FAINE:
John Howard, the Prime Minister of Australia good morning to you
and welcome to 3LO.
PRIME MINISTER:
Good morning, how are you, very good to be here.
FAINE:
I am exceptionally well. US President, Bill Clinton, has interrupted
his holidays to report to the nation on a military strike against
terrorist bases in Afghanistan and Sudan. You would support the
American action 100% Prime Minister I presume?
PRIME MINISTER:
My advice is that the strike was based upon very strong, I think
he may have used the expression overwhelmingly or highly persuasive,
evidence that the targets against which the strikes were made were,
in fact, operational bases or headquarters of the people responsible
for the embassy outrages in Kenya and Tanzania. Now, if that is
the case then the Americans are quite justified in doing what they
have done. Now, I don't, at this stage, have a separate intelligence
briefing but if that is the case then the American action is justified.
Any country is entitled to act in self-defence and to embark upon
a retaliatory strike where there is a clear attack upon its own
citizens. And the bomb outrages in those two African countries,
more than a week ago, were indiscriminate acts of murder and terrorism.
They were clearly directed against United States citizens. Tragically
also they involved the lives of Kenyan and Tanzanian citizens, so
it wasn't only the Americans who suffered. In those circumstances
I think any country is entitled to take retaliatory action and that
is what the Americans have done.
FAINE:
There is a risk of escalation, of course, and a constant [inaudible].
PRIME MINISTER:
Well, there is always a risk if you do anything, but the alternative
to doing nothing is to allow terrorism to succeed and no self-respecting
country, whether it is the most powerful military country in the
world, the United States, or indeed any other country can send a
signal to the murderers and the terrorists of the world that they
can bomb and maim and murder at will. Now it is difficult, we all
wish that strikes of this kind were not necessary. I don't
enjoy it, I don't think anybody does. Inevitably other people
can be killed and injured and maimed. I think the whole circumstance
is appalling but you have got to remember where it started and the
Americans have been subjected to a large number of indiscriminate
attacks and they have a perfect right to defend themselves and if
they don't defend themselves, if they don't send a signal
to terrorists around the world, if they are not prepared to lie
down and cop it then they are inviting not only a loss of face in
their world leadership but they are also inviting a repetition of
the appalling deeds that were committed 10 days ago. The response
to terrorism is never to facilitate the objectives of the terrorists.
The same thing applies in Northern Ireland where the first real
hope of peace for 30 years has obviously been subjected to the most
violent sabotage attempt by the bomb that was detonated in Omagh.
Now, that was an appalling deed. The best response to that, of course,
is not only to catch the criminals responsible for it but also for
those men and women of goodwill on both the Catholic and the Protestant
side in Northern Ireland to press ahead with the peace process.
And the most encouraging thing to me out of what has happened in
Northern Ireland in a terrible event - dreadful - is that both sides
of the debate in Northern Ireland are saying we have to still go
ahead with the peace process. And I applaud both the British and
the Irish Prime Ministers for having done that.
FAINE:
Proof that the terrorists are wrong. On the domestic front Prime
Minister, on the selling of the Goods and Services tax and at the
moment it seems it's a bit like wrestling with an octopus.
You nail one arm down and suddenly another tentacle curls up and
grabs you by the throat.
PRIME MINISTER:
Well look, can I just say a couple of things about the explanation
of the tax plan. I think it has gone very well. This is a gutsy,
fair plan to fix the tax system that everybody knows needs fixing.
I mean everybody knows we need tax reform and everybody knows that
you can't have tax relief without tax reform. You can't
say to people: we'll give you a tax cut but we won't do
anything to try and fix the tax system. Now what we have had the
courage to do is to say to the Australian public: we are going to
put forward a comprehensive plan to fix the taxation system. Now,
you are gong to have people out there trying, not in the name of
fairness, really in the name of political advantage, like the ACTU
and sections of the Labor Party and some people in other sectors
who have personal political axes to grind.....
FAINE:
The church?
