MITCHELL:
First in our Canberra studio, a day early because tomorrow is Good Friday, the Prime Minister Mr Howard, good morning.
PRIME MINISTER:
Good morning Neil.
MITCHELL:
Prime Minister it strikes me the tax system is looking like a wreck. Do you agree with the Treasurer that the GST agreement is now broken?
PRIME MINISTER:
What the Treasurer is saying is that if one side doesn't follow the agreement, and we haven't heard the final word from the states because they have said they are going to come back in the next four or six weeks with some counter proposal, then obviously it raises serious doubts about the future of the agreement.
MITCHELL:
But he said the agreement's gone now, they won't honour it, there is no longer an agreement.
PRIME MINISTER:
Well let me put it this way; we will see if they come back with something as an alternative. But I want to make it clear in saying what the Treasurer did yesterday; he was speaking for the whole Government. We discussed this matter before the meeting and our view is that the states should abolish the additional taxes. It was one of the understandings of the whole GST that they would abolish a specified number of taxes and then they would review other taxes obviously in the light of how revenue collections were going. Revenue collections have turned out to be even greater than we predicted.
MITCHELL:
How much greater?
PRIME MINISTER:
Well the total over and above the guaranteed amount is $16 billion dollars over the five years from the current financial year; that's the projection.
MITCHELL:
That means the GST is bringing in $16 billion more than expected?
PRIME MINISTER:
Over that period, $16 billion dollars more than they would have got under the old financial arrangement.
MITCHELL:
But how much more is the GST bringing in than you've expected?
PRIME MINISTER:
Several billion. I can't give you a precise figure because it moves around a bit in the projection.
MITCHELL:
$12 billion has been floated, though hasn't it?
PRIME MINISTER:
Well, no it would be less than that.
MITCHELL:
Much less?
PRIME MINISTER:
It would be several billion dollars more than the original estimate.
MITCHELL:
Well where's our benefit from that, if we're paying several billion dollars more than expected?
PRIME MINISTER:
Where's your benefit? Well that's a good question. We think your benefit should include the abolition of a whole lot of additional state taxes. You have of course..
MITCHELL:
But it isn't, I mean that is my point, the GST's not working...
PRIME MINISTER:
No well it's not fair to say it's not working because a lot of the state taxes and of course the wholesale sales tax, which is a federal tax - they have all been abolished and there have been other general benefits for business through the introduction of a GST, the benefits for exports...
MITCHELL:
But would you seriously say we are better off financially? We are paying this extra tax...
PRIME MINISTER:
I think the economy is much better off with the GST...
MITCHELL:
What about the taxpayer. Are we paying more than we used to?
PRIME MINISTER:
No we are paying less. Our overall tax burden has fallen. Our overall tax burden has fallen.
MITCHELL:
Despite these extra billions that have come in through the GST?
PRIME MINISTER:
Yes but they replace a lot of taxes that were abolished when the GST was introduced.
MITCHELL:
I guess that's my point, is there, if you look at the bottom line, is the...
PRIME MINISTER:
Well you asked me a question about the, how the states were going and the deal we had was that the states would get all of the GST, which they have, and out of that they would abolish certain taxes, and some of those taxes have certainly been abolished (I am not suggesting that for a moment) and out of that GST we'd also get rid of the wholesale sales tax and then we would review the abolition of further taxes in the light of the operation of the GST. Now we argue that given that the GST has collected even more than we have predicted, the states, having reviewed those taxes, should get rid of them. Now it's a pretty simple proposition and that is what Peter Costello put to the states yesterday.
MITCHELL:
Well the states are saying it's up to you to come back with the answer, not up to them, what would you do if they continue to not reduce their tax?
PRIME MINISTER:
Well we'll see - they indicated they wanted to come back in four or six weeks with a counter- proposal and we'll have a look at that. In the meantime, obviously, we reserve our position.
MITCHELL:
Are you willing, if necessary, to use your control of the Senate to re-write the whole tax framework?
