AUSTIN:
Well, he’s the man with his hands on the economic levers of the country, the controller of the nation’s purse strings, an accountant on a grand scale, the Federal Treasurer, Peter Costello, in Brisbane to boost the Liberals in a campaign where the published polls indicate “Team Beattie” is going to beat everyone. Peter Costello, welcome to Brisbane.
TREASURER:
Great to be with you Steve.
AUSTIN:
I want to ask you about a couple of Federal issues.
TREASURER:
Sure.
AUSTIN:
The ALP has revealed, or at least The Australian newspaper has revealed, that the Australian Labor Party will be refusing those lucrative bucks from tobacco companies – donations, sponsoring of conferences etc. Will the Liberal Party do the same?
TREASURER:
Well, in the past both parties have received donations from all sorts of businesses. The Liberal Party declares them all. It is all on a public register so that anybody can look at it. We have taken a very strong anti-smoking stance…
AUSTIN:
But you won’t refuse the cash?
TREASURER:
…but we haven’t refused it. And the tobacco companies are lawful companies, are these days, diversified food and manufacturing companies as well, and I think it is important that people know the source of donations which is published, but they’re operating legal businesses.
AUSTIN:
So you definitely won’t be refusing any money from tobacco companies…
TREASURER:
Well we have…
AUSTIN:
…to match the ALP’s …
TREASURER:
…we have received donations from all sorts of companies including those companies in the past and we have no plans to change that.
AUSTIN:
Do you know, that, in this State alone, tobacco is linked to three thousand deaths every year?
TREASURER:
Oh, tobacco is a very bad product. And we run anti-smoking campaigns which try and discourage children from taking it up. And I don’t smoke myself and I would discourage anybody from ever taking it up. But…
AUSTIN:
It’s still okay to take the cash?
TREASURER:
Well, hang on, you have tobacco growers in this State that grow it.
AUSTIN:
Up north on the Atherton table lands around Mareeba way.
TREASURER:
Well, it is legal for them to grow it, isn’t it?
AUSTIN:
Mmm.
TREASURER:
Nobody has banned the growing of tobacco to my knowledge. Can I tell you the Federal Government would take hundreds of millions, maybe billions in taxes from tobacco – it takes income tax from…
AUSTIN:
I am sure that would be hard to let go of.
TREASURER:
…it takes income tax from people who are employed in growing and distributing. Now that doesn’t mean that I approve of the product, I don’t. But it is a legal business in Australia.
AUSTIN:
You’re not concerned that that’s going to give the ALP the high moral ground when they start refusing tobacco company money?
TREASURER:
Oh look, let me tell you the ALP has a little money earner by which the Australian National Audit Office pays them large sums of money on an over-inflated lease year-in-year-out and they will get the moral high ground when they give that money back to the Australian taxpayer.
AUSTIN:
Well, I won’t be diverted, I will move on to other issues. Let’s look at the National Australia Bank’s currency trading scandal at the moment. ASIC has announced that they are now investigating the move. Where was APRA in all this? Why didn’t they get involved earlier in this? Are you concerned?
TREASURER:
Well APRA is a prudential regulator. Its job is to look at financial institutions, make sure that they have set aside sufficient capital to meet their obligations. I don’t think there is any doubt that the NAB meets its obligations.
AUSTIN:
You are not concerned by the losses by the NAB?
TREASURER:
Well of course I think it is a matter for investigation. And I am the person who suggested at the outset that information be provided to external sources. That was my suggestion.
AUSTIN:
There is obviously some concerns there isn’t there?
TREASURER:
Well, you asked me about APRA’s role and APRA’s role is to look at things from a prudential point of view, which it is doing. Now, I don’t think there is any doubt that the National Australia Bank is properly capitalised, one of the most profitable organisations in Australia. But…
AUSTIN:
(inaudible)
TREASURER:
…it will look at this from a prudential point of view to make sure that there is nothing that affects that. Now, let me tell you where the real, important part of this investigation is going to be.
AUSTIN:
It is whether the NAB properly informed the market?
TREASURER:
Well, no, that is also important and that is being looked at, no the important point here is did those traders act within their authorities or were they acting in an unlawful way and if they were, did that break the law – civil or criminal?
AUSTIN:
Or was there a “nudge-nudge, wink-wink, go for your life mate” by their superiors?
TREASURER:
Or was the management on its game? Now that question…
AUSTIN:
Or even complicit?
TREASURER:
That’s a big statement. I don’t want to go that far. I don’t think they would have been encouraging these guys to lose money. But you might…
AUSTIN:
Sure.
TREASURER:
…there would be an allegation that maybe they could have stepped in earlier to stop it. Or they should have had systems that would stop it. Now, that is a question that the Bank will have to answer and if these employees have acted outside their area of authority and maybe broken the law that is a matter that the police will look at.
AUSTIN:
Do you feel…
TREASURER:
And can I tell you, I don’t think there is any shortage of investigation going on now. There is the police, the Bank, the police, the prudential regulator and the corporate watchdog.
AUSTIN:
Obviously ASIC is not as confident as you are. They are probing as to whether the NAB has properly informed the market. Do you believe that the NAB has properly informed the market?
TREASURER:
I couldn’t tell you. It informed the market of the $160 million and it has made a subsequent statement. The question is, what did it know and when and that is a matter for ASIC, the corporate regulator, to look at. I couldn’t tell you that. That is their business.
AUSTIN:
The figure that you have just mentioned, the Bank has actually yet to disclose the full extent of its losses, isn’t it?
TREASURER:
Yes, that is right. The Bank…
AUSTIN:
So it could be much greater?
