FAINE:
Peter Costello is the Member of Federal Parliament for the seat of Higgins, the Deputy Leader of the Liberal Party and I think we can say, the heir apparent and of course also the Federal Treasurer. Mr Costello is in our Canberra studios. Good morning to you, Mr Costello.
TREASURER:
Good morning John, how are you this morning?
FAINE:
I’m well. Why did you drop the Timor tax after the hard yards of selling it to the Australian public and even finding that it was very well supported, why did you decide to drop it?
TREASURER:
Because we said to the Australian people that when the costs of Timor came up, and it was about a billion dollars, and our troops did a magnificent job in humanitarian and military terms and I just pay tribute to them. We said to the Australian people that the cost of that would drive the Budget into deficit. We didn’t want the Budget to be in deficit and so for a limited 12 month period to cover those costs for one year only we would have a levy. As the economy strengthened it became clear that we could fund our engagement in East Timor as part of the INTERFET and UN peace keeping operations and keep the Budget in surplus anyway. We didn’t think it would be right to say that we’ll have a levy to keep the Budget in surplus and pay for East Timor when it was clear we could do it without the levy.
FAINE:
You’d be the first Treasurer I can remember who has sold a tax to the Australian people, had it fully accepted by the Australian people and then decided you didn’t even need the money.
TREASURER:
Somebody said probably the first Treasurer too to abolish a tax before it even took effect.
FAINE:
…but it must have hurt.
TREASURER:
Well some people said to me, well you’ve done the hard work why don’t you keep the money anyway. And I thought well it wouldn’t be right. Because we said it was for East Timor to keep the budget in surplus. People would have said hey the budget is in surplus, you’ve paid for East Timor, why the levy. You’ve broken faith. I didn’t want to be accused of breaking faith so we abolished it.
FAINE:
But the budget is only in surplus because you’ve engaged in this practice that’s brought substantial criticism from many quarters of using the money from mobile phone spectrum sales to get it into surplus. You could’ve avoided all that criticism by keeping the Timor tax.
TREASURER:
Well it was in surplus without the mobile phone licenses anyway.
FAINE:
Well barely.
TREASURER:
Because and so the mobile phone licenses are just a bonus which we use to pay off debt, but could I just say, with spectrum you license it, it is not a sale. You license people to use it for a certain period of time and when the time expires you put the licenses up again. This is not a sale. There has been a lot of confusion I think. People say oh what you’re selling something. No you’re not selling it this is something that can be licensed over and over and over again. I hope it will be and Treasurers long after I’ve come and gone will be licensing this. And it’s what we call a non tax revenue. It’s like a dividend that we get from the Reserve Bank or our other GBEs. Always counted in the budget as it turns out the budget was in surplus without it…
FAINE:
Mr Costello you get two points…
TREASURER:
…but it will go to debt repayment.
FAINE:
You don’t get $2.6 billion each year for 15 years. You only get it once. Why have you used it to offset one, in one year, in revenue instead of spreading it over the fifteen years. Wouldn’t that be what your accounting standards expect of you?
TREASURER:
No, it’s not actually. It’s what the accounting standards say is the license fee has to be brought to account today. And that’s the license, that’s the accounting standards as set by the IMF and by the Australian Accounting Standards Board. You can’t treat it any other way. It has to be treated that way. But the budget is in balance anyway. As it turns out we’re going to be repaying $9 billion worth of debt in the next financial year. In the last five Labor budgets the cumulated deficits added up to $80 thousand million, $80 billion. Our first five budgets will have, not only balanced the books, but will have repaid $50 billion of that $80 billion. And the debt reduction program continues.
FAINE:
Who valued the spectrum at $2.6 billion? Where did that figure come from?
TREASURER:
The independent advisers.
FAINE:
Who, according to one newspaper report, only six months ago said it was probably only worth a tenth of that.
TREASURER:
And according to another newspaper report, I think last week, they said it was worth $20 billion.
FAINE:
And in the UK the sale of the similar spectrums have raised $60 billion worth.
TREASURER:
That’s right. So the value is …
FAINE:
…very rubbery.
