Subjects: Economic figures; tax cuts; budget; Ryan by-election
E&OE................................
KIRK:
Mr Howard, in hindsight, the Dunn & Bradstreet were spot on last survey. The economy went backwards in the December quarter. Are you now more willing to accept the prospect of another quarter of negative growth and then a return to positive growth?
PRIME MINISTER:
Look, I'm not going to get into the prediction game about growth in this quarter. Obviously it would be good for the economy if the contraction in the December quarter were the only one. The advice we have at present is that there were some one-off factors, particularly in the housing industry, and we took action in relation to that. We think talk of a recession is wrong. We think talk in an alarmist fashion is wrong and it's no good for business confidence and it's really no good for anybody. Forget the politics of it. From a business confidence point of view some of the extravagant language that's been used has really been a bit ridiculous. We've got to remember we've had five years of strong growth and because we have one quarter where there's a contraction, people are running around saying the world has come to an end.
KIRK:
Are you prepared for another quarter of negative growth?
PRIME MINISTER:
Well, I can't tell you because I don't have the figures because the quarter hasn't finished. I mean, to ask me to tell you now what the March quarter is, I can't. And nobody can really say with any certainty what it is. I can only tell you what I know from Treasury and Reserve Bank advice that they believe there are strong grounds to see the December quarter as a one-off. Now, I can't say any more than that because I am no better informed than that and I suggest, with respect, nobody else is either. Now, I hope that the March quarter is not one that sees contraction and there are a lot of reasons why it ought not to. But the quarter's not even over yet and it really is a waste of time asking me to predict what the outcome in growth terms will be of a quarter that's still not finished.
KIRK:
Well, the survey shows that the GST is causing small business cashflow problems. Did you underestimate the effect of a GST on small business?
PRIME MINISTER:
Well, I listened to that introduction and if you're talking about the remittance of GST collections, net of any input tax credits, then you're talking about the remittance of money that has been paid as tax by consumers. You're not talking about the ordinary income of the business. So, in those circumstances the GST - I mean, it is reasonable that the GST be collected every quarter. I don't think you can generalise from one particular survey. Obviously there were some transitional challenges with a new system. As we've identified difficulties, such as with the Business Activity Statement, we have acted to do something about them.
KIRK:
Eight months into the new tax system, which is where we are now, do you still claim that no one is worse off as a result of the GST?
PRIME MINISTER:
Look, the claims we made we stand by. But to ask me to sort of answer for every individual situation of 19 million people is a bit unreasonable. I don't know everybody's individual circumstances but I do know that we made provision to ensure that people weren't worse off.
KIRK:
But if you look at what business is saying, that the Government's handed that now to motorists, 1.5 cents a litre, because of the GST, you've kickstarted a depressed housing industry with the new home buyers grants. They're all policy changes to counter negative impacts of the GST. So, was it a mistake to say that no one would be worse off?
PRIME MINISTER:
Well, I'm sorry, that's a non sequitur. In the case of the housing industry, we identified a problem and we did something about it. It's not a backflip. In relation to the fuel excise, the public is unhappy about the very high price of petrol caused by world oil prices. They wanted some action by the Government. I have acknowledged that we should have responded to that concern earlier and we have provided some relief but we can't afford, out of the budget, to provide any more relief in relation to the level of excise.
KIRK:
Well, if we look forward now, the Government is looking at income tax cuts for people earning between $30,000 and $50,000 a year. The last round of tax cuts were described as the most generous in a long time so why would you need to extend that now?
PRIME MINISTER:
Well, I haven't said we are going to cut tax. Can I just try and get this into.
KIRK:
Well, two Government Ministers have confirmed that tax cuts are on the agenda for the budget.
PRIME MINISTER:
Look, I don't know what references you're pointing to but let me, as Prime Minister, just make a couple of things very clear. The budget is not awash with money. There seems to be a false view around that we are collecting billions more than we budgeted for as a result of the GST. That is not correct. This year's budget will be quite tight. That has implications for us. It also has implications for the Labor Party in relation to its lavish spending promises.
KIRK:
So could you afford a tax cut?
PRIME MINISTER:
Just let me finish, please. When I was asked about this matter yesterday I made the general observation that it's always the preference of the Liberal Party and the National Party to cut tax rather than to spend more and that remains our priority. But I don't want people to imagine that tax cuts in the budget are inevitable. At this stage I have to say that we have a tight situation. I don't want to raise expectations. That would be irresponsible. It will be a tight budget. The slowing in growth has revenue implications. We are determined to maintain a budget surplus because that's important to the overall international perception of the strength of our economy. And I think the whole tax cut argument has just, sort of, got a little bit out of hand.
KIRK:
Are they on the table, though?
PRIME MINISTER:
Look, Alexandra, I'm not going to speculate what is in the budget. I can only respond to facts. I mean, I know you want, sort of, a quick grab about something but I'm not in the business of quick grabs. We have to put together a budget that produces a surplus and we are determined to do that and that's not going to be easy because there has been a slowing in revenue growth projections because of the moderation in the rate of growth in the economy. Now, I repeat, that has implications for us but it also has implications for Mr Beazley who's talking about big spending in areas like education and health. He's accountable to the budget bottomline, just as I am.
