Subjects: petrol prices; interest rates; inflation; IVF; Tax reform; Sir James Gobbo; Russian submarine; Sir Don Bradman;
E&OE……………………………………………………………………………………
MITCHELL:
Good morning.
PRIME MINISTER:
Good morning Neil.
MITCHELL:
Petrol prices around Melbourne have hit 99.9 cents for unleaded today. About 50 cents of that goes to government. What can you do about it?
PRIME MINISTER:
Well you can do two things. You can try and impose some kind of control on the price of petrol, national control, and thereby move away from the world pricing of petrol. I think that would be a huge mistake because one of the things that is important to guaranteeing investment in crude oil exploration is that we are pegged to the world price and we still have by world standards very cheap petrol. The other thing you can do is to have a discretionary cut in the amount of petrol excise. Now that of course to make any difference would cost hundreds of millions of dollars.
MITCHELL:
Will you look at that?
PRIME MINISTER:
No, not at the moment. We won’t.
MITCHELL:
Do you accept that the GST has added to the price and you said it wouldn’t?
PRIME MINISTER:
Even if you accept, which I don’t, the arguments of our critics, the addition from the GST they say is no more than one-and-a-half cents a litre, even our critics say that. I don’t accept that but even if you did that’s the magnitude you’re talking about and if you’re talking about the six-monthly indexation that’s 0.6 cents a litre. So overwhelmingly the movements in price are driven by the world price of petrol. I know it’s easy for State premiers and motoring organisations and everybody to call for something to be done. Okay I’m telling you the two things that can be done.
MITCHELL:
Cut excise.
PRIME MINISTER:
You can cut excise but that costs hundreds of millions of dollars.
MITCHELL:
[Inaudible]
PRIME MINISTER:
Yes but in the end if you take, I mean the buck stops with me. I have to decide, the Treasurer and I and the Government have to decide whether we do something like this and in order to make any difference at the pump it would cost an astronomical sum to cut the excise by say 5 cents a litre. It would cost hundreds of millions of dollars to do that. Now if you take that money and give it back by way of an excise cut than you’ve got to take it from somewhere. You’ve either got to run the surplus down and incidentally I hear Simon Crean who’s calling for a cut in excise saying he’s going to have a bigger surplus. I mean I don’t know how you quite achieve that but I leave it to him to explain that mathematical impossibility. But you know, in the end I have to say to people, and I do, I know how sensitive petrol prices are to Australians. I’m very much aware of that. But we can’t control the world price. It would be a big policy mistake to move away from world parity pricing. The other alternative is to cut excise and if we take the hundreds of millions of dollars required to make a difference you’ve got to take it out of something else and you’ve got to run the surplus down and I don’t want to run the surplus down at the moment. I don’t think that would help the outlook in relation to interest rates.
MITCHELL:
Are you comfortable with half, 50 cents out of every dollar that we pay for petrol going in tax? I mean in 1983 it was 7.4 cents the excise, now it’s 39.
PRIME MINISTER:
Neil looked at in isolation that’s a big take but governments need revenue from somewhere and the overall benefits of tax reductions as a result of tax reform are very significant and you have to look at the total picture. And I don’t have the luxury of saying oh yes we’ll cut excise without having to tell the Australian people where the money’s coming from. And at the moment it would be very unwise to run the surplus down because that would put further pressure on interest rates and if you take the money from something else, you’re taking it out of, potentially out of social welfare, you’re taking it out of other spending and I just don’t think that’s wise.
MITCHELL:
Do you now accept that the GST has in fact added to the price?
PRIME MINISTER:
Well I don’t accept that.
MITCHELL:
[inaudible]
PRIME MINISTER:
Well I mean we’ve been through this argument this before.
MITCHELL:
But petrol prices have gone up.
PRIME MINISTER:
Yes but Neil, even our fiercest critics are not saying that the GST would have added more than a cent or a cent-and-a-half a litre. Even our fiercest critics.
MITCHELL:
Well it’s added 9 cents with the GST.
PRIME MINISTER:
Well they’re wrong. I mean they’re not really saying, I mean there’s no argument that there was a discretionary cut of 6.7 cents a litre in the excise and on top of that there were flow through cost savings as a result of GST. The argument between us and the oil companies is about the timing of the flow through of those. Now even if you accept what some of them argue, some of them admitted there were immediate cost savings, you’re looking there at a debate about probably a cent at most, perhaps a bit more a litre.
MITCHELL:
So you don’t feel a promise is broken?
