Subject: The Budget; taxation reform
E&OE…………………………………………………………………………………
PRESENTER:
Well on the morning after his Government’s fifth budget we’ve been joined in the studio by the Prime Minister, John Howard. To speak to him our chief political correspondent, Philip Williams.
WILLIAMS:
Morning Prime Minister. The immediate market reaction of the budget was to sell the dollar down, it’s recovered a little since then but it hasn’t exactly been an enthusiastic endorsement of the budget has it?
PRIME MINISTER:
Well I’m not going to talk about the level of the dollar but I’m going to talk about the fact that in its last five years in government Labor racked up $80 billion of debt through running deficit after deficit and after five years we will have repaid 50 out of that $80 billion of debt and that is a very proud achievement but most importantly it’s something that has worked to the benefit of all of the Australian people, it’s one of the reasons why interest rates now are a lot lower than they were when Mr Beazley was finance minister; it’s the reason why on the 1st of July we’ll have one of the largest, the largest tax cut in history with 80% of the Australian community being on a top marginal rate of 80 cents in the dollar and it’s why we’ve been able to afford the biggest onslaught ever on the most profound area of disadvantage in rural Australia and that is the relative paucity of medical services in the bush and all of those things have been made possible by our careful financial management over the last four and a bit years.
WILLIAMS:
OK, that management of course includes a surplus which is a key plank of your economic program. If you strip out the sale of the G3 mobile phone spectrum and the defence land sales you’re actually in the red aren’t you?
PRIME MINISTER:
Yeah, but you can say that about any budget since federation if you leave something out.
WILLIAMS:
Aren’t we talking about an asset sale . . .
PRIME MINISTER:
No, no we are talking about following the accounting practices that have been followed since 1956. The methodology that we are using is the methodology that was used by Treasurer’s from Faddon to Holt to Howard to Keating through to Costello. We’re not… and I mean if you really want shonky budgets go back to Labor budgets when they included the proceeds of the sale of shares in the Commonwealth Bank in the bottom line, we don’t do that. We follow the rules and the rules say that if you auction something like spectrum because it is a non-financial asset the proceeds of sale are properly, like the rental payments on a building leased by the Commonwealth, proceeds of that are properly put into the bottom line. Now you know you can run around saying if this were that and something else then you’d be in a different position, of course you would be but we’re not, we’re properly including this money and in any event we are using it to retire debt, what could be more responsible?
WILLIAMS:
OK, the Opposition also says there’s a bottom line fiddle going on here.
PRIME MINISTER:
Oh, these are the fellas that ran up $80 billion in their last five years and they’re talking, they’re lecturing us and the Australian public about bottom line fiddles!
WILLIAMS:
Well I’ll just run this past you. They say that the hundreds of millions of dollars in Reserve Bank revenue has been pushed from this year to next year to prop up that surplus.
PRIME MINISTER:
Well you know once again, I mean you either have Reserve Bank dividends or not. I mean look, look these characters in five years they ran up $80 billion of debt, Mr Beazley left me with a $10.5 billion deficit having said the budget was in surplus when I became Prime Minister. I mean the reality of our economic achievement is there.
WILLIAMS:
Did you [inaudible].
PRIME MINISTER:
In five budgets we have reduced $50 billion. . . look there’s been no manipulation of anything.
WILLIAMS:
OK, Access Economics, Chris Richardson, a person you’ve had respect for in the past says this budget will lead to interest rate rises.
PRIME MINISTER:
Well I haven’t said I don’t respect him still.
WILLIAMS:
He says this budget will lead to interest rate rises and that the surplus is illusory.
PRIME MINISTER:
Well the surplus is not illusory and Chris should know that there are accounting conventions.
WILLIAMS:
He knows his stuff, doesn’t he?
PRIME MINISTER:
Well he certainly knows that the accounting conventions that we are following are orthodox ones and to suggest that there’s something illusory about an item that is properly included in the Budget is being disingenuous.
WILLIAMS:
The Budget papers predict a pretty rosy outlook on growth and yet we’ve already got rising interest rates, slowing retail sales, dropping business confidence. Couldn’t it all come unstuck before we even get there?
PRIME MINISTER:
Well we don’t believe so and our forecasts about economic growth are in line with private sector forecasts. I read many of them this morning and they are all around the same area, three to three quarters percent, three and three quarters percent, so we’re in the middle of that. But in any event we rely on the experts, we don’t invent these forecasts for me. They weren’t written in Peter Costello’s office, like the One Nation economic forecasts were written in Paul Keating’s office.
WILLIAMS:
But there are risks, aren’t there?
PRIME MINISTER:
Well, there’s always risks. I mean life is full of risks. But the degree of risk is a lot less when you’ve got less debt and if you’ve paid 50 out of $80 billion of debt down in four years, or in five years rather when the budget’s finished than the risk if something goes adverse in the rest of the world is a lot less. I mean that really is the story of Australia in the last four years. There was an enormous risk to this country when the Asian economies fell over, but that wasn’t visited on us because we had done the right thing in our first two budgets. And we had strengthened the Australian economy against the adverse impact of that risk.
WILLIAMS:
Ok, you’ve cut the Timor tax for the wealthy, the bush gets . . .
PRIME MINISTER:
Can I just stop you there and say that somebody earning $50,000 a year, or over is not wealthy.
