TREASURER:
Well, today’s first Inter-Governmental meeting on the reform of Commonwealth-State financial relations was a very productive and positive meeting. It was the first meeting of State Treasurers and Commonwealth Treasurer to discuss the reform of Commonwealth-State financial relations, which involves revenues from goods and services tax going to State Governments, and to discuss the amounts that will be going in accordance with the relativities of the Commonwealth Grants Commission. It’s certainly a much more positive framework then the old Premiers Conference framework, and there was really no issues in dispute as to the amounts that would be given to the States under the arrangements of the GST. I’m pleased to say that the State Treasurers of both political persuasions were cooperative, have a determination to implement the New Tax System, and are working towards the goal of the reform of Commonwealth-State financial relations. I’ll be releasing this afternoon the amount of the allocations to each of the States under the agreed formula. And now that we have an agreed formula it’s taken a lot of the argy-bargy out of this particular argument. And long-term, not only will tax reform give Australia a better taxation system, but long-term the States will be in a better financial position because they’ll be getting revenues from goods and services tax.
JOURNALIST:
Treasurer, there’s two things. The States, first of all, they say, that under the new GST deal that they’re going, some of them aren’t going to be better off from the GST until 2007. And the second thing is, they’re very upset about the cuts to specific purpose payments, and they’re talking about legal action . . .
TREASURER:
Well, I’ll be . . .
JOURNALIST:
. . . for breach of contract.
TREASURER:
. . . I’ll be releasing the actual allocations after the conference, but there are some States that will get additional revenues from GST, as you say, later on, I think, in relation to New South Wales, 2005, some that will be a long way ahead, as early as next year, Queensland, 2001, will be in front. Now, the fact of the matter is, that all of the States would’ve been further in front at an earlier period if the Senate had passed the Government’s legislation. And it’s a point that’s not lost on the State Labor Treasurers, I can tell you. Because as I pointed out, when the Australian Senate altered the Government’s tax policy, it took $6 billion out of the States’ revenues. It took $6 billion out of GST, it took $6 billion out of the State’s revenues, and that left the States worse off than they could’ve been if the policy, which this Government took to the people and was elected on, was enacted in full. And the Labor Treasurers acknowledged that it was the blocking tactics of the Labor Party in the Senate that altered the GST base, and it means that although they are all as well off as they would’ve been under the old system and will all be better off than they would’ve been if the old system had continued, it’s going to take some of them a longer period to realise the dividends. And I think that they made it entirely clear to me that they took a pretty dim view of the way the Federal Labor Party had been operating. And I pointed out to them that if a rollback strategy were ever implemented, instead of them being better off after four years, they probably wouldn’t be better off after forty years.
JOURNALIST:
So where’s the . . .
TREASURER:
A proposition . . .
JOURNALIST:
. . . $750 million?
TREASURER:
. . . a proposition which none of them demurred from. I don’t think you’ll find very much support for a rollback out of the State Labor Treasurers and Premiers. Now in relation to, you asked me about Specific Purpose Payments, in relation to Specific Purpose Payments, there are no cuts to Specific Purpose Payments. The Specific Purpose Payments, as we said in the Inter-Governmental Agreement, are not being reduced as part of tax reform. Now, let’s go to the Health Care Agreements because that was also raised. In relation to Health Care Agreements, the increase in funding in the Health Care Agreements over their five years from 1998/9 to 2002/3, the increase in nominal terms is 38 per cent, in real terms 25 per cent. That’s the increase under the Health Care Agreements. That is the largest growth in Commonwealth funding for Health Care Agreements that there’s ever been. Now, you can always say, as some of the State Treasurer’s do, what, only a 38 per cent increase. You know, we’d like more than a 38 per cent increase. But, I tell you what, if I was getting a 38 per cent increase in nominal terms, I’d be pretty happy.
JOURNALIST:
Why is the Commonwealth breaching the Arbitrators decision on health funding?
TREASURER:
The agreement in relation to health funding had several indexes. It had a population growth in ageing, it had a utilisation, and it had a cost index to be developed which has never been agreed on. Now what the Commonwealth has said is, in the absence of the development of that health output cost index, the Commonwealth will apply the index which it applies to itself - the wage cost index - which is, we believe, the appropriate index for costs in hospitals. Not the Consumer Price Index, it’s the cost of running a hospital, not the cost of buying consumer prices which is the appropriate index. That’s always been our position. It’s the index that we apply to ourselves.
JOURNALIST:
But didn’t the Commonwealth agree to this arbitrator?
