To implement them we have to pass a law through the Parliament. That law will go through the House of Representatives where the Government has a majority and Kim Beazley wants to block it in the Senate. Kim Beazley stands between Australians and their tax cuts and I say to him, get out of the way.

JONES:

What about the Tax Commissioner, given that he is not going to have to make any judgment on tax liability until June next year, why couldn’t these tax cuts be implemented on the condition that the legislation is passed?

TREASURER:

Well, I have been speaking to the Tax Commissioner about this and he will be making a statement today, I believe. The way in which it works is that he publishes a schedule Alan, which goes to employers and employers work off that schedule to know how much tax to take out of someone’s pay. Because we want to cut taxes on 1 July, the schedule should tell employers to take less tax out than they are currently taking. The Commissioner, like me, doesn’t know whether this law is going to go through before the 30th of June, so what he is going to do is he is going to publish two schedules and send them around to employers. One is the schedule that you will be paying if those tax cuts don’t go through and the other is what you will be paying if they do go through. He has to do it now because the software providers have to get it out to the hundreds of thousands of Australian employers. I say to those employers, I am terribly sorry, you are going to get two alternative schedules. You won’t know which one to apply until we can deal with Kim Beazley in the Senate. Now, remember this, if Mr Beazley is successful he can delay those tax cuts, but he will never stop them. Labor will not stop these tax cuts because after 1 July, a new Senate will come into existence and that new Senate will eventually pass these tax cuts. Australians will get their tax cuts, the most Mr Beazley can do is confuse the issue up until 1 July.

JONES:

There are, surprisingly I think, some economists today who are saying that the rebound in consumer confidence, rising wages, healthier retail sales figures, have vindicated the Reserve Banks’ March interest rate increase and raised the likelihood of future rises. In other words, the evidence to keep them on hold now is a whole lot weaker. What do you say to that because interest rates are a real worry to people listening to you?

TREASURER:

Well, the first thing I say is because the Government isn’t borrowing any money, unlike American or Britain or Japan, this Government isn’t driving up interest rates. This Government is actually saving money. And all other things being equal, if the Government is adding to savings rather than drawing down, it is putting downward pressure on interest rates rather than upward pressure on interest rates. That is our Budget strategy here. This is not a Government that goes out into the market, borrows billions of dollars and drives up the price of interest rates because as you know…

JONES:

It drives up the price of money.

TREASURER:

…that is right, that is right. The money is like anything else, if there is more demand for money then there is supply, the price goes up. But this is a Government that is actually saving money, adding to the pool of savings and that is exerting downward pressure on interest rates. Now, you have got to remember Alan, that there are a lot of people in financial markers who take positions one way or another, that is their business and sometimes they try and validate their positions. But I will say this to you, that when you look at the way in which the Budget policy is being managed, when we see the debt reduction, when you see the surpluses, when you see the Government in the market with downward pressure, this is a Budget which is very, very consistent with continuing low interest rates.

JONES:

Alright, well let’s talk about low interest rates, let’s talk about low taxes. Four out of five taxpayers earn less than $58,000 a year, indeed the medium wage of an adult full-time worker is about $45,000 a year, they get about $6 a week, four out of five taxpayers. The rest, one in five, get anything up to $42 a week, so it has been argued against you that we have left some people behind again.

TREASURER:

Well two points I’d make Alan, is the first of course is we have increased family assistance for middle income earners with families. There is additional assistance in this Budget to help with the cost of raising children. And, can I tell you, if you happen to be one of those families earning about $40,000 with two children, in fact you don’t pay any tax because your Family Tax Benefit cashes out your tax liability. The second point is of course, that for low income earners we are cutting rates from 17 cents in the dollar to 15 cents in the dollar. That is a very low rate, it use to be 20 cents in the dollar before our Government was elected and that gives them tax cuts. At the middle to upper income levels, we don’t cut rates, we increase thresholds and we basically say to people that are middle income earners, you won’t have to come into the top tax rate anymore. The idea is that the top tax rate will not apply to your middle income earners, to your tradesmen, to people who are doing overtime, to people that are working on weekends, to people who want to make a go of it and want to do better and that will be a very, very big change and improve incentives, particularly for the guy that is out there giving it a go - your plumber, your electrician, your ground engineer who is out at the airport who you would have seen in the paper, your steel worker at the Wollongong Steel Mill, those are the people that have been caught in top tax rates in the past and they shouldn’t be in the future. If we get our tax cuts through the Parliament, they won’t be.