WILLIAMS:
Well the better heeled Australians.
PRIME MINISTER:
Yeah, well but I mean I think a lot of people out there who work very hard and earn $51,000 or $52,000 a year resent very much being told that they are wealthy.
WILLIAMS:
Ok, let me rephrase that – you’ve cut the Timor tax and the bush gets the lionshare of the budget goodies. What about the people, your backbencher Ross Cameron says the Government has forgotten in the cities?
PRIME MINISTER:
Well we haven’t forgotten them, I mean . . . .
WILLIAMS:
But there’s no special treatment though is there? There is nothing targeted?
PRIME MINISTER:
Yes, but the reason that we’re putting money into rural health is that there’s a real disadvantage there and they deserve help. And I don’t think there’ll be anybody in the cities begrudges the right of a mother in the country to have medical attention if she’s having a baby. Or begrudge the right of rural people to have access to doctors and to decent health services. We have it in the cities. And I think people living in country Australia have a perfect right as Australians to those kind of services and I think people in the city support that.
WILLIAMS:
You spent all this money in the bush and yet still the National Farmers’ Federation says you’ve only got it half right. Are they being ungrateful?
PRIME MINISTER:
Well I suppose if you lead a lobby group you think it’s your job all the time to ask for more. I would simply say to the National Farmers’ Federation that as I go around rural Australia the thing people express directly to me as Prime Minister, they’re concerned about most, is the absence of medical services and we have done a good job of that. And I think they should be understanding and gracious enough to acknowledge that.
WILLIAMS:
Is Ian Donges then from the NFF whinging when he says, ok we’ve got the health spending, but really we need a lot more, and particularly we need big infrastructure projects?
PRIME MINISTER:
Well I am really interested in doing what the Government thinks is needed to address the major priorities of people in the bush. And the major priority to date has been the inadequacy of medical services and doing something about it and we have really addressed that in a very comprehensive way and I think the people that the National Farmers’ Federation is meant to represent will understand the priority that we’ve put on rural health.
WILLIAMS:
Bit disappointing though isn’t it? To spend all that money, to put all that effort into the bush . .
PRIME MINISTER:
Well I don’t. Well I’m not going, I mean one comment is neither here nor there.
WILLIAMS:
Ok, how would you answer your critics who say that after a record run of growth all you can manage is a modest surplus, dependent on the sale of assets?
PRIME MINISTER:
Well running up big surpluses for their own sake is not good economics. There’s no law of good economics that says you should have ever increasing surpluses. It depends upon the amount of your debt and it depends on your other obligations. I mean if we had not retired debt, then of course people would have been entitled to say well look you’ve done all these things, you haven’t achieved anything. But we’ve retired debt. We’ve cut 50 out of the $80 billion of debt that Mr Beazley ran up in the last five years. And we’ve also financed a tax package, a massive reform. I mean we were always going to have invest some of the surplus in personal tax cuts. People want personal tax cuts, they’re entitled to have them. They haven’t had them for more than a decade. They’re long overdue and they’re going to get them. I mean 80% of Australian taxpayers are going to be on a top marginal rate of no more than 30 cents in the dollar as from the 1st of July. I mean that is a huge reform, it virtually wipes out bracket creep, for the great bulk of Australian taxpayers.
WILLIAMS:
So this budget really isn’t as important as the GST in terms of the long term effects for Australians.
PRIME MINISTER:
Oh, from a long term economic point of view, the tax reform package is the biggest thing that this country has seen in fifty years.
WILLIAMS:
Are you getting nervous about it?
PRIME MINISTER:
No, I am looking forward to the 1st of July. I believe the 1st of July will come and go and people after a while will look back and say what was all the hullabaloo about? I’m better off. Some prices have gone up, some have gone down and some have remained the same. Rural people will find that their fuel is cheaper and business people will find after they get used to the new system that it’s simpler and fairer. And I think in a few months time, a lot of people are going to say, you know why were people trying to stop this happening.
WILLIAMS:
If you’re wrong, you’re basically out of office, aren’t you?
PRIME MINISTER:
Now look, I don’t believe I’m wrong. But look, all the years I’ve been in politics, and can I tell you now more than ever, I am at a stage where I’m interested in doing what is right for the country and what I believe will be good for Australians irrespective of the political perils and so forth that might be involved. I’ve set my heart on tax reform. I am glad that we won the last election, we’ve got an opportunity of implementing it. I believe that the Australian people will see it as beneficial, but I will happily accept their judgement whatever it might be.
WILLIAMS:
Ok. Finally, I saw you with Malcolm Fraser in Melbourne a couple of weeks ago and it just occurred to me that no prime minister has exited with dignity at a time of his choosing since Robert Menzies. How will you know when the time is right?
PRIME MINISTER:
Oh, one morning I will wake up and decide it.
WILLIAMS:
Isn’t there a window, a golden window of opportunity such as an Olympics atmosphere, or the GST just, just in place? Isn’t there a timing – timing is everything isn’t it?
PRIME MINISTER:
Well, timing is something. I think doing the right thing by the country. I mean I will do in all of my political career, what I think is in the best interests of Australia and the best interests of the Liberal Party and I am enjoying my job immensely.
WILLIAMS:
Prime Minister, thanks for your time.
PRIME MINISTER:
Thank you.
[Ends]