MURRAY:
Good morning Peter.
TREASURER:
Good morning to be with you Paul.
MURRAY:
Peter, are you stunned by Access Economics' criticisms?
TREASURER:
No. I have brought down nine Federal Budgets, seven surplus Budgets, we have reduced Labor's $96 billion debt by $73 billion. That record of seven surpluses has not been matched by any other Treasurers. So I think the record is there for all to see. It is a very strong record. I don't think there is a stronger record around the world, with comparable countries: the United States or Britain or France or Germany or Japan. So, it compares well around the world and you would have seen in the papers today that the Bank of International Settlements released a report saying that Australia probably had the strongest Budget policy of any developed country of the world. And the record shows it is extremely strong. So I am very confident that we can continue good economic management.
MURRAY:
But just two days ago you conceded publicly that there was “not a lot of room for error if the economy slowed dramatically” given the way you have cut into the surpluses. Now Access Economics says that that dramatic slowdown is likely to happen.
TREASURER:
There never has been room for error in relation to economic management, that was the point I was making. That is why you can't trust Mark Latham. The margins for error are small when you are dealing with an $800 billion economy. But I have brought down nine Budgets now and I have been responsible for economic management over the last eight and a half years. The record is there for everybody to see – seven surplus Budgets, we have reduced Labor's debt by $73 billion. What I would say to people is, in this election, you can listen to what people say, you can listen to what Mr Latham claims but look at what Labor did and compare it to what we have done.
MURRAY:
Yeah look, there is no doubt, people will say you have done very well on the economy. You have built a reputation for fiscal discipline. The reality is, you have spent $52 million, billion on new policies in the pre-election Budget including all that cash to families. Since then you have spent another $16 billion, $12 billion during this election campaign alone - $6 billion in just one day. I mean, a lot of people will say that you are risking your reputation for fiscal discipline with what is pretty reckless spending.
TREASURER:
Well when you go back to the Budget and you say, oh you spent $X in the Budget. Let me remind you that we cut taxes in the Budget. This idea that you spent money by cutting taxes, we cut taxes. It was the responsible thing to do. Now the Labor Party says, oh they spent money. No, we cut taxes. We reduced the amount that the Government actually takes. And I think it was the responsible thing to do. The Treasury has put out its forward estimates over the next four years which show that the Treasury believes that the Budget on our policy will continue to be in surplus. It is the task of the economic managers to keep the Australian economy growing. Now if the Australian economy stops growing and we have a recession like the recession that Labor gave us in the 1990s then Australia would be in trouble. But the object of economic policy is to keep the economy growing. That is what I have been doing for the last eight and a half years. That is what I intend to keep on doing. That is, the real thing here is, who are the economic managers who can be trusted with managing an $800 billion economy, to keep it growing against all of the challenges that are going to come across us. Now we have got challenges with rising world oil prices. We have got challenges with terrorism. We have got all sorts of challenges out there and the critical thing in this election is who can manage that economy? And I would say, not only look at our record but look at the way in which we have dealt with these problems in the past, compare it with Mr Latham and his record down at the Liverpool Council where he couldn't even manage a Sydney City Municipal Council. Make your choice accordingly.
MURRAY:
Well Access Economics, I will go back to their criticisms, because they were senior Treasury officials and it is a pretty well respected outfit, on the tax cuts, they say that by the 2005-2006 year income tax rates will be to the lowest levels since the 80s averaging about 19.3 per cent of income. And they question whether it is sustainable given the downturn that we are going to get.
TREASURER:
Well, if income taxes are low as a proportion of the economy, and they will be, because we cut taxes, I actually think that is a good thing. You know, I would be interested if people are critical of us because income taxes in proportion to the economy are falling. I actually think that is a good thing Paul. Income taxes as a proportion of the economy are falling. There you go, Access Economics said it.
MURRAY:
But you're going to need, you're going to need revenue to pay for services and what they're saying is that the revenue that you will get from things like the housing boom, that will be over, company tax receipts will be down because the economy has slowed, and you get yourself into a position where you will be strapped to pay for the services that we elect you to perform for us.
TREASURER:
Well Paul, that is why I keep making this point. The important thing is to keep the economy growing. You are right, that if you mismanage the Australian economy, company profitability would fall and company tax receipts would fall. You are absolutely right about that. So what do I say about that? Well the task is to make sure that you don't mismanage the Australian economy. We have a situation at the moment where company profits are as high as they have ever been. It didn't happen by accident, it wasn't a fluke. It didn't just appear. It wasn't ordained from outside. The reason it appeared in Australia, Paul, let me tell you, is we cut the company tax rate, we took interest rates down, we introduced full refunds of dividend imputation, we gave capital gains tax relief and the companies of Australia got a chance to be profitable. The good thing for people is that if companies are profitable then they pay more tax and they are paying more tax than ever before. You are completely right. If Australian companies became unprofitable again they wouldn't be paying tax. So what is the task? The task is to manage the economy and keep them profitable. That is my policy. That is my record.