TREASURER:
Well the Bank made a statement saying that they thought it was up to $160 million and they then made a subsequent statement saying that it could be higher, figures of $600 million were being thrown around. I don’t think the Bank knows at this stage and ASIC will be looking at all of that.
AUSTIN:
Seven minutes to nine. This is 612, ABC Brisbane. My studio guest is the nation’s Treasurer, Peter Costello. Let’s move on to matters of state. Queensland has a jobless rate that is at 6 per cent, back to 1980s levels. Standard and Poors gave this State a foreign currency rating last December, last month, a AAA rating. It is the only State in the country where superannuation liabilities are fully funded. The State Government has a $1 billion plus infrastructure program underway, they have got healthy stamp duty revenue, and their Government owned corporations providing a return to the State Government. The State Government has been very keen and it has pointed out many times that it shows the good economic management of Treasurer, Terry Mackenroth and Premier, Peter Beattie. Would you agree?
TREASURER:
Australia as a whole is doing well. Let me make that point. Our economy is growing between 3 and 4 per cent, our interest rates are low, the national unemployment rate is 5.6 per cent, and we have more people in work than ever before. And Queensland, as a State, has been participating in that.
AUSTIN:
Leading it. Surely leading it?
TREASURER:
Well unemployment is higher in Queensland…
AUSTIN:
Marginally, fair enough.
TREASURER:
…than the national average.
AUSTIN:
Marginally.
TREASURER:
And if Queenland’s unemployment performance met the national average, then the national average would be lower. I mean Queensland is one of the States that is marginally, not in a great deal, holding up unemployment in Australia. So Queensland has prospered in a strong economic environment of low interest rates, strong growth, industrial relations reform, and all of the things that we have been working on for the last eight years. There is no doubt about that. I, the only thing, the point I would go on and make about Queensland, you are right that its superannuation is funded.
AUSTIN:
It’s the only State which is, isn’t it?
TREASURER:
The legacy of Joh Bjelke Peterson.
AUSTIN:
That was fourteen years ago. That was 1988. That was fifteen years ago.
TREASURER:
Hang on, it was Joh Bjelke Peterson that decided to fund the super liabilities. But leave all that aside. Queensland…
AUSTIN:
Are you serious? That the credit for that lies at the feet of Joh Bjelke Peterson?
TREASURER:
Now leave all that aside.
AUSTIN:
Yeah, I want to make sure I understand you clearly…it was Joh…
TREASURER:
Now hang on, no, no, no, the decision to fund superannuation liabilities in Queensland was made by the previous National Government. Yes it was.
AUSTIN:
Right.
TREASURER:
I don’t think there is any doubt about that.
AUSTIN:
Okay.
TREASURER:
There wasn’t a new policy that was introduced recently.
AUSTIN:
Not that I am aware of. Fair enough.
TREASURER:
But the only point I would make about Queensland is this. I think its financial management has not been as good as it should have been.
AUSTIN:
Like where? They are doing pretty well aren’t they?
TREASURER:
Well, two Budget deficits and their Budget would be in deficit this year if it wasn’t for the $334 million windfall that they are getting out of GST. Now, I just want to make this point because I don’t think this is well understood. All GST revenue goes to State Governments. Every last dollar.
AUSTIN:
Yes.
TREASURER:
A lot of people don’t know that. They think the GST is a Federal tax. The biggest winner…
AUSTIN:
Well, it is. But anyhow.
TREASURER:
No, it is not. Because every last dollar is received by State Governments. The Commonwealth Government doesn’t receive a dollar of revenue from GST. It is collected by the Australian Taxation Office and dispersed to the States in its entirety. And this is a very important point. And the biggest winner out of the distribution of GST is Queensland. This year Queensland will receive over $6,300 million of GST. There will be a windfall of $334 million over and above what they would have got under the last, old taxation system. And my only point is, that that is propping up the Queensland Budget. And that is fair enough. They are entitled to it.
AUSTIN:
But I want to ask you about one other thing.
TREASURER:
My only point is this, that it would be nice if some of that windfall of $334 million had been used to reduce taxes. That is the point I am making, rather than having new taxes.
AUSTIN:
All right. Well there is a couple of things we have been focussing here on, in the lead-up to the State election campaign. The most, the last State Budget was a balanced Budget and there was a bit of controversy last year when Energex, a State owned, Government owned corporation here, borrowed $150 million and passed a dividend on of around the same figure to the State Government. Terry Mackenroth at the time pointed out that that made it tax deductible. And that way, you guys, the Feds, wore a large part of the payment. Is that acceptable activity do you think? It worked very well for Energex and the State Government.
TREASURER:
Well, look we face this problem constantly. That State Governments entering into innovative schemes to try and reduce the Commonwealth tax base. We face it all the time. And I don’t think it’s right. I think State Governments, like private sector employers, should pay their full tax liability. Particularly when they are sharing in lucrative taxes like the GST and you mentioned stamp duties that are booming.
AUSTIN:
But Energex has to compete now doesn’t it? Energex is a Government owned corporation that has to compete in the real world. They borrow $150 million, pay a dividend to the State Government and can write off part of the borrowings against their tax.
TREASURER:
That’s the law. You can write off your borrowings against your profit and if your profit is low then your taxes are low. Leave aside that situation…
AUSTIN:
We have got about 15 seconds.
TREASURER:
…less clear, my point is the State Governments do regularly try and cost shift. We try and stop it when we have the ability at the national level and I think State Governments, like private employers, should observe their lawful tax liabilities.
AUSTIN:
We will talk to you again no doubt, particularly in the lead up to the Federal election. Thanks for coming in.
TREASURER:
Terrific, thank you.
AUSTIN:
Australia’s Treasurer, Mr Peter Costello.