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 15/08/2006

Press Conference

Parliament House
Canberra

Tuesday, 15 August 2006

12:35 pm

SUBJECTS: Government response to the Taskforce Report: Rethinking Regulation, migration, David Hicks, emissions trading, economic management, Telstra, RBA

TREASURER:

Today I am releasing the Government’s final response to the Taskforce Report: Rethinking Regulation, the Taskforce on Reducing Regulatory Burdens on Business. The response which I am releasing today addresses all 178 recommendations of that Taskforce and it agrees in full or part to 158 of the 178 recommendations. Regulation is a matter of concern for all Australian businesses. It is important that governments take steps to reduce the amount of red tape. And this report we know as the Banks Report was a report that tried to come to grips with areas where we can reduce regulation and to put in place procedures which will prevent unnecessary new regulation being introduced. The Government’s response which, as I said, accepts the majority of the 178 recommendations, announces that we will be introducing procedures to make it tougher, to make new regulations; that new regulations will have to undergo cost benefit analysis before they can go to the Cabinet, that we will be screening all regulation in Australia every five years to see whether or not it continues to be necessary, and how it can be reduced.

The response which I announce today maps out proposals to harmonise State and Territory conveyancing laws; to work towards a single regulator for mine safety; it has FBT exclusions for pool motor vehicles. It introduces a Simplified Accounting Method to be developed for small restaurants, cafes and caterers, and I am also announcing today details of a proposal which aims to harmonise, between the Commonwealth and the States, business reporting, hopefully through computer technology, which will allow information to be taken off accounts of companies rather than require them to fill in multiple forms for both different levels of government.

The responses which I announce today are in addition to the interim responses which we announced on the 7th April 2006, which simplified Fringe Benefits Tax by increasing the exemption, increasing the reporting exclusion, we have halved incorporation fees and allowed companies to make annual reports over the internet. This is a very, very detailed response to a very, very good report on ways in which we can reduce regulation for business. I want to thank the Taskforce members Gary Banks, Richard Humphry, Angela MacRae and Rod Halstead for the work that they did. Can I indicate that I think the most important procedural and substantive changes which will come out of this report are new provisions to prevent unnecessary regulation being made in the first place.

Reducing regulation is one thing but stopping new regulation being put in place in the first place, where it is unnecessary regulation, would do an awful lot to ease the burden on business. I am very conscious that business feels that regulation, has increased in recent years. This is a dramatic attempt by the Government to deal with that and to put in place procedures which will ensure that unnecessary regulation can be avoided in the future.

JOURNALIST:

Can you say a bit more about the way in which you will quantify the cost and the benefits? Obviously a lot of consumers might be concerned that their interests in the properly regulated business sector might be downgraded?

TREASURER:

Sure, there is always a reason why regulation gets proposed. Quite often it is because consumers are demanding action in a particular area. The problem however is when you get a case, or even a number of cases that cry out for a solution, the solution which applies to every case can be unnecessarily burdensome. Quite often the best thing to do is to stand back awhile to see whether intervention is warranted. But what we are going to do is we are going to use a business cost calculator which has been developed through principally the Office of Small Business and we are going to run proposed regulation through this cost calculator. And this cost calculator is a tool which tries to put a cost to a business on a new regulation. Once we see what that cost is then we can assess that cost against the benefit that we are shooting for and if you have got disproportionate costs for the kind of benefits that you are shooting for that would be a warning sign not to go ahead with the regulation.

JOURNALIST:

What if those benefits can’t (inaudible) the costs (inaudible)?

TREASURER:

That is right. The benefits are harder to calculate the cost of, but the regulation can be calculated, the cost of the regulation can be calculated and this is what the calculator attempts to do. It attempts to build in the costs of reporting for example, the number of hours that it would take in a business and put a cost at an hourly rate. It attempts to put a cost on various activities which would be prevented. So you can get a reasonable grip on the cost to the business, the benefit as you say is harder to assess and that is where the judgement of the Cabinet will come into effect.

JOURNALIST:

Treasurer, can you tell us a bit more about the conveyancing laws, does that deal with the old (inaudible) positive (inaudible)?

TREASURER:

It is designed to try and get harmonised laws around the States so that the way in which you transfer a property in one State is more or less the same as the way you do it in another State. It is not looking at taxation of property if that is your question, it is not a proposal to do that.

JOURNALIST:

What about consumer protection?

TREASURER:

Well conveyancing laws are not really consumer protection in the sense that you have got a buyer and a vendor. They don’t deal with the public at large, if that is what you mean but both the vendor and the purchaser need protection and it would be of advantage if laws around Australia were harmonised, it would mean that the market would be better informed, transactional cost would be lower.

JOURNALIST:

Treasurer, have you considered putting legislation through the kind of filter that you are planning for regulation?

TREASURER:

Yes, when I use the word regulation I am taking about whether it be in a legislative instrument or a regulatory instrument, so absolutely, proposed new legislation can be put through this filter.

JOURNALIST:

It will be or can be?

