Subjects: The 2000-2001 Budget; G3 spectrum; Labor’s debt; monetary policy; Senate obstruction; personal tax cuts; interest rates; home mortgages; bracket creep; rural programs; $20,000 scholarship scheme; pensions; diesel fuel; higher education
E&OE…………………………………………………………………………………
JONES:
And the Prime Minister’s on the line. Prime Minister, good morning.
PRIME MINISTER:
Good morning Alan.
JONES:
Prime Minister everything seems to be about surpluses and we’ll talk about that in a moment. And there’s going to be a bit of nit-picking today but I think everyone will be driven nuts unless you say something about the mobile phone G3 spectrum. In simple language can you explain that to people?
PRIME MINISTER:
Well all we’ve done is what Treasurers have done for forty years. And if you get licence fees for the sale of spectrum you include that in your receipts because it is a receipt.
JONES:
But just explain to them why would it be worth so much?
PRIME MINISTER:
Because it’s a very valuable asset and because people in the new information technology age can do a great deal with the spectrum. You can have voice mail services, you can have interactive services, a whole range of things that you can have with this spectrum. And you know and most of your listeners know just how information technology has exploded and how people are using digital technology to change their method of communication and because of that companies are prepared to bid very large amounts for it. And we’re not relying on some kind of back of the envelope, pie in the sky estimate.
JONES:
So this is open bid?
PRIME MINISTER:
Yeah and…
JONES:
Would you make it more than $2.8 billion?
PRIME MINISTER:
Well I don’t know. I mean $2.8 billion is a very conservative figure, it’s not our figure, it’s the Treasury’s figure. We have used normal accounting procedures.
JONES:
But it’s a licence not an asset.
PRIME MINISTER:
That’s right.
JONES:
And the UK government as I understand it just collected $60 billion…
PRIME MINISTER:
That’s right. And we are at the very conservative end of the estimate and for anybody to suggest that we shouldn’t have included it is just plain madness. It’s like saying if the Commonwealth owns a building and rents it out it shouldn’t include the rent from that building in its receipts for the year. Now that would be stupid and for us to leave this out would be stupid and for us to treat it any other way than we are treating it would be to defy the practice of the last forty or fifty years and avoid and ignore the advice of our independent financial experts.
JONES:
If you were to get $8 billion though as some are suggesting today you could, what would you do with that?
PRIME MINISTER:
Well Alan I’ll answer that question if and when that arises.
JONES:
Can you understand the seeming contradiction in the budget that was brought down last night. Your Government has not borrowed a single cent, a single dollar. Your Government’s payed back $50 billion of $80 billion of debt you inherited. You’ve produced a budget surplus on each of the five occasions you’ve presented down a budget. You’ve saved taxpayers $3 billion in interest payed on debt, the market doesn’t seem to like all that.
PRIME MINISTER:
Well I’m interested in the end in what the Australian public feel and last night in a sense with some of the observers we’ve become the victims of our own earlier success. It is true that in their last five budgets Mr Beazley’s crowd racked up $80 billion of debt and in our first five budgets we will have repayed $50 billion out of that $80 billion.
JONES:
They’re very keen on surpluses now apparently.
PRIME MINISTER:
Well, I’m fascinated. I mean these are the blokes who left us with a $10.5 billion deficit. They’re now giving out lectures about the strength of our surplus. I don’t think they have any credibility to give us any lectures about any aspect of budget surpluses.
JONES:
Just on this, you’re the Prime Minister, you run the country but the most important matter to the people that you’re talking to now is the value or cost of their money. You don’t really run monetary policy, someone else is influencing this critical area of interest rates and apparently the value of the dollar.
PRIME MINISTER:
Well Alan in the globalised world in which we all live and have lived for a long time there’s no one person or no one government that runs everything. We’re all influenced by international factors. Even the mighty United States economy is influenced by international factors. But we are influenced by the rest of the world but we can also exercise a huge influence by what we do. I mean with an act of conscious choice by the Government I lead that we got the country back in the black. I mean we could have gone on, we could have doubled that $80 billion to $160 billion. We could have done what Mr Beazley had done for five years and continued to run up debt but that would have inflicted enormous pain, much higher interest rates, higher taxes and a lower standard of living on the Australian people.
