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 22/11/2005

Interview with Paul Murray
6PR

Tuesday, 22 November 2005
8.30 am (Perth time)

SUBJECTS: Uranium, oil, tax reform, Budget, IR reform, McGauchie

MURRAY:

Good morning.

TREASURER:

Good morning Paul, it is great to be with you.

MURRAY:

Five thousand dollars a head, do you give away a Rolex watch to each guest or something do you?

TREASURER:

Imagine what they would pay if you were there Paul.

MURRAY:

I know that and it is not very much. In fact going cheap is the term. What about what I started off with today about uranium and the West Australian Government's approach to it?

TREASURER:

Well I can't understand their approach. Australia as you know is one of the great mineral exporters of the world. We have from memory about 80 per cent of the world's proven uranium reserves. This is a fabulous industry for Australia, the mining and exporting of uranium, which we are already doing by the way

MURRAY:

Yeah.

TREASURER:

Roxby Downs

MURRAY:

Hmm.

TREASURER:

we are already mining and exporting uranium. We only do it subject to very strong safeguards agreements, if you want to buy Australian uranium you have got to enter into a safeguard arrangement; you have got to be subject to inspection; it can only be used for peaceful purposes; it can only be transported in accordance with a licence; it can only be exported in accordance with a licence; enormous safeguards on it. But if Britain or anyone else were to say that they would take more of our product why wouldn't we sell it to them?

MURRAY:

If you couldn't trust Britain with it who could you trust?

TREASURER:

Well, we are at the moment selling to countries like Japan, France, the Chinese are showing that they are interested, and I just can't understand why you would say, we have got the stuff, we are already exporting it but you are only allowed to export it from Roxby Downs. I think that is the Labor policy, if it is not an existing mine they won't support it coming out of any new mine. In other words, you know, we are not against uranium, we are just against uranium coming out of any new mines which is a bizarre situation.

MURRAY:

It seems the Premier is prepared to adopt a lot of the ideology that comes from his friend Tony Blair's Labour Government in the UK but it just goes so far, there is this bit he won't adopt.

TREASURER:

Well the thing is this, that Britain has had nuclear power for a long time and you know, you have got problems obviously with disposal of nuclear waste, it is not without its environmental problems, I acknowledge all of that, but in a world which is now getting worried about hydrocarbons, which is now getting worried about global warming, I believe that nuclear power will become more and more used around the world. This is great news for Australia because we have got the reserves. What is stupid is if we had all of these reserves and all of these markets and for ideology, people said, we are not allowed to sell to them. Stupid stuff, particularly, in a mining State like Western Australia. Now I think Federal Labor is changing its position here, that they are starting to say, well look, new mines ought to be allowed and if Federal Labor changes its position then it is quite likely that State Labor will be pulled into line.

MURRAY:

Well it is a State Labor Government in South Australia that's exporting the uranium.

TREASURER:

From Roxby Downs, absolutely, and up in the Northern Territory - a Territory Labor Government - so, you know, there is no great principle to this operation.

MURRAY:

Yeah.

TREASURER:

If you don't want to export it from WA, South Australia will I can assure you of that.

MURRAY:

Well it just appears that Geoff Gallop has been somewhat isolated in the debate and now his mate Tony Blair I think is going to leave him stranded.

TREASURER:

Well, here is Blair saying, as I understand it, Britain has nuclear power needs that when you consider global warming and reduction in carbon fossil fuel requirements, this is going to become much more necessary. The good news for Australia is we have got the product. The bad news is some of the ideologues want to stop us selling it.

MURRAY:

I have got a visiting expert on Peak Oil coming in to talk around about half past nine this morning and his contention is that we have got to the stage now where the demand for oil is, we are very close to not being able to supply it any more. We all know the basic economics of that, that's really going to push oil prices through the roof. So these gravy days, glory days of having lots of reasonably cheap oil are just about gone.

TREASURER:

I think that is right. What the price tells you, when a price goes up, it basically tells you there is more demand than supply, that is what the price is telling you. And when the price goes up, other fuels start to become more competitive and around the world I don't know that there is much more oil production. There are deposits where, as the price goes up, you can go back and get more of the deposit out, technology is improving, but when you look around the world it doesn't appear as if there are new fields that could be brought on-stream very easily

MURRAY:

Hmm.

