E&OE.............................................................................................
Well, thank you very much to John Olsen, the Premier of South Australia,
to your wife, Julie, to Martin Cameron, the President of the South
Australian Division, to my many Federal and State parliamentary colleagues,
ladies and gentlemen.
I am delighted to be amongst you on the first day of a bit of a trip
around Australia, talking about, explaining and answering questions
about the plan that was unveiled yesterday. I thank you most warmly,
John for your words of support. I am very proud of many things in
the tax plan, and one of the things of which I am particularly proud
is that we have after decades of rhetoric on the subject, we have
at last done something which will be of lasting and enduring value
in improving the balance of Commonwealth / State financial relations.
It's been around for years. It's dogged both sides of politics.
It has produced some of the less edifying political exchanges that
the Australian people have had to put up with over the years, and
at long last we've devised a plan and an approach that will give
to all of the States of Australia a tax that gives them the capacity
because of the growth in the economy to finance the things for which
they constitutionally responsible.
I think there is a degree of historic symbolism in the fact that in
the one week we have announced that there will be a seventh state
for a new century and that we have delivered a tax plan that, in so
many ways, will help to revitalise the Australian Federation.
I would like, ladies and gentlemen, for this tax plan not to be seen
in isolation. I don't want it to be seen as some kind of aberration
or abstraction, but rather I want it to be seen as the next logical,
albeit, very significant step that has to be taken in order to strengthen
the Australian economy. Some people say to me, things are difficult
in Asia, the world's a bit unsettled economically, Japan is going
through difficulty, other countries are going through difficulty,
this isn't the time to be embracing fundamental reform. Can I
say to those people, that they couldn't be more wrong. It is
because of what is happening in the Asian-Pacific region, that it
is all the more necessary that we go the next step, we travel the
additional distance that is needed to strengthen the Australian economy.
Over the last two-and-a-half years, we have done a number of quite
major things to strengthen and protect the Australian economy. We
inherited budget deficit of $10.5 billion, we put it into surplus
one year ahead of time. We are now very much back in the black. We
are now able to say that in the period of two years we have turned
that into a surplus. We have delivered the lowest interest rates that
Australia has had for thirty years. We have generated 300,000 new
jobs in just over two years. We have the lowest inflation rate in
the OECD area, we have a very high level of business investment. And
there are many other economic achievements of which I could speak.
But I mention those things very briefly because they provide the context
for what we have done in relation to taxation. Taxation is part of
that economic continuum. It's not something that is unrelated
to what we have done in other areas. It's all part of a steady
measured plan to strengthen and make modern the Australian economy,
to equip the Australian economy for the 21st century.
Now, I would be the last person in Australia to in any way under-sell
or under-describe the scale of the taxation plan that was unveiled
yesterday. It is, without argument, the most comprehensive reform
proposed to the Australian taxation system since World War II. It
is built upon a belief that we need a modern taxation system for the
21st century. It is not just a goods and services tax,
although that's an element. It's not just a revamping of
the Commonwealth / State financial relations, although that is an
element. It does not just involved major reductions in personal income
tax, that is also an element. But when you put it all together it
represents as a plan the investing in the Australian community of
an enormous amount of additional incentive to not only work harder
but to save and to invest.
Let me quote just one example of what I mean by that. You read a lot
in the newspapers of a thing called bracket creep. Now bracket creep
is where you earn a bit more but because of inflation you get sucked
into a higher tax bracket. But one of the particular features of this
tax package, is that between the income of $20,000 a year and the
income of $50,000 a year, and let me remind this audience that 80
per cent of wage and salary earners in Australia are at or below $50,000
a year, so when you talk about $50,000 a year, you are talking about
the overwhelming bulk of our fellow Australians. I think it's
important to keep these proportionalities in mind.
Now under this plan, you will be able to pass from $20,000 a year
to $50,000 a year and that would be the experience of the great bulk
of Australians during their working lives, and you won't go into
a higher tax bracket. Because what we have done is to introduce what
is effectively a marginal rate of 30 cents in the dollar for everybody
earning up to $50,000. Now that may not mean much to some people,
but can I say in terms of incentive it means an enormous amount to
the great bulk of our fellow Australians. How often do you hear the
complaint from some of your employees that it's not worth doing
some extra overtime because the tax man takes half of it. But what
you can now say to him or her that the tax man will only tax 30 cents
at most if the top income is over $50,000.