TREASURER:

It will be. Where we are proposing new regulation whether it be done by legislation or by other means, we will be putting it through this filter to see whether or not it is necessary.

JOURNALIST:

How, based on this system, is there a meeting of minds between you on, are they going to apply a similar system?

TREASURER:

Well I would welcome it if they would. I think a lot of regulation is now done at State level, perhaps even more at local government level and I would welcome States and local governments adopting similar procedures. One of the things that I announced last week was a proposal for the States to be benchmarked against each other in terms of regulatory burdens and to ask the Productivity Commission to do some work in relation to that and if we got the States being benchmarked on a regular basis, a business which was looking for a new investment could go to this indicator, could find from the indicator which was the best State in terms of regulatory cost and take its investment accordingly. And if that were to be done, I think you would have this competitive pressure from States to improve regulatory performance because it would be essential to attracting investment.

JOURNALIST:

What do you make of the threat from Indonesia that Australia is facing an avalanche of boat people after the failure of the migration legislation to get through and are you concerned that some of your own supporters have been very active in the rebellion?

TREASURER:

Well you make it sound as if there is a gun powder plot or something. Various people in the Liberal and National Parties have been opposed to this Bill and they have made their position clear. As you know I supported the Bill. So I wouldn’t try and characterise those people who had difficulties as supporters in one way or another, I think that may be a little unfair to them. I think what they have done is they have taken their position based on their own political views. In relation to the implications, bear this in mind – that somebody who comes to Australia and claims to be a refugee will have to be assessed. Not everybody who turns up and claims to be a refugee is a refugee and I would say that the most important thing is if we can protect the rights of people so that they don’t fear discrimination then they would not have the basis to claim refugee status.

JOURNALIST:

And so that same group now it seems to be worried about David Hicks, after 4 years the US authorities can’t find some sort of a placement for commission that was brought down by the Supreme Court, do you think Australia should ask that David Hicks be sent home?

TREASURER:

David Hicks has been charged with some pretty serious offences, offences which it is alleged he committed overseas. Let me make this point, any Australians who commit an offence overseas, whether it be a drug offence in Bali or some other offence somewhere else around the world, can be charged and has to stand trial in a foreign jurisdiction. Just because you are an Australian it doesn’t mean you are immune from the laws of other countries. Now, Mr Hicks is charged with various offences relating to matters which occurred outside of Australia. As of now, those charges have not been heard, most recently because the US Supreme Court struck down the military commission. Here is what I think should happen. The US should as a matter of priority, and as fast as possible, put in place a trial which is consistent with the US Supreme Court decision and have those charges heard.

JOURNALIST:

Treasurer, the States have released a framework for an emissions trading system today, are you concerned that it could firstly reduce the nation’s economic growth and secondly increase the compliance burden on business?

TREASURER:

Well, I am not sure that an emissions trading system between States will work and the Australian Government, as you know, is not part of such a plan so I think it will have limited effectiveness. You must bear in mind of course that the way a trading system works is essentially if you can’t get credits somewhere you bear an additional cost and that additional cost does put a cost on Australian industry, yes it does, and that cost is ultimately borne by consumers.

JOURNALIST:

But would you be trying to maybe, could you, have you got any indications about what effect it may have on sort of reducing economic growth?

TREASURER:

Well I have seen reports, I don’t have them with me but I have seen reports, particularly coming from industry which say that trading systems or carbon taxes would push up the cost of energy in Australia very considerably.

JOURNALIST:

Treasurer the Government yesterday announced measures to encourage more oil exploration as part of its response to higher petrol prices, is there a case for re-examining the proposals for a flow-through share tax scheme to encourage further exploration?

TREASURER:

Can I say oil exploration is a very expensive business and oil exploration is not done at the small prospecting end of the industry. Oil exploration is invariably done by companies which have large financial resources and particularly if you are going to be doing oil exploration offshore, as is increasingly the case in Australia. Flow-through shares are only of interest to companies that don’t have a cash flow because if you don’t have a cash flow you can’t capture the value of the tax deduction. So whilst flow-through shares have been supported by small prospectors for things like base minerals, they have not been advocated for the oil and gas industry. And the oil and gas industry, which in Australia as we know has involved companies like BHP and Woodside, has sufficient cash flow to cover their exploration costs. Companies like that are not in the market looking for flow-through shares.

JOURNALIST:

Treasurer, how vigilant do you have to be about inflation and the potential for the economy to overheat? Has there ever been a period where these risks (inaudible) while you have been Treasurer?

TREASURER:

Look the risks at the moment are significant. That is, we are living through a period of world record oil prices, this is the third oil price shock. The first and the second oil price shocks unleashed inflation globally and that ended very badly for Australia. We have got to make sure this one doesn’t do the same, and oil prices are much greater today than they were under the first and the second oil price shocks. Now, our economy is in a better position in this sense: that our reliance on oil is less, that our economy is more open and it is much more competitive, that our labour market is better, that our tax arrangements are better, that our monetary policy is conducted better, but in the base of those all-time record high oil prices we have to remain vigilant. The risks are significant and economic management is difficult, it is very difficult at the current time. There is not much of a margin for error I can assure you of that and anyone who thinks that just because we have had the all time record period of growth in the Australian economy, that therefore the economy runs itself, is completely wrong. To have had that long economic record has taken considerable management and to continue it will take even greater management. And the risks are great and the margin for error is small.

