Subjects: Centenary of Federation London visit; tax reform
E&OE .........................
O'BRIEN:
John Howard, it seems an unfortunate accident of timing for you as the architect of the GST that you'll be celebrating federation in London at the time that the rest of Australia will be experiencing the first impact of the new tax.
PRIME MINISTER:
Well, I'm not going to London until Monday. I'll be here when it is introduced. I'll be away for about eight days. I'll be in very regular contact with Peter Costello the Treasurer. Kerry, in a sense the die is now cast. The decisions that can be taken to have an impact on the structure of the tax have already been taken and of course it will be some months I believe before the full impact is absorbed. I think we'll go through a period of probably several months before a final judgement is made, and I've certainly had that view for some time.
O'BRIEN:
I guess all those things are true but I'm thinking in terms of juxtaposition of images while invariably I'm sure even you would acknowledge a lot of people are going to get a lot of surprises in areas that they hadn't considered before. While all of that's going on there is the image of a very large number in this official party with the cost and so on, over in London partying for federation.
PRIME MINISTER:
Well, it is not partying for federation. I mean, what you forget is that Britain is the largest foreign investor in Australia. We invest more money in Britain than any other country. Australia, after France, is now the largest exporter of wine, to take but one example, into the United Kingdom. If you put all the history and any nostalgia to one side, it is an incredibly important bilateral relationship and I can't for the life of me understand why it is inappropriate for an Australian prime minister in four-and-a-quarter years of prime ministership to be paying only his second bilateral visit to the United Kingdom when in that same period of time I've been on more occasions to other countries with which we perhaps don't have such a close relationship. But I doubt I'll convince you.
O'BRIEN:
No, no it's not about convincing me, it's just about me asking the question.
PRIME MINISTER:
No, that's fair enough.
O'BRIEN:
I suppose it is the large number of people that will be around you, not just the fact that you are there, including something like 180 ceremonial troops.
PRIME MINISTER:
Well, it's not the first time we've done that. We did it in 1988 and Mr Beazley who was then Defence Minister sent them off at equivalent cost and with very great fanfare. I mean, you do need to celebrate your history and you do need to celebrate events. I mean, as somebody remarked in the paper I think this morning we were very happy to expend millions of dollars with fireworks on the beginning of the millennium. I mean, if life was just about always looking at doing things in an utterly pragmatic way and you had no commemoration and no history I think we'd be the poorer for that. Now, that's a judgement that in the end the Australian people will make. Bob Carr, the Labor Premier of New South Wales, Steve Bracks the Labor Premier of Victoria, Jim Bacon, the Labor Premier of Tasmania and Peter Beattie the Labor Premier of Queensland all agree with me.
O'BRIEN:
Right, when you first launched your push for tax reform did you know then that it would be as complicated as it is now turning out?
PRIME MINISTER:
Well, Kerry I don't know that I can honestly say I foresaw all of the complexity but I knew it would be hard. I knew it would be incredibly risky and I knew I'd take a lot of flack. I knew that the Government would go down in the polls as we introduced it and would probably stay there for a while but I was determined to do it because I believed it was the best thing for the country and I have no regrets. I feel, as I said to my colleagues at the party meeting this morning, that we have been involved in doing something that this country has needed for a quarter of a century. And if you go into public life to do things that are really going to benefit the country, then you've got to be prepared to take the flack and you've got to be realistic enough to acknowledge that you are going to go through a certain amount of pain and difficulty. And I understand that there will be transition problems, and I'm sympathetic to people and I want small business to understand in particular that we are not, and the tax office are not waiting around the corner to pounce. We want compliance, but we are not going to clobber innocent mistakes.
O'BRIEN:
Did you anticipate then that so many of your business constituents who supported the GST concept so strongly would be as worried as they seem to be now about the way it is being introduced?
PRIME MINISTER:
Well, Kerry, I don't think they are as worried as that question implies. I talk to a lot of business men and women, in fact I had a gathering last night with five or six prominent businessmen. Now, they don't represent the whole business community and they wouldn't pretend to, but there is a general view that yes it is complicated, yes we have criticisms of this or that, we wish the Government hadn't have quite done it that way, but they also acknowledge that changes were forced on us by the Labor Party and the Democrats in the Senate. I mean, they would have preferred what we took to the public exactly in 1998, but as you know, we had to make some changes and some of the complexity is a consequence of those changes. Now, it is still going to give us an infinitely better and fairer system than we have now got. It is 85% of what I originally wanted, but that is so much better than what we now have and people will find when they get the tax cuts, when the exporters get the benefits of more competitive pricing, they will find over the months ahead the benefits are really there.