Now, I dragged that out of the myriad detail of the package to drive
home the point that this is very much a taxation reform for middle
Australia. We have devised tax scales for families for middle Australia
and for the Australian battlers. And I am quite unashamed about that.
Because they are the people who need help. They are the people who
deserve reassurance and they are the people who can be easily frightened
by a dishonest fear campaign about the operation of the goods and
services tax.
I know that in an audience such as this, I probably don't need
to extol the fundamental virtues for business of a goods and services
tax. But let me nonetheless remind you of some of the benefits of
it that are perhaps over looked because they're taken for granted.
I mean every single business operator in Australia because of the
way in which a GST operates will find that the cost of fuel will fall
by 7 cents a litre, because the way we've structured the fuel
taxes is that you'll reduce the excise on fuel by the necessary
amount to allow in the 10 per cent GST so that there is no increase
in the pump price for any person who purchases fuel. And because the
GST is fully rebatable on your business inputs, the net effect of
that, of course is, that you end up that your fuel, and this has got
nothing to do with your fuel concessions which I will come to in a
moment, but because of the way in which the system works, you end
up with a 7 cent reduction a litre in a the cost of all the fuel that
is used.
We have calculated that the introduction of the new system will reduce
the operating costs of Australian business by about $10,000 million
a year because of your capacity to recover tax payed on business inputs.
We've also calculated that it is going to reduce the cost of
exports by in the order of $4.5 billion a year. Now at a time when
Australia must more than ever trade successfully abroad, I can't
think of a more beneficial generic gift to the Australian economy
than a $4.5 billion reduction in the costs of burdening exporters.
We calculated the overall cost reduction for Australian business will
be in the order of 3.5 per cent. We believe that there are very significant
cash flow benefits, particularly for small and medium sized firm.
Any firm with a turnover of less than $20 million a year will be only
required to remit on a three monthly basis. And that will represent
on average that the amount of the GST collected by those firms will
be held on an interest free basis for a period on average of 66 days.
Now that does represent, particularly when compared with the existing
arrangements in relation to wholesales sales tax, which have frequently
been criticised, that represents a very significant improvement so
far as the cash flow situation is concerned.
There will, of course, be a one off price impact of the introduction
of the goods and services tax. Some prices will go up, some will go
down. A South Australian audience will know that one of the important
prices for Australians that will go down, will be the price of the
family motor car. And that is certainly going to fall very significantly.
And there will be transitional measures introduced so that the abrupt
drop in the price of things like cars will not occur so that there
will be an adverse effect, expectation wise, in the operations of
that industry. And I think the transitional arrangements that we're
going to propose in that area will be of very, very considerable benefit.
Ladies and gentlemen, this is one of those once in a lifetime opportunities
that a Prime Minister or a government has to put down a plan that
has a long-term, visionary, positive impact for the benefit of the
country. And the greatest enthusiasm I have for this plan, the greatest
passion I have for it, the greatest commitment I have for it, is not
born out of a narrow political context, it is born out of a deep personal
belief that if this plan can win the support and the approval of the
Australian people, it will be of lasting benefit and it will deliver
lasting improvement to our entire nation.
And that is why I ask you to give it your very strong and your very
active support. Of course it is a mixture of economic vision, of economic
reform and economic improvement and political judgement. There has
never been a successful reform plan put to the Australian people or
any other country in the democratic world that isn't a mixture
of the two. Anybody who tries to sell pure economic theory is doomed
to rejection. And anybody who simply operates on the basis of political
advantage and political expediency deserves to be repudiated by the
public. And what you need is a sensible amalgam of the two.
And what I think, and I direct these remarks particularly to a Liberal
supporting audience, and what we now have on the Australian political
scene, we have a government, a Coalition Government, that has been
willing to tackle some of the fundamental areas that have needed change.
We've encountered some barriers along the way. We've encountered
opposition. We have been grievously hamstrung by the fact that we
don't control the Senate. We have had the Labor Party and the
Australian Democrats and others in the Senate throwing dirt in the
face of the Australian people in terms of rejecting for which they
voted at the last election. But despite that we have continued on
our reform path. And the greatest example of that reform path, is
of course the plan that was unveiled yesterday. And the response of
the Opposition has even been by the standards of automatic opposition
in Australian political history, particularly pathetic and particularly
negative. I thought Mr Beazley's response yesterday was even
uninspired in its negativism. To say that something was the most unfair
thing that has ever been dumped on the Australian public, when even
some of the Government's other strident critics have at least
been willing to acknowledge that there is some merit in it was a,
I think, a particularly pathetic demonstration of automatic knee-jerk
opposition from the Opposition.
