E&OE.........................................
JONES:
Prime Minister, good morning.
PRIME MINISTER:
Good morning Alan.
JONES:
It isn't the proposal though that you took to the electorate, is it?
PRIME MINISTER:
No, it was changed at the insistence of the Democrats and of course the Labor Party too. The Labor Party just vote against everything.
JONES:
Just on that, if I could just interrupt you there ? I hear our news lead this morning with a story where Mr Beazley says he will forensically go through this legislation and change it. Yet four Labor Premiers passed the GST legislation in their states without even any debate.
PRIME MINISTER:
Well, no they not only did that, they enthusiastically embraced it because it will leave them better off. But Alan, what we're implementing tomorrow is not entirely what we put to the people, it's about 85 to 90%, but it still represents a huge beneficial change. It will result in lower income tax, it will result in cheaper exports, it will reduce over time business costs by 7 or $8 billion a year. It really is a gigantic step forward. I ask people to give it a fair go. There will inevitably be some teething troubles, I never pretended otherwise and some of the glitches we've had already are absolutely unavoidable in a change of this magnitude. But I do thank the business community for the work it's put into getting ready for it. And I want to assure people that if innocent mistakes are made then the Tax Office and the Government are not going to pounce on you.
JONES:
It's the nature of a tax system though isn't it, where the more exemptions there are, the greater the confusion? Do you detect a sense of anger amongst some Australians or has that been blown out of all proportion?
PRIME MINISTER:
Well I guess the answer to that will be revealed over the next few months. My sense is that there has been a lot of exaggeration and that most Australians in their normally sensible, practical, down-to-earth way will say, right leave us alone, we'll work this out, we'll make up our own mind. And I think if that happens, it will be well received because it's a very fair change.
JONES:
It's a major revamp I suppose to put simply of benefits to families, welfare recipients and the aged. Can you say now to all families and all welfare recipients and all the aged, that most will be better off, but none will be worse off?
PRIME MINISTER:
Alan, that is the intention. We have been meticulous in saying we want benefits increased to an amount sufficient that people are not worse off and that is, that's been the design all along. Pensions are going up by 4% with effect from tomorrow, and thereafter they will all be 2% higher than the cost of living no matter what the impact of the GST will be on prices. So you don't then have the debate about whether it's you know 1.9% or 2.5% or whatever, you have the assurance that the increase will always be 2% ahead of what the prices effect of the CPI, price effect of the GST is.
JONES:
But many people are saying, just to canvas some of the concerns, why so complicated? Now I don't want to get into the John Hewson cake scenario, but I'll just use this silly example as proof of the point ? raw fish if you buy the raw fish, or you buy rice separately, there is no GST, put the raw fish and rice together and they are GST. Who has dreamt up all this stuff?
PRIME MINISTER:
Well Alan that is the result of the Democrats insisting that food be taken out. Simple as that.
JONES:
But raw fish and rice separately don't attract the GST, put it together and they do.
PRIME MINISTER:
But that is the, that is the consequence of that kind of change.
JONES:
But can you understand that people going into the outlet today, tomorrow won't quite know whether the breakfast bar which is GST free, but then they buy the muesli bar and it attracts the GST and they don't know why?
PRIME MINISTER:
Yeah well Alan the reason for that is that originally it was all treated the same, that was the plan we took. But we couldn't get that through the Senate, the Labor Party voted against it, the Democrats voted against it and Senator Harradine said he was going to vote against it. And although the Australian people had voted for it, the only way we could get it through was to enter into a negotiation with the Australian Democrats, whereby most basic food items if I can put it that way, were taken out. Now, that is now behind us, that's the law. I, you know we had a different position, but we're not going to revisit it. I mean, this is a huge change and what people want after tomorrow is frankly no more change in this area for quite some time.
JONES:
Ok, well now Joe Punter out there who has a few beers down at the pub, he thinks that you said that beer wouldn't rise by more than 1.9%, but the price of beer that will be served to him in the pub and club will rise by about 8%.
PRIME MINISTER:
Well, it will rise actually according to the AHA recommendations by less than that. It depends on what you ? I think it's 6.7%, 7.5%.
