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Transcript 10657

TRANSCRIPT OF THE PRIME MINISTER THE HON JOHN HOWARD MP RADIO INTERVIEW WITH NEIL MITCHELL RADIO 3AW

Photo of Howard, John

Howard, John

Period of Service: 11/03/1996 to 03/12/2007

More information about Howard, John on The National Archive website.

Release Date: 14/08/1998

Release Type: Interview

Transcript ID: 10657

E&OE....................................................................................................

MITCHELL:

Good morning.

PRIME MINISTER:

Good morning, Neil.

MITCHELL:

Mr Howard, why should we believe you?

PRIME MINISTER:

You should believe me because deep down the Australian community

knows that the present system is not working. They know that it

needs overhaul. And they also know, deep down, that you can't

sort of have that overhaul easily and overnight. And then if people

come along offering them a personal tax cut with no GST and no change

to the present tax system, they're entitled to say, well, that

sounds okay, but in the long-run you can't have any kind of

improvement without basic change.

MITCHELL:

Just, for example your strategy relies on a surplus.

PRIME MINISTER:

Yes.

MITCHELL:

What if you don't have it, what if the Asian crisis knocks

the living daylights out of it, what if your revenue measures don't

work, would you go into deficit to prevent this?

PRIME MINISTER:

Well, Neil, we don't rely on all of the surplus, there'll

still be a large surplus left after this plan has been introduced.

It's not all financed from the surplus. A lot of it is financed

from the fact that a GST catches tax cheats that are not in our

court. And that's one of the things that people have got to

understand in relation to alternative offerings. You can't

have the efficiency gains from a GST without the GST. You can't

have the $3 billion out of the black economy without the GST. You

can't have the reduction in business costs without the GST.

So those who say you can have all the nice bits in this without

the GST are misleading you. And that is something that I think the

Australian people will grow to understand and they, in the end,

will say: righto, we need this change and the only way to do it

is to do it properly.

MITCHELL:

Okay, well you've locked in the GST rate, that would be very

hard to change...

PRIME MINISTER:

I would say impossible.

MITCHELL:

Okay, impossible to change. Why not lock in the compensation mechanism?

This all comes to trust again. We've got to trust you that

these tax changes will go through [inaudible]...

PRIME MINISTER:

Well, can you imagine any Senate allowing changes to the compensation

mechanisms to go through?

MITCHELL:

Why not really convince people, though? Why not look at indexation...

PRIME MINISTER:

Well, you don't need an indexed tax rate if you can go from

$20,000 to $50,000 without going into a higher bracket. That is...

MITCHELL:

[Inaudible]

PRIME MINISTER:

Well, that is 60 to 70 per cent of the population, Neil.

MITCHELL:

But some people are going to be caught...[inaudible]

PRIME MINISTER:

Well, I tell you what, Neil, this will be the most bracket creep

free tax plan this country has ever seen because when you broaden

that band in the middle – now, just let me say this again –

you can go from $20,000 a year to $50,000 without going into a higher

bracket. Now, there has never been, in the history of Australia,

a breadth of income in the low and middle area free of bracket creep

like that.

MITCHELL:

We still have one of the highest top rates in the world, why not

reduce that?

PRIME MINISTER:

Well, it's a question of balance. I've increased the

threshold. That doesn't now apply until $75,000. You can't

do everything. In the name of fairness, people say, you've

got to make certain that the low and middle income people are looked

after. I don't think the Australian public would believe that

it was a higher priority for us to reduce the top rate.

MITCHELL:

Would you still like to get it down?

PRIME MINISTER:

Look, I mean, there are a lot of things that I would like, but

I've got to try and get something that is balanced and fair.

And I think the fair, balanced thing to do was to say to the great

bulk, 60 to 70 per cent of Australian wage and salary earners, 60

to 70 per cent of them, you can increase your income from $20,000

to $50,000 without going into a higher tax bracket. In other words,

for them bracket creep is a thing of the past.

MITCHELL:

Jobs – will it create them?