PRIME MINISTER:
No, no, well I am glad you said the churches because buried away
on page four, astonishingly page four of The Australian at the bottom
of an article on the attitude of the churches and the welfare sector
to the GST is the following statement. "There is no one Catholic
position on an issue as complex as taxation", he said. "Tax
reform is needed, the system is inequitable and my personal point
is somehow the tax base has got to be broadened if we are going
to have enough money to provide the welfare services that are needed
in a modern, civilised society." Now they were the words of
Archbishop George Pell the Catholic Archbishop of Melbourne and
I think they are a very accurate statement. Of course there is no
one Catholic position. There's no one Christian position, people
of goodwill will have different views. And what George Pell has
done, what his grace has done is to nail, with his great authority
as the senior Catholic prelate of this city, nail with his authority
the idea that there is a single Catholic position in opposition
or indeed in support of the Government's tax reform plan. And
I'll go further, the Reverend Tim Costello of the Baptist church
last night on the 7:30 Report widely praised the Government's
plan. There are sections of the Salvation Army apparently and there
is no organisation in Australia more admired for the work it does
for the downtrodden and the poor in this country. I mean what they
are saying, they are questioning the capacity of ACOSS in the statement
it made a couple of days ago to speak for all sections of the welfare
sector. Now, the point I am simply making is that there is no one
single church position. Some church men and women are against the
Government's plan. Some church men and women are in favour
of it but it is absolutely wrong, as the Catholic Archbishop of
Melbourne has made quite clear, for people to run around representing
one position as the one true Catholic or Christian position. There
is none, and I think as this debate goes on you will have men and
women of goodwill from the churches arguing the toss and that is
as it should be. I do not want to see a situation, I don't
think anybody does, where the Catholic church or the Anglican church
or the Uniting church is seen as sort of saying: well this is the
churches point of view and unless you support it you are disobeying
the church. I'm sure nobody wants that.
FAINE:
But it's not just the welfare lobby and the churches, business
representatives also are now starting to say they are not sure the
package offers them everything that they were promised. The Australian
Business Chamber and the Heavy Engineering Manufacturers' Association
have said they don't accept that business will be better off
with a lower business tax rate.
PRIME MINISTER:
But we are not in the business, John, of placating business on
everything.
FAINE:
But you can end up with no one happy.
PRIME MINISTER:
No, no, no, you will end up with the national interest served.
And the purpose of this tax plan is to strengthen Australia. And
the biggest feature of this tax plan, the most commendable feature
of this tax reform plan, is that it is good overall for the Australian
economy. And why it is good is that it reduces the costs of producing
things in this country. Now, it may not suit in all its particularity
one section of the business community. One section of the business
community thinks that the best way to have taxation arrangements
is to have, say, depreciation. Another section of the business community,
which is not in manufacturing but which is in service industries,
says that it would rather have in lieu of depreciation allowances,
which they can't utilise, they'd rather have a lower tax
rate. So what we have said is that we will get the business community
together under the chairmanship of John Ralph, the former Chairman
of CRA, to work together over the next 18 months to determine what
is the best outcome. Now, we have got 18 months or more to do that.
Now, we made this clear, we made this clear last Thursday, we said
last Thursday that we would announce a number of decisions affecting
the business community. As to the rest there would be a process
of review and consultation shared by Mr Ralph.....
FAINE:
You don't have 18 months before you go to the people though,
you have got a matter of weeks or months before......
PRIME MINISTER:
Well we are going to the people with a plan that involves a $13
billion reduction in personal income tax, a plan that will reduce
business operating cost by $10.5 billion. It will provide the most
effective far-reaching reform of the fuel tax system in this country,
which will be of enormous benefit to the rural sector because this
is a big country. And we are also going to take $4.5 billion of
costs off the backs of the export sector. The most compellingly
attractive feature of this package is that it reduces the cost of
doing business in this country and will, therefore, generate more
jobs and is, therefore, very good overall for the Australian economy.
So, I don't express any surprise at all that individual sections
are saying: well look, from our personal point of view we would
have rather you had gone further here or not so far here. But what
really matters is out there the Australian community is getting
the tax reform it's desperately needed for 20 years.
FAINE:
You'll listen to what the business community say, you'll
listen to what the welfare and church groups have to say, you'll
listen to what the aged care people have to say, you'll take
all their needs into account? Because if you do John Hewson in the
Financial Review today says that your tax reform package is as good
as dead.
PRIME MINISTER:
Well look leave John Hewson out of it. I think....we'll just
leave....I don't intend to comment on his views. We have....
FAINE:
But his advice is if you tinker with it then you end up having
a message that you can't sell.