PRIME MINISTER:
I am not going to get into that at this stage. Our desire is that the states use the windfall of the GST (bigger than any of us predicted) to abolish a raft of state taxes and we've indicated what those taxes are. The states rejected that yesterday, although I understand that they said they'd come back with some kind of counter-offer. Well let's have a look at that. I'm not saying we are going to accept it, and I want it to be understood that we were not playing games on this. We are serious about making sure that the benefits of the GST are enjoyed by all Australians. Now can I just make a point about, because I am addressing a Victorian audience, that under our proposal over the five years from the current financial year, Victoria will be $3.2 billion dollars better off than it would have been under the old financial arrangement. The cost of getting rid of the taxes that we proposed be got rid of yesterday is $1.3 billion, so they'd still be left with an additional windfall after the abolition of those taxes of $1.9 billion. Now we think in those circumstances, the proposition we have put is reasonable and I think most Victorian taxpayers would think it's reasonable - that's the essence of what we're putting. We're not asking them to cut services, we're just asking them to use the windfall of the GST to abolish some additional taxes which was the original understanding of the agreement if the GST performs well.
MITCHELL:
Is it not also true that Victorians are paying more in GST than they're getting back?
PRIME MINISTER:
Well it's always been the case, whether it's a GST or it's any other taxation that...
MITCHELL:
So what's the gap?
PRIME MINISTER:
Now well I can't tell you the precise... It's always been the case that the Commonwealth provides a total amount of money, the pie, and then a joint Commonwealth/State body, not the big part of the Commonwealth, a joint Commonwealth/State body called the Grants Commission, makes recommendations as to how that pie will be cut up. Now if Victoria and New South Wales think that the pie can be cut up in a different way, and they can persuade the other states to agree to a different division, we're quite happy to accept that division.
MITCHELL:
You mentioned the windfall to the states, what's the windfall to the Federal Government, would you accept that you are also getting a windfall out of this?
PRIME MINISTER:
Well we're not getting any of the GST.
MITCHELL:
Are you getting a windfall out of this?
PRIME MINISTER:
Not out of the GST.
MITCHELL:
Out of a different system, is it not benefiting you?
PRIME MINISTER:
Well to the extent that the different system has produced a more strongly growing economy, yes.
MITCHELL:
So how much?
PRIME MINISTER:
That sort of thing is almost impossible to estimate. And I do think that the compliance mechanisms associated with the GST - the Australian Business Number and the requirement that because of the GST everybody you do business with has got to in effect have a tax number - that has probably cut the cash economy. I can't say by how much. And overall the GST has been highly beneficial. It has reduced tax evasion, it has produced a better tax system for business, it's helped our exports, it's made a contribution to boosting economic growth - you can't quantify that. I acknowledge that the stronger economy has meant increased personal and company tax collections, I acknowledge that. And of course in addition to all of this we've also given the states the growth tax to fund their hospitals and schools and police which they have long begged us to.
MITCHELL:
Do you accept that this is a real threat to the GST system, this disagreement? Or do you think it's just, with due respect to Peter Costello and John Brumby, gorilla's bellowing at each other and it's going to be sorted out?
PRIME MINISTER:
We're not playing games, we're serious and Peter was talking of the Government when he went into that meeting yesterday. It's a matter that we discussed and we hope that the states will come back with a proposal consistent with both the spirit and (inaudible) the original agreement, so I remain optimistic.
MITCHELL:
Matt, go ahead please Matt, you're speaking to the Prime Minister.
CALLER:
Thank you Neil, thank you Prime Minister. I've got a question, I hear all this discussion about taxation and states wanting their share and Federal Government wanting their share, does anyone ever consider that maybe it's time to get rid of state governments and just have a federal Government?
MITCHELL:
You want to abolish State Governments?
CALLER:
Yes.
MITCHELL:
Okay.