PRIME MINISTER:

Yes it will, because it will make it less expensive to run a business

and therefore you'll have more capacity to employ. This will

take $10,000 million of costs off the operations of Australian business.

It will take $4.5 billion off the costs of exporters. It will be

a very good thing for Australian business. It will have very big

cashflow benefits for businesses with turnovers of less than $20

million a year because they'll only pay the GST quarterly,

and that's 99 per cent of Australian businesses.

MITCHELL:

Okay. How many jobs have you estimated?

PRIME MINISTER:

I can't put an estimate on it, no I can't. But we have

generated 300,000 new jobs over the last two and a half years.

MITCHELL:

Mr Howard, how long do you think people should have to absorb this

before they decide on it?

PRIME MINISTER:

I don't know. I want to allow adequate time. You ask me, what

is adequate - I can't put a figure on that. My immediate preoccupation

is to move around Australia explaining this plan and answering people's

questions on it. And I start on the way to Adelaide immediately

after this interview. And I'll be going to every State. I'll

be in Victoria over the weekend and I will be going to Queensland

next week and then across to Western Australia. So I'm going

everywhere, talking about it, listening to questions, explaining

the detail of it because it is an historic plan.

MITCHELL:

Well, is a mid-October election a possibility?

PRIME MINISTER:

Neil, I don't know when the election is going to be held.

I'm accepting dinner date invitations right through October.

MITCHELL:

What does that mean?

PRIME MINISTER:

Well, people keep asking me and they say can you come to dinner

on such and such a Saturday in October and I'm accepting the

invitations. But, Neil, I don't know when the election's

going to be and there's no way I'm going to be sort of

drawn to speculate because I don't know.

MITCHELL:

Mr Howard, the private health insurance rebate.

PRIME MINISTER:

A very good initiative.

MITCHELL:

Are you going to give yours back?

PRIME MINISTER:

Mine? No. Do you mean to say, am I going to claim it? Well, I...

MITCHELL:

Are you going to give it back, were going to give it back, yeah,

is that right, are you going to claim...?

PRIME MINISTER:

Well, I reserve the right to claim it. I think it would seem rather

odd if I'm selling this as a terrific change and something

that people ought to get into and then I say I'm not going

to take it...

MITCHELL:

Well, you [inaudible]...

PRIME MINISTER:

No, well, I didn't. I think that probably sends a rather mixed

signal.

MITCHELL:

Why?

PRIME MINISTER:

Well, because if you're saying it's good for people and

you don't take it yourself people are going to say: well, is

it good for me?

MITCHELL:

Well, of course, the people already getting the $450 only get $150

out of this, don't they? It's the high income earners

that...

PRIME MINISTER:

No, no, no. No, I'm sorry, I'm sorry, that's wrong.

People get 30 per cent of whatever it costs them.

MITCHELL:

Yeah, but if you say they're paying $2000 every year....

PRIME MINISTER:

Well, that's just an example.

MITCHELL:

Well, it's not a bad one.

PRIME MINISTER:

Well, that is a, I mean, that is a very typical family cover. Now,

so there's no misunderstanding about this, whatever your private

health insurance premium is, you get 30 per cent back and, therefore,

it is of no greater benefit to somebody on $500,000 a year than

it is for somebody on $45,000. In fact, it's a proportionately

greater benefit. It's a flat amount.

MITCHELL:

But the people who are on [inaudible] are already getting something,

people up the other end aren't.

PRIME MINISTER:

That's true. But what is wrong with encouraging them to take

it out as well? Isn't the name of the game, with private health

insurance, to get greater coverage, greater involvement? You need

to get some of the higher income, healthy people into this because

they will help subsidise through community rating the other people.

That is how private health insurance works.

MITCHELL:

Is there anything in this package which is non-negotiable?

PRIME MINISTER:

Well, the fundamentals of it aren't negotiable. I mean, if

you say to me, is there some fine detail over on page 300 –

I mean, we have consultative mechanisms. But having spent months

putting it together and having announced it yesterday, I'm

not going to today start talking about changing it.