MURRAY:
And you are right to stand on your record. That is a reality of politics. Another reality of politics is the Government's run out of steam. And you know, your Government has been around, well the Government you have been part of has been around for a long time. And when people, including well respected commentators like the Finance Editor of The Australian newspaper say that your spending in this campaign has been reckless, then people will wonder whether the Government has run out of steam.
TREASURER:
Well the Government has not run out of steam. Can I tell you, I am as focused on the Australian economy as I have ever been. You know, after you have been, after you have brought down nine Budgets and you have repaid $73 billion worth of debt the thing you focus on, is if you have got an inexperienced team in, they could undo all of that. They could undo all of that in a couple of years. What focuses me is having made these hard yards, having got the economy to where it is, the prospect of it all being undone with reckless mismanagement with inexperienced people really worries me. And that is why I am absolutely motivated. I don't think that the Government has run out of steam. On the contrary I actually think we are as invigorated and committed as we have ever been, more so. Because now we have actually got some achievements to defend and we want to make sure that they are not dissipated.
MURRAY:
We have got some callers lined up for you Peter. 922 11 882 is the number if you want to speak to Treasurer Peter Costello today. Mike in Claremont is first up. G'day Mike.
CALLER:
G'day Paul. Thanks and welcome to Perth Treasurer.
TREASURER:
Thank you.
CALLER:
The issue is superannuation surcharge and constitutionally protected funds which affects thousands of Australians particularly those interesting in, interesting South Australia and Western Australia. And can I stress that this is a policy matter and not an individual matter. And Treasurer, the concern relates to the wording in the Commonwealth legislation. Now I and thousands of Australians receive a super surcharge account from the ATO on an annual basis and we can pay it annually or when we retire when the massive calculation is done. However if you want to defer interest, then interest on the interest, you want to pay it annually. But the way the Commonwealth Act is worded Treasurer you could end up paying more on an annual basis than when you retire, you don't get your money reimbursed. So for example, if you can pay on a yearly basis you pay $25,000, your surcharge, when the final assessment is done you only owe $20,000 there is no reimbursement of the money. So I actually made representations through my local member Julie Bishop, it went to your Minister Assisting Helen Coonan on the matter, she didn't answer sadly the policy question. I tried again, it went to Mal Brough. Again the policy question wasn't answered. Can you just stop our frustration Treasurer and put this right please in the interests of equity?
TREASURER:
Well if this is a constitutionally protected scheme it must be a State Government scheme of some kind. Is it?
CALLER:
That is right. Like, yeah, across Australia there are these, yeah.
TREASURER:
Yes, no, no I am just clarifying the issue. I think there are two things that play in here. One is the imposition of the Commonwealth superannuation tax and the other is the rules that are concerned. It would be necessary to sit down and talk to the trustees about the rules, the way in which they actually allow for that annual payment which we are happy to do. At the Commonwealth level can I tell you, I think I have got even better news for you which is that the Commonwealth, the Coalition Government, the Liberal and National Parties are trying to reduce that superannuation surcharge. Under our legislation it will go down to 10 per cent next year. We have already got it down from 15.
MURRAY:
If you can get it through the Senate?
TREASURER:
No, no, we, well we wanted to take it further but we can actually, we have actually got through the Senate a proposal to take it down. If Mr Latham is elected he is going to legislate it up again back to 15 per cent. And we have actually got it down to 12 ½ we have got a proposal to take it down to 10, that will happen if we are re-elected. The bad news for you is that if Mr Latham is elected he is going to whack that back up to 15 per cent.
MURRAY:
That's a specific Labor promise?
TREASURER:
That is a specific Labor promise.
MURRAY:
Okay thanks Mike. Velma in Menora. Hi Velma.
CALLER:
Oh hello, good morning, Peter.
TREASURER:
Good morning.
CALLER:
And welcome to Perth. I'm just ringing, I'm not a member of any Party and I'm part-pensioner, but I want to congratulate you on the way that you've managed the country's finances over the last eight years. I think you and John Howard have done extremely well and I just shudder at the thought of Simon Crean being in charge of the country's finances. God help us.
TREASURER:
Well it causes me to shudder too I can assure you.
MURRAY:
You mentioned just earlier about the 29 page dossier that was released yesterday on Mark Latham and his record at the Liverpool Council. It's pretty personal that stuff. Do you think Australians like you playing the man?