Now what happened was, we inherited that $80 billion or more of debt, we set about getting rid of it. And not only did he leave us with it but at every stage Mr Beazley and Mr Crean have tried to stop us cleaning us the mess they left us. I mean to add insult to injury…
JONES:
How much money have you had to forgo because of Senate obstruction?
PRIME MINISTER:
Oh, the GST, several billion dollars different as a result of Senate obstruction. I mean if the Senate had supported what the Australian people voted for we would have had more flexibility last night in our budget but that’s what’s happened. We have to live with the deliberations of the Senate. We have a new tax system, 85-90% of what we wanted coming into operation on the 1st of July, it will have $12 billion of personal tax cuts.
JONES:
First tax cut in nearly a decade isn’t it?
PRIME MINISTER:
It’s the first personal income tax cut in more than a decade and…
JONES:
… the last one we got it got taken away from us wasn’t it?
PRIME MINISTER:
That’s right, it was taken away after Mr Keating was re-elected on a promise not to introduce a GST.
JONES:
Just on this though, earlier this week we had and I know you can’t answer this question but we’re going to ask it. We had figures showing the weakest quarterly growth in retail for seventeen years, a drop in the ANZ banks job ads index. Given that interest rates don’t actually kick in for some months down the track, I mean are we at risk here of the Reserve Bank board providing for us a rather rough landing at some point down the track? Should we have had an interest rate increase?
PRIME MINISTER:
Well, Alan, I think you know and you anticipated it when you asked the question, but I don’t comment on movements in interest rates.
JONES:
I understand that and we could if this kicks in down the track have a bit of a rough landing, are you worried about that, that could affect revenue projections couldn’t it?
PRIME MINISTER:
Well that’s another way of asking the same question. I just make the observation… no, no let me… I will make this observation because it’s not talking about future movements. Since we came to office as a result of the cumulative changes in interest rates the average Australian home buyer is $220 a month better off than he or she was in March 1996. So interest rates now even after the recent increases are massively lower than what they were four years ago and that is in part due to the fact that we have paid off $50 billion of the $80 billion of debt that Mr Beazley ran up in his last five years in government.
JONES:
Should we because of this revolution now in commonwealth/state financial relations, that is the GST money is going to the states, should we now then perhaps to try and determine where we are though because I know some commentators are saying that it’s a rather loose budget in relation to fiscal policy, that is expenditure. Now I note that the aggregate outlays are estimated now, if you take state, local and commonwealth government are estimated to be about 34.2% of GDP up 1.9 percentage points from 97-98. Someone is spending a lot more money.
PRIME MINISTER:
Well Alan we have a larger population. It’s really the proportion of the of the gross domestic product of the country which goes on expenditure which is the real measure of whether we can afford it and that proportion of course has moderated since we came into power and is very manageable. Let me put it in another way. Four or five years ago we were consuming something like 20% of our annual wealth generation in debt servicing, that figure is now down to 7%. We have one of the lowest debt servicing debt ratios of any industrialised country in the world. If we’re successful in the sale of Telstra, the sale of the rest of Telstra in three years time the Commonwealth of Australia will be free of any net debt obligations having started in 1995/96 with a total debt obligation of about $95 billion. Now that will be a mammoth achievement, we’re a long way down that path and in the end if you are less burdened by debt you have a greater freedom to do other things and there’s no reason why the Government shouldn’t spend money on sensible things like providing more doctors for Australians who live in the bush.