TREASURER:
Well the value, some people say, is $20 billion. Obviously I think that’s far too high a value to put on it. Although let me say to any of the buyers that are out there listening, you know, if the price is $20 billion, that’s what I would like you to pay. But, and from a taxpayers point of view, I want to maximise, let me make no bones about this, I want to maximise the licence fee. In the interests of taxpayers, I’m going to get the best deal that I can for the taxpayer. Let’s make no doubt about that. But in relation to these things, I don’t put values on these things. I ask for independent valuations and I put them in the Budget the same as I do in relation to dividends. I’ve always had independent people do it. And the figures just become one of the items in a budget.
FAINE:
But the quip you make there underlines how rubbery the valuation is. It could be worth anything. Nobody really knows and yet that’s the figure that you use to get your budget into surplus.
TREASURER:
Well it’s not rubbery. That is, people would say a very firm prudent estimate. It’s not rubbery.
FAINE:
But it’s all over the place. Every couple of months these things change their value depending on what the market thinks.
TREASURER:
But John everything’s all over the place. Dividends are all over the place. We put in to budgets dividends on the independent advice and analysis. Now you say how do you value this. One of the ways we value is, this is not the first time the Government has licensed spectrum by the way.
FAINE:
Of course not.
TREASURER:
We’ve had spectrum licence proceeds in the budget since the advent of television which uses spectrum and I’m not sure on this, but I think I’m right, since the advent of wireless.
FAINE:
Radio indeed.
TREASURER:
We’ve had spectrum in the budget in my time since 1996. Last year we had it in the Budget because we were selling the licensing spectrum last year as well. So what we do is, this is what’s called a non taxation revenue like a dividend. These things are always part of the Budget. But what’s the budget bottom line. The Budget’s in balance and not only in balance but this year, this financial year, 2000-01, the Government will receive $9 billion in excess of it’s expenses, all of which goes to repay Labor debt.
FAINE:
And Mr Costello the Australian newspaper, Rupert Murdoch’s newspaper, is saying you’re a hipocrite because if you are prepared to auction that mobile phone spectrum for so much money, why weren’t you prepared to auction the digital television spectrum because it would have raised even more.
TREASURER:
Yeah, well, I can understand why the Murdoch press would say that. But let me make this point…
FAINE:
But what’s the answer?
TREASURER:
… well that since 1956 the Government has been receiving revenues from television stations for the use of spectrum and they all pay for the use of that because it’s a public asset and they should. And what the Government has said is that they could have the bands outside of that spectrum to go into digital broadcasting. May I say for your ABC listeners the ABC was treated on the same basis. The ABC of course, because it’s government owned, the money just goes around in a circle. But the ABC is actually being given and SBS well at least the ABC is actually being given the same treatment. We aren’t sitting down making the ABC pay for going into digital television. And in fact I think I should say on your program in this budget we actually provide additional money for the ABC in two respects. One is to help it with programming in digital and the second is to help it in relation to equipment for digital. So this is a budget which actually increases funding to the ABC to help it with it’s digital responsibilities.
FAINE:
Mr Costello just turn to some specific things, I see that there’s a $60 million grant for childcare in the home to assist women in the workforce who are involved in shift work. This to me seems little more than a subsidy for nannies. $60 million being spent for instance on community childcare centres would allow many, many more people to share in the benefits of extended support for working mothers. But $60 million for home based childcare is $60 million to subsidise nannies for the middle class.
TREASURER:
No these things are very carefully targetted and in particular that initiative is targetted for people who can’t get access to general facilities and particularly in regional Australia. It’s all very well to say take your children down to the Community Childcare Centre but if you live in a rural district there just is no childcare centre. There’s no centre you can drive to.
FAINE:
But there’s nothing I’ve read that says this is limited to the bush.
TREASURER:
Oh, yeah it does and if you listen to my Budget Speech last night, I said it’s particularly to help people in regional Australia, in particular.
FAINE:
If you thought that people in the rah rahs, regional and rural Australia would go rah rah, I suppose you were disappointed this morning because they haven’t. They’ve said there’s money there for doctors but where’s money for all the other things that we think we’re missing out on.