TREASURER:
Well I don't think it's personal at all. Here's a man who was a Mayor and you look at his financial record, I don't regard that as personal. It's looking at his financial record. Mr Latham is allowed to look at my financial record and he does every day. He can criticise my management in this area or that area or the other area. Similarly, we are entitled to look at his financial record and, you know, really when you look at it, it is very, very frightening. Now, here's a bloke running for Prime Minister, Paul, he's got a job application out there with the Australian people. Previous experience: no private sector experience, no ministerial experience. So what's his previous experience? His only previous experience is as a Municipal Mayor, so if you want to have some idea as to what he would be like, you have to look at his previous experience as a Municipal Councillor. You know, let's suppose somebody turned up and said they wanted to be Prime Minister and had no record in anything. You know, how would you actually judge them? And he wants to be able to say, well okay, I've never had a job in the private sector, okay, I've never been a Minister and you're not allowed to look at my time when I was a Municipal Mayor. In other words, nobody is allowed to look at my previous experience before they vote me in as Prime Minister.
MURRAY:
But what he says, the most you could lay on him is that he put up swimming pool fees.
TREASURER:
No. He drove the Budget into deficit. Eventually the Council couldn't manage, couldn't manage to continue. The Council was suspended. He supported developments at the Oasis Development Centre which came back to bite the Council, eventually got it in financial trouble. That Council has been suspended. Now there's a lot people in Perth that won't know about the Liverpool Council. This is in Sydney. It's probably the worst Council in Australia. It's now been suspended. There is now a receiver running it, and lo and behold, who is the man that was responsible for its financial management back in the mid-90s.
MURRAY:
But he's been out of if for a while, hasn't he, yeah?
TREASURER:
Back in the mid-90s. Back in the mid-90s. And you know it's the same old thing, what he said is he's going to spend all this money and then they would find the savings to pay for it. Well, they spent the money but the savings never appeared. So he says, it's not my fault, somebody else should have found the savings. He's doing the same thing now, he's saying I'm going to spend my money here and then someone will find the savings. If Mr Latham were to run Australia like he ran the Liverpool Council, the Government would probably end up in receivership.
COMMERCIAL BREAK
MURRAY:
John of Noranda. Hi John.
CALLER:
Yes, sorry Mr Treasurer. I'm just making the query, you say that if Labor gets in they'll increase the interest fees, yet on the ALP financing government policy, it states that Labor will investigate alternative funding options including Government bonds. Doesn't that mean that they're not only going to go on bond market to raise money to pay for their policies but they're also going to seek out other ways to charge?
TREASURER:
Well quite possibly. At the end of the day, if the Government goes out and borrows money, that drives up interest rates because you've got a big new borrower in the market. And if there's a competition for funds and the Government is borrowing a lot of money, interest rates go up. One of the reasons why interest rates have been low since 1996 is that our Government hasn't been borrowing, it hasn't been in the market driving up interest rates. In fact our Government has been repaying debt. That is, instead of drawing down on savings, adding to savings. And the consequence of that is that the Government's actions in the market has actually been driving interest rates down, rather than driving them up. And if the Government got back in the market and started borrowing again, it would push up interest rates.
MURRAY:
Okay John, thanks. Dave in Jandakot, good morning.
CALLER:
Hello.
MURRAY:
Yeah, g'day Dave. The Treasurer's listening.
CALLER:
It's Peter here, Paul.
MURRAY:
Oh right. Sorry.
CALLER:
Sorry Mr Treasurer I was just would like to congratulate you in the way you've conducted the finance of this country over the last eight years. I wish you and the Coalition all the best and someone at Centrebet yesterday on the radio put $200,000 to win 66, so I tell you what I reckon you're on a good thing.
MURRAY:
Okay Dave, all right, we haven't got time for cheerios. I've got an email from Hal who says with the latest petrol prices on the way up, I'd like to ask any politician you talk to in the next couple of weeks, and you're sitting right here, what are they going to do about it? We have absolutely nothing to do with the rest of the world in terms of petrol prices. We produce our own oil for our fuel. Why on earth do we bow and scrape to the petrol companies who use the world prices to push up our prices, I imagine if the Government dropped the fuel excise as they should have under the GST, they'd automatically win Government.