TREASURER:
The Commonwealth, in its agreement, agreed to a health output index which has never been agreed with the States. We have been unable to get that index. In the interim, because that couldn’t be agreed, an arbitrator came in with a CPI decision, and a CPI decision is not the appropriate index, self-evidently. Hospitals aren’t buying consumer prices. Hospitals aren’t out there buying - you would index a pension to a Consumer Price Index because a pensioner is buying goods in a CPI basket, they’re buying their petrol, they’re buying their confectionery, they’re buying their food. That is not the way costs are driven in hospitals. In hospitals costs are driven by wage increases, which is why the appropriate index is the wage cost index, which is what the Commonwealth applies in relation to itself.
JOURNALIST:
Now the States are wanting a meeting with the Prime Minister on this issue. What do you think about that?
TREASURER:
Well as I said, we had a long discussion about health today. This was actually a meeting to discuss the implementation of the New Tax System, and because there was such agreement on that and that agenda finished, we actually managed during the course of the morning to have a discussion about health as well. And as I said at the meeting, that just as I was quite happy to listen to their views on health, if any Premier wants to put their views to the Prime Minister, I’m sure he’d be very happy to hear them.
JOURNALIST:
The States say Mr Costello, that you haven’t accepted the recommendation of your own review, Mr Castles, the former statistician, and instead of getting CPI plus a per cent they’re actually only getting 1 per cent in real terms, is that true?
TREASURER:
What they’re getting in real terms is . . .
JOURNALIST:
Each year.
TREASURER:
Well no. What they’re getting in real terms over a five year period is a 25 per cent increase, and in nominal terms a 38 per cent increase. So let’s . . .
JOURNALIST:
So what’s that on an annual basis?
TREASURER:
Well in 1998/99, it’s a real growth of 11.45 per cent, in 1999/2000, 3.52 on that, and the next year 1.93 on that, and the next year 3.2 on that, and the next year on that 3. And that’s in real terms. A 25 per cent increase in real terms. This increase, I mean, you can say, and look, you know, if you wanted to make the point, you know, that you’re in Canberra, you could say, oh, only a 25 per cent real increase. The State Treasurers would say, you know, only a 25 per cent real increase. A 25 per cent real increase . . .
JOURNALIST:
But Mr Costello . . .
TREASURER:
. . . in health funding is, well, is just an increase which is way out of proportion and more generously than anything under the Medicare agreements.
JOURNALIST:
But didn’t Mr Castles know that?
TREASURER:
These increases are substantial increases. And not only is there a cost increase, but as I said earlier, there’s a utilisation increase, there’s a population and ageing increase, and in addition to that, the root cause of the health problem in Australia, which is the decline in private health insurance which means more people are using public hospitals, is being addressed by this Government with a $1.3 billion rebate for private health insurance, so that for the first time ever we look like we could be stopping the exodus from private health insurance and turning it up. And may I say again, this point is acknowledged even by the Labor States, acknowledged that for the first time this Government is doing something about private health insurance, and that’s another $1.3 billion that’s being put into the rebate system.
JOURNALIST:
(inaudible) no breach of the agreement then, 18 months ago, so there’s no breach of that agreement?
TREASURER:
There’s been no breach whatsoever of the Inter-Governmental Agreement, which we are here to discuss. In relation to healthcare funding, the Commonwealth is observing the promised grants, which it promised, which is a 25 per cent real increase.
JOURNALIST:
Can I ask you another topic? Apparently Moody’s has downgraded Telstra’s economic outlook rating from stable to negative, and it’s all to do with, they won’t get, with the full sale of Telstra (inaudible).
TREASURER:
Well look, I haven’t seen the announcement, but let me make this point, that Telstra is a company which is now privately owned as to approximately 49 per cent, and Telstra would as a company be able, I believe, to fulfill its mandate and operate better if it were entirely in private ownership. And subject to guarantees of standards and all the like, which can be set by legislation, that is the Government’s policy. Now, if Telstra is going to be caught in this position where it’s half privately-owned and half Government-owned, I don’t think that is going to be a good outcome. Telstra should all be either privately-owned, or if people really think that nationalisation and Government ownership is necessary they ought to have the courage of their convictions and nationalise it. If the Labor Party really believes that you need a nationalised telecommunications company, I don’t understand why it doesn’t nationalise the lot of it. And the economic point is, that Telstra is now in this position, well we know why it won’t nationalise the lot of it, because it’s a laughable proposition. Telstra ought to be put in a position where subject to community safety standards, and subject to service standards, and subject to access standards, which can all be set by legislation, it has the opportunity to perform efficiently.
Thanks.