TREASURER:
Well the OECD has released its 2004 Economic Survey of Australia overnight and in the course of its survey it notes that Australia has become the model for the developed world in terms of structural reform and macroeconomic management.
The OECD points out that the economy has an enviable degree of resilience and flexibility and that Australia as a consequence has had a prolonged period of good economic performance.
It forecasts continuing growth in the Australian economy accompanied by low inflation and the Government of course will be publishing its own forecasts in the course of the Budget but we see good prospects for continuing growth in the Australian economy keeping it at the forefront of the developed world.
Notwithstanding that, it is important that we continue to keep the economic reform programme running in Australia. And that is a point that the OECD makes in its report. It is important that we continue with structural reform - and can I indicate that the Government remains absolutely committed to structural reform, much of which has been frustrated by a hostile Senate - but if Mr Beazley wants to change the policy of the Labor Party and support industrial relations reform then much of that reform agenda could be put into place more or less straight away. If Mr Beazley can’t change the position of the Labor Party maybe we will have to wait until after July of this year.
The OECD also notes that commendable progress has been made towards reforming tax but issues remain. The OECD says that the priority for tax reform should be simultaneous continuation of policies which contribute to the lowering of high effective marginal tax rates and the raising of the threshold at which the maximum marginal income tax rate cuts in, consistent with Budgetary objectives. And the Government would agree with that assessment and that it is important that we continue the steps that we have put in place to improve the interaction between the tax and welfare system. And we agree with raising the threshold at which the maximum marginal income tax rate cuts in and we will be raising that on 1 July 2005.
So whilst this is a glowing report of the state of the Australian economy and the reform which has taken place to date, it is important that we continue here in Australia to get on with the reform programme particularly in areas of tax, industrial relations, welfare reform – with many of the initiatives which we have already flagged and which we will have better opportunity to put in place with a better Senate after 1 July of this year.
JOURNALIST:
And what the report is just saying - obviously we haven’t seen it - it does seem to suggest that the Government is dragging its feet and could do more to cut that personal tax, that personal marginal rate further. Is that a possibility?
TREASURER:
Well you can see it. It has been released. It is a public document. And I think most of the media outlets do have a copy. But what it says, it says that, and I will read you on page 11: “The priority for tax reform should be continuation of policies which contribute to the lowering of high effective marginal tax rates”, that’s at the lower end, “ and the raising of the threshold at which the maximum marginal income tax rate cuts in”. Now the Government will be raising that threshold on 1 July 2005. We raised it on 1 July 2004. We will be raising it again on 1 July 2005. And we absolutely endorse the observations that are there made by the OECD.
JOURNALIST:
The issue of the Future Fund is raised. Are you able to give us any more detail, any more substance about that idea here? Any structure? Have you done much work on it?
TREASURER:
Well we have done a lot of work on the Future Fund. We announced it as part of the campaign. I have made statements as to the way in which funds will be managed through the Future Fund. And I expect to be able to put the final details on the Future Fund in the context of this year’s Budget in May.
JOURNALIST:
In terms of labour market reform it talks about targeting pattern bargaining. Is that something that you would be looking at in your industrial relations reforms?
TREASURER:
Sure, there is no point in taking the industrial relations outcome from one workplace and then trying to apply it in some kind of pattern across an industry or across a sector. The important thing is that each outcome be negotiated and tailored to each workplace and based on productivity in that workplace. And we want to encourage that and our industrial relations reforms will take steps to continue encouraging that.
JOURNALIST:
Treasurer I think the (inaudible) Telstra (inaudible) should be made to (inaudible) in Foxtel in the interests of competition. What is your stance on that?
TREASURER:
Well look I think that we have to look at all avenues of promoting competition and structural competition in the economy. But I am not flagging any changes in relation to the Governments communication policy because I think that the greatest issue at the moment is to ensure that Telstra is treated like the competitor that it is, as one of a number of competitors in the telecommunications industry not as a government department. And whilst Telstra still has a majority Government ownership it tends to be treated unlike a private competitor to the degree that it should but more like a government department in some respects.
JOURNALIST:
Treasurer can I ask if you know, and whether it is accurately reported that this American shipping company Northrop is entering the bidding for (inaudible) warship and what do you think about it?
TREASURER:
Well look tenders have been called and as I understand it this Northrop may well have put in a tender. I don’t know the details of its tender but as the Defence Minister has repeatedly said, the builder of the ship will be an Australian company. So I can’t comment on how Northrop proposes to meet that condition or what the essence of its bid is. It may well be that it is in partnership with someone else, I wouldn’t know, but as the Defence Minister has repeatedly made clear, the builder of the ship will be an Australian owned company.
JOURNALIST:
So there is no chance of buying one “off the rack” from America?
TREASURER:
No. We have decided that we will actually be building these ships in Australia. There is a tender which is going on at the moment. The tenders will be assessed in accordance with the conditions and it won’t be “off the rack” shopping for an air warfare destroyer.
JOURNALIST:
And you are sticking with your line that the most competitive bid is the only test?
TREASURER:
Well meeting those other conditions as to capacity, as to ownership, then the syndicate that will win the tender will be the one that can meet the conditions with the best product for the best price.
JOURNALIST:
Just before you go, just back on the tax rates, even though you are raising the threshold wouldn’t you agree that unless more is done to overhaul the tax system there is still a disincentive for people with that top marginal rate?
TREASURER:
Look I think it’s important that we have the most competitive tax system we can consistent with meeting the expenditure requirements in relation to health, education, aid to Tsunami affected victims, protecting the country against terrorism, building air warfare destroyers and balancing the Budget. And they are the expenditure requirements that we have and we have got to have a tax system which is capable of delivering that and as low as possible consistent with delivering that. And that is one of the reasons why we are increasing the threshold on both 1 July last year and 1 July this year. We must continue to keep working to have a tax system which is as competitive as possible because that will keep our economy growing and our economy is growing.
JOURNALIST:
Will you look at a more comprehensive overhaul of the system though beyond this year?
TREASURER:
Well let me just remind you, we have cut the company tax rate, we have halved the capital gains tax, we have given small business capital gains tax rollover relief, we are raising the top threshold on 1 July of last year and 1 July of this year, we are introducing tax reductions for mature aged workers, we have just cut childcare expenses with a new 30 per cent rebate for working parents. This is a very, very full agenda and we continue to work on our agenda consistent with good investment in education, consistent with good investment in health, consistent with fighting the war on terror and consistent with balancing the Budget. We want to keep our income tax and other tax rates as low as we possibly can. Thanks very much