JONES:

Right, the big thing I have been, and a lot of correspondence there from sole parents or parents of the disabled, or Karen, for example, with a severely disabled 10 year old son Alec who suffers from (inaudible) Syndrome which is so severe an illness that doctors describe it as being not compatible with life. These people are worried about all the argument about having to be forced back to work. Can you confirm to all of them because I think this has not perhaps been explicitly put, that the changes to sole parents and disabled are to new people entering that category not people existing on the benefit now?

TREASURER:

Yes, that is a very important point that everybody who is currently on a benefit - that is a disability support pension or a parenting payment for a sole parent - will have their pension guaranteed. That is, the terms and conditions won’t change for anybody that is on an existing payment.

JONES:

Sole parent or disabled.

TREASURER:

Absolutely.

JONES:

Right.

TREASURER:

The changes are going to occur on 1 July 2006, that is 1 July next year, and they will apply to people that are coming onto those benefits for the first time. Either you become a single parent for the first time after 1 July or you are applying after 1 July 2006 for the Disability Support Pension for the first time. So, I can say to people, those people that are currently on benefits that they won’t be affected. Now, of course, if you are currently on a benefit, a sole parents benefit, when your child turns 16, you lose it, that it is there to support you whilst your child is growing up. The change that we want to introduce after 1 July 2006, is that when your youngest child goes to school, then we want to encourage you to look for part-time work. At the moment when your youngest child gets to 16 you lose your benefit, the change is going to be when your youngest child goes to school we will encourage you to look for part-time work.

JONES:

Just on that, Patrick McClure, Patrick McClure who has been an adviser to the Government on this sorts of welfare changes is arguing and I thought he made a very valid point that he says that, unless you can get a greater flexibility from business people, from the employer, there is not going to be the opportunity for single, un-skilled mothers or people with a disability to gain employment. How do you persuade business to change its stance?

TREASURER:

I think that is perfectly fair that it does involve changing attitudes amongst business. There are many businesses that are enlightened but I think that many more have to hear the message that people who may have a slight disability, maybe they have got a bad back or something, they are not permanently disqualified from the workforce, that they are people with valuable skills.

JONES:

We have gone mad on economic efficiency, haven’t we and so someone with a bit of bi-polar comes in the door and actually says, look, I do have a mental illness problem but I am quite good at work and the employer thinks hang on, he won’t be here everyday, Monday to Friday, that is a bit of a risk, no I will take this bloke here. How do you break down those barriers?

TREASURER:

Well, we do have some programmes in there which will have wage assistance for some of the long-term disadvantaged, say to employers there will be wage assistance. But take somebody with bi-polar Alan, people with bi-polar who are on medication…

JONES:

Are very effective.

TREASURER:

…are very effective. This is one of the things about medical advances, we invest a lot of money in medical advances, the payoff of all of this should be that we can now treat conditions that we couldn’t treat before. People can be treated, they can get back into the workforce and if you can get back into the workforce, that is a big part of your rehabilitation. Can you imagine what it would be like if you were put on a pension at the age of 20 and they said to you, well that is it until you are 65, at 65 we will put you on the Age Pension. Absolutely demoralising, you are not part of mainstream Australian society, you are not working, you don’t have people around you in the workplace that can look after you and that is what we have been doing, there have been people in Australia going on a disability pension at 20 and then at 65 we say, come on, because we will give you the Age Pension now. Not much of a life.

JONES:

There is a lot of talk today about the Prime Minister going around and inspecting drought affected areas and there is going to be some revision I think they call it, to drought assistance. I spoke at Parkes during the week, 2,000 or more farmers there. Is the Government moving away from this concept of drought assistance to a minimum form of drought prevention? We need dams to be built, we need (inaudible) to be filled, we need pipelines to be laid so that there is access to water for farmers so that we won’t have any meetings at Parkes again. When are we going to move into this infrastructure phase, rather than the cash handout phase?

TREASURER:

Well, I think what you say is right. Water, I think, is not being managed well in this country, it has traditionally been an area of State responsibility and the results are there for everybody to see how the States have managed it, particularly, in relation to rivers which flow across State borders and I think…

JONES:

There is talk today, for example, about you taking over the ports, don’t we need to take over water and make it a national initiative?

TREASURER:

Well, we do have a National Water Initiative as you know…

JONES:

It is only $2 billion bucks.

TREASURER:

…well $2 billion is…

JONES:

But you have given $12 billion for roads, I mean you can’t have a road if you have got no water, there is nothing to go down the road, I mean…

TREASURER:

…water doesn’t go down a road Alan.

