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 17/05/2006

Interview with Geraldine Mellet

ABC Perth

Wednesday, 17 May 2006
8.30am
(Perth time)

SUBJECTS: Budget, executive salaries, tax cuts, petrol prices, pensioner benefits, wages, childcare

MELLET:

Today as we said Mr Costello is here on a 24 hour visit to Western Australia and he has agreed to make himself available to our statewide audience so if you have a question or comment please give us a call right now 1300 222 720 or you can SMS us your comments directly on 199 22 720

Treasurer, welcome to Perth.

TREASURER:

Geraldine, very good to be here, thank you.

MELLET:

Can we talk about how the Budget affects those not in the top income bracket and are the tax cuts already eaten up by the rise in cost of food other essentials and particularly petrol?

TREASURER:

Well this is a Budget which cuts taxes, it cuts taxes for all Australians and in fact in percentage terms the largest tax cuts go to the lowest income earners.

MELLET:

As I said is it not already offset? So all you are doing is actually compensating us I suppose for rises rather than enabling us to get ahead?

TREASURER:

No, the tax rates have been changed in a structural way giving very large reductions to people on lower incomes who don’t pay any tax if they earn $10,000 and for seniors they do not pay any tax until they earn a lot more than that, about $24,000 for a senior, and for a family they do not pay any tax until they earn about $50,000 if they have got mum, dad and a couple of kids. So this is a huge structural change in our taxation.

MELLET:

It maybe a huge structural change but do you hear from middle Australia that they are in fact not getting ahead with the tax cuts? That they are actually just making do?

TREASURER:

Well, look it is important that you take everything into account, petrol prices are very high, of course they are. It gives me no pleasure to see high petrol prices in Australia, unfortunately they are high around the world and we don’t control that price, but overall people are getting ahead through wage increases. What we know in Australia is that wages are rising faster than prices. That has been going on now for, well all the time that I have been Treasurer, ten years. So in real terms, if a wage has gone up faster than your price, the price of living anyway and in real terms people are now getting real wage increases which they have never had before.

MELLET:

I suppose you know this morning we got up and looked at stories about the Chief Executive of Macquarie Bank who is earning something like $58,000 a day. So his tax cut is I understand something around $6,000 a week. It just doesn’t sit well with the average earner, does it? I mean he is earning in a day what most people earn in a year if you like.

TREASURER:

Well that is because he has an extremely high salary …

MELLET:

But his tax cuts…

TREASURER:

…well I suppose everybody wishes they could have an extremely high salary like that, but unfortunately you and I do not have that job, Geraldine and most people don’t. I got asked about that yesterday. The Government doesn’t set salaries either, his shareholders will set salaries and it is up to them to approve or to disapprove but if you happen to be a middle income earner in Australia, that’s about $50,000, that’s about average earning in Australia, if you are a family you won’t pay any tax, any tax at all.

People often say to me what about cutting taxes further for middle income earners? If you are a family we cannot cut it further because you are not paying any tax by the time the Family Tax Benefit is taken into account. So we work at reducing taxes as best we can, the best way for people to actually get in front of prices is by having real wage increases and that is what we have been having in Australia over the last ten years.

MELLET:

Do you believe the new industrial laws will actually help people get increased wages?

TREASURER:

I am very confident of that. The only way to increase wages above prices in a sustainable way is in a better economy and that is what we are working at creating. Now you don’t have to have a very long memory to go back to when Labor was in office, the biggest boast the Labor Party used to make is that they had declining real wages, that is they got wages to grow slower than prices. That was the experience through the late eighties and the early nineties. We have turned all of that around, wages are now rising faster, and I believe with a better industrial relation system it can rise faster again.

MELLET:

It is coming up to 20 minutes to 9, you are listening to the Treasurer, Peter Costello and you are able to speak directly to him this morning, so if you would like to call us it is 1300 222 720 or SMS 199 22720. Treasurer should we take some calls and I will just ask you to put your head phones on. We are speaking first of all to Laurie. Hi Laurie.

CALLER:

Hello. Treasurer how come it is that we are selling our oil overseas at such a low price and we have to buy it back in at such a high price?

TREASURER:

Thank you for the question Laurie. We sell it on world markets at the same price that we buy it. That is Australian producers sell their oil at $70 a barrel and the Australian importers buy it at the some price. We do not sell it at a lower price overseas. Australia unfortunately is not self sufficient in oil, we are now importing about 2/3 of our oil we have to import it at the world price, some of it we buy from our own producers at the world price. Sometimes our own producers sell at the world price but they sell to the best price available, they don’t sell anything less than the world price.

MELLET:

Okay let us go onto Jill, good morning Jill. Hello Jill are you there?

CALLER:

Yes.

MELLET:

You are on with the Treasurer.