JONES:
Right. But when you say ‘we’ to our listeners you’re talking about your Government and I think I everyone gives you a tick for that are you worried though about things like credit card debt which is up $14 billion, like us, our behaviour, I mean…
PRIME MINISTER:
When I say ‘we’ I mean after all, it’s not my money, it’s your money and your listeners’ money that the Government spends and the Government raises in taxes and we act on your behalf and on behalf of all the Australian people and therefore if we can get the debt of the Government down we’re helping all of the Australian people. Am I worried about the… well anything to excess is a worry. I think if you look at the overall levels of debt in personal debt in this country they in many cases are affordable, in some cases as always they’re not affordable, some people go beyond their capacity to repay, most people don’t, most people are sensible. We try and give a lead by living within our means that’s why we place such emphasis on the fact that we’ve paid back $50 billion of debt in the last four or five years.
JONES:
Given that this is revolutionary tax reform did you ever consider reintroducing taxation honesty which is tax indexation. I mean many of the people listening to you are going to have their income tax cut on July 1 followed up by bracket creep and higher interest rates.
PRIME MINISTER:
Well I tell you what we have done, we’ve created a situation where 80% of the population will be on a top marginal rate of thirty cents in the dollar and you’ll be able to go from $20,000 of income to $50,000 of income without going above $0.30 in the dollar.
JONES:
So you need a lot of bracket creep before…
PRIME MINISTER:
Well a lot of bracket creep is really gone as a result of this new tax cut.
JONES:
Capital gains tax?
PRIME MINISTER:
Yes, more than half, about half.
JONES:
So if an asset is held for twelve months. From July 1 you’ll only pay capital gains tax on 50%?
PRIME MINISTER:
That’s the broad [inaudible]…
JONES:
And if a business has been held for fifteen years?
PRIME MINISTER:
Fifteen years and you sell for retirement purposes, no capital gains tax.
JONES:
The rural thing, the rural programs. Can we just… a snapshot of that? You’re talking about more GP’s, more specialists and more ancillary services in the bush are you?
PRIME MINISTER:
And more regional health centres and more assistance to keep existing bush hospitals going and also nursing homes and other special services. We’ve tackled every area of concern, it’s a $560 million package over four years. It meets all of the worries that over a period of time have been brought to me as one of the issues people constantly raised with me when I went on my rural tour earlier this year. It’s a deliberate, carefully targeted very comprehensive response to something that is fundamental and that is the right of every Australian no matter where that person lives to have good, affordable health services, the is an inalienable right and I think every Australian living in the cities will recognise that their fellow Australians in the country areas are entitled to those benefits.
JONES:
Right just tell us about the $20,000 scholarship scheme. That will be for one hundred undergraduates, and what $20,000 a year?
PRIME MINISTER:
Yep.
JONES:
… for each of the years that they study medicine so long as they bond to work a six years…
PRIME MINISTER:
That’s right.
JONES:
..in the bush. Who will appoint them to the bush?
PRIME MINISTER:
Well they just have to go, I mean they have . . . there’ll be no trouble getting jobs.
JONES:
Right, they can choose where they go?
PRIME MINISTER:
Oh yes, as long as they’re in the bush.
JONES:
Right. I notice in the figures there’s talk that inflation will get to 63/4% post-GST.
PRIME MINISTER:
There is a one off spike because there’ll be increases in the prices of things after the 1st of July, but it will only last for a quarter. It goes up and then it goes down.
JONES:
I just make the point that my maths tell me that if that is to include the two-and-a-bit percent of orthodox inflation – does that mean that the GST is creating four-and-a-bit and therefore wasn’t there a promise that it would be no more than 1.9%?
PRIME MINISTER:
Well the GST over time that’s calculated is going to add about 23/4, but what you have in these things is you have an initial spike and then something goes up and then it moderates away so that over a longer period of time the average is about the 23/4.
JONES:
Right, so if all pensions and allowances of family benefits go immediately up by 4%…
PRIME MINISTER:
Yes and the other commitment is that the pension will always remain 2% ahead of what it would otherwise have been in real terms.
JONES:
So no person on a pension will be worse off?
PRIME MINISTER:
No, they’ll be better off.
JONES:
The price of diesel fuel.
PRIME MINISTER:
The price is going to fall by 24 cents a litre.