PRIME MINISTER:
Well Matt, if we were starting Australia all over again, I wouldn't support having the existing state structure. I would actually support having a Federal Government, a national government and perhaps a series of regional governments having the power, say of the Brisbane City Council. But we're not starting Australia all over again and the idea of abolishing state governments in unrealistic. We do, however, need to make the federal system work better and the idea of the GST was designed to achieve that. We wanted to in fact give the states a growth tax. I used to go to Premiers conferences as Treasurer and people like Charles Court and Joh Bjelke-Petersen and Neville Wran used to say we don't have access to a growth tax like you do, you have income tax and company tax and wholesale sales tax, please give us access to a growth tax and we'll go away and never bother you again because we'll have a guaranteed rising share of the growth of the economy. And we did that through the GST and that is why we decided to give every last dollar of the GST to the states. It was a huge investment in federalism, the GST, and it was the strongest demonstration in the nine years I've been Prime Minister of this country in the importance of the federal system and that's why I'll be sorely disappointed and many people in my party will be sorely disappointed if the states don't meet their end of the bargain.
MITCHELL:
I'll just repeat Prime Minister, you'll have control of the Senate - you will be able to fix it.
PRIME MINISTER:
Well Neil, lets always ere on the side of co-operation.
MITCHELL:
Okay. Bob go ahead please Bob.
CALLER:
Good morning Neil.
MITCHELL:
Yes, go ahead.
CALLER:
Yes, Mr Prime Minister, I'm just an average Joe Blow on the streets and regarding this tax debate, you come on and say one thing, Mr Bracks comes on and says another thing. Now the policies, you saying you're getting billions more from GST, who do we believe?
PRIME MINISTER:
Well that's something that you have to work for yourself. I ask you to believe me because it is an undisputed fact that all the billions from the GST are going to the states. It is an undisputed fact that the basis of the agreement was that we introduced the GST, it was designed to give the states a growth tax, it was designed to replace existing less efficient taxes - that's happened to a degree but not as much as we believe should have happened and that's what the argument's about.
MITCHELL:
Thank you for that Bob, we'll take a quick break, come back with other issues for the Prime Minister.
[commercial break]
MITCHELL:
Prime Minister's in our Canberra Studio. Mr Howard the Director General of ASIO says there are as many as 80 people in Australia who have close links with terrorist groups, trained with them, including al-Qaeda but only eight or 10 will be dealt with because of the laws being introduced in 2002. Would you look at retrospective legislation to deal with this?
PRIME MINISTER:
I have an aversion to retrospective legislation imposing a criminal penalty.
MITCHELL:
You must be concerned by it, if we have got 80 people in this country...
PRIME MINISTER:
Yes, well, it's hard to give a definitive, for all time answer to that sort of question. Firstly, I don't know the full context, the statement that was made by Dennis Richardson. Secondly, even if I did, you'd have to weigh a lot of considerations. We take the terrorist threat very seriously, as everybody knows. In fighting that terrorist threat we have to be careful to preserve the fundamental liberties of this country and one of those fundamental liberties is that you don't render what was non-criminal yesterday, criminal today...
MITCHELL:
... retrospective...
PRIME MINISTER:
Well I can't speak in relation to each case. Some people who've had affiliations with certain organisations are not automatically a threat as the result of that because of their personalities, others are. I think every Australian would wonder why any Australian would want to have any contact with an organisation like al-Qaeda that is why we're taking the hard line we have. Now I think I can give the general indication that if further steps to amend the law consistent with the pillars of our justice system are needed, they will be taken.
MITCHELL:
Mr Howard, why did you gag debate on the damage done at Gallipoli?
PRIME MINISTER:
I don't think gagged the debate.
MITCHELL:
No, no the debate was gagged according to reports?
PRIME MINISTER:
How, when?
MITCHELL:
In the Parliament, stopped it, said no more, move on.
PRIME MINISTER:
I'm not aware; there may have been some procedure of which I'm not aware. I answered all the questions I was asked too. Now I don't know whether somebody moved an urgent (inaudible) we didn't accept it, that really doesn't represent gagging a debate, I think it represents a legitimate Government response to an Opposition tactic.