PRIME MINISTER:
.....Just let me finish please. We have laid down a plan. We said
in that plan that in relation to certain things we would consult
people. For example, the structure of the business tax system, we
said we would consult about that and we will do that. Obviously
there are areas in a plan like this where, from the very beginning,
you say you are prepared to engage in fine tuning. But that doesn't
mean that you are going to make major changes. I mean the whole
question, for example, of the GST on drugs, medicines, we made it
perfectly clear that prescription ones were GST free. We said in
relation to the non-prescription ones that there was obviously a
disposition to have a process of consultation over the next couple
of years and I think that is a very sensible thing to do. I mean
it seems that you are dammed if you do and you are dammed if you
don't. I mean people want tax reform, they want the Government
to say: this is how it is going to be but they also want the Government
to consult. And when you try and be faithful to both of those things
they say that you are backing down. I mean this nonsense this morning
about the backdown in relation to nursing homes, there's no
backdown. Position that was stated yesterday by Mr Costello and
Mr Smith was always the position. The same principle applies in
relation to the drugs. I mean we said in the document that there'd
be a certain procedure followed.....
FAINE:
For pharmaceuticals?
PRIME MINISTER:
Yes, and then we said we would have a consultative process but
I hear somebody on AM this morning saying: oh well that's not
good enough, we've got to know now. Well if you have got to
know now, don't ask for consultation. I mean you can't
simultaneously say to the Government: will you talk to us but we
want to know now what your position is. I mean that makes a mockery
of the whole process of consultation. I mean let's have a little
bit of sense and balance. I mean let's not trivialise something
that is in the long-term interests of this country. Everybody knows
the present tax system needs to be changed. We have made the gutsiest,
thorough-going, comprehensive, fair attempt to fix that tax system
of any side of politics in Australia since World War II. And I think
it's too important to be trivialised by point scoring. If people
want information about how a complex change like this operates,
the Government will provide it. In areas we have designated we will
only be too happy to have consultation.
FAINE:
The Labor Party are proposing to release their version of tax reform
some time in the next week. It's all very delicate, the timing
of it, it's all very strategic of course. It's quite possible
and conceivable and I ask you to respond on this, we can speculate,
that the Labor Party can offer personal tax cuts without a GST because
your GST is almost separate fiscally from the tax cuts.
PRIME MINISTER:
Well, John, there is no doubt in my mind that what the Labor Party
will do is promise to cut personal income tax and say you can have
it without a GST. I am sure they will do that. That's what
they did in 1993. That's what Mr Keating and Mr Beazley did
in 1993.
FAINE:
It's a pretty big promise.
PRIME MINISTER:
They got re-elected didn't they and do you know what happened?
The tax cuts disappeared and the indirect taxes went up without
compensation. There was no compensation to the nursing home residents
in 1993 when Mr Keating and Mr Beazley put up the indirect taxes.
There was no compensation to the pensioners. There was no thought
for the battlers then, there was no outcry from some people who
are now complaining about what we're doing back then. I mean
I am certain that the Labor Party will promise personal tax cuts
without tax reform. The Labor Party will try and do it the easy,
lazy way. They will say: look, you can have tax cuts, you can have
tax relief, you can have a few dollars in your pocket, but we won't
change the system.
FAINE:
Well it worked last time, why wouldn't they try it again?
PRIME MINISTER:
Perhaps in the end, of course, that will be decided by the Australian
public. But I will be saying to the Australian public that we are
not trying to fool you. We don't believe you can have lasting
tax relief without tax reform. Because in the end if you don't
repair the indirect tax base you are going to run out of resources
to support those things that need support. I mean what is happening
at the moment is that the system is crumbling and unless the foundations
are reinforced, unless there's fundamental change, then the
system will break down. And if the system breaks down the poor and
the needy will suffer more than the wealthy and the affluent. That
always happens. And the Labor Party, I am certain, will try the
old tax bribe technique - here you are, here's some dollars
but don't worry about the reform that can wait to another day.
Now they did that in 93, it worked in 93, they fooled
the Australian people in 93. The Australian people paid very
dearly for it, particularly the poor immediately after the election
in 1993. So I'll certainly await the Beazley promises with
great interest. But my guess is that in 1998 you are going to get
a re-run of 1993 with the same consequences if Labor wins the next
election.
FAINE:
So the election will be this year?
PRIME MINISTER:
The election may be this year. But the promise of Mr Beazley will
be made this year and that's what I was referring to when I
said 1998.
FAINE:
Do you think the media have given you a fair run on your tax reform
package?
PRIME MINISTER:
I think it varies. I think there is an obsessive sniping in relation
to issues and a play on words. I mean this talk of backdown when
you are merely confirming something that is already there, it's
all intended to try and create an impression of things going wrong.
I think we have done remarkably well. I mean this is a huge, complex
package and I defy anybody to say that, you know, overnight you
can absorb every single detail. Of course it takes explanation but
if people don't want reform, if they don't want a complex
package, then they can't have reform. I mean go back to what
I said earlier, you are dammed if you do and you are dammed if you
don't. If you attempt to reform the system people say: oh you
are politically crazy, you are attempting the impossible, look it's
unravelling already.....
