TREASURER:
The collapse of HIH insurance is one of the largest collapses in Australian history. The Federal Government has put in place as a consequence of that, a taxpayer scheme for people who have been left high and dry, which has paid out to date $400 million. In addition to that, the Commonwealth Government called a Royal Commission which cost around $40 million. Arising out of that, the Commonwealth Government increased funding to the Australian Securities and Investment Commission of $28 million over two years to establish a Task Force to undertake further investigations in relation to HIH. As a consequence of that, the Federal Government provided an additional $14 million to the Director of Public Prosecutions to bring charges in the Courts. As a consequence of unprecedented funding to investigate the affairs of HIH in the Royal Commission, the increase to ASIC, the increase to the DPP, we have now seen the following: civil proceedings against Rodney Adler which disqualify him from being a company director for twenty years and audited, and compensation of $7 million to be paid. The sentence of William Howard, the former General Manager to three years imprisonment, suspended on the basis of ongoing assistance. Mr Bradley Cooper committed for trial on six charges. Former Deputy Chairman of HIH, Charles Abbott, facing charges with a committal due to commence later this year. Timothy Mainprize committed for trial on charges, with a trial due to commence in September. Daniel Wilkie committed for trial, with a trial set down to commence in September. Stephen Burroughs committed for trial. Ray Williams pleading guilty to three charges, with sentencing due tomorrow. Today, Rodney Adler has been sentenced in relation to the criminal charges. He has been sentenced to a term of four and a half years gaol, with a period of two and a half years non-parole. That is a very heavy sentence. There is a very powerful message in relation to that, that criminal conduct in the corporate sphere will be investigated, it will be prosecuted, and the courts have shown that they are prepared to impose heavy gaol terms. And anybody who thought that corporate crime would not lead to gaol would have seen from today’s sentence that the terms can be very heavy indeed. This is a very powerful signal to corporate Australia about the importance that the Government places on upholding corporate law and the sentences the which the courts are prepared to impose where people are found guilty. This was a large collapse. It has cost hundreds of thousands of Australians in terms of taxpayer support, hundreds of millions had to be paid out and tens of millions had to be committed to the investigation and prosecution, but you have seen very substantial results, and the message should be absolutely clear. I hope that nobody is tempted to breach the corporations law, but if you wanted a reminder as to what the penalties would be then you have seen it in today’s sentencing.
JOURNALIST:
Are you happy that this will set a trend for heavier penalties to be handed down as a matter of course in the (inaudible)?
TREASURER:
Well this is a very heavy penalty, this is four and a half years gaol for someone who in the end pleaded guilty, with two and a half years non-parole, and if you wanted a message to come out of this, it shows that executives who breach the corporations law will go to gaol, for substantial periods. And if anyone was ever tempted, I hope that today’s announcement will leave them in no doubt whatsoever as to the danger of breaching Australia’s corporations law.
JOURNATLIST:
Do you personally support the sentence? Has justice been served you know?
TREASURER:
The Government supports gaol terms for criminal conduct, where the corporations law has been breached, yes. We put this corporations law in place, where the conduct is criminal, the appropriate penalty for serious criminal conduct is gaol.
JOURNALIST:
So Treasurer, are you saying that this sentence is more than you would have hoped for?
TREASURER:
No, I did not say that. I said the Government supports gaol terms for criminal conduct. We put this law in place, where you engage in serious criminal conduct, the penalty is gaol.
JOURNALIST:
But are you saying that four and a half years is a very strong sentence, so are you saying it is more than what you would have hoped, expected?
TREASURER:
No. I said we believe it is appropriate that gaol follows and the fact that this was a heavy gaol term of four and a half years indicates the seriousness of the criminal conduct.
JOURNALIST:
What about Mr Williams.
TREASURER:
Well Mr Williams is to be sentenced tomorrow, that is a matter for the court. I would not make a comment on a sentence before it has been handed down.
JOURNALIST:
Is there a need for more funding of financial watchdog organisations so that it does not get to this point?
TREASURER:
Well let me give you the figures. A Royal Commission of $40 million. ASIC’s investigation of $28 million just on HIH. The DPP - $14 million to prosecute. They are very considerable resources. The Federal Government put more resources into this investigation than any other investigation in corporate regulation. We did it because it was one of Australia’s largest. We did it because it affected millions of people, we did it because we wanted to send the message that corporate crime is crime. And if you engage in crime what follows is a gaol term, and I think you can see that these were large sums of money, and you can now see that those investigations have brought (inaudible).
JOURNALIST:
This is really a one off though, all this money you put into HIH, I imagine compared to the money you put in some of the other collapses, this is the largest one, are you going to be continuing this kind of effort?
TREASURER:
Absolutely, the Australian Securities Commission is better funded now than ever before. We now have a national corporations law. We now have a national regulator. It is funded by the Commonwealth, it is funded better than ever before. We have moved from light years on from when the States use to run corporate regulation, we never want to go back there, ever again.
JOURNALIST:
Mr Costello, just another issue if you don’t mind. On behalf of colleagues in WA, they have put the question as they say you are obviously involved in a slanging match with Geoff Gallop over the abolition of a series of taxes, Dr Gallop says WA has honoured the GST agreement, is that your understanding?