TREASURER:

at the tap of a well as it were, and other fuels are certainly going to start moving and not just uranium by the way, there will be other biodiesel, I think will come back onto the market. From Australia's point of view, gas an alternative fuel to oil is starting to become much more competitive and we may have a great opportunity to start selling gas to the United States because even in the United States the oil reserves are now very limited.

MURRAY:

Hmm. You can see that the oil producing countries aren't increasing their refining capacity and that must tell you something, that they know what it is going on with the supply.

TREASURER:

Absolutely, and you get new countries emerging like China, huge demand for oil, when the capacity can't increase to meet that demand, what happens? The price goes up. And that is a signal that demand is starting to exceed supply.

MURRAY:

922 11 882 is the number if you want to speak to Peter Costello today. Can we talk about every Treasurer's favourite subject, tax. Is there an emerging opportunity for you now to look at tax cuts in the next Budget?

TREASURER:

Well, we cut tax in this year's Budget of course

MURRAY:

Hmm.

TREASURER:

$22 billion of tax cuts. What I said this year is, if you can balance your Budget, pay for our health needs and our security needs and all of our social welfare needs and if after that you have balanced your Budget and met your expenditures, if you can cut taxes, you should. And we have in the last three Budgets. So, it is too early to say whether or not you would be in that position but we did it last year, if we can do it in the future we will because we think that Governments should try and cut the tax burden wherever they can.

MURRAY:

Well, next month you get the Treasury's Mid Year Fiscal Outlook so you will get a projection on the surplus then?

TREASURER:

We will get an update next month, that is quite right, and then next Budget would be in May, and you know, there are a few difficult things going on in the economy at the moment. My impression is that it is slowing a little bit in relation to consumption. Oil has been a problem as we all know and it could well be that because the oil price has gone up and the petrol price has gone up that has slowed consumption they could be related. But we will get a better fix over the course of Christmas and into the New Year.

MURRAY:

Your noisy backbencher Malcolm Turnbull has put out a whole series of options for tax cuts. On his preferred option, that is to abolish the top rate at 47 per cent, to drop that to, to drop it then to 42 per cent, no to drop the 42 per cent rate to 35 per cent and to increase the tax free threshold from $6,000 to $10,000. Now you have had Treasury have a look at that?

TREASURER:

Well, we look at things all the time. Can I tell you, all the time over the last 10 years we have been looking at various options so, you know, we have got a pretty fair idea how the tax system works.

MURRAY:

But that would sound pretty good to middle Australia, what he is talking about.

TREASURER:

Well, look, I am not going into any speculation except to say this; that we have cut taxes in the last three Budgets, the Federal Government at least is talking about cutting taxes, most of the States are talking about increasing them, that makes us quite different and if we can do further tax cuts after meeting our expenditures and balancing the Budget. Well why do I say, balance the Budget? Well I don't think it would be of any consolation to anybody if the Government cut taxes, drove the Budget into deficit and put up interest rates. You know, how would you like it if they said, oh, by the way you get a little tax cut but your mortgage has increased by three or four times because interest rates, I don't think that would be of any consolation.

MURRAY:

Yeah.

TREASURER:

So, you have got to hold all of these things in balance Paul.

MURRAY:

Because you got caned last time for the fact that petrol prices went up after your tax cuts and people immediately said well they were gobbled up.

TREASURER:

I know. People can always find a reason, you know, why one arm of policy is counteracted by another. But here's the evidence Paul. We have been in Government now for nearly 10 years, unemployment is the lowest it has been since the 70's, inflation is still low, the Budget is balanced, we have paid off $90 billion worth of Labor debt and 1.7 million new jobs have been created in Australia. That's the record. And it was done through good strong economic management. It doesn't happen by accident, it is not a fluke, you have to work at it, sometimes you have to take tough decisions and we will continue to make the tough but right decisions, the fair decisions for the Australian people.

MURRAY:

922 11 882 if you want to talk to Federal Treasurer, Peter Costello today. It is 14 to 9.