JOURNALIST:

You pointed out yesterday that the RBA Governor appointed to state budgets (inaudible) concern (inaudible) on monetary policy, they also referred to the smaller surplus in the Federal Government and the income tax cuts as contributing to activity. What do you say about the state of fiscal policy and whether that is now contributing to the overheating pressures?

TREASURER:

Well Australia’s fiscal policy would be one of the strongest in the world. If you compare us to the G-7, we are miles in front of the G-7 average, we are miles in front of the United States, we are miles in front of the United Kingdom, we are miles in front of Japan. I think as the Governor said – this is the Governor, Ian Macfarlane – that he has been managing monetary policy at a time where we have been running surpluses. Most other Central Bankers around the world have been managing monetary policy at times of significant fiscal deficit and that is what led him to say that the new emerging player in the equation are the States, because earlier on this decade the States were in net surplus as well but they are not going to be from this year. So, there is an emerging fiscal change and it is coming from the combined position of the States and Territories, that is the point he was making on Saturday. That was a very significant and new point that he made on Saturday, I have never heard him make that point before.

JOURNALIST:

Is there a case for holding back on income tax cuts in next year’s Budget in an election year in this environment though?

TREASURER:

Well we just cut income tax in May’s Budget and it only came into effect on the 1st of July so I think it is getting well in front of ourselves to be looking for further income tax cuts.

JOURNALIST:

Treasurer, Telstra (inaudible) again today what does this do for your outlook in terms of revenue from the sale and does this (inaudible) bring on the urgency to get rid of it?

TREASURER:

Well of course we don’t put the proceeds of a sale of a government business on our bottom line, so it does not affect our bottom line, we don’t treat it as revenue - that is what the Labor Party used to do, they would treat it as revenue. We don’t treat it as revenue so whether it goes ahead or whether it doesn’t, does not affect our bottom line. The Government believes that Telstra’s situation would be improved if it were all in the private sector, rather than part in the private sector and part in the public sector. But we are not going to engage in a full sale and if anybody thinks we are, they are wrong. We will deal with the Government share holding at a time which is in the interests of other share holders and the Australian taxpayer. We are not a forced seller. We are not selling this to get the money. As I said we don’t need the money, it is not on the bottom line. We are selling this to resolve its ownership structure and put it on a better footing, and if the conditions don’t suit then we have indicated that the Government’s Future Fund, which has now been established to meet future liabilities, would be a very suitable vehicle to hold that share holding. It would hold that asset on behalf of taxpayers against future liabilities. So my message to anybody whether they are in the company or elsewhere, if they think the Government is over a barrel here, they are wrong.

JOURNALIST:

Can I come back to regulation? This (inaudible) process of monitoring, submitting new regulatory proposals to the cost benefits scrutineering …

TREASURER:

Sure. Well we are going to strengthen and reorient the Office of Regulation Review to become the Office of Best Practice Regulation. That is located within the Treasury portfolio but will work closely with Government agencies to co-ordinate the views right across those agencies as to whether regulation is required. The business cost calculator which, as I said earlier, has been developed in the Office of Small Business will be used and it will be also be available to business so that they can run a check in relation to these proposals.

JOURNALIST:

Treasurer, are you confident that you will find a deputy governor for the Bank within four weeks and are there advantages of injecting outside blood so to speak to kind of broaden the gene pool of the Bank?

TREASURER:

I did say at the time that we were not holding ourselves to do it by September the 18th because creating, I should say elevating the Deputy Governor to the Governor’s position created a new vacancy. I don’t want to be rushed into filling that vacancy and I indicated at the time it would not necessarily be done by September 18th and that is so we can look at candidates from outside the Bank. I think if we had said it has to be done within a short timeframe then that would have narrowed our focus to the Bank itself. I do want to consider candidates from the private sector, from the Treasury, from the Bank and assess them all to make sure we have got the best person for that job. I don’t think there will be any assumption that these positions will always be filled from within the Bank. As I said with the appointment of the Governor, I did look outside the Bank and as it turned out the Deputy was the best person for the job, but we did look outside.

JOURNALIST:

What are the benefits of outside blood?

TREASURER:

Well they might bring a wider perspective, they might be better economists, there might be many benefits but on the same token you might find the best person for the job is the person who has had experience, so let’s just see how that goes.

JOURNALIST:

(inaudible).

TREASURER:

No. We will be looking for an Australian. It could be an Australian who has worked overseas but no we will not be bringing a non-Australian citizen in for a position at the Reserve Bank of Australia.

JOURNALIST:

(inaudible) appoint someone from the manufacturing side (inaudible).

TREASURER:

I don’t want to hold ourselves to a particular occupation.

JOURNALIST:

(inaudible).

TREASURER:

Oh yes. All right, thank you very much.