KNIGHT:
The Treasurer, Peter Costello, my guest in the studio this morning. Welcome.
TREASURER:
Thank you very much, great to be here.
KNIGHT:
It’s good to have you along. We’ll be talking about petrol in a moment, but I wanted to start off on the issue of the power crisis that’s happening in Victoria at the moment. First of all, just a few words from the Premier, Steve Bracks, speaking a few moments ago on ABC Radio.
BRACKS:
Well look, I’ve indicated, I’m indicating today that I want this matter settled and resolved. That’s the matter to do with Yallourn, which is one part of the problem. I want that resolved by Sunday night, if it’s not we’ll look at, of course the State legislation. State legislation which was not available to us previously John, because it can only be effectively triggered when it comes to this, regrettably. We had no power previously over industrial relations legislation because we had no recourse to a State system. Nevertheless, we’ve sought the goodwill of both parties and have a mediator, and at least that’s one good step, they’re agreeing on who should mediate and try and resolve the matter.
KNIGHT:
The Premier, Steve Bracks, speaking on ABC radio just a few moments ago. Mr Costello, this is the Federal Government’s problem, isn’t it?
TREASURER:
Well, it’s Victoria’s problem, that union disputes down in the La Trobe Valley have been going on so long and are now leading to critical power shortages. I hear Mr Bracks say, he wants it finished by Sunday. It’s a pretty late start to the events to start operating now to try and resolve it. And as he said, he can resolve it, incidentally . . .
KNIGHT:
But only after it reaches this point?
TREASURER:
No, he’s got emergency services legislation, that’s what he’s referring to. And from memory, I’m going by recollection now, you’ll recall when the unions were threatening the Newport power station, I think that’s when the emergency services legislation comes in. That Government has emergency services legislation and it empowers it to take emergency action where critical supplies are affected. And he’s saying, oh, he won’t do anything until Sunday, but he’s had that power all along.
KNIGHT:
Is it up to the State Government though under a Federal industrial relations system?
TREASURER:
Well, he has the power to protect the citizens of Victoria. That’s legislation in place which any State Government would want and would need. And I heard the call from the Victorian Farmers’ Federation that it be used. He has that power available to him now. He’s also trying to mediate with one of his ex-Labor minister’s Neil Pope, we’ll see how that goes. But did I hear rightly, that this has been going on for eight weeks?
KNIGHT:
Something like that.
TREASURER:
Oh well, it’s pretty late in the day for intervention, but let’s just hope for the sake of Victoria it can be fixed.
KNIGHT:
True. But Peter Reith is one of those who over the last eight weeks has been calling on the State Government to get involved. Where has the Federal Government been?
TREASURER:
Well, the State Government has got involved. I mean, Mr Bracks was in Davos, and he might say, well, you know, he couldn’t do anything until he got back from Davos, but there are some other people around and he could have if he’d wanted to, got involved a bit earlier. Now, he’s saying he’s called a deadline for Sunday night, all I say, he’s got the powers and the faster he works on it the better it’ll be for Victoria.
KNIGHT:
So would you say that having shifted Victoria’s industrial relations system to the Federal system is working?
TREASURER:
Well there are two separate issues here. One, of course, is the industrial relations issue and who has jurisdictions over that. The second issue is the protection of the public. Now, you said before, I don’t know if it’s right, but you said before you’d had a report that there were people on dialysis machines who got five minutes warning that they could lose their power. Let’s suppose that’s true, right. That’s not an industrial dispute, that is a life threatening, public problem. And to cope with that you have a thing called emergency services which is designed, regardless of industrial disputes, to get power going so that people, you know, don’t have their dialysis machines switched off. Now again, I’ve never heard that this morning until I heard it from you. I’m not saying it is the case, I’m saying, if that were the case, or if things like this were happening, that’s, I would have thought, an emergency situation.
