Subjects: Budget reaction; tax reform
E&OE…………………………………………………………………………………
MILLER: Welcome to the programme. It is a beautiful looking day, on the line from our Canberra studio now the Prime Minister of Australia, Mr John Howard. Prime Minister good morning.
PRIME MINISTER:
Good morning John. Good to be with you.
MILLER:
Good to have you too sir. Well the budget last night. Now the first question that I have for you this morning and I know time is limited so I will be as succinct as possible. The surplus. Now is this the surplus we are having when we are not having a surplus.
PRIME MINISTER:
No, absolutely authentic bona fide surplus. This suggestion that in some way we shouldn’t have included the fees we got as a result of the auctioning of the spectrum is ludicrous. It’s like saying if the Commonwealth has a building and it leases that building, it doesn’t include the rental payments it receives in its income. I mean what we have done is to follow the advice of our experts. They told us that conservatively we could expect to receive quite a lot of money from the auctioning of the spectrum over the coming year and if you look around the world, particularly at Britain where this same process has occurred, they’ve received a great deal more. And the Treasury and the Bureau of Statistics and the IMF and all the bean counters and the boffins they all said look, the safe conservative thing to do is to assume you are going to get this. And look the Labor party and some critics in the media are just looking around for a stick with which to beat us. They can’t find any proper authentic accounting argument for this money not being included and we have done the very safe thing. We have used it to retire debt. We haven’t used it to hitch ourselves to ongoing expenditure that we can’t afford in the years ahead. It’s given us the flexibility to get rid of the East Timor Levy. But bear in mind that Levy was only going to come on for one year. So we are not being very adventurous in getting rid of it against the background of this unexpected additional money from the spectrum sale. But the whole thing is hunky dory, ,straight up and down and it’s just a case of people casting around for some reason to attack the Government that inherited more than 80 billion dollars of debt run up up by Mr Beazley in his last five budgets. And at the end of this budget we will have repaid 50 billion of the 80 billion dollars of debt that we inherited from Mr Beazley.
MILLER:
All right. Lets look then at the criticism saying that this is based on a lot of fairly optimistic forecasts.
PRIME MINISTER:
The only optimistic..
MILLER:
In terms of economic performance in terms of the impact of the GST?
PRIME MINISTER:
Well the growth forecasts are in line with the forecasts made by private sector economists. I went through those comparisons earlier this morning. And what we have been told by the Treasury and we rely on their estimates, we don’t invent them in the Treasurers office or the Prime Minister’s Office, as Mr Keating did on one occasion. What we do is we rely on the advice of experts and the experts tell us that we are going to have growth of about three and three quarters per cent next year. By the June quarter of next year we are going to have unemployment at six and a quarter per cent which will be an astonishing turn around from what it was a few years ago and if you look at what people in the private markets are saying about growth, they are saying basically the same thing.
MILLER:
All right, well in fact Mr Paul Drum who is senior tax counsel with the Certified Practising Accountants Association actually backs you up on that on this programme about half an hour ago so you may be pleased to know that.
PRIME MINISTER:
Well I am very pleased and he sounds very reliable adviser.
MILLER:
Well one of the things that he did raise though is the issue of the GST and the apparent lack of any funding for on going GST education after the implementation of the tax. He said it’s in those first few months when businesses have to comply that more education will be needed. There is no provision for that.
PRIME MINISTER:
Well I am not sure that there is absolutely no provision in the money that we have already allocated to cover education in the first few months, I am not sure that is right. We have allocated quite a lot of money and we are pouring hundreds of millions of dollars into education, obviously we will keep an open mind about the need for further help if we think that is necessary.
MILLER:
All right. Now there has criticism too this morning I notice of the, whilst the package for the rural Australia has been you know, widely and broadly welcomed, there has been some criticism that OK, it’s shooting at areas like health, it’s shooting at areas like education and the rural families but it’s missing the big picture infrastructure projects.
PRIME MINISTER:
Well the biggest piece of social infrastructure that people need is health services. When people talk about infrastructure, they shouldn’t only think of roads and bridges. They ought to think of basic health services and of all the needs of rural communities in Australia, none is more pressing and none has a higher priority than the need for basic health services and the right of every rural family to have affordable access to a doctor is basic and fundamental and something that all Australians recognise. And what, in particular I and my colleagues have set out to do in this budget is to really do a good job on fixing the health problem in the Australian bush.
Now I acknowledge there are other challenges as there are other challenges in other parts of the country and I don’t have a closed mind to doing something about those in appropriate circumstances. But this year we decided to really put the emphasis on fixing in an effective way the health challenge in the bush and that came through to me as one of the strongest areas of need. Now you can always more can be done in some other area. That is always the case, but we have done very big things on health.
I would remind country listeners that the budget includes several hundred million dollars to deliver in full on the commitment that there would be no increase in the price of petrol as a result of the GST. I would also point out that rural people benefit very much from the cut in diesel excise of 24 cents a litre. It’s going to make the cost of transport in the bush cheaper than it would have otherwise have been and it’s also going to add to cheaper, to the cheapening of exports which will make many of our rural producers more competitive and of course as part of the general community rural people will benefit from personal tax cuts. There is a continuation of the Australia, Advance Australia Agricultural programme. So overall the benefits to the bush if I can put it in that generic way amount to about 1.8 billion dollars over four years in this budget which is not a bad earnest or not a bad piece of evidence of our commitment to remove the disadvantage that people suffer in rural Australia.