KIRK:
But would you prefer to give the money back as tax cuts rather than, say, spend money on health, education...
PRIME MINISTER:
Well, that assumes that there is money and I can't, at this stage, underwrite that assumption. All I can say is that in a general sense we have a preference for cutting tax rather than spending more. And, look, can I just make another point, on the question of health and education we have greatly boosted spending on public hospitals from the Commonwealth. We've put $2.5 billion into a private health initiative and the Labor Party's pledged to keep that. And, on top of that, people seem to have forgotten that the GST goes to the States. And as the years go by and the States are infinitely better off as a result of the increased GST revenue in the years ahead, the States will have more money to spend on hospitals and schools. And, afterall, public hospitals and government schools in this country are overwhelmingly the responsibility of the States. So it would seem to me to be a false economic policy to keep the GST, which Mr Beazley is going to do - he's not going to get rid of it. He may attack it, he may say he hates it but he's going to keep it. And that will deliver more money to the States and, on top of that, Mr Beazley's saying he's going to spend still more money in the very areas of immediate State responsibility for which they will have more revenue out of the GST. It seems to me to be a double expenditure.
KIRK:
Now, the next test for the Government comes as early as Saturday with the Ryan by-election. You say that the outcome doesn't necessarily point to a Federal Election result later in the year. But if the Coalition loses in Ryan will you take responsibility for that?
PRIME MINISTER:
Well, Alexandra, I'm not going to hypothesise about the outcome of Ryan. It is very tough. And I know that there are Liberal voters in Ryan who want to give us a kick on the basis that it sends a message. Now, can I just say to those people that I understand how they might feel on certain issues. We've tried to respond to those issues. But if Ryan is delivered to Labor off the back of an anti-Liberal protest vote that will only encourage the Labor Party to believe that it can play a completely negative game and get great political rewards. I mean, everything that we have done over the last five years to strengthen the economy, which is so important to people who normally support the Coalition, the Labor Party has opposed. They opposed cutting the debt by $50 billion. They opposed all the things that have made lower interest rates and lower inflation possible. They opposed Work for the Dole. They opposed
things like the abolition of compulsory unionism. So, a Labor victory in Ryan off the back of an anti-Liberal protest vote will only be a vote of confidence in that negative approach by the Labor Party.
KIRK:
Well, we've seen three bad polls now for the Government in a week. Do you accept just how angry voters continue to be with the Government?
PRIME MINISTER:
Well, Alexandra, I don't like bad polls. I expected them and I think they'll go on for quite some time. But I should remind you and your listeners that governments are not elected by opinion polls, they are elected at general elections. And there are plenty of examples in political history, as recently as 1998, of governments being a long way behind in the polls but winning elections. But it's tough and I don't underestimate it. And, of course, we're going to have a big fight but could I also remind you that I said that when we were doing well in the polls. It is no surprise to me that we're going through a degree of political turbulence.
KIRK:
And how long do you think that might last?
PRIME MINISTER:
Well, Alexandra, I don't know. What I intend to do is to focus on good policy, to identify the negative approach of the Labor Party to remind people that when Mr Beazley was last in government we had 17% interest rates, 11% unemployment and $85 billion of Government debt. Now, in the end, the choice will be between going back to that or sticking with the Coalition and the great strength that we have delivered to the economy over the last five years, the lower interest rates, the lower inflation and the lower unemployment. Now, it's tough and it's easy for the Labor Party at the moment. There are times in politics where one side can have easy pickings. But the days of easy pickings go when people have to decide who the Government is. They really think about it and they make a choice. And as we sharpen that choice I'm confident.
KIRK:
And can you expect, can voters expect, more policy changes then over the next few months between now and the election?
PRIME MINISTER:
Well, you talk about more policy changes. We responded as I promised to concerns about the Business Activity Statement. We will deliver policies that are right for the circumstances but we're not going to abandon our strongly held beliefs, such as keeping the budget in balance. We will always deliver policies that keep inflation low, interest rates low. I mean, homebuyers are $270 a month better off now than they were when we came to office because of our low interest rates. We have the lowest Government debt to GDP this country's had for probably 20 years and one of the lowest in the world. We are in a very strong fiscal position.
KIRK:
Just finally, Mr Howard, some good news for you over the weekend with your Employment Minister, Tony Abbott, saying you're the best Prime Minister since Robert Menzies. Would Tony Abbott make a good Prime Minister after you?
PRIME MINISTER:
Well, that's very nice of Tony to say that but who becomes the Leader of the Liberal Party after me is a matter for the Liberal Party. I think in that same interview Tony said that not even his mother thinks he is ready to be Prime Minister at the present time so I can't trump that.
KIRK:
Mr Howard, thanks very much.
PRIME MINISTER:
Thank you.
[Ends]