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 16/12/2005

Interview with Leon Byner
5AA

Friday, 16 December 2005
11.10 am

SUBJECTS: Competition policy, tax, Budget forecasts, debt, egg industry

BYNER:

Good morning and Merry Christmas.

TREASURER:

Leon, it is great to be with you.

BYNER:

Now, before we talk about the possibility of tax cuts and the underestimation of funds which the Treasury predicts they are going to get and you seem to be doing much better than what the predictions are, I want to ask you about the National Competition Payments which have gone to egg growers in Australia but not those in this state and ours are in big trouble?

TREASURER:

Well, competition payments are paid to State Governments for reform and South Australia in this most recent round got $54 million. Some of the States use those payments to help people who are adversely affected by reform and some don't it is a matter for the States but the State of South Australia has got the money and it could use that money to help people who have been adversely affected if it wanted to.

BYNER:

Alright. Now, when the business of, first of all the Treasury estimates, in recent times under your stewardship of being Treasurer, it seems that the monies that they thought they would get have been vastly overreached by reality.

TREASURER:

Well that is, we have revised up our projections yesterday for the Mid-Year Review, we revised them up by about $2.5 billion, that is quite true. The reason for that is that company profits have been stronger than they were expected to be and the main reason for that is the surge in prices for mining and minerals exports. So, sometimes throughout the course of the year the economy will strengthen and we will revise up our projections, it has happened to me by the way that it has weakened and we had to revise them down, but bear this in mind Leon, the Federal Budget is about $200 billion

BYNER:

$200 billion?

TREASURER:

yes, so if you revise your revenue by $2 billion that is a 1 per cent revision. Now, you know, it sounds a lot of money doesn't it but when you say it is a 1 per cent revision there are many, many companies out there that would be revising their forecasts a lot more than 1 per cent, you know, if we revised it by 10 per cent that would be $20 billion we revised it 1 per cent so you know, it is very, very hard to get a 99 per cent accuracy, it is very hard to get 98 per cent.

BYNER:

So how likely are tax cuts as a result of this surplus when we are already getting some more as of the 1 st of July next year?

TREASURER:

Well yes that is right, we have already legislated a tax cut to take place on 1 July of next year and what I have said is if the economy stays strong, if we can keep interest rates down, if we can keep a grip on expenses I would like to cut taxes again, sure I would, but we have got a long way to go before we can accomplish all of those things. We are now beginning another Budget round, we will bring it down in May and it depends how well we go between now and May.

BYNER:

So apart from the tax cut already announced which will cut in next year, at this stage that is not gong to be anything more until close to that time?

TREASURER:

Well, we have already legislated a tax cut, I have said if you can balance your Budget, keep interest rates low, fund health and education and also cut taxes that is what we would aim to do.  

BYNER:

Access Economics is saying that tax cuts would actually fuel a Reserve Bank increase in interest rates.

TREASURER:

Well this is where you have got to be careful Leon, inflation has moved up a bit, particularly because of petrol prices, you don't want inflation to move up further because that would put up interest rates. So you know, these are the things that you have got to take into account when you are engaging in economic management, how do we pay for our services, how do we balance our Budget, let's not do anything that will push up inflation, let's keep interest rates low, how low can we get taxes. You are dealing with vast sums here, it doesn't run itself, it is very complicated and you know, these are the line ball calls that we have to make between now and May.

BYNER:

Treasurer, how much are we in debt to the World Bank or the International Monetary Fund in terms of our trade deficit?

TREASURER:

Well we the Government are not in debt at all. In fact one of the things I announced yesterday is that the Government, this is the Commonwealth Government, the Australian Government, will be able to clear its debt this financial year. The private sector borrows from overseas and the private sector has extensive borrowings mainly banks by the way Australian banks that borrow money overseas, bring it into the country and lend it but that is not the taxpayers obligation, we have got the taxpayer to be debt free.

BYNER:

But it seems though that these deficits are still a worry for our country because they are going up very, we are talking I think now about $400 billion.

TREASURER:

Oh yes, the private sector, and this is almost totally private sector debt, does borrow overseas. If they borrow for good things Leon that is not a problem. Let's suppose BHP borrows money overseas, uses it to expand Roxby Downs, builds a better export Uranium trade, that is not a problem that is actually a good thing. If you borrowed overseas and were unable to sustain it, if a company were to do that, that would be a problem and the point I am making here is this is the private sector, this is not the Government, this is the private sector and the private sector is taking its own risks. I believe the Australian banks who borrow most of this money are in very strong positions, very solvent and can handle their borrowings.

BYNER:

Just quickly, on the business that we started with when you first came on this morning, the fact is that we have got cheap eggs coming in from interstate which are undercutting the local producers and if this continues and nothing changes apart from that there is going to be a thousand jobs and an egg industry just disappear in this State. Is there any role for the ACCC in this or is it purely in your opinion up to the State Government to repatriate like some of the States have done and give egg growers the same help that has been given interstate?

TREASURER:

Well if you want to direct assistance to South Australian egg growers, then the South Australian Government would have to do that. You know, when you say cheap eggs come in from other states, you know, I don't know, say Victoria, you know that is just like saying well, cheap cars come in from Victoria

BYNER:

But that is different here, we are not getting cars below the cost of production across the border.

TREASURER:

well this is my point. You can trade freely across state borders, you can't stop any Australian from trading freely across state borders. If somebody cuts a price in order to drive a competitor out of business, with the intention of driving a competitor out of business so that eventually they can raise prices again, yes the ACCC can look at that. But if all somebody is doing is trading their goods across state borders there is nothing illegal about that.

BYNER:

Well Treasurer I just point out that the eggs are coming here well below the cost of what anybody could produce them for and that has been something that has been happening now for a while, it can't go on forever and the state has also been saying that surely under those circumstances there should be some investigation by the ACCC.

TREASURER:

Well if the State Government believes there is a breach of the Trade Practices Act it should take its evidence to the ACCC. There is nothing to stop that, they can do that any time they like, Leon, and the ACCC would investigate that.

BYNER:

What are you doing for Christmas?

TREASURER:

Going home. I have been away all year it is time to go home for Christmas.

BYNER:

And you will be doing a lot of deputising roles I presume?

TREASURER:

Oh yes, I take my turn over summer so that other people can have their holidays.

BYNER:

Peter, thank you for calling in this morning.

TREASURER:

And great to be with you Leon and all the best to you and your listeners for Christmas.