KNIGHT:
All right. We’ll be coming back to the subject of petrol in a moment with the Treasurer, Peter Costello. You’re listening to ABC Victoria. And we’ll be off to the weather bureau also shortly. Well of course, the subject of the GST is the one that’s about to roll along and there’s still a lot of confusion out there, people still struggling to find out exactly how it’s all going to happen. Do you believe that members of your own Government have got the ability, the information to be able to pass that on, because that’s where most people are looking.
TREASURER:
I think they’ve got the information, sure. And it’s not just the members of the Government, I think at this stage people are more looking to the Tax Office, because the Tax Office, of course, is going to be administering that.
KNIGHT:
Well, I must say that I’ve made about half a dozen approaches to the Tax Office and have been unsuccessful each time.
TREASURER:
What, to get someone on your programme?
KNIGHT:
Yes.
TREASURER:
I’ll get someone on your programme.
KNIGHT:
Thank you.
TREASURER:
Alright, when would you like them?
KNIGHT:
Oh, next week would be nice.
TREASURER:
I’ll have someone on your programme next week from the Tax Office. There you go, that’ll be no problem. But they’ve got to work harder at it and we’ll get somebody on to the programme next week to do that. You know, one of the things, I think, is that everybody’s, sort of, trying to think of everybody else’s problem. As the guy that’s, sort of, regarded as the expert implementing this a fellow called Chris Jordan said, he said, for 95 per cent of businesses, 100 per cent of the questions that are now being asked are not relevant. For most businesses that are inside the system all you do is, you say quarterly, well, my sales were X and I’ve got 10 per cent tax on that, my purchases were Y and I’ve paid 10 per cent tax on that, I remit the difference.
KNIGHT:
But it’s what it applies to and what it doesn’t that’s going to be the issue.
TREASURER:
Well, that’s the whole point – what it applies to and what it doesn’t. Now, I was asked, for example, this morning, about long-term rents and caravan parks. An interesting question if you happen to run a caravan park. How many people in Australia run caravan parks, I mean, amongst your listeners there would be some, but I imagine most of your listeners would be in regional businesses or farming businesses where they’re totally inside the system. They don’t have to worry about esoteric questions like applying GST to long-term rentals in caravan parks. They might hear a lot of discussion about it on the radio and they say, that sounds complicated, but it’s not for them. And I think with a lot of these questions, you know, they concern small parts of industry and for 95 per cent of industry it’s not their problem and it’s not their complication. And I would say to the small businesses in particular, the important thing now is to get your number, get the activity statement which has to be filled in quarterly. You’ll see that for a business inside the system it requires essentially to know three things – your sales, your purchases and the difference.
KNIGHT:
Treasurer, have a sip of coffee. We’re going to go to the weather bureau right now and we’ll be back in a moment to talk about petrol.
(Break)
KNIGHT:
The Federal Treasurer, Peter Costello, is with me in the studio this morning. And turning to the subject of petrol, there has been a recent increase in fuel excise, that is because excise is linked to CPI, is it about time that that system was changed?
TREASURER:
Well, just to put this in context because, you know, I read in the Herald Sun, shock, horror, petrol excise went up by 0.7 cents, and people confuse that with what happened on the same day, namely the oil companies or the distributors or the retailers or maybe all three, put up petrol 10 cents a litre . .
KNIGHT:
Which, of course, contributes to CPI which means that the tax goes up.
TREASURER:
Well, it depends how long it’s there. But let’s put this in perspective. The market moved 10 cents a litre and I noticed there were a lot of people out there including some of the auto clubs saying, oh, you know, isn’t it terrible the excise went up 0.7 cents. A 0.7 cents excise didn’t move petrol prices 10 cents a litre. What moves petrol prices is two factors. Either the world price of oil, which throughout most of this part of the year, the early part, the last six months was going up or competition in the industry. And I think two days ago it was competition in the industry and then all of a sudden we allowed the prices to go up 10 cents.