O'BRIEN:
Can we just try to clear up the confusion over petrol prices? Will the price at the bowser rise as a result of the GST or not?
PRIME MINISTER:
Well Kerry the position is that what exactly happens at the weekend will be determined by a lot of things. Excise will have an impact, so will competitive pricing by the various companies and retailers. So will the price which fluctuates almost from day to day. What we have done is we have said that we'll cut the excise by 6.7 ? we believe there are cost savings of 1.5 cents a litre. We believe the companies should pass those cost savings on, they say they can't, we'll wait and see. We believe they should. And the whole basis of this reform has assumed that cost savings would be there and that those cost savings will be passed on. I mean?
O'BRIEN:
But you would acknowledge yourself that those cost savings in some instances might come quickly, in many instances as many people across a whole range of business are saying, some of those savings will not be clear for six months, twelve months, in some cases several years. Can you really expect cost savings to be passed on before the businesses themselves experience them?
PRIME MINISTER:
Well, some companies have indicated already that they are going to do that ? I'm not saying in the oil industry but other companies have. And the other point I'd make about petrol is that the strike price that we used of 90 cents a litre ? if the actual price is lower than that, well you are, you are building into the structure at the bowser, a buffer that could be anything up to 0.5 cents a litre.
O'BRIEN:
So if I understand you correctly, you can't say right now despite your promise a couple of years ago, you can't say for sure whether petrol will rise after Saturday as a result in part at least of the GST?
PRIME MINISTER:
Well Kerry what I'm saying is that the price on Saturday will be determined by a lot of things.
O'BRIEN:
Including the GST?
PRIME MINISTER:
Well, I've always acknowledged that excise has an influence on it. But the point I'd make is that we have done all we reasonably could to meet the commitments we made at the time of the election.
O'BRIEN:
You have identified small business over time as a special constituency of yours. It seems on a lot of the feedback that is coming through that they are going to bear the brunt of the impact in terms of compliance and the raft of other tax reforms that follow. Are they overreacting on that?
PRIME MINISTER:
Kerry, it depends who you talk to. I mean I talk to a lot of small business many, most of them say to me, not a problem I am ready. Most of them do. And if you look at the . . .
O'BRIEN:
And do they show, do they indicate to you that they understand that it's not just the GST? There's a whole swag of other tax reforms coming as well and if they get through next year and then there's another round coming the following year.
PRIME MINISTER:
Yes, well most of them understand that and there's ongoing debate about those, those things. But we're addressing at the moment the GST and everything associated with it and most of the small businesses I have spoken to have said, yes we had to go to seminars, yes we've got to get used to it, yes there could be some teething problems, but fundamentally they are positive and optimistic. And can I say to them again we are not in the business of clobbering people for innocent mistakes.
O'BRIEN:
So in the main they're relaxed and comfortable about this?
PRIME MINISTER:
No, I think that is, I mean it is a very clever use of language, but I think the situation is that they have got themselves ready for what is a very big change. I mean I don't underestimate the significance of it. It's the biggest tax change this country has ever had. And it will change economic life quite significantly. And it's a very important change. But I find on inquiry that most of the small businesses I talk to, that they are ready for it.
O'BRIEN:
And ready for instance for the fact that they are going to be making a lot more tax payments through next financial year than this financial year because while they Pay As You Go system catches up, in other words while they're paying tax for this year, they're also paying it for next year?
PRIME MINISTER:
Yes, because bear in mind depending on what sort of business you have, there's some cashflow advantages in the GST. I mean a lot of them are discovering that and finding it very useful.
O'BRIEN:
But in many instances there will be, also cashflow problems, won't there? Particulaly for people operating on small margins.