MITCHELL:

I can understand that but the Democrats are already saying, well,

we'll negotiate it after the election if they win, which puts

people in a position of saying will we vote for this at an election

or we vote against it but how much is it going to change afterwards.

PRIME MINISTER:

Well, Neil, we're obviously not going to sort of fundamentally

compromise it. Of course we're not going to do that. And we'll

be going to the election asking the public to vote for us in both

Houses of Parliament. I mean, I'm pleased that the Democrats

haven't rejected it out of hand, I think that's sensible.

They're not as negative as the Labor Party. But we want this

plan endorsed and if it's endorsed, whenever the election is,

we will present it to the Parliament and we will say to the opposition

parties in the Senate: you had your go, the people have spoken,

listen to the people, do what the people want and let it go through.

MITCHELL:

There are [inaudible] anomalies being suggested already, no GST

on education, but there is...you do pay the GST on food, school

uniforms, tuckshop food, books, did you look at that?

PRIME MINISTER:

No, the reason - well once you start looking at that, you look

at something else and then you....

MITCHELL:

On hospital care [inaudible] on linen and [inaudible].

PRIME MINISTER:

Yeah, but they get it back. But look, what you've got to understand,

Neil, the way this thing operates is once you start chopping and

changing with one bit then the next person says, oh well, look,

will you have a look at mine and then you have a look at something

else and then you're back to the system we've got at the

present time.

MITCHELL:

You'd have to be very...persuasive argument to get you

to change anything.

PRIME MINISTER:

Well, anything fundamental to it, yes.

MITCHELL:

Mr Howard, the provisional tax. Now, page 152 of the document –

this confuses me, I must admit because we've got provisional

tax being abolished and that's savings or negative income...[inaudible]...well,

I'm looking over three years [inaudible]. However, over the

three years company payment arrangements brings in 7.5.

PRIME MINISTER:

Yeah, what happens is that we're altering the timing of company

payment arrangements so that in those early years there's a

bigger yield and that evens out later on. But that is eminently

affordable for those companies because they get a huge cashflow

benefit out of the GST.

MITCHELL:

But isn't that, in fact, an increase on the tax [inaudible]?

PRIME MINISTER:

No, it's not. It's just an alteration in the timing arrangements.

You have a look at the detail.

MITCHELL:

[Inaudible]...7.5. Housing – house and land packages according

to the HIA up $16,000 for an average house and land package.

PRIME MINISTER:

Well, the HIA is not happy, I understand that. But you've

got to remember we're providing a first home owners scheme

of $7000 and the climate for the housing industry at the moment

has never been better because interest rates haven't been as

low as they are now for 30 years. So when you take all that into

account – and houses will not go up by 10 per cent. We calculate

the cost of new housing will rise by 4.7 per cent and that is why

we're bringing in a first home owners scheme of $7000 because

when you build a new house now you pay wholesale sales tax on a

lot of items like baths and heaters and toilets and all those sorts

of things and they won't be...wholesale sales tax will disappear

under the new system.

MITCHELL:

Of course, there's not much doubt consumers are paying more

all the way along the line, isn't there?

PRIME MINISTER:

Well, we worked out, right across the board, Neil, that the price

increase is an average of 1.9 per cent. Now, in some cases it's

higher, in other cases it's lower.

MITCHELL:

Sure. But I'm looking at that again, at the table on page

158, the impact of the tax reform on industry and how the industry

cost goes down and the impact on consumer prices go up. And that

shows it pretty clearly. And [inaudible] industry cost down 3.4,

the consumer up 4.4 and there's a 4.5 per cent increase across

the board.

PRIME MINISTER:

Yes, but you get a tax cut. And over and above all the impact of

the GST you get a tax cut and anything makes business operate more

efficiently and more economically has got to be good for the country.

I mean, the end gain in all of this is a more prosperous, a stronger

growing and overall stronger Australia. I mean, the aim of a tax

reform is surely an aggregate national aim to build a stronger and

a more economically viable Australia. And the fact that we do have

an Asian economic downturn, that you mentioned a few minutes ago,

is an added reason for reform, it's not a reason to postpone

reform.

