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 23/10/2007

Interview with Kerry O'Brien
7.30 Report

Tuesday, 23 October 2007

7.40 pm

SUBJECTS: Polls, election, Coalition's economic plan for the future, tax cuts, banks' mortgage rates

O'BRIEN:

I'm joined now by Treasurer, Peter Costello in Melbourne.Peter Costello, when you opened your Australian newspaper this morning and saw Newspoll, I wonder whether you had that sinking feeling in your stomach, that sense of power slipping away?

TREASURER:

Kerry, I think there is going to be a poll every day between now and Election Day.I am not a pollster.I don't take them.I am not going to spend my time commenting on them.I'm going to talk about the things that are important to the Australian people.I'm a Treasurer - my job is to manage the economy so that people can keep their jobs.My job is to help them keep their jobs and that is what I am going to focus on.

O'BRIEN:

Well, certainly Newspoll did get Cabinet's attention and the Prime Minister's attention when he asked his Cabinet colleagues to consider, after a previous Newspoll, whether he should in fact, resign the leadership rather than contest this election.I don't think you were invited in on that one but nonetheless it happened as we know.

TREASURER:

Well, I'm ready for a question.

O'BRIEN:

Well, there was a question implied in that but I'll move on if you don't want to address that.But in trying to turn public opinion around now, in terms of that Newspoll today, it is hard to know where you go from here.You've dropped your big tax plan, you've tried every conceivable attack on Kevin Rudd - on his leadership, his experience, his trade union links - nothing has really worked it seems?

TREASURER:

Well, the tax plan which I announced with the Prime Minister on the first day of the campaign is a plan to build a stronger economy and it will get more people into the workforce.And if we get more people into the workforce we'll have stronger revenues, we will pay less in unemployment benefits, we will be able to grow the economy and that will provide us with the base to fund health and education.This is a very ambitious plan for Australia's future economy.Now, a large part of it has been adopted by the Labor Party, that's true.The part they didn't adopt, they got wrong.But it is an important policy.It is important for Australia's future.It was laid down so that we could build the economy stronger and it is important that it be implemented and only the Government, only the Coalition has the experience and the expertise to actually implement this plan.

O'BRIEN:

But you explained all that over the course of last week.Newspoll comes out today and actually drifts back to Labor.

TREASURER:

Well, I am going to be explaining it over the course of the campaign because it will get more people in work.They won't have to pay tax - for low income earners - until their income goes above $20,000, that's our goal.Working mothers will be able to return to the workforce without paying more in 15 cents in the dollar as the top tax rate.A lot of the businesses in Australia at the moment are reporting that they've got the problem of labour shortage.That is, unemployment is now so low they can't find workers to fill the jobs. And building the capacity of the Australian economy involves encouraging more people into work so we can have a stronger economy.

O'BRIEN:

Well your tax goal beyond the next term in office - your aspirational set of tax rates for 2012-13 - that's five years or two elections away.By goal you mean something that you hope to achieve rather than something you guarantee.Is that correct?

TREASURER:

Well, I said when I released the policy last Monday that what we would be doing is increasing the Low Income Tax Offset, cutting top rates, moving thresholds, and I laid out where we wanted to be in five years time.And I said that we would do that as long as the economy keeps growing and under our Government I have every confidence the economy will keep growing and we will deliver on it.

O'BRIEN:

But you did identify it as aspirational, as a goal rather than a firm promise?

TREASURER:

I laid out three years - fully costed - and then I said this is where it is all going.As you move the thresholds up, as you cut rates, as you increase the Low Income Tax Offset, this is where it ought to end in five years' time and it will end there.And the only thing I said about it, as long as the economy keeps growing.And I have no doubt that under our management it will keep growing.

O'BRIEN:

Well I notice the Financial Review today quotes tax experts putting a cost of $80 billion on your package over the five years if we include that aspirational goal.It really does sound like Monopoly money after a while, doesn't it? $80 billion over five years, it almost becomes meaningless?

TREASURER:

Well Kerry, it all depends on what you regard as your base year.If you take a particular base year and you extend it long enough you get very large sums of money.Let me give you an example.When I cut tax in 2000 as part of the new tax system, we cut income tax by $35 billion - that's the figure we used, over four years.If you were to extend that tax cut out to today or out to 2010, for example from the 2000 base year, its cost is $185 billion.You see the point I'm making?$35 billion was the cost over four years but if you want to extend it out to 10 years you will get a very large sum of money.Was it the wrong thing to do, even though if we hadn't have done it you'd have $185 billion more?No, it was the right thing to do.Because by reforming the tax system in 2000 we kept the economy growing and it is far more productive today than it used to be.Is this the wrong thing to do?No, it is the right thing to do because by keeping the economy growing with more people in work we will have increased productive capacity in four years.Now, if you want to extend the timeframe out beyond the forward estimates from a historical base year, of course you can get very large sums of money.

O'BRIEN:

No, you do.

TREASURER:

But Kerry, this has always been the way.What I've done here is I have said, here is where we can be in five years time.We can have a top rate of 40 per cent, we can have 98 per cent of people paying less than that, we can have 45 per cent of people paying a top rate of 15 cents in the dollar and we can implement it all.