MILLER:
OK we have increases in family benefits. Eighty per cent to pay top rate in tax, no higher than thirty per cent. But what of the criticisms that these cuts and benefits are being all but wiped out already by increases for example in interest rates.
PRIME MINISTER:
Well I don’t accept that because if you are going to bring interest rate movements into the equation then you have to be fair and include the reductions as well as the recent increases. And I am quite prepared to be held accountable for what’s happened since I have been Prime Minister and since I became Prime Minister, the average monthly cost of a mortgage in Australia, a housing loan, has fallen by about $220 a month. That’s even allowing for the increases of the last few months.
MILLLER:
So real tangible benefits then for the traditional Australian family?
PRIME MINISTER:
Real tangible benefits are there. Let me give you a snapshot. A month after the introduction of the GST, that average family you speak of, $220 a month on current levels, better off as a result of cuts in mortgage interest rates. Depending on the level of their income you could be thirty, forty, fifty dollars a week better off tax wise and many of those people have also enjoyed an increase in their wage greater than the increase in inflation over the last four years. And more than likely their younger brother or their eldest daughter who mightn’t have had a job a year ago has got a job because there is 650,000 more Australians in work now then was the case four years ago. So if you look at, and they’re the basic indicators, they’re the basic drivers of whether we are better or worse off. People have enjoyed benefits, we don’t pretend that every problem has been solved, we’re not arguing we’re perfect but the economy is going well, inflation is under control, interest rates are lower, tax is coming down, people have got more jobs. Now they’re the things, the bread and butter things that Governments are meant to deliver on.
MILLER:
OK, a couple of other things that stood out for me last night. One was and I’m very glad to see it, more recognition for Vietnam Veterans.
PRIME MINISTER:
Yes well, that was a report we received and there are obviously a lot of difficulties with some of the families in particular of the Vietnam Veterans and we felt we have a, not only a moral obligation but I think a national obligation to do something about it.
MILLER:
All right, now also we’re talking $100 million defence boost. These submarines did I hear correctly last night that we will have two of these Collins Class submarines operational by the time the last O-Boat retires next year. But will the other four be mothballed?
PRIME MINISTER:
No that’s not quite, they won’t be up to operational standard. I mean this has not been a happy project. It was a project started when Mr Beazley was Defence Minister and we have invested as a country an enormous amount in it. There have been cost over runs, it has not been well managed and we are trying to get the project under control. We’ve sunk something like four to five billion dollars into it and it would be foolish of course to just turn our back on it. And if we can as we believe to be the case, we can get them operational they can make a very significant contribution to the forward arc of Australia’s defence. But it’s been a difficult project and one that’s had a very long history and as I say started back in 1987 when the Leader of the Opposition was Defence Minister in the Hawke Government.
MILLER:
All right, now I also noticed you announced, or the treasurer announced last night quite a substantial amount of more money to combat illegal immigrants?
PRIME MINISTER:
Yes that’s necessary. We don’t like the fact that a lot of illegal immigrants are coming into this country. We are trying a variety of strategems making it less attractive when they get here and also communicating more strongly to the source countries that they are not welcome and cooperating with the source countries to prevent them leaving in the first place. Now we’ve had to make more money available, it’s necessary to provide the detention facilities and the handling of them and this continues to be a significant problem but it’s one that’s very much under control. We have put more money into border surveillance and that’s working very effectively. We are apprehending people, they’re not arriving unknown, they are being apprehended and they are being dealt with but that does cost money and we have to make more provision for it.
MILLER:
So you have delivered a stable and conservative document. How much of this is about economic management and how much of an element is there of politics in shoring up the Government in areas such as the bush and with families where you are likely to have the backlash?
PRIME MINISTER:
Well John, you try to do the right thing by the country and we’ve done that. We inherited more than $80 billion of debt. At the end of this budget, in five budgets we will have repaid fifty of that $80 billion. Now that’s got to be good for the country. We are paying our way now far more than we were when this Government came to office. We have as a result lower interest rates, inflation lower, people getting a big tax cut on the first of July, more people in work. So if you look at those things they’re all beneficial for the country. Now if in the process, people react positively to those things, and that is to our political benefit well so be it and we are entitled to get that benefit. But you don’t consciously set out to do something that is popular which doesn’t make any sense from the point of view of the country’s overall future. There’s nothing sensible in doing something that is popular in the short term that has a medium or long term detriment to the country. In the end if you do the right thing by Australia, Australians will support you but if you think that your personal political interests are more important or separate from the national interest of all Australians then you deserve to be thrown out of office.
MILLER:
Prime Minister, in the minute or so that we have left just one final question. Do you still firmly believe that Australian families will wind up better off once this GST arrives.
PRIME MINISTER:
Well I do. I think they will find after the first of July that there has been a lot of scare mongering, a lot of hullabaloo and in the end this has been a very courageous and a very visionary reform and I think in six months time most Australians will say what on earth is all the fuss about, this is quite a big and a good reform and I’m better off.
MILLER:
Prime Minister I hope you’re right. Thanks for your time this morning.
PRIME MINISTER:
Thank you.