TREASURER:
Well the reaction as far as I can tell is that people say on the medical initiatives that this is great, we’ve never had anything like this. This is a program which is really designed to boost medical and hospital services in regional Australia. As some people say we’d have liked additional money as well. And you know, I’ve never done a Budget yet where people haven’t asked for additional money. But we have to make sure John that our spending is moderate and restrained and it’s consistent with keeping the Budget in surplus. That medical program to regional Australia, $562 million over four years is a pretty good program.
FAINE:
Well that money is for health in the bush. There’s nothing that I’ve found in additional funding for instance for Aboriginal health which all Australians would agree is a burning priority.
TREASURER:
Well, I am not sure that there are measures, additional measures for Aboriginal health because we have spent a lot of money on that already. There are certainly additional measures for new work opportunities for … Aboriginal people.
FAINE:
CDEP for Aboriginal people.
TREASURER:
Yep, yep.
FAINE:
I saw that.
TREASURER:
Now let me come back to health in regional Australia. In the metropolitan areas the number of people for each doctor is a thousand. Outside the metropolitan areas it is fifteen hundred. And there are a lot of people in regional Australia say we can’t even get to see a doctor. There is not one in our town and if there is, we can’t get an appointment. So we’ve got a whole lot of initiatives in there including one by the way to create another hundred extra medical places for any student that’s prepared to enter a bond that after qualifying as a doctor they will practice exclusively in rural or regional Australia for six years. And if they’re prepared to enter into that bond, they won’t be able to practice in the cities, they’ll only be able to practice in rural or regional Australia, they’ll be paid a scholarship of $20,000 a year. Practical measure, very practical measure to help get more doctors into regional areas.
FAINE:
But the question remains in the lead up to the Olympics when we’re facing some international scrutiny over the conditions of our indiginous citizens, no additional money for Aboriginal health.
TREASURER:
Oh we spend an awful lot of money on Aboriginal health already. And it’s not to say that there aren’t continuing health problems. But I haven’t got the figure with me. I can pull it out of the Budget papers, but there is a very large spending on health measures for Aboriginal people already, John.
FAINE:
Finally Mr Costello, I know you have another commitment, but a few things that are a bit of a worry on the economic front, the big picture. The current account deficit is $31 billion a year. Our foreign liabilities as a nation are up over the last few years by as much as 40 per cent. The dollar is sliding to what must be a level that concerns you, inflation is approaching 3 per cent before the GST kicks in and could go up to 5 or even 6 per cent while interest rates are going up and up and up and up. If US interest rates go up again which they well may and our savings and debt levels continue, the economy could be in trouble in 6 months in a big way.
TREASURER:
Well that may be your assessment but I don’t believe it’s, it’s certainly not our assessment and I don’t believe it’s the right assessment. Let’s just take a few of these things – the current account deficit is actually narrowing in the next year, it’s going to be lower than it’s been in this particular year. In relation to inflation, yeah we think inflation will be between 2 and 3 per cent. Which is our target band for ongoing inflation. Do you know what inflation averaged in the (inaudible). I think it is important that we as a nation save more. And that’s why the Government runs surplus budgets, the Government’s trying to do it’s bit. The one thing that I can say to you is after five Coalition Budgets we have repaid $50 thousand million of Labor debt and it’s $50 thousand million of additional Government saving. So we’re trying to do our bit and if the Coalition continues it’s economic management I think we could possibly even repay Labor’s debt. But it takes a lot of work and it’s also something that we need to overcome Senate opposition because as you know the Senate votes down most of the Government’s measures and if the Labor Party is successful in the Senate it could actually make it much more difficult for us to repay their debt. We don’t control the Senate as you know and all of these measures have to get through the Senate, so you know, I think that Labor having run up the debt, they should sit back and they should say that we’ll let the Government government and get on with the measures which will fix things up. I regret to say they’ve been pretty opportunist to date. Maybe they’ll change.
FAINE:
Maybe they will, it will be an interesting couple of months to come with the GST and we’re already in pre-election mode. I’ll spare you the clich question about whether you want to be Prime Minister by the time the next Budget comes around. Peter Costello I expect to get some brownie points for not asking you.
TREASURER:
Consider yourself brownie appointed John.
FAINE:
And thank you very much for your time this morning, I am sure next time we speak it will be about the GST and it’s implementation. I know you have another commitment. Thank you for your time this morning.
TREASURER:
Thanks very much John.