CALLER:

Okay. Am I on now?

MELLET:

Yes you are.

CALLER:

Okay. I am a single aged pensioner on around $12,000 a year, I live out in the Bush, I have to drive about 80 kilometres round trip to go to my doctor and a 100 kilometre round trip to go to the shops. There is nothing in the Budget at all that helps people like myself. We still have to bear the brunt in the rise in fuel prices and food and all the things that go with it, but the other thing, the point about this also is that mostly it is aged pensioners who run the emergency services in the bush, fire brigade, ambulances and things like that, and we run that voluntarily, we don’t get paid anything and it seems that the Government is quite happy for us to go out and do that or risk our lives and get called out in the middle of the night, whatever, whatever but there is nothing for us, nothing at all. How are we supposed to cope with these rises in fuel?

TREASURER:

Well Jill thank you very much for your call and can I begin by saying that we do value the volunteer work that you and others do and we know that the country would just not work if we did not have volunteers so thank you for that.

In relation to the pensioners we have a policy of increasing the pension by fixing it to wages and not to prices, that means that the pension is rising faster than the cost of living and has been now for ten years.

MELLET:

Is that what it feels like to you Jill?

CALLER:

No it doesn’t . After the budget I sat down and worked out what my expenses were in a year and I haven’t done that before but I figured out that insurance, house, car and you know different stuff and servicing my car, maintenance on my property, I have to do various stuff on the bush out here fire breaks and all the rest of it, come to and you will not believe this, but it really does and that is $7,500 a year and that comes out of $12,000 a year and I am supposed to live on the rest?

TREASURER:

Well, as I said what our Government has done, is it has legislated to fix the pension to wages rather than prices, and wages are rising faster than prices which means the pension, the aged pension is rising faster than the cost of living. If we had not have done that by legislation the pension today would be substantially lower than in fact it is. A couple of other things to do with pensioners. The first thing of course is we introduced a private health insurance rebate of 30 per cent …

CALLER:

I can’t afford private health insurance, Treasurer.

TREASURER:

…35 per cent for older Australians and 40 per cent when you get to 70 and of course the other thing that we did in this Budget is we built on a utilities allowance which we introduced for the first time in 2005. You should be paid an annual utilities allowance of a hundred dollars or so and that came in, in 2005.

MELLET:

With respect that is not going to go very far with utilities bills surely?

TREASURER:

Well, with respect it never existed in the past.

MELLET:

Yes, but if you are going to do something like that surely you would make it big enough that it is actually going to make a dent in those bills?

TREASURER:

No, because what happened is that the state governments used to have pensioner concessions. State governments are supposed to be giving pensioners concessions on their gas, electricity, their motor car registration and their licences. We found that the state government concessions were not providing the kind of value that we wanted so the Commonwealth Government introduced over and above the concessions a utilities allowance which had never existed before and in this Budget we announced an additional annual payment a utilities allowance in this financial year before the 30th June which is designed to help people in this financial year and this will be $102.80 for each pensioner household to be paid before the 30th June.

MELLET:

I have to say though the day after the Budget when we were taking talkback and the days that followed there were so many pensioners ringing us saying there is nothing for us in this Budget.

TREASURER:

Yeah and that is why it is good to be able to talk about the utilities allowance because I do not think it has got the kind of press it deserves. The utilities allowance come in, in 2005, an annual payment of around about $100, it has been indexed since, and in the Budget I announced not just for pensioners but for self funded retirees as well, an additional annual payment which will be $102.80 cents in this financial year, that one off additional payment.

MELLET:

It is a quarter to 10 on the morning programme, you are listening to the Treasurer, Peter Costello you are able to phone him on 1300 333 720 and we are speaking with John now, you are on with the Treasurer John.

CALLER:

Yes good morning Mr Costello.

TREASURER:

John.

CALLER:

I have to clarify something I am getting a bit old so we make mistakes. I am 66 years of age, I have been unemployed for over four years, I finally would you believe actually managed to get a job. I have remarried and I have a wife and three primary school children are you saying to me now that I am on $44,000 a year, are you saying I am paying no tax?

TREASURER:

Well John, if you have a wife and two dependent children and had a total taxable income of $44,00 yes you would not pay any tax.

CALLER:

Thank you very much, you just improved my income by $500 a fortnight. Thank you very much indeed Treasurer.

TREASURER:

Yes indeed, very happy. Now what you should get is you should get the family tax benefit in respect of your two children. It would be $4,200 per child, you would get an additional payment if one of them was under five, you would get an additional payment if your wife was out of the work force and it should net out all of your tax liabilities so in fact you would have no tax liability you would be a net beneficiary after the Family Tax Benefit.

MELLET:

Okay let’s go to Josh now. Hello Josh.