MITCHELL:
Will you release the letter, the exchange about Gallipoli with the Turkish...
PRIME MINISTER:
We don't normally do that without permission of the Turkish Government and I've indicated because when you have correspondence with an overseas country you don't normally release that correspondence without its permission. I have offered a briefing to Senator Bishop, the Opposition spokesman on Veterans' Affairs matters, and I'm quite happy to extend that briefing to the Opposition Leader who will be accompanying me to Gallipoli for Anzac Day as a guest of the Government. I'm quite happy to have him briefed on it too.
MITCHELL:
Are you confident that our Embassy oversaw that work as it was expected?
PRIME MINISTER:
Well I'm confident that our Embassy has done everything it could have done. We asked for some roadwork to be carried out - we have been constantly told that has not resulted in the disturbing of human remains. There's been some debate about two photographs. The information I received was that in relation to one it had been, one of the bones in the photographs that is, it had been buried, the other couldn't any longer be found.
MITCHELL:
I guess it's not so much to do with the bones, I know you know and respect Les Carlyon, the author of Gallipoli...
PRIME MINISTER:
Yes, very much so, yes.
MITCHELL:
I spoke to him on air and he was very concerned that the topography had been changed significantly and significant places had been damaged, irretrievably.
PRIME MINISTER:
I'd be interested to talk to Les because I have a great respect for him. I'll try and do that.
MITCHELL:
Okay. The Schapelle Corby case, will the Australian Government help to send the Victorian prisoner to give evidence in the Schapelle Corby case in Bali?
PRIME MINISTER:
Yes, we are doing everything we can right at the moment to help. The conduct of the case is not a matter for the Indonesian Government or for the Australian Government - it's a matter for the Indonesian court. I spoke to our Justice Minister about this matter twice last night and he was in contact with his Indonesian counterpart and discussions are going on about effectively a formal request coming from the Indonesian Government for the prisoner in Victoria to be taken to give evidence. Now it's up to the Indonesian Government under the relevant treaty to make that request. My advice is that there are three ways in which this person could give evidence - he could be taken there under this treaty following a request. He could obtain bail, although I'm further told that that's complicated by jurisdictional issues as he's a prisoner of the state of Victoria, and the third is that it could be possible that he give evidence by video-link. Now these are matters ultimately that have to be determined by the young woman's lawyers. Let me say, we will do everything that we are properly and reasonably asked to do to see that any relevant evidence is presented. Now I'm not going to comment on the nature of the evidence - it's not my role to do that, that's a matter for the court. But if there's anything we can do we will do and we are doing.
MITCHELL:
Do you accept that the problems of our current account deficit are one of the reasons we have higher interest rates?
PRIME MINISTER:
I think the reason that we have - we don't have high interest rates given the strength of our economy.
MITCHELL:
How are we compared to the rest of the world?
PRIME MINISTER:
Well if you take into account the strength of our economy, our interest rates are at reasonable levels - in fact they're at quite low levels historically.
MITCHELL:
But they are quite high.
PRIME MINISTER:
Well they are higher than America, but America's been in recession and the gap is closing as America's economy grows. Look, you can have very low interest rates if you flatten the economy.
MITCHELL:
Well I guess the point is, the trade deficit is one of the reasons causing it and surely you do carry some responsibility for the trade deficit.
PRIME MINISTER:
See I'm challenging I guess Neil your fundamental proposition that our interest rates are high.
MITCHELL:
Well they've gone up, in fact they've increased.
PRIME MINISTER:
Well they're still much lower than they were several years ago, and I'm not talking here about the Labor period - they're much lower than they were then - but they're even lower than they were at an earlier period this time, of this Government's term in office. The major impact on interest rates is inflation, and if inflation gets out of control well that has an effect on in interest rates. But we've controlled inflation very effectively.
MITCHELL:
I have seen quotes from you going back the mid-90s saying higher interest rates are the result of current account deficit...
PRIME MINISTER:
Look I'm not saying it's irrelevant. I haven't said that, but what I'm challenging is the fundamental proposition that you put to me that our interest rates are high - that's what I'm telling you.