FAINE:
And surely Prime Minister, politics is the art of achieving?
PRIME MINISTER:
Well it is also the art of leading, it's both. I mean if we
are always pragmatic. If we always say: well I won't do that
because it is too difficult that breeds the cynicism. You really
do occasionally have to have a go even if there are personal political
risks, and that's what I am doing. There may be personal political
risks for me but I believe in my heart that this plan is good long-term
for all Australians and that is why I am so dedicated to it.
FAINE:
Since last Thursday afternoon when you released the package, I've
spoken to every small business operator with whom I've conducted
a transaction, whether it's the newsagent or the man who repaired
my car or the little Malaysian restaurant where we went for dinner
the other night. Everyone of those small business operators I've
spoken to have had the same response and they are your core constituency
and they all say I don't want to become the government's
tax collector.
PRIME MINISTER:
Well that's interesting you should say that. I don't
for a moment doubt that that has been your anecdotal experience.
The reaction that I'm getting from small business has been
terrific. I was in Townsville two days ago and I addressed a meeting
of the Townsville Chamber of Commerce, there were 620 people at
that meeting, that function. Now Townsville is a quintessential
small to medium size business city, it's a very thriving city.
Small business is the backbone of North Queensland and the Chamber
of Commerce people said it was the biggest crowd they have ever
had at a Chamber of Commerce gathering in that town. They were overwhelming
supportive and this included restaurateurs, chiropractors, tour
operators, solicitors, people running other kinds of retail shops,
people running service stations, it was the whole gamut. That's
what you get in a large provincial centre such as Townsville and
the overwhelming message I got and it was in the preamble to some
of their questions was well we personally would rather you have
done this or that but we do recognise that this is good for the
country. If we are to have some kind of long term reform then we
have to accept that we can't personally get everything that
we would like and I was very, very heartened by that response. I
regarded that as a marvellous bell whether of the attitude of the
small business community of Australia as I moved around.
Now can I just say that for small businesses generally this system
will be much better than the present one. Now so many small business
men complain to me about the fact that the wholesales tax system
drives them crazy in that some things are in and some things are
out. I mean, how crazy it is that you can have a taxation, a wholesale
tax system, for example, tax on pet food and toothpaste and shampoo
and soap and other soap powders, wheel barrows, lawn mowers, ladders,
garden equipment, children's toys, umbrellas, handbags and
luggage at 22%. Yet it taxes at 32% clocks, watches, TV sets, video
recorders. It taxes at 12% such things as Cadbury family blocks,
Peter's natural ice-cream, Berri orange juice and Berri cordial
and yet it doesn't....
FAINE:
No adds please....
PRIME MINISTER:
Well no ads. But it doesn't tax caviar. You can buy a family
car providing you pay the 22% wholesale sales tax but if you're
wealthy enough like three or four people in Australia to buy a Lear
jet you don't have to pay any wholesale sales tax. Now you,
you translate that into the daily, monthly, quarterly experience
of your average businessman and it drives him mad.
Now the other beauty for business of the new system is that they
will be able to get back all of the taxes they pay on their business
inputs. Now a lot of manufactures for example don't understand
how good this is for them because at the moment they say, "Look
we've got a wholesale tax exemption for manufacturing inputs",
but you don't have it in relation to say a computer which carries
a wholesales tax of I think 22%. But under this plan every single
dollar of tax paid on a business input will be fully refundable.
And something else I don't think business understands is that because
of the new arrangements with the GST, every litre of petrol you
buy for your business purposes will be 7 cents cheaper because under
the plan we're reducing the excise to the extent necessary
to let in the GST at 10% and because you can get a refund of your
GST on a business input, and petrol in a business input, per go
your petrol is 7 cents a litre cheaper.
FAINE:
All right. Prime Minister the other main complaint people have
is they fear the rate at which the GST is pegged can eventually
rise. You've built in a mechanism that you assure us is fail
safe which is that both Houses of Parliament and all the States
have to agree to rise before it can go through. But you've
also built in a mechanism where the GST revenue gathered goes back
to the States, so in a way it could be in the States interests to
agree to a rise rather than the other way around.
PRIME MINISTER:
Well, two things about that John. Firstly,....
FAINE:
They'd get more money
PRIME MINISTER:
But firstly, they won't need it because under this plan within
10 years of its operation, the States will be $25 billion better
off than they are under the existing revenue sharing arrangements.