KNIGHT:
The margins are that tight in the petrol industry though, that why is it necessary to link the fuel excise to CPI. I mean it’s effectively a way of giving you a tax increase once or twice a year.
TREASURER:
We link, in Australia today we link most things to the CPI. Let’s take pensions for example, why do we link pensions to the CPI? Well, we link pensions to the CPI simply because if prices are going up the pension is not increasing in value, if it follows the CPI it’s maintaining its value. On the other side of the equation, why do you link excise to the CPI? Because the excise as it moves up with the CPI, assuming petrol moves in line with the CPI, just maintains the same proportion. And, you know, this was the system that was introduced by the Hawke Government in 1983, 18 years ago, it wasn’t introduced by me. But what it does is it maintains the proportion of tax to the price, just as with a pension you maintain the pension to the price. I mean, I don’t think anybody would say for example, that we should abolish indexing pensions. Now if you use this argument. I hear the automobile clubs argue it all the time, oh if you put up excise, you know, it’s actually sort of, you know, a terrible thing. I mean, and they say, oh, it’s a big increase. People say it’s a big increase to maintain pensions to the CPI. I don’t see it as a big increase at all, I just see it as maintaining the proportionate value.
KNIGHT:
What is the reasoning for linking this particular excise to CPI, I mean, you get what, $15 billion a year?
TREASURER:
Because it’s not a percentage. There’s another way you could do it. You could say, like you do with income tax, that the tax rate is X per cent, right, and then as the price went up the tax proportion would maintain. But this is not a percentage, this is actually a cent amount, so that if you held the cent amount and the price went up, your proportion is decreasing all the time . . .
KNIGHT:
You would then have to justify your tax increases.
TREASURER:
Well, I’ve got no trouble justifying tax increases because one of the things we’re doing at the moment is reducing taxes. I mean, let me just remind your rural viewers, listeners, we cut capital gains tax in half last year, for farmers that hold onto an asset like a farm or a property for 15 years or more and sell it when they’re going to retire, they’re moving to their homes, there is no capital gains tax on the sale of that asset. That’s the first time that this has been done. This is the first reduction in Capital Gains Tax that we’ve had since the notorious capital gains tax came in in 1985. So, we’re actually dramatically reducing taxes in some areas, capital gains tax, rollovers, income taxes, diesel excises we’re reducing from 43 cents down to 20 cents for business . . .
KNIGHT:
But the promise to reduce tax . . .
TREASURER:
(inaudible)
KNIGHT:
. . . on fuel is going to be a very difficult one to keep, isn’t it? The promise to reduce the cost of fuel to the consumer is going to be very difficult to keep?
TREASURER:
Well, I’m not sure what promise you’re referring to. Let me tell you what our promises are in relation to fuel. Our promises are this. The diesel excise is 43 cents we’re going to cut to 20 cents for all heavy transport, right, which is going to make transport to rural areas cheaper. Is that going to be hard to keep? Well, it’s going to deliver hundreds of millions of dollars of benefit to rural and regional Victoria, but we’re going to keep it. In fact it’s in legislation.
KNIGHT:
That’s diesel?
TREASURER:
That’s diesel. Yes, that’s diesel. It’s the first diesel cut, I think probably ever in Australian history, and that is going to be kept in full.
KNIGHT:
Unleaded motor fuel?
TREASURER:
Now, in relation to petrol let me tell you what we’re going to do. At the time GST comes in we’re going to cut the excise to equalise the price back. This has the effect of meaning that anybody that uses petrol in a business gets a 10 per cent reduction in their price, because businesses get all the GST inputs back. For the consumer, the idea is that the GST, once you drop the excise, that the GST equalises back. Now, there are no additional bells or whistles, that’s the commitment and that’s what we’re going to do in full.
KNIGHT:
We’ll leave it there, we’re out of time but it’s been good to have you in this morning.
TREASURER:
Great pleasure.
KNIGHT:
The Treasurer, Peter Costello.