Ad Break

MURRAY:

Treasurer Peter Costello is in the studio, 9221 1882 if you want to speak to him. Russell in Dianella. Morning Russell.

CALLER:

Good morning Paul, good morning Mr Costello.

TREASURER:

Good morning Russell.

CALLER:

I'm ringing regarding the new changes to the IR laws when they come in - for pensioners. I have heard that pension payments will be reduced. Is that going to be correct?

TREASURER:

No.

CALLER:

It's not.

TREASURER:

No. Look, the opponents of industrial relations reform are coming up with all sorts of arguments as to why you should not support reform, that is one of the more far fetched ones. The pension is set at 25 percent of male total average weekly earnings. As male total average weekly earnings go up, the pension goes up, if inflation goes up faster than that it is fixed to inflation, and it is not fixed to awards in any sense, shape or fashion.

MURRAY:

Well what if these changes collapsed average male earnings?

TREASURER:

Well of course these are total average weekly earnings - MTAWE we call it - and they are separate from awards. Awards are by and large minima. They are a component of total wages, but they are not the full sum of total wages, and my own view by the way is that these changes will lead to wage increases, so they are more likely to lead to pension increases, than pension declines.

MURRAY:

There was a story to that effect in the Sunday Times a couple of weeks ago, and I know a couple of local Labor local members sent out a letter to their constituents pointing to it, that's why

TREASURER:

It is an organised campaign by the union movement and the Labor Party to try and get this up, but can I tell you that our Government actually introduced the indexation to wages or CPI by law, whichever is the higher. It is like saying, by the way, you know somebody might say to you well if inflation goes down that means that the pension is going to be less, if it is indexed to the pension. The reality is of course, that if inflation stays low and it is indexed to the pension, then in real terms you are protected.

MURRAY:

The pension buys more. John in (inaudible), gidday.

CALLER:

Good morning Paul. Good morning Mr Costello.

TREASURER:

John.

CALLER:

Mr Costello, I will bring you back to your, just before the break, you said that there was quite a few jobs that had been, had this year, since you've been in government.

TREASURER:

Yes, over the course of the Government, not just this year

CALLER:

Yeah.

TREASURER:

There were 1.7 million new jobs.

CALLER:

Well Mr Costello, I am nearly of retirement age. I turn sixty very soon. I am still unemployed. I go to one of these job centres. I am very disillusioned with them, because all they seem to have is part-time work. There is no full-time, you cannot get any full-time work. I am not a skilled person, but I am, you can say well travelled, and through the job situation in my years, and I am a swinging voter, and I am very sort of, concerned that there is only part-time work now, and not the full-time work.

TREASURER:

Well, if you look at the overall changes in society, it is true that there are more part-time jobs around, but also there are more full-time jobs around today. I do not know if you are interested in taking some part-time work. It may, I do not know if that is of interest to you or not, but if you actually look at the overall changes in the economy, both have increased, and I am obviously very sorry about your situation. If the provider can keep working with you, I still think that is the best opportunity to get back into the workforce. I do think, I will say another thing, that we do have to educate employers better these days about the value of mature age workers. I do hear a lot of stories of people, particularly men, in their fifties or early sixties that find it hard to get jobs because employers do not seem to be interested in mature aged men. And it is one of the things I have been pushing very strongly, the advantage of mature aged workers, and the benefits they can bring to employers.

MURRAY:

Thanks John. Murray in Subiaco, morning Murray.

CALLER:

Oh good morning Paul and Peter. Thank you very much for the opportunity. I just want to congratulate the government for a few things from a pharmaceutical point of view. I am actually a pharmacist. I just wanted to say thank you for the fact that, John Howard in particular, did not want Woolworths to come in on pharmaceuticals, and I think that is a good thing for the country in the long term. But my question actually to Peter is, could he address please the fact that pharmacists pay input GST on scheduled medicines, but they do not pay output, you do not collect output GST, on schedules for national health drugs, prescription drugs and patent medicines. Can he comment on the anomaly of that please?