JONES:

But the traffic does and there is nothing, there are no people there. I mean we are building a railway line from Darwin to Alice Springs, now if there is no pastoralists there, there is no industry there, there is nothing to go on the train.

TREASURER:

Well, I agree with you, the important thing I think is to get national management, particularly crossing State borders. Now, the National Water Initiative…

JONES:

(inaudible) I will just stay with the Treasurer because this is an enormous issue and we will bring you on update on the news shortly but it is half past seven, just on the water thing, yes, go on.

TREASURER:

...for the first time in Australia we have got a National Water Initiative. The idea is to try and get the States come into it, all of the States have not yet agreed. We want to get the States involved, we have to get a system where we properly value water, where we give title to water, where we manage water, where we conserve water, where we improve flows and I think we can do that, I think we are on the road. Our biggest problem today Alan, is that in order to do this you have to get agreement of eight States and Territories, and you know what these State Governments are like, they all sit back and they try and hold you to ransom until such time as they can accomplish some other agenda. The most important thing I think, is to get national agreement. The Federal Government is prepared to give national leadership and I think we can make a big improvement.

JONES:

When Jack McEwan was the Deputy Prime Minister and head of the bush, he said that the civilising thing for bush people then was to build air strips because otherwise babies couldn’t be born in hospitals and they were transported and so on and so on. There are air strips all over Australia. The one civilising thing that the bush are asking for now is water harvesting where you harvest the water for everybody. I mean no business can survive without water. So when it is going to rain, which it will in five months, six months, 2 years time, there is no capacity to harvest any more water then we can harvest now. That is a major public policy weakness, isn’t it?

TREASURER:

I think so. The other thing that keeps occurring to me is every time it rains, you hear somebody say on the news, ‘it rained today, but unfortunately not in the catchment areas.’ It makes you wonder whether these dams are in the right areas, doesn’t it? And I think that there has got to be a lot better planning in relation to the building of dams. First of all there has got to be building of dams…

JONES:

But will the Commonwealth accelerate that initiate?

TREASURER:

…well, this is our National Water Initiative, it is not personally handled by me I must say, but as far as the Government is concerned, we want to accelerate water reform in this country because we know that it is very important. We do and we need the cooperation of the State Governments. We want to bring the State Governments into it and we want to make progress.

JONES:

So you said on Treasury night, on Budget night, that $33 billion from the sale of Telstra will go along with the other $16 billion into the Treasury and it will be quarantined until such time as all that unfunded public superannuation liability is met. Now, John Anderson says, ‘we want a slice of this to improve mechanisms in the bush.’ Is there a chance of a slice of the Telstra stuff going to this sort of initiative?

TREASURER:

Well, there is, what should happen is that the funds should invest in projects which can give returns for the taxpayer and those projects could well include infrastructure projects. But the fund is not going to build it itself, the fund is not going to take the risk because the risk could involve losing the money and we don’t want to lose the money Alan. But it could well invest in important infrastructure projects and they would be good as investments, they would also be good as returns. There are a lot of good investment and infrastructure programmes that are going on at the moment in relation to roads, where Australia is very, very good at this kind of thing at the moment, as you know.

JONES:

But just say a word to the bush people, because they out there thinking that they are tenth class citizens. The bush strength is being wound down utterly in a most demeaning way. There are people out there that haven’t had a holiday, they haven’t had an income, they haven’t had any support for six, seven years, no rain. Now, none of us could endure that. If the union movement were told tomorrow that you can’t have a holiday or if the politicians were told they couldn’t have a holiday, they would be outraged, they have had nothing. Now all they are asking, is not handouts, but how can we build systems in the bush which will maintain our viability in the future, what as you as Treasurer, what priority can you as Treasurer give to them on that?

TREASURER:

Well, I can say this. Obviously we understand that the drought is biting hard. Obviously we know what it is doing to families and to products and to morale. I can pledge this, that the Federal Government stands ready to support farmers when they need income support through those dreadful periods, we stand ready to direct ourselves to all of those policy measures that can help them to get back on their feet and back in business, we know that they are proud and independent people who want to work hard and want to make a return. And I can assure them that the Commonwealth Government, taxpayers through the Commonwealth Government, will support them in their time of need until such time as their farms can profitably recover and we can get on with the business of proud independent agriculture.

JONES:

Good to talk to you and thanks for your time.

TREASURER:

Thanks (inaudible) Alan.