JONES:
But where does that fit into your 1.9%?
PRIME MINISTER:
Well the 1.9% is the packaged beer which is 75% of beer sales.
JONES:
But you're going to finish up, you're going to finish up as a Government out of all of this with $200 million more coming from beer excise than exists today simply because the difference from the amount that you're actually reducing and the excise full buy and the amount you're getting in is about $200 million on my calculations. I mean couldn't you avoid all of this by just reducing the excise on beer and petrol in such a way that the price doesn't go up?
PRIME MINISTER:
Well the only flaw in that argument is that you are not . . .
JONES:
You'd lose revenue?
PRIME MINISTER:
Well, no leave that, put that aside. The other flaw in the argument is that the price of other items is going up, but not the price of beer. And some people might think that's a bit odd.
JONES:
Now . . . well you're wanting to try and encourage people to drink light beer and light beer is dearer than standard beer.
PRIME MINISTER:
Well, no not if the, if the state subsidies remain the same the variation in relation to light beer will be very modest.
JONES:
Well a $22 cartoon of Toohey's Blue is going to go up by 12.95%, so I thought we should be encouraging drinkers to drink the light stuff.
PRIME MINISTER:
Well if you look, if you look at the thing over all, the increases in liquor are fairly modest and against all of these things Alan you've got to take into account the fact that people are going to have a very significant tax cut. I saw an item in a South Australian paper yesterday where a publican in Adelaide has got the recommended prices from the Hotels Association and she said, oh this is not a problem at all, the increases are much lower than everybody's been saying.
JONES:
You were under some attack, at least John Anderson was this week for a reality at Castlereagh, at Coonamble ? the Castlereagh Regional Abattoir. This is a big problem for many business. That's been owned by the same family for forty years, we've talked to them and I've talked to them at some length. Because of GST compliance costs, they're going to have to find about $700,000 to set aside to pay their GST costs and they can't afford it, so they're going to close down. Because when they buy their stock, they're going to have to pay the GST, and as you know the stocks moving through the abattoir because they don't get it back until the carcasses are fully processed. In the meantime, there's a shortfall of that $700,000 ? they can't afford it. What is the answer that can overcome that?
PRIME MINISTER:
In terms of administration, we've been searching for some simple solution to that. But this is, I have to say to you this a direct result of there not being a GST on fresh food, because the purchase of the livestock is GSTable, but the sale of the meat is not, and as a result you don't have the cash flow of the GST you're collecting.
JONES:
They'll get this back eventually, but in the short-term.
PRIME MINISTER:
Just let me finish. They get it back eventually, but the problem is that in the meat industry the terms of sale are that you pay your livestock supplier within seven days, and you've got to pay the GST.
JONES:
The gold industry is the same.
PRIME MINISTER:
Whereas in many other businesses, that is not the case, you have a longer period of time which more naturally fits the monthly remittance period for the GST, and therefore in the case of this abattoir - a refund. Now we have looked at different ways and we are still doing so, but can I say in relation to that abattoir that John Anderson has spoken to the people. There are a lot of other reasons why that abattoir is in difficulty ? including State Government charges and of course, long standing union practices that have had a very negative effect on their operation. I think it would be wrong to see this entirely due to this aspect of the new tax system.
JONES:
Okay. We had a hail storm here last year as you know, which just clogged up the whole works. I mean, every person involved in the building industry was dragged into that. Now people signed building contracts in the expectation that homes would be completed before the GST. Now they're the victims of delays not of their own making. Do they have to then pay a GST, simply because a joint isn't finished when it was promised that it would be?
PRIME MINISTER:
In relation to the unfinished portion, not in relation to the whole lot.
JONES:
What about car leases. If you took the car lease out, took the car lease out before July 1, do you have to pay a GST?
PRIME MINISTER:
All of those things, the way it operates is that you have an apportionment. It's the same thing with people that have been paying GST on insurance premiums, they do an apportionment.
JONES:
But they don't get an apportionment when the sales tax. . . when you buy the car, you pay a sales tax on the car, but when July comes they won't get a rebate from the sales tax that is being withdrawn as from today.