O'BRIEN:

All right.Once again though, the very clear impression from all of this is that your Government has been awash with money.If you have been awash with money and when we hear the Prime Minister articulate why it was so necessary to find $4 billion over the next four years for pensioners to help them with their extra utility costs and expressing concern about the plight of carers in those kinds of situations, why couldn't you have found that money in your May Budget or the previous year or the year before that instead of $4 billion out of that, what, $180 billion in tax cuts?

TREASURER:

Well let me say, when you say awash with money, in fact…

O'BRIEN:

It sounds like it, is what I am saying.

TREASURER:

…the Government has been returning taxes to taxpayers.It is not the Government's money.It is taxpayers' money.

O'BRIEN:

Same difference Mr Costello, in terms of the fact that this money has been there at your disposal.

TREASURER:

I am going to make two points here.So returning it to taxpayers is actually the right thing to do. Otherwise the Government would have more money than it needed.So for five years now we have been aggressively returning money back to the taxpayers. Now, you asked me about …

O'BRIEN:

But you couldn't find any money amongst that, a small percentage of that money to give something to pensioners for their utilities, two, three, four years ago when presumably their plight was just as bad as it is today?

TREASURER:

Well, in fact, we did.

O'BRIEN:

Relatively speaking.

TREASURER:

Well, we gave a pension bonus of $500 in June of this year and we gave a carers payment bonus of $1,000.In fact we did, Kerry.We did return to carers and pensioners.Now going forward, what we are saying is we will now permanently build in that $500 for pensioners, for self-funded retirees and for those on the carers payment and, indeed, in addition to that those on the Disability Support Pension.So what we did in the past is we declared a bonus and we paid a bonus.What we are going to do in the future is we are going to build that in so it will be an annual entitlement and this is the way of distributing the proceeds of a strong economy to pensioners, to those on the disability pension and to carers.

O'BRIEN:

On interest rates Mr Costello, we know the CPI figures come out tomorrow which may or may not put further upward pressure on interest rates - we will know that tomorrow.But in the meantime we read in the Fin Review today the National Australia Bank chief, John Stewart, who is also the Chairman of the Australian Bankers Association, flagging that loan rates are likely to be going up soon regardless of what the Reserve Bank does.He said ‘banks don't want to stick their heads above the parapet at the moment but: ‘once there is no election is looming prices will rise'.I guess for some mortgage holders there goes their tax cut long before it arrives if that happens.

TREASURER:

Well this is a different point.The point that is being made there by John Stewart is this: that because of the sub-prime fallout in the United States the cost of borrowing, particularly in the United States, has gone up.What he is saying is that those institutions that were borrowing in the United States and lending back in Australia are paying more for their money and therefore, will want to put their interest rates up.I have made it entirely clear there are no grounds, no grounds whatsoever for any of the banks to use the US sub-prime fallout as a reason to put up home mortgages.There are no grounds and this Government has made it entirely clear to the banks that they should not be doing it.

O'BRIEN:

Then what's your reaction what Mr Stewart said today?

TREASURER:

Well, well, my reaction is, it hasn't happened and it won't happen whilst I am the Treasurer.

O'BRIEN:

How do you stop him?

TREASURER:

Because there's no grounds for doing it.

O'BRIEN:

How do you stop him?

TREASURER:

Well, I think as Mr Stewart has said, the message that I have already given him has stopped him to date and the message will continue whilst we are in office.Now, there is no reason at all Kerry, for them to move it.What they can do and what they may well be doing is they may be reducing the level of discounting that they are offering to new borrowers.But there are no grounds whatsoever to increase costs to existing borrowers on the basis of what has happened in the US sub-prime.

O'BRIEN:

You wouldn't have seen the Nine's worm reacting to the debate on Sunday night because you were sitting in the audience.But three times when Mr Howard mentioned your name the worm turned negative each time.Have you ever been able to pin down to your satisfaction why so many people in opinion polls so consistently seem to react so negatively towards you?

TREASURER:

Well I wasn't watching the worm - you are quite right - but I saw footage of it after.It was a pretty funny worm.This worm used to jump before Kevin Rudd even opened his mouth.

O'BRIEN:

Sorry, I missed the last bit.

TREASURER:

Well, the worm used to jump before Kevin Rudd even opened his mouth, you saw that, which is a pretty funny worm.But I don't think I would be basing too much of my serious policy analysis on Channel Nine's worm.

O'BRIEN:

I suppose it was more on the question that it seemed to confirm what opinion polls have been saying very consistently.

TREASURER:

Well, explain this to me.How does a worm jump before Kevin Rudd even says anything?

O'BRIEN:

We will leave that to Channel Nine to explain.

TREASURER:

Yes, yes.We are not in the business of helping them here, are we Kerry?

O'BRIEN:

If you win the election and become Prime Minister after Mr Howard, who would you choose as your Treasurer, your right hand man?Would it be Alexander Downer, for instance?Would we see a comeback of the old Liberal dream team in reverse?Would it be Tony Abbott?

TREASURER:

Well Kerry, these things are long into the future.The important thing is winning the election and if we win the election I'll be the Treasurer managing the Australian economy…

O'BRIEN:

For a time.

TREASURER:

…and if Mr Rudd wins, Wayne Swan will be managing Australia's $1.1 trillion economy and people can make their choice whether they want to trust the Australian economy to Mr Swan or whether they want experienced management and I'll leave the decision to them.