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 24/07/2006

Interview with David Speers
Agenda, Sky News

Monday, 24 July 2006
4.15 pm

SUBJECTS: Lebanon, James Hardie, interest rates, fertility and population, leadership

SPEERS:

Well Treasurer, thanks for your time. If I can firstly ask you about the situation in the Middle East. Would you like to see a cease fire take place there?

TREASURER:

Well I think all of us would like to see a situation where the prospects for peace are improved but you have got to remember how this all started. It started with Hezbollah making an incursion against Israel, capturing Israeli soldiers, and Israel defending itself. Israel has every right to defend itself against Hezbollah militants and take such action as is necessary to disarm Hezbollah in its capacity to fire rockets on northern Israel. Now, I think once we have a situation where the capacity of Hezbollah to do that has been taken out of the game then you have got a much better basis for a permanent cease fire.

SPEERS:

But in taking that action, some 360 people so far have been killed in Lebanon, there are Australians still stuck in that dangerous part of southern Lebanon, do you think a lot of people would find it a bit odd that the Australian Government is not calling on Israel to stop firing and stop bombing Lebanon?

TREASURER:

Well let me make it clear, everybody regrets the loss of innocent life, but you have got to bear this in mind – if a group like Hezbollah has rockets which are capable of attacking Israeli cities, if it is prepared to begin attacks and take soldiers then leaving all of that apparatus in place could well lead to greater loss of life in the months or the years that lie ahead and that is why Israel has every right to defend itself and is aiming to take out that apparatus and once the apparatus is taken out the prospects for a durable cease fire will be much, much better.

SPEERS:

But during 18 years of occupation in southern Lebanon Israel could not take out Hezbollah’s capacity to launch those sorts of attacks, is it realistic to suggest that it can do so this time around without a prolonged engagement?

TREASURER:

Well I think it is realistic to say that it has the right to make every effort to take out that apparatus, also of course there are countries that have given free passage, that now seems, to rockets to get into southern Lebanon, that has worsened the situation and you can’t have an organisation like Hezbollah with rockets and arms and the capacity to launch them onto a State like Israel. Israel has every right to live behind secure and peaceful borders and let’s not forget how this started, it started with an attack from Hezbollah and Israel now has the right to go and to try and take out those rockets and those launch pads which have the capacity to destroy its citizens and other States would do the same thing and I believe, I think the Government believes, that when the capacity to launch those strikes has been diminished the prospects for a durable ceasefire will be much greater.

SPEERS:

Well therefore shouldn’t Israel also be turning its attention to those supporters of Hezbollah – Syria and Iran – should it also be focussing on those countries that also do not support the right of the Israeli State to exist?

TREASURER:

Well I said earlier it doesn’t help the situation if there are other countries that allow free passage for rockets and armaments and it would be in everybody’s interests if that were not allowed, but at the moment Israel is engaging in self defence which it is entitled to do. It did not start this and we of course regret the loss of life on all sides but the only basis on which you could have a durable ceasefire would be if this apparatuses is very much diminished and preferably if it is destroyed altogether.

SPEERS:

Alright Treasurer, on some domestic matters, James Hardie, why have you refused to give this company the tax breaks it is after on its $1 billion compensation fund for asbestos victims. It argues that without the tax breaks that money for those victims is going to be at risk.

TREASURER:

Well James Hardie can deduct against its tax every dollar that it pays to a victim. It has full tax deductibility. Let’s be clear about this and it has full tax deductibility because the Government legislated quite recently we announced a few years ago, but finally got our legislation through the Senate, to allow companies to deduct what are called black hole expenditures. So let’s make this entirely clear…

SPEERS:

But the fund itself is still going to be taxed.

TREASURER:

…no let’s make this entirely clear. Every dollar that James Hardie pays to victims is tax deductible. Let’s be clear about this. It has…

SPEERS:

But what they want is the fund itself to be tax free.

TREASURER:

Oh, no, no, I will go into what they want in a moment. There are other companies that had asbestos victims – CSR and BHP. CSR and BHP didn’t try and hide assets and income offshore. What CSR and BHP did is they paid their victims, they paid them up front and early and they got a full tax deduction. If James Hardie pays its victims up front even though it is not early, it is late, it will still get full tax deductibility. Now, there is another issue at the same time here which is whether James Hardie can set aside money and accumulate income tax free. The answer to that is if the money goes to charity it can. But if the money is not in a charity it can no more accumulate money tax free than you can or I can or any other company can. That is the argument that is going on here. James Hardie says it wants to have charitable tax treatment for its fund, it can do that if its fund is a charity and it can make it a charity but if its fund is not a charity then it can’t have charitable status.

SPEERS:

The asbestos diseases campaigner, very well known, Bernie Banton, he seems to be under the impression that the Prime Minister gave him an assurance there would be this tax free status, I will just play you what he told us on Sky News today:

BANTON:

His advice was contrary to our advice but he definitely wanted the deal put to bed as soon as possible. Whatever needs to be done, needs to be done with Hardies and the tax man and the Prime Minister gave us an assurance that he would do whatever he could in his field of expertise which is telling people what to do.

SPEERS:

Now Treasurer, Kim Beazley has also been critical of the Government on this saying this it is effectively taking a windfall out of taxing this compensation fund, what do you say to that?