PRIME MINISTER:
Only if you're a retailer.
JONES:
Not if you're a buyer?
PRIME MINISTER:
No.
JONES:
The leasing company gets a windfall at the expense of the client?
PRIME MINISTER:
It's in relation to the unused portion, yes.
JONES:
Just in relation to this petrol issue which has been going on and on. The argument being. . .
PRIME MINISTER:
Somebody from England earlier this morning said petrol there is $2.40?.
JONES:
That's right. But at the same time, wouldn't it have been easier simply to avoid the fall-out to just reduce the excise, because Government is taking about 46 cents every litre excise ? which is tax, in every litre of petrol for unleaded petrol. Couldn't you have cut that back to avoid the political fall-out so that you can say ? petrol prices won't go up as a result of the GST?
PRIME MINISTER:
Well Alan, as you say we could have done that. The only weakness, and I'm not going to quote revenue, but the other weakness in that is that this whole system is built on the fact that people will get cost savings as a result of the abolition of indirect taxes, a cut in diesel excise and the removal of embedded taxes. And if you say in relation to one commodity, well we're going to ignore that, you immediately are saying to the rest of the business community ? well we don't really think there are going to be any cost savings and there's no obligation or pressure on you to pass on those cost savings. For the consumers to get the real benefit of this change it's important that retailers, it's important that anybody who sells product to the public, passes on in full as soon as possible, the savings that are going to accrue to that trader, that retailer as a result of the introduction of the new system. If that doesn't happen, then the public ? your listeners, are not going to get the full benefit of this change, and that is why we have taken this view to put maximum pressure, and I don't mind saying it, I don't mean it in any belligerent fashion, the maximum pressure on oil companies to pass on, in full, as soon as possible the benefits of taxation reform, and there are benefits and they know it.
JONES:
Buying on the Internet ? is it true that the GST will then be picked up when the goods arrive in Australia by the Australian Customs Service, but if you're buying domestically off the Internet, you wouldn't collect the GST?
PRIME MINISTER:
Well?
JONES:
?and send it through the post.
PRIME MINISTER:
[inaudible]
JONES:
But if you buy it from overseas, the Customs Service will pick up the GST?
PRIME MINISTER:
Right.
JONES:
Just a quick one on the tourism industry.
PRIME MINISTER:
It's all GSTable. . . it's just a question of. . .
JONES:
Whether you can collect it [inaudible]
PRIME MINISTER:
That's it, and let me make that clear.
JONES:
Just on the tourism industry ? one of the biggest industries in the country. Go out tomorrow, book a room in a hotel - you'll pay a GST of 10%. Book into a serviced apartment ? that's GST free because it's rent.
PRIME MINISTER:
Depends on the length of the stay. It does. It depends on a number of conditions. Alan, what you've got to try and do is recognise long and short term accommodation. Long term stays are if you rent ? that's free, it's not free - it's not subject to the GST, but short term accommodation is.
JONES:
For pensioners before we go. Pensioners, elderly self-funded retirees ? what are you saying to them?
PRIME MINISTER:
Well I ?m saying that their pension's going up with effect from 1 July by 4%. I'm saying. . .
JONES:
They should be able to endure the impact without a cost to them?
PRIME MINISTER:
Yes absolutely.
JONES:
Self-funded retirees?
PRIME MINISTER:
Self-funded retirees, if they're paying tax they get a tax cut, if they've got a, most of them have an income ? that's why they're self-funded and they'll be paying tax. If they're not paying tax then they get a pension, and on top of that they get a savings bonus.
JONES:
Given that the GST will go to the States. Given that a State like NSW controls the Harbour Bridge, should the State be putting up the toll on the Harbour Bridge if it's getting all the GST money?
PRIME MINISTER:
It's a service, therefore that's GST.
JONES:
But shouldn't it wear the service because you're providing them with all the GST revenue?
PRIME MINISTER:
That's an argument you might have with Mr Carr, and I hope the public of NSW is vigilant to make sure the NSW Government doesn't get away with any rorts in relation to the GST.
JONES:
Thank you for your time.
PRIME MINISTER:
Okay Alan.
[Ends]