CALLER:

How are you going?

MELLET:

Good thank you. You are speaking with the Treasurer.

CALLER:

G’Day Mr Costello, how are you?

TREASURER:

I am not too bad thanks Josh.

CALLER:

First of all I would like to say thank you for the tax cuts.

TREASURER:

Thank you

CALLER:

You do not hear that very often but anything you get is better. But part of my concern is that you always hear about the average income $50,000 and wages going up well I am on about $30,000, $35,000 a year, I am on a lot more money than people I know and these wages have not gone up for years, so how are these wages going up and up and up to keep with the inflation prices going up?

TREASURER:

Well, we have bureau which collects information on wages throughout Australia and the average wage in Australia is about $50,000. Wages are increasing around about 4 per cent per annum that is over the whole economy and of course it depends on the individual but most individuals get an annual pay increase as they move through their career or as wages get adjusted and I cannot talk about your personal circumstances but overall we see there is a rise in wages in Australia and it is a rise which is faster than inflation and provided we keep the economy going well we can sustain that.

MELLET:

Just a couple of SMS’s, one form Allan in Pilbara; petrol has two taxes - GST and fuel excise - on $26,000 and no access to middle class welfare, I am hurting – how about the removal of one of those federal taxes?

TREASURER:

Well, only one of those taxes is a federal tax, that is the fuel excise which is 38 cents a litre and it doesn’t increase with price. The second tax of course is GST which is ten per cent and that does increase as the price goes up and all of that revenue goes to the state governments. Some state governments, such as the Queensland Government, does use part of its GST to rebate some of that increased prices but the Commonwealth does not increase its excise nor does it even index it. So as time goes by the proportion of Commonwealth excise on petrol price declines.

MELLET:

Okay let’s go on to Jeff now. Hello Jeff.

CALLER:

Hi, good morning Peter. I am a third generation TPI, my grandfather and my father and I all had our working life cut short because of going to war. I meet you in Gallipoli in 2003, my kids helped me to get over there and that was a fantastic experience and I thought after meeting you , I thought that you know you had some compassion for returned servicemen, but the TPI rate has dropped from 100 per cent of average weekly wages to 40 per cent and is going backwards.

Unemployed benefit people got more than us over the last rises that went up. When are you or when is somebody in the Government going to release the depth of feeling amongst really suffering returned servicemen are really waiting for something from the Government and getting nothing?

TREASURER:

Well look let me say we absolutely value Australia’s servicemen.

CALLER:

Nice words Peter.

TREASURER:

And we want to acknowledge the service that you and your family have made as have a lot of Australian families. Those figures don’t sound right to me I will take them away if you want to leave your name and address I will get back to you. The figures that you gave, there must be some other explanation because nothing has declined in this area but if you want to leave your name and your number I will come back to you on that.

CALLER:

All right, thank you very much but believe me it is true.

MELLET:

Can I just talk to you about childcare briefly because even people within your own party like Jackie Kelly have been saying you still have a way to go. I want to know, taking a cap of places, but how are you actually going to counter the staff shortages to make sure that you have got people who are bale to supervise and look after the children?

TREASURER:

Well, we have taken the cap off and we now subsidise the centres with the childcare benefit and if you are out of pocket, the childcare rebate.

MELLET:

But hang on that is not addressing staff shortages?

TREASURER:

Well, if I may say so this area like every other area, in the private sector in a full employment society, may in fact be having difficulty finding additional labour. That is what happens in a full employment society.

MELLET:

But can’t the Government show leadership in some way?

TREASURER:

Well the Government does.

MELLET:

(inaudible)

TREASURER:

Well the Government does show leadership, the Government pays the operators a childcare benefit, uncapped places and makes taxpayers’ dollars available.

MELLET:

Well why not do something like take the fees out of childcare courses to enable, to make it more attractive for people to go into that industry and try and fast track it?

TREASURER:

Well let me say the Government provides training for childcare as we provide training for kindergarten as we provide training for teachers, as we provide training for tertiary lecturers, in relation to all of those teaching occupations the fees are nothing like they are for commerce or law or medicine, they are very, very commercial at the moment. Now we have more childcare places in Australia than ever before.

MELLET:

But that is on paper.

TREASURER:

No, it is not on paper I am sorry it is in real childcare centres with real children in them.

MELLET:

Then why do we get constant stories of people not being about to get a place at childcare centres?

TREASURER:

Because I think more and more people want to get childcare. We had 300,000 places - not on paper, 300,000 places in 1996 we are up around 600,000 now, and we are planning to go to 700,000. They are real places with real children in them if I may say so.

MELLET:

You were asked in the Parliament; how many of those places are going to be filled in, the extra places that you are offering going to be filled within a year with that desperate need out there. How many places do you think are going to be filled within a year?