He knows, Gareth Evans knows. The former Labor Prime Minister, Mr
Keating knew, Mr Hawke knew. Anybody who has had any acquaintance
with the way this country operates in Government knows that we can't
go on forever with the existing taxation system. And sooner or later
we have got to change it. And how better than to try and change it
than from government. How better to do it than to lay the plan out
before the election, to involve people in it, to involve the States,
to bring them into the process, to offer them part of the action and
part of the reform and part of the change and to involve the entire
Australian community in the process and government is, in the end,
about taking the right decisions for the future. It is not just about
staying in government, comforting and nice as that may be, and much
in all as we'd like it to occur, in the end you are elected to
take decisions that are good for the country's future and that's
what we've tried to do.
When we came into office we took some decisions in getting the
budget back into balance which some people didn't like. But I'm
glad, I really am glad we took all of those decisions, every last
one of them, because given what has happened in Asia I'd rather
be in the black a year ahead of time than lagging behind against what
is now occurring.is what we've tried to do.
When we came into office we took some decisions in getting the budget
back into balance which some people didn't like. But I'm
glad, I really am glad we took all of those decisions, every last
one of them, because given what has happened in Asia I'd rather
be in the black a year ahead of time than lagging behind against what
is now occurring. Yet, if we had listened to Mr Beazley, we'd
have read some of our press critics and listened to them and listened
to some others in the community, we would have soft pedalled on getting
the budget back into surplus. I think if we'd have done that
we'd have now been more vulnerable and more exposed to what has
happened in the Asia-Pacific region.
And that is why it's so important that we push ahead with this
taxation plan. You can't muck around if you're going to
have reform. People argued we should have left more things out. The
old dictum about taxation is that if you're going to change it,
the broader the base the lower the rate. If you start leaving food
out, then somebody will want clothing left out. If you leave that
out, you'll want something else left out and then it really isn't
worth doing at all. And the best way to deal with low income earners
in the Australian community is to give them adequate compensation
through the social security and the taxation system and that is what
we've done because one of the many outstanding elements of this
package is that we have embraced some quite fundamental reform of
the social security system. We have given low income earners more
incentive to work rather than to stay on benefits. We have altered
the taper rates, we've increased the levels at which welfare
benefits begin to phase out, because under the existing arrangements
there are some family groupings who find it hardly worthwhile being
in work because the level of social security benefits are so high
and those sorts of incentives to stay out of the workforce are bad
policy and they're bad for our society.
So it's a plan, ladies and gentlemen, which is not just about
taxation. It certainly not a plan which is just about a goods and
services tax. It fundamentally changes the way our taxation system
operates. It is of enormous ongoing benefit to the business community,
it will operate more efficiently and more fairly than the present
system, it does contain major personal tax cuts and they are quite
deliberately skewed in favour of those who have the responsibility
of raising children and I make no apology for that, in fact, it's
one of the proud features so far as I am concerned, of this policy.
It also brings back something that many Australians believe should
never have gone and that is for most Australians effective full tax
deductibility of private health insurance premiums. And that measure
is available free of income tests and anybody, irrespective of income,
will be able to claim either through their tax system or by way of
a direct payment from the government 30 per cent of their health insurance
premiums.
And the final thing that I'd particularly like to mention is,
of course, that this plan is of special benefit, not in an unreasonable
way, but quite importantly, given the significance of it to the national
economy, this plan is of particular benefit to the bush or country
Australia or rural Australia or whatever definition one might like
to use because the changes that we propose in the area of excise on
diesel, not only have we maintained and slightly extended the full
rebate in relation to off-road use of diesel, but we have also introduced
what is effectively a reduction of 25 cents a litre from 43 down to
18 cents a litre in relation to heavy transport and rail use of diesel
and when you combine that with the fact that every business in Australia
will be able to buy all of their fuel effectively 7 cents a litre
cheaper, it all adds up to something like a $3.5 billion reduction
in fuel costs throughout Australia.
Now, not surprisingly, that's a very special benefit to rural
Australia and deservedly so, because the cost of transportation bears
very heavily on people who live in the non metropolitan areas of Australia
and I said last night, and I will repeat it here today, that I can't
wait for Monday to come when I can get to Queensland, and I can start
pointing out to the people of Queensland which is not only
a large State but also the most decentralised State in Australia
that in relative terms it will probably gain more and the people of
Queensland will gain more from that diesel fuel change than any other
part of Australia.