TREASURER:

Well that is absolutely untrue. Let me say again, for every dollar that James Hardie pays to its victims, it gets a tax deduction. Now you can’t do better than that. This is what BHP did and what CSR did. What’s more, if James Hardie wants to set up a charity then the charity will be given charitable tax status. It can set up a charity tomorrow but what it can’t do is set up a fund which is not a charity and ask that that fund be given charitable tax status.

SPEERS:

So are you recommending they set up a charitable fund then to get that status?

TREASURER:

Well if they want charitable tax status they can set up a charity, it is that simple. But what you can’t do is you can’t say well we would like to earn income tax free but not give it all to charity. That is what you can’t do and BHP didn’t do it and CSR didn’t do it and James Hardie knows all of this. Let me make this clear. James Hardie has to pay the victims. It has to pay the victims everything they are entitled to and when it pays those victims everything that they are entitled to it will get a full and total tax deduction for doing so. And that is why I call on James Hardie just to announce that they are going to do it, you will get a full tax deduction for doing so. We should never have got to this stage. It didn’t get to this stage with BHP, it didn’t get to this stage with CSR. Finally James Hardie has been pulled back to the table and it should pay its victims and when it does it will get a full tax deduction for doing so.

SPEERS:

Alright Treasurer, interest rates, a lot of people are worried they will go up next week, the markets are factoring in an 85 per cent chance of a rise and we have just seen the tax cuts come into effect, they could be chewed up fairly quickly by an interest rate rise. What sort of assurances can you give homebuyers?

TREASURER:

Well the assurance that I give homebuyers is that our interest rates in Australia by historical standards are low. They are much lower than when the Government came to office where they were above 10 per cent and they are much lower than they were when they peaked under the previous government at 17 per cent. The fact that they are in single figures is an indication as to how far they have come down. It is important for us to keep inflation low because only if we keep inflation low will we be able to keep interest rates down and we have a few things that are building into those inflation figures, particularly petrol prices, we all know that, which have been extraordinarily high and they are building into those inflation figures but the extent to which we can stop second round effects in relation to those petrol and transport prices is the extent to which we can keep inflation low.

SPEERS:

Well the Reserve Bank also seems to think that labour shortages are feeding into inflation, you have been at odds with them on that though, do you think there is any pressure coming from the skills crisis on the inflation issue?

TREASURER:

Well unemployment is low, it is at a 30 year low, it is at 4.9 per cent. Now, I don’t think I would go so far as to call 4.9 per cent unemployment a labour shortage. It is a good figure and it is certainly better than having mass unemployment but I wouldn’t call it a labour shortage. There will be some industries which are doing very well at the moment such as mining, where they will be having difficulty getting all of the labour that they require. But we still have people that are unemployed in this country, so I wouldn’t say that we have a general labour shortage, we have good employment and we have low unemployment. But I wouldn’t say that that amounts to a general labour shortage yet in the country.

SPEERS:

Treasurer, you gave a speech today at the launch of the 2006 Census on the ageing of the population in Australia, you pointed out that we have our fertility rate at 1.8 per cent at the moment, I think it needs to be 2.1 you said to get the replacement of the existing population. What more are you thinking of on this front to encourage people to have kids and in particular is paid maternity leave an option that is even going to be back on the table?

TREASURER:

Well the good news is that the fertility rate started falling in 1961 which was more than 40 years ago. In 1961 we had a fertility rate of 3.55, that is the number of children per woman over the course of her reproductive life. Over 40 years it fell and back in 2002-03 it had got as low as 1.73. The good news is that we have arrested the decline. So, we have stopped it falling further. In fact, it has picked up a little bit but the good news is we have stopped the decline. And here is the even better news. We appear to be one of very few countries in the world that has managed to do that. Most of the European countries and Japan for example haven’t managed to turn that around and they are now facing absolute population decline.

SPEERS:

We have still got a bit of work to do though, don’t we?

TREASURER:

But for replacement level as I said, we bottomed at 1.73, it looks like it has turned up to about 1.8 but to get to replacement level we would have to get to 2.1 so it…

SPEERS:

So is paid maternity leave an option then?

TREASURER:

Well one of the reasons we introduced the Baby Bonus of course was so that mothers would receive payment for, partly for, the costs of having a child but also partly for the time they are out of work. That came out at $3,000, it has gone up to $4,000 and it is going to go up to $5,000 in a couple of years and part of the thinking behind that Baby Bonus is to provide an income for mothers during the period that they leave the workforce to have their children.

SPEERS:

Alright Treasurer, look, just finally on the issue of an ageing population, a certain colleague of yours does turn 67 on Wednesday, the Prime Minister of course, there has been an exhaustive analysis of this leadership issue over the past few weeks, look just finally, are you happy with the way things stand at the moment on that question?

TREASURER:

Well I went through the details when all of these question arose two weeks ago, I made a full and complete disclosure as I said at the time, I am not going to go over it on a daily basis and that is one of the reasons I made a full and complete disclosure so that I don’t have to go over it on a daily basis. And of course with his birthday coming up I wish the Prime Minister a happy birthday and I am sure he will enjoy it with his family and friends and we all look forward to our birthdays and he deserves to have a very, very happy day.

SPEERS:

Alright Treasurer thanks very much for your time.

TREASURER:

Thank you very much