PRIME MINISTER:
There will be variations and I don't, I don't want any small business operator listening to this tonight to think that I regard this thing as just sort of closing one door and opening another. I know there is a process of adjustment, that's one of the reasons why we've spent a great deal of money on sending out information and holding seminars and something like 150,000 personal visitations by the Taxation Office. You know we do understand that and Kerry I can't look you in the face and say there will be absolutely no teething troubles at all, everything will work with absolute ease and smoothness ? that is unrealistic. But . . .
O'BRIEN:
Well how reassured were you given that you're saying 150,000 visits by tax officials, how reassured were you by the assessment from within the Taxation Department that one in three of these officials don't properly understand the situation themselves?
PRIME MINISTER:
Well that was long before the system had been settled. The Tax Commissioner explained that on a brother programme of yours this morning.
O'BRIEN:
So, everything's fine?
PRIME MINISTER:
No, look Kerry, no I don't trivialise the fact that people have got to grapple with complex change. I don't trivialise that. But I do say that we have tried very hard to help them to get ready. We are keen to continue to do that. We're not in the business, nor is the tax office of jumping on people who make inadvertent error. But I am passionate in my belief that when this change is bedded down it will be of enormous benefit. People will be paying lower income tax. We will have cheaper exports. We will have cheaper diesel fuel in the country by 24 cents a litre. We'll have halved the capital gains tax and companies in two years time will be paying 30 cents in the dollar company tax, small business and big business, compared with the current 36. Now they are monumental generational changes and on top of that the states will have for the first time a guaranteed source of revenue to fund the roads, hospitals, schools and police ? something they've been screaming for ever since I've been in politics and for years before.
O'BRIEN:
But when you say the tax people won't be jumping on people, you've also at the same time got this image of the ACCC being built up as super cop. And there are people in small business and various sectors of business who are saying that even before it starts there is this implication that they're going to be cheating. That every time somebody puts a price up you know people are going to be rushing to lift the phone to the ACCC and complain. Do you really think, given the full range of businesses that this is operating that the ACCC no matter how many resources you throw at them are going to be able to deal with it and deal with it fairly in every instance?
PRIME MINISTER:
Well Kerry you've got to have a balance. Most business people are honest. Most business people play the game. Most business people want to make the system work for their benefit and the nation's benefit but some may not. And you do need a watchdog. And I think the ACCC has done a very good job. And I know some businessmen have been critical of it and critical of the Chairman but I defend what he's done. There is a consumer watchdog role involved in this and I ask business to understand as in all of these things you've got to strike a fair balance.
I mean I could have avoided all of this by having done nothing. I mean I could have, like former Prime Ministers, walked away from tax reform but I didn't do that because I've know in my heart that for twenty years it's been necessary and I just didn't want to walk away from it.
O'BRIEN:
You've acknowledged the risk and the gamble of this for you, for your Government but also for you. You're the architect, you've led the way on this.
PRIME MINISTER:
Yes I am and I don't walk away from it.
O'BRIEN:
Right you don't walk away from it. So you're saying it's your anticipation that by say early next year things will have settled down. If you're wrong, if it becomes clear that there is a bigger, more ongoing backlash than you are hoping for and if as the architect you're in the gun that you, if you personally read that you have become a burden to your party and the Government over this would you sacrifice yourself for the sake of increasing your party's chances of winning the next election?
PRIME MINISTER:
Well Kerry I don't believe that that will arise. I believe that the public will see this as a hugely beneficial reform. I've always said that as far as my future is concerned that if the Liberal Party wants me to lead it to the next election I'll be very happy to do so. I owe the Liberal Party a great deal. My concern is about the future of Australia first. My political concern is about the future of the Liberal Party. My future has always been in the hands of the Australian people and in the hands of my colleagues. It's been like that ever since I became leader in 1995 and before, and that remains the case now. But nothing has changed. I am totally relaxed about that. I feel that we've reached a stage in our term of office where we are on the brink of having achieved an historic reform that even Kim Beazley and those in the Labor Party know in their hearts this country has needed for a generation and I think that's a pretty exciting thing to participate in and I believe the Australian people will support it. Whatever their judgement is, I will of course always accept it.
O'BRIEN:
Very quickly, do you rule out a Cabinet, is there likely to be a Cabinet reshuffle in the next few months?
PRIME MINISTER:
I never comment on those rumours.
O'BRIEN:
John Howard thanks very much for talking to us.
PRIME MINISTER:
Thank you Kerry.
[ends]