TREASURER:

I would say we would probably be at 600,000.

MELLET:

And do you think that is enough?

TREASURER:

Well it is double what we had ten years ago, it is the most we have ever had in Australian history. It is the largest expenditure that we have ever made. If there is a higher demand we will fund higher places, it is a demand driven programme. So that if more people set up childcare centres either outside school hours, family day care or even long day care it is a demand driven programme and we will be funding more places. Can I say at the end of the day when child care is being set up somebody has to run it, somebody has to set aside the area, they have to comply with state health requirements generally, they have to employ the staff, they have to manage the Commonwealth Government subsides. Mostly this is now being done in long day care by private operators who as you see on street corners are setting up many, many more childcare centres, but if there is an unmet demand and a church wants to set one up or a voluntary group or a council we will fund it.

MELLET:

What about workplace?

TREASURER:

Or a workplace, we will fund it. The Commonwealth Government does not own these centres, we don’t purchase the land, we don’t employ the staff. What we do is we say we will fund anyone who sets them up and I would say to councils or churches in areas where there is unmet demand set it up because you will attract a very decent Commonwealth subsidy.

MELLET:

Let’s go back to callers. We are speaking with Wendy. Hello Wendy.

CALLER:

Hello, am I speaking to the Treasurer?

MELLET:

Yes you are.

CALLER:

Congratulations Treasurer on your Budget I thought overall it was excellent and made the most of our resources boom. You have just been talking about childcare and I think the free training places for childcare workers is a great idea. I also would suggest when the time is right perhaps you need to do the same for aged care workers because there is a huge demand for those as well throughout Australia.

TREASURER:

Well that is a fair point, that the number of aged people in Australia is going to double over the next thirty or forty years and unfortunately the number of children in Australia is hardly going to increase. So we are going to have huge pressures on aged care workers and we have got to start preparing for this now over the next ten or twenty or thirty years and in any area whether it be childcare or aged care at the moment in a near full employment society it is hard to attract labour. But I keep I saying this is not all downside, ten years ago when we had mass unemployment it wasn’t hard to attract labour to anything, the fact is we have a stronger economy, we have more people in work than ever before and we do need to attend to areas of demand and I think you are absolutely right over the longer term aged care is going to be one of them.

MELLET:

Lets speak with Manny now. Hello Manny you are on with the Treasurer.

CALLER:

Yes I have been taking notes. I would rather have my say and not have the Treasurer interfere and drear on with his party political broadcast.

MELLET:

Yes okay you can have your say but then the Treasurer of course has right of reply.

CALLER:

Yes right of reply but don’t overrun me. You said, I have been taking notes, you’ve said that pensioners pay no tax. We pay GST as well as all the other tax. You said that the GST would override all other taxes, we would pay no other federal taxes once we paid GST. You said we are paying a federal levy on fuel as well as the GST on fuel. Now in this last thing you have given tax cuts to people who are theoretically comfortably off over $40,000. I know no-one personally who I know intimately enough to know their income who is on $40,000. My children are fully employed and some of them, they do get $40,000 when they work more than 14 hours a day.

MELLET:

Manny, I’m sorry I have got so many people…

CALLER:

Okay, to keep it brief if you are genuinely going to do anything for the people who are poor enough to have federal health care cards then you should make it that anybody who produces a card like that pays no GST on anything on toothpaste, toothbrush, fuel, power, water all the essentials.

MELLET:

Okay Manny thanks well let’s get the Treasurer to give a response.

TREASURER:

Well the GST was introduced to replace wholesale sales tax and a whole raft of state taxes, it was not introduced to replace income tax which is the principal federal tax base and nobody ever said it would. Nobody ever would imagine in the future it could, so there might be a misunderstanding there. In relation to presenting a health care card and getting a different price at the counter for your toothbrush I just don’t think it is practical. The idea of a 10 per cent GST, that it is a simple, simple for people to understand and it is simple for retailers. If somebody was to present a card at the cash register and say change the price of the toothpaste or change the price of toothbrush fee the complications would be so great for both the consumer and for the seller that we would loss the advantage of efficiency in the tax system.

MELLET:

Treasurer, before you go (inaudible) a few seconds I have seen some of the footage from Mr Howard’s trip to America and President Bush was saying the only difference between him and John Howard is that Mr Howard is not as pretty and does not have as much hair and I just wanted to ask you in what way do you differ from George Bush?

TREASURER:

From George Bush? I think he is probably beating me in the hair stakes, I maybe a little taller than him though.

MELLET:

And do you think his prediction that he will not be in the job for as long as John Howard is (inaudible)?

TREASURER:

Oh well, we get asked these predictions all the time and if I knew what the future held, I do not think I would be in this business I would be in clairvoyance somewhere.