MITCHELL:
The Federal Government spent $95 million on advertising in the run up to last year's October election. Why should we fund your ad campaign?
PRIME MINISTER:
Well let's have a look at what the money was spent on - advertising the GST, I think that was legitimate, advertising changes to the health system, I think that was legitimate...
MITCHELL:
So it wasn't political advertising?
PRIME MINISTER:
I think it's fair to advertise a new tax system. I think it's fair to advertise major changes to a health system. There's always going to be a debate at the margin as to what is legitimate provision of information and what becomes too emphatic an endorsement of the quality of the changes.
MITCHELL:
Prime Minister, we have a caller, Leanne Sheridan who called you in December, I think she wants to thank you. Hello Leanne.
CALLER:
Hi Neil.
MITCHELL:
What happened?
CALLER:
Well I'd just like to take this opportunity to thank Mr Howard on the delivery of my Christmas parcel to my brother-in-law in Iraq. You may remember I rang...
PRIME MINISTER:
The Tim Tams?
CALLER:
Yes, the Tim Tams.
PRIME MINISTER:
Fantastic. Did he like them?
CALLER:
I just have to tell you thank you very much. He was absolutely... he just thought it was so unbelievable that you had gone to so much trouble and he was very popular amongst the soldiers when it arrived.
MITCHELL:
He is an American soldier too isn't he, in Iraq? Or was in Iraq.
CALLER:
That's correct Neil; he actually arrived back on U.S. soil on Friday afternoon.
PRIME MINISTER:
Is he safe and okay?
CALLER:
He is safe - he's not home yet but he is actually back in the United States on Friday.
MITCHELL:
What sort of, how did the Australian Prime Minister send Tim Tams to an American soldier in Iraq?
CALLER:
A lot of people doing a lot of jobs trying to locate him for starters. They actually located him, he was away on a mission, they contacted him and let him know that there was a parcel at Camp Victory and when he returned from his mission he was taken to Camp Victory to take delivery of his parcel.
MITCHELL:
How did you do it Prime Minister?
PRIME MINISTER:
Well we have our ways. We worked very hard, and I remember the call and we asked that something be done and we were very pleased that it happened and it shows the power and reach of Neil Mitchell on 3AW, that's what it shows.
MITCHELL:
I didn't send it. Thank you Leanne.
PRIME MINISTER:
Thank you Leanne and when you're in touch will you give him my warm regards and thank him for what he's done for the cause of democracy in Iraq.
MITCHELL:
Send George Bush some Tim Tams. Prime Minister, one last serious thing to finish on, the asylum seekers, it seems you've changed your mind with this bridging visa, why?
PRIME MINISTER:
I think the change is fair and a common sense one. I think it is fair that if a person is finally determined not to be a refugee, but for a combination of reasons it's simply not possible or practicable to send that person back to the country from whence or he she came, that until it is that person should not be detained further.
MITCHELL:
But why has that changed? I mean that was the case a year ago.
PRIME MINISTER:
Well that's true. I guess you become, as times go by, more conscious of the need to make common sense adjustments without fundamentally altering the policy and this doesn't in any way undermine the policy.
MITCHELL:
Well do you regret not doing it earlier?
PRIME MINISTER:
No, I don't regret not doing it earlier.
MITCHELL:
A lot of people would have been in out?
PRIME MINISTER:
Well you can say that. I mean hindsight is a wonderful capacity. But we think it's a fair and a common sense adjustment of the operation of the policy and it's a sensible and good thing to do.
MITCHELL:
Thank you for your time. Have a safe Easter.
PRIME MINISTER:
You too, and to your listeners and I hope everybody enjoys the start of the season tonight.
MITCHELL:
It's in Brisbane. Outrageous.
PRIME MINISTER:
But surely you're still going to be following it aren't you?
MITCHELL:
Oh, I don't know. Thank you for your time.
PRIME MINISTER:
Thank you.
[ends]