MITCHELL:

You don't agree that it makes the whole package a bit fragile.

PRIME MINISTER:

Fragile!

MITCHELL:

Well, the Asian...the possibility of an Asian economic downturn

and other economic problems in this country, we know we're

not headed into a great period of prosperity...

PRIME MINISTER:

But Neil, it's...

MITCHELL:

[Inaudible]

PRIME MINISTER:

But Neil, it is precisely because of those challenges we must now

reform. If we put the reform off yet again, as Mr Beazley wants

us to do and others want us to do, we'll be weaker. I mean,

why is Japan in trouble now? Because Japan, eight or nine years,

refused to undertake fundamental reform of its banking system. Japan,

eight or nine years ago, was seen as the second most powerful economy

in the world. It is now seen as being in difficulty. Why? Because

it put off reform. It was loaded with people who had the attitude

equivalent to Mr Beazley who's saying: no, don't do it

now, it's too difficult, put it off. I mean, you can't

do that. You have a responsibility in government to undertake the

reforms, to do the things that are necessary to strengthen your

country for the future and that is why I'm so committed to

this.

MITCHELL:

I would like to take some calls in a moment. Another quick question

first on the facts. I mean, $1.6 billion is really the amount that

will not be coming out the bank, isn't that right – something

like that, on the FID and tax?

PRIME MINISTER:

Oh yes, well that is, I mean, that's one of the beneficial

offsets for consumers.

MITCHELL:

The Treasurer, Mr Costello, has been pretty critical of the banks

in the past [inaudible]. Can we trust the banks to do the right

thing?

PRIME MINISTER:

Well, the best way to make sure the banks do the right thing is

to have more competition. And the reason...

MITCHELL:

[Inaudible] competition and they're still screwing people...

PRIME MINISTER:

Oh, but hang on, interest rates now are lower than they've

been for 30 years.

MITCHELL:

But bank charges are higher.

PRIME MINISTER:

But Neil, Neil, the net position of a homebuyer and a small businessman

now is better than it's been, interest rate wise and bank wise,

than it's been for 30 years.

MITCHELL:

Is there a mechanism to ensure the banks don't just pocket

the $1.6 billion?

PRIME MINISTER:

Neil, we're going to give special powers to the Competition

Commission and there'll be fines of up to $10 million for people

who don't pass on offsetting indirect tax cuts.

MITCHELL:

So we've got to keep a close watch on the banks.

PRIME MINISTER:

Well, you've got to keep a close watch on everybody. But a

lot of people in the business community are fundamentally very honest

and they'll try and do the right thing. There are some who

aren't and we'll have somebody there to give them a whack

if they don't.

MITCHELL:

We'll take some calls, [inaudible] go ahead please.

CALLER:

Oh, hello, excuse me, I'm very nervous.

PRIME MINISTER:

Don't be nervous please, so am I.

CALLER:

I find it very...what prompted me to ring was that when Mr Howard

says that the whole big thing of the GST is that it will stop the

tax cheats. From what I saw last night, and I can only go by what

so far from what I've seen, is that the black economy is actually

going to grow.

PRIME MINISTER:

No, it won't.

CALLER:

Now, the example that they showed last night was a cleaner. You

have a cleaner who cleans homes, has cash in hand, puts on the GST

when she's doing the cleaning, basically she has the cash in

hand and she basically has the extra GST and she doesn't pass

it on to the Government.

MITCHELL:

No, she doesn't declare it...

CALLER:

That's right. She doesn't declare it. Cash in hand is

cash in hand – [inaudible] you will not find it...what they

said last night was that in New Zealand, in Canada and, I believe,

in Europe, the black economy has actually grown.

PRIME MINISTER:

Well, let's say, for example, that that cleaner you're

talking about is operating entirely in the cash economy. Now, at

least under a GST when that cleaner goes and buys a restaurant meal,

they'll have to pay some GST. And for the first time in their

lives they'll be paying, in relation to that particular service,

a bit of tax.

MITCHELL:

[Inaudible]

PRIME MINISTER:

Well, they have, yeah, I know, but because it's br

Transcript 10657