And how on earth the new Premier of Queensland, Mr Beattie, can keep
a straight face in opposing the government's plan is completely
beyond me.
My friends, this has been a very important week in the life of the
government. It's been a week in which the government has kept
face with the commitment that I made on its behalf when it was elected
and that is that we would govern for all Australians. Only the blinkered
and the mean-minded and those of narrow understanding could possibly
argue that the tax package delivered yesterday was a package for the
rich or a package for the privileged.
It was a plan and a package for all Australians. First and foremost,
it's given to the country the prospect and the hope of a taxation
arrangement that will boost the economic growth of the country and
generate more jobs. It's offered the Australian people a tax
plan for the 21st century. It proposes to sweep away a
ramshackle, unfair, inefficient, lopsided indirect tax system and
replace it with a modern, comprehensive one.
It offers the biggest personal tax cuts in decades. It offers a radical
and beneficial overhaul of Commonwealth/State relations and will at
long last deliver to the States of the Australian federation an arrangement
to which they have long been entitled, but equally long denied.
And most importantly of all, it offers to the Australian people the
next necessary building block in further strengthening our economy
against the difficult years that lie ahead, particularly in our part
of the world.
It is a comprehensive plan. It's an integrated plan, it's
not one that can be subject to a process of put and take which undoubtedly
our opponents will endeavour to do. I don't underestimate the
challenge ahead of me and ahead of the government in explaining and
advocating and winning support for the plan. It's had a good
response of course it has. It's early days and all of
us who believe in it and all of us who want tax reform for Australia,
let me say one thing to you. This is the best opportunity this country
has had for fundamental tax reform at any time since I have been in
politics, and that goes back to 1974.
I saw attempts in the last 1970's I was part of them.
I was part of attempts in the early 1980's, I watched the former
Labor government try it in the mid 1980's, I was part of the
Opposition in 1993 that tried it then. Now all of those attempts have
failed. This attempt, I believe will succeed. It will succeed because
I think the economic and political balance in this plan is better
than any that have been offered in the past. It will succeed because
it is being offered from the vantage point of government. It will
succeed because I think there is a greater understanding in the Australian
community now that we do need tax reform and I think it will also
succeed because there is a sense in the Australian community if we
don't achieve it this time, it's going to allude us in the
lifetime of most people in this room.
But having said all of those things, it remains a very very big challenge.
And if you want it, if the business community of Australia wants it
and supports it, we need your help energetically to go out and advocate
the cause of taxation reform. Because it does matter to all of you,
you all benefit but most importantly, our country benefits and the
great single justification for this plan above all other plans is
that it will be good for the entire nation. I have always believed
that if you can persuade the Australian people of two things in relation
to a reform the first is that it's good for Australia
and the second thing is that it's fair to them then they
will embrace it and they will support it.
And I believe that this plan meets those two criteria and I believe
it will be good for Australia, it will be fair to all Australians
and I ask you to give it your very strong and active support. Thank
you.
A couple of questions. Any questions? Yes?
QUESTION 1:
(inaudible)
PRIME MINISTER:
He wants to know how I am going to make him pass on the price cuts,
is that right? Well, now that you've tempted me, I, well we have,
there are a number of ways in which that will occur. The first and
most obvious one is that when this new plan comes into operation,
there will be a very finely-tuned and heightened sense of individual
scrutiny on the part of every consumer in Australia. They will all
know, they will have their lists and if I know the media of Australia,
they will publish before and after prices. I think you will find the
Tiser' and the Telegraph' and
the Melbourne Sun' will have lists. One on the 30th
of June 2000, showing the prices of all the things you buy pre-GST
and the prices of what they ought to be afterwards and I think a lot
of Australians will carry those lists around, that's the first
comment I'd make. Second comment I make is that the natural forces
of competition will work to ensure it happens and I hear a lot of
men and women in business tell me these days that the competitive
pressures have never been as strong. I understand that. And thirdly,
we are going to invite the ACCC to adopt a surveillance role and to
invest it with some authority in relation to that to ensure that the
full measure of the changes that ought to occur, do in fact occur.
Now, there will be some in the community who will try and behave in
an unscrupulous fashion, they won't have any sympathy from us,
they won't h