That's the first reason.
The second reason is that you know as well as I do that trying
to get agreement amongst all of the States on anything, let alone
a tax rise, is extremely difficult.
FAINE:
Well, that's my point, they might not find it difficult to
reach agreement when they're getting more money ...
PRIME MINISTER:
Oh no, no, no, no, no, no, no ...
FAINE:
That's the one thing they'll all agree on.
PRIME MINISTER:
My point is the reverse. I mean they'll never agree on it.
The political pressure against that occurring is enormous. I mean,
John, I've been to more Premiers' Conferences than I think
anybody left alive, as a Treasurer. Well I have. I mean, I went
to six of them when I was Treasurer and I've been to four or
five of them as Prime Minister, I don't know whether anybody
else around has been to more than that. But anyway, I have been
to a lot of them and can I tell you the hardest thing in the world
is to get unanimous agreement on something. And anything as politically
charged as some suggestion from a remote part of the country that
you ought to have a tax rise I would think the Premiers would be
falling over themselves to be the first to say no, I'm against
it.
FAINE:
Four minutes to nine, a couple of other quick things beyond the
GST and tax reform if we can in the time that's remaining.
Opinion polls released overnight show that support for the One Nation
Party in Western Australia has plummeted from 22% to 8% and the
One Nation Party at the Northcote by-election in the State poll
in Victoria last weekend scored 6% including the Donkey Vote. Are
they on the decline?
PRIME MINISTER:
Well I don't count any chickens, I don't make wild claims.
I was pleased with the result in Northcote. I'm glad One Nation
did poorly in that by-election and if they're are signs that
One Nation is losing support than it is because we are doing what
I said in Western Australia three weeks ago we should do. And that
is that the best way to fight you political opponents is to offer
the Australian public something better and that is what as a government
we are doing. Rather than get into rhetorical exchanges with One
Nation or indeed anybody else, we are offering the Australian public
leadership and a plan, we're talking about the 21st century.
We're willing to say to the public, honestly you can't
have tax relief without taxation reform, so I'm hopeful that
we are being seen in a more positive light and that we are being
seen as a government that is trying to do things in the long term
interest of Australia. But I don't make any wild claims about
what might happen to One Nation or indeed anybody else. I operate
on the principle that I've always got to work hard to earn
the support and the votes of the Australian public, I'd never
take them for granted, never ever.
FAINE:
And finally John Howard we can't really pin you down on when
the election will be, it's your prerogative and you'll
tell us when you're good and ready to. Last time when you went
to the people you promised that you would reduce unemployment in
Australia. If anything it's where it was when you were elected.
We've made some increases in the number of people with a job
but the number of people without a job remains pretty static.
PRIME MINISTER:
Well John there's about 300,000 new jobs, more jobs than when
we were elected, yes. The rate is a little lower, it's not
dramatically lower. This tax plan will help because it will reduce
the cost of doing business.
FAINE:
But you must be disappointed you haven't been able ...
PRIME MINISTER:
Well, well John, John I would like to see unemployment lower. If
we had have been able to get the unfair dismissal law through the
Senate then I think that would've helped small business a lot
because there is still a lot of small businesses out there who are
intimidated by the current unfair dismissal laws against taking
on more staff. And this is something that is now just blithely overlooked.
It was one of the major things we campaigned on at the last election
for small business.
FAINE:
You'll have another go?
PRIME MINISTER:
Well we will continue to try and reform the unfair dismissal laws.
Yes we will, we'll try again, absolutely. But I say to every
small business man and woman who's listening, you know as well
as I do that if you had better unfair dismissal laws you'd
take on more staff and it's the Labor Party and the Democrats
and the Greens and others in the Senate who repeatedly have blocked
our attempts. And if we had have got the legislation through a couple
of years ago then I believe in the small business sector there would
have been a larger number of people taken on. But we're going
to try that again but it is the Labor Party and the Democrats and
the Greens and others who are blocking that in the Senate.
FAINE:
What's in your diary for October the 17th?
PRIME MINISTER:
Oh, a normal day at home.
FAINE:
Kicking a footy with the kids?
PRIME MINISTER:
Well, a normal day at home perhaps doing some reading, perhaps
even playing a game of golf.
even playing a game of golf.
FAINE:
Well I hope you find the time to at some stage John Howard, you
certainly haven't got time at the moment you're on the
road doing the hard sell on the tax reform package. Thank you for
joining us here at 3LO this morning.
PRIME MINISTER:
Thank you.
[Ends]