JONES:
So how do you estimate that will impact on the daily cost of people listening to you?
PRIME MINISTER:
Well it’s particularly beneficial to people in the bush because they use more diesel, but anybody using diesel in certain circumstances will get the benefit of it. Although it is more beneficial to regional Australia. It’s going to make a lot of exports cheaper. And the other thing to bear in mind is that after the introduction of the GST, anybody using petrol for business purposes, anywhere in Australia, will be able to recover the GST paid on that petrol which is something they now can’t do.
JONES:
Do you think there’s a problem with higher education here? I mean everywhere I read about this there is a concern about funding. I notice an analysis by the Centre for Public Policy at the University of Melbourne of Commonwealth social expenditure, which says that expenditure on education was 1.94% of GDP in the early 90’s, now it’s back to 1.61%. Now all you provided here is a very limited contribution to that area of social policy. What’s the rationale for not doing to them what you’ve done say to medical care in the bush?
PRIME MINISTER:
Well the need, relatively speaking was much greater. And there was an absolutely chronic need for something more to be done about health services in the bush.
JONES:
Universities would say that’s ….?
PRIME MINISTER:
Well I know, I hear what the universities are saying. We don’t think that the relative pressure, or the relative need was quite as great there as it was in relation to rural doctors.
JONES:
Is there a likelihood that there will be some fillip in higher education?
PRIME MINISTER:
I don’t think the morning after the Budget is the time for me to start even musing about the new expenditure areas. We put out a budget which we think is right and gives the right priorities. We have very, very large numbers, I think record numbers of young Australians going to university and into tertiary institutions. We’ve provided a lot more money for traineeships and apprenticeships. We are getting more money from private schools and into education which is the way we have to go, because no government can afford to provide free university education.
JONES:
I just noticed, I must congratulate you on the recognition that’s been offered for the full veteran status of the 2,000 Australians who served in the Royal Australian Navy as part of the Far East . . .
PRIME MINISTER:
Yes, I think you’ve raised that with us over the months.
JONES:
I have, but have I missed something about the 4,000 war widows that . . .
PRIME MINISTER:
We haven’t addressed that and all I can say is that I am aware that a lot of people have lobbied for it. I am also aware that there are other things people have lobbied for and we’ve chosen to do those other things.
JONES:
You’re talking about, how do people estimate all this? I mean the debt to GDP is 7%, but what about the current account deficit? Isn’t that a function . . . we are never going to be able to pay for imports. Imports pouring into the country….
PRIME MINISTER:
But we’ve always…. it’s a question about how big it is Alan. I mean we are the sort of country that imports a fair bit. And the current account deficit is predicted to be lower this coming year than it was the previous year because our export performance is improving as the Asian economy revives. And the good news is that, the really good news on the trade front is that we survived Asia’s collapse and now that Asia is recovering, Asia can contribute to the continued strong growth the Australian economy is likely to enjoy.
JONES:
Just on this question of you’ve got, or Kerry Packer’s got, or I’ve got – investment?
PRIME MINISTER:
Well I think mine are a little smaller than Kerry Packer’s.
JONES:
Ok. But investors out there . . .
PRIME MINISTER:
Your’s mightn’t be, but mine aren’t.
JONES:
They are not deemed to earn whatever rate of interest the government might deem it to earn. Don’t you think there’s a point at which this whole notion of deeming pensioners’ investments, most probably cost too much to determine and we really, we once upon a time had none of this. Why couldn’t we relieve pensioners of this deeming rate business?
PRIME MINISTER:
Well the problem you have in that kind of approach Alan is you can end up that people are for all sorts of reasons not really fully disclosing or not fully revealing what their financial position is and the idea of a deeming thing flows from the fact that we do have assets tests and income tests and while we have those, and I think there’s good arguments on equity grounds to have them, you really do need to have things like deeming so that you get a proper set of rules for the disposition and the use of people’s assets.
JONES:
Okay, good to talk to you. Thank you for your time.
PRIME MINISTER:
Okay.
[ends]