TREASURER:
Well let me make the first point, we do import oil. Australia is not self-sufficient. We do import oil and when we import oil, we import it at the world price. And as you know the world prices have gone above US$50 in recent times. And that's the single biggest determinant of the petrol price. Can I say that when GST came in we did cut the petrol excise, we cut it from 44 cents a litre to 38 cents a litre and we don't index it, it doesn't go up. The petrol excise is 38 cents a litre. It doesn't move. When inflation goes up, it doesn't go up, it's still 38 cents a litre. So that as the petrol price goes up, the Commonwealth excise remains the same. The Commonwealth gets no additional money as a consequence of that. Now, there is a GST in relation to petrol and as the price goes up, the GST which is one eleventh or 10 per cent would raise more money. That goes to the State Government. And I'll just tell you what the Western Australian State Government is getting from GST in this financial year, $3,613,000 with a $2,086,000 windfall.
MURRAY:
So talk to them.
TREASURER:
Well you know what happens in Queensland of course. The Queensland Government uses some of its GST revenue to subsidise the price of petrol.
MURRAY:
Four cents a litre.
TREASURER:
Seven or eight I think. So that's what happens in Queensland.
MURRAY:
Matt from Swan View is on the line for you. G'day Matt.
CALLER:
G'day. I just want to talk to Costello about, he's going on about the Labor Party not being good economical managers. He's been in there for nine years right, he's saying what a good bloke he is. There was a time when he wasn't bloody in as an experienced Treasurer. The only reason why he's got a surplus today, he's taxed the pants right off every Australian, the average Australian. He has introduced this Goods and Services Tax, he has made us the higher taxing people in the country, in the world, and he's sitting there gloating about what a good bloody bloke he is.
TREASURER:
Well that's completely wrong. According to the OECD, which is the group that monitors the developed economies of the world, Australia is one of the lowest taxed developed economies in the world, one of the lowest. I think there are about two or three below us.
MURRAY:
Access are today questioning whether you've taken taxes too low.
TREASURER:
Well, and Access Economics is today questioning whether we've taken them too low. Let me tell you one of the reasons why revenues have been strong, is not because taxes have gone up, but 1.3 million more people are in work. Not because you put tax rates up, you've just got more people in work paying them. And when you get people off the dole, you save the money from paying the dole, when you get them into work, they actually pay taxes, then you've got a much stronger economy. And on all of these international measures, Australia is a low taxed country compared to, you know, all of the Europeans, and compared to the Scandinavians, and compared to nearly all of the developed economies of the world.
MURRAY:
Thanks Matt. Jason from Orelia. Hi Jason.
CALLER:
Morning gentlemen. My question is about the LPG. Now the greenhouse emissions etcetera have got to be coming down apparently, so lots of people are switching over to LPG, one for the economy, one for price. But the price of LPG has doubled over the last five or six years and it is ridiculously high, especially when it's sold to the Japanese and Chinese for about four or five cents a litre. I'm wondering if they're going to drop the excise or do something along those lines to make LPG a little bit more fairly priced?
TREASURER:
We don't have an excise on LPG. So, it's not a tax question.
MURRAY:
But you're looking at putting one on?
TREASURER:
There is a proposal which has been laid down to have a, I'm just trying to remember the amount, to have an LPG excise introduced in a few years time which will go to about, from memory, don't hold me to this, about 50 per cent of the petrol excise, so it will never be the same as the petrol excise and that doesn't apply at the moment. So it's not a tax question. Apparently, I've made enquiries about this myself. LPG is a by-product of oil and as oil prices go up, so can LPG prices, but it really depends as much on anything on the demand apparently and if the demand grows in world markets, then the price of LPG can go up.
MURRAY:
We're almost out of time. I just want to get your view on one thing. On my estimation, if the Green vote is strong enough at this election, the Greens preferences to elect a Labor Government, then it's likely that the Greens would also then get control of the Senate. Is that your view?
TREASURER:
Yes they could have the, when you say control, they would have the deciding…
MURRAY:
Balance of power.
TREASURER:
Balance of power. Yes, that's right. Quite right. And in that case you would have a Labor Government which had been elected to the Lower House on preferences relying on Green Senators with the balance of power in the Senate. And the Greens would be an incredibly powerful force over a Latham Government. Bears thinking about too.
MURRAY:
Yes, does indeed. We're waiting today of course to see Mark Latham's campaign launch, a little later than yours. Has he got any money left to spend?
TREASURER:
Well, it depends what he's going to announce in his campaign launch. Apparently he's going to call Vision or something. I think it's more about Division that it's going to be about Vision. If you look at the school's policy for example that Latham brought in, it's the Division policy to try and set Australian against Australian. And I think in many respects Mr Latham wants to take us back to the old Australia of division and I don't think it's going to be the future.
MURRAY:
Well we'll find out a little later in the morning. Thanks very much for your time today Peter.
TREASURER:
Great to be with you, Paul. Thanks.