TREASURER:
When the GST was introduced, everybody in Australia knows it was introduced to abolish nine other taxes. That is what we promised the people would happen when it was introduced. It has now been introduced, it has raised more money than was expected and in order to honour that Agreement, we need to abolish those nine taxes. Now, the Commonwealth Government has said we will discuss timing and sequencing with the State Governments. But it is not an option to have the GST and those other taxes. The GST was introduced to abolish those other taxes.
JOURNALIST:
If WA doesn’t agree, will you withhold GST revenue to that State?
TREASURER:
Well, the other States that have now looked at this carefully are going to do the right thing. They are now going to do the right thing by the public, which is, no double taxation - the GST or the other taxes. You don’t have the GST and the other taxes and I hope that Western Australia will also see it that way. How would it look if alone of the people of Australia, in Western Australia you have got double taxation – GST and the other taxes. How would that look? The people of Western Australia would be outraged by that. The people of Western Australia deserve the same treatment as the rest of Australians (inaudible).. You have the GST or the other taxes, you don’t have the GST and the other taxes.
JOURNALIST:
Finally, WA is saying it is just a power grab by the Feds?
TREASURER:
It has got nothing to do with Commonwealth versus the States. This is all about cutting taxes for Western Australians. This is what it is about. If these taxes are abolished, the people who get the advantage are West Australians. Canberra doesn’t get the money. Western Australians get the advantage of the abolition. If these taxes aren’t abolished Western Australians get GST and the taxes that have to be, that is was introduced to replace. Double taxation in Western Australia. Now, we don’t want that to happen to Western Australians, I think when the West Australian Government thinks about it, it will say that Western Australians like other Australians ought to have this promise upheld, that when the GST came in, it came in so that other taxes could be abolished. That ought to be upheld in Western Australia as it is in other States.
JOURNALIST:
How far off do you see an agreement being reached with the States?
TREASURER:
Well obviously some of the States are now close to an agreement and I hope that eventually all of them will.
JOURNALIST:
On another issue, the IMF World Economic Report, they are indicating a slowing of the Australian economy later this year and saying that it is an argument that interest rates should not go up. Does that support the Government’s perceived position that rates shouldn’t go up this year?
TREASURER:
Well I don’t want to comment about future movement of interest rates but I have observed that there is, there has been some slowing in the Australian economy. I think that was shown by the most recent National Accounts and in fact our forecast is for slower growth than in the previous year. But having said that, this is still substantial growth by world standards, it is just that we were in excess of world standards and will slow to a more normative growth rate by world standards, I believe, in the forthcoming years.
JOURNALIST:
Is that growth going to be slowed by rising petrol prices?
TREASURER:
Rising petrol prices are in nobody’s interests, poor consumers are paying the pain at the pump. The cost of petrol has increased, it will slow the economy down and it is not good for the Australian economy. Why have petrol prices risen? Because petrol is made from oil, it is that simple and oil prices are now at record levels. Until such time as the oil price comes back, the petrol price will be high. That is in nobody’s interest. The oil price is a global price and it is influenced by supply coming out of OPEC and demand particularly, coming out of China. But we look forward to those oil prices stabilising. We hope they will for the sake of the motorist and for the sake of the economy.
JOURNALIST:
You don’t think Australia’s relatively insulated because we are a net resources exporter?
TREASURER:
We are a major importer of oil though. It is true we are net resource exporter but that would include iron ore, coal, gas. We are a major importer of oil. That is why we pay the world price. We are not self sufficient in oil, we are no where near self sufficient in oil. Our oil fields have been running out of reserves and that is why we import so much oil from the Middle East and that is why we are price takers in the international world.
JOURNALIST:
(inaudible).
TREASURER:
After (inaudible) the man behind you Sir.
JOURNALIST:
(inaudible)?
TREASURER:
You don’t pay as much as (inaudible).
JOURNALIST:
If I can just just go back to the Rodney Adler sentence, does the Government welcome that?
TREASURER:
The Government has introduced a Corporations Law which makes it a criminal offence if you act dishonestly. We take the view that if you act dishonestly and people lose money as a result, that is a crime. And for serious crimes the penalty is gaol. And that sends a very powerful message to corporate Australia that if you are tempted to break Australia’s corporations law, don’t do it. It is a crime and where you are convicted and it is serious, the penalty which will follow is gaol.
JOURNALIST:
Is the sentence strong enough, does the Government believe … (inaudible)?
TREASURER:
Oh this is a very strong sentence, this is 4 ½ years for someone who pleaded guilty. Normally you get consideration where you plead guilty. He pleaded guilty and he got 4 ½ years with 2 ½ years parole, this is a strong sentence.
JOURNALIST:
Going back…
TREASURER:
Last question Sir.
JOURNALIST:
…to the petrol price issue, will the Government consider changing the excise take on fuel?
TREASURER:
No. The Commonwealth Government has 38 cents excise, it doesn’t vary according to price. Whatever the price is, it is still 38 cents. The Government, the Commonwealth Government, gets no more as the price moves. We cut that excise in 2000, we cut it by first of all 6 cents and then we cut it by another 1 ½. So the excise that the Commonwealth takes is now around about 8 cents less than it was five years ago. The reason why the price has gone up, it has got nothing to do with excise, it is all to do with the oil price. Thank you.