TREASURER:

Well it was a Government decision to have no GST on medical treatments because we thought that if there were GST on medical treatments, the price would be higher to the consumer and there was a lot of resistance to that so, we have a broad based GST, but there are some things that it is not on, and one of the main ones is, it is not on health, not on education, the consequence of that is that the consumer does not pay the final GST. If you happen to be a provider that means you do not collect it.

MURRAY:

Peter in Duncraig, morning Peter.

CALLER:

Good morning Paul, and good morning Mr Costello. What I rang up about was that is there many services in Australia I am looking particularly at the amateur radio service at the moment, the licence costs $20. The total tax on the form is $36, and then they say plus GST of $2. It seems like an anomaly where the tax is nearly 200 per cent the cost of the item. I would just like to ask Mr Costello if he could possibly look into that, and that also to wish him good luck with the top job in the future.

TREASURER:

Thanks. Thank you very much. Well that sounds strange to me. If it is a licence of $20, and I think you said a tax of $16 on that, did you say?

CALLER:

No a tax of $36.

TREASURER:

On $20?

CALLER:

Yes.

TREASURER:

So the licence is $20, and there is a tax of $36.

CALLER:

That is exactly

MURRAY:

Plus the GST too

TREASURER:

I must say you have stumped me on that one. I do not know what that tax is. I doubt that it is a federal tax, but I'll look into it.

MURRAY:

Peter, Peter. Send us in the details, and we will pass it on to the Treasurer's office.

Just on what he raised there about the succession, I don't normally ask you about this, but I am told that Labor is working on the basis that the Prime Minister goes next April, are you two discussing succession?

TREASURER:

Look we get asked about this all the time, and you can imagine Paul, for about the last ten years, I have been asked

MURRAY:

I have refrained, but now the time

TREASURER:

And, you know I really do not go into discussions that we have about anything because, once you do, then people say, Did you discuss this? Did you discuss that? We have a lot of private discussions, do not read anything into this, but we keep them between ourselves.

MURRAY:

I just think it is a logical thing that you would do.

TREASURER:

Well as I say, don't speculate on anything, but at the moment I start going into private discussions I have with John Howard, you know, the next thing you know I will be producing a diary like Mark Latham.

MURRAY:

Well let me ask you about this

TREASURER:

It will be one of the world's great sellers

MURRAY:

How, how do you explain the Government's spectacular fall in the opinion polls out today? Is this John Howard taking a hit on IR reform, and you are going to pick up the ball next year?

TREASURER:

No I think that there is genuine concern in the community that change is coming. We do not quite know it is going to work out, and that is understandable. Ive seen this in relation to a lot of political issues, and it is not really until such time as it does work out, people see the results that they feel reassured. So I would just say, and I am not commenting on the polls, that whenever changes is being proposed in the community, you will always get people that are a little bit nervous, and the only thing you can do to reassure them is to show them the outcome, and show them the benefits, and I am very confident there will be strong benefits from this, when it takes effect.

MURRAY:

Just finally, the Melbourne Age says that you are thinking of pushing Donald McGauchie off the Reserve Bank Board, because he has been difficult for you to handle as Chairman of Telstra. What do you say?

TREASURER:

Well the Melbourne Age is wrong. They ran this story yesterday. I had a press conference and put out a statement in response, which could not have been clearer, indicating that Mr McGauchie is a valued member of the Board, and what he does in his other directorships does not impinge on that. Every other newspaper in the country seems to have reported that straight up and down - me standing by Donald McGauchie. The Age, having got the story wrong on the first day, did not turn around and correct it on the second, they just re-doubled their efforts to promote their error.

MURRAY:

So he is safe?

TREASURER:

I have enormous confidence in Donald McGauchie. He is a very, very valuable member of the Reserve Bank Board, and where the rest of the story comes from is beyond me.

MURRAY:

Finally, and importantly in the last fifteen seconds, is Mark Harvey leaving a big hole in your beloved Bombers?

TREASURER:

Yes. He is a great guy Mark Harvey. I have known him over the years since he burst onto the scene in the 84-85 premierships, so he will be a great addition to Western Australia. Give him my regards.

MURRAY:

Good to talk to you again Peter, thank you.

TREASURER:

Thanks Paul.