PRIME MINISTER:
No I don’t and I do feel very strongly that the main reason for the rise in the price of petrol at the bowser is that the world price is higher now than what it was six months ago.
MITCHELL:
So if that comes down petrol prices will come down?
PRIME MINISTER:
They should yes. Now there is always a lag but it should. Right at the moment, you heard the news a couple of days ago where the price of Brent crude had hit $US32 a barrel. Now if that comes down then that eventually flows through to the bowser. But we can disconnect ourselves from that and you might think that’s good for a while, but over time that would discourage exploration. When shortages occur in the world oil market we’ll be at the mercy of that and the process of adjustment and the amount of dislocation would be enormous. I don’t hear anybody in the Labor Party, I don’t hear anybody in the oil industry arguing that we should move off world parity pricing. It’s been a bipartisan policy for 25 years.
MITCHELL:
If petrol prices don’t settle at the level they are and even go up, and there’s some suggestion from a motoring organisation that they will continue to increase and stay there, will you review that policy? Will you look at….
PRIME MINISTER:
I don’t have any plans and nor does the Government to review that policy. We’ve looked at this in the past. We think it’s a sound policy and although this is not of any great comfort for people for me to say it, I know that, but we do have the second or third cheapest petrol in the world.
MITCHELL:
Will you look at the excise amount if it does stay high?
PRIME MINISTER:
We don’t have any plans to do that because where’s the money coming from.
MITCHELL:
Peter Beattie the Queensland Premier has said if the ACCC can’t do something about petrol prices they should be wound up.
PRIME MINISTER:
Yes I heard that interview. That’s the sort of easy hit that a premier with no responsibility, he’s got no responsibility and it’s very easy to have a hit. Queensland does better out of the GST than any State in Australia. Queensland will at the very latest start to get greater revenue out of the GST reform in two years time. It’s ahead of the other states. Queensland gets more benefit out of the cut in excise on diesel fuel.
MITCHELL:
So is there a role for the ACCC here?
PRIME MINISTER:
The ACCC in my opinion is discharging its role quite effectively. But Peter Beattie knows as well as I do that you can’t cut excise without the money coming from somewhere. If Mr Beattie wants me to cut excise perhaps Mr Beattie could volunteer the Queensland government programmes that we fund that he would like me to withdraw funding from. Now this is a challenge I make to Mr Beattie. If he really wants the price of petrol cut through a cut in excise can he nominate the specific purpose grants that the Commonwealth government now makes to the state of Queensland which he would put on the table in order to fund a reduction in excise.
MITCHELL:
Well you talk about where the money’s coming from. There’s some suggestion, I’ve been told that the GST could be a lot more effective than expected and you could end up with $16 billion.
PRIME MINISTER:
Well, well Neil in your dreams and mine and somebody else’s. I’ve been given no evidence of that. I can assure you…
MITCHELL:
With the indications…
PRIME MINISTER:
Neil there are no indications, none what so ever. This is just the sort of folklore that’s around that when you introduce a new system like this because of the enhanced compliance the black economy shrinks and you collect more money. Can I tell your listeners this - if we do find in the fullness of time that there are higher revenues from the GST, and the GST itself that will all go to the states. So if you catch Mr Beattie or Mr Bracks saying that we can afford to do this that and the other because the GST is producing more revenue you ought to tell them that they’re going to get the increased revenue. If there is more revenue flowing to the states or to the Commonwealth as far as I’m concerned we’ll use that sensibly. But I have no evidence from Treasury.
MITCHELL:
If you do get more revenue you could look at petrol prices.
PRIME MINISTER:
Look I’m not going to hypothesise Neil. All I’m going to do is give a general promise that if there is higher revenue we’ll use it wisely. But I have no evidence. I think it really is, how should I put it, fiscal fools gold to be sort of pretending that we’ve got billions of dollars of extra revenue. There’s no evidence of that. We’re only seven weeks into the GST.
MITCHELL:
But there must be predictions surely?
PRIME MINISTER:
No there aren’t.
MITCHELL:
There are not?
PRIME MINISTER:
No, no there aren’t. There aren’t any official predictions. People have these ideas. I mean people are coming to me everyday with ideas and say look you’re going to have this and that and the other. Now if it proves to be right, and we won’t know for a long time yet, but obviously we’ll address what we have to do. Can I say one very important thing? There’s a bit of comment around about interest rates at the present time. Now one of the worst things you could do for interest rates, something that is calculated to push interest rates up and not down is to reduce the surplus. And whenever I hear a state premier saying do this, do that, cut excise, give us this, give us that what I say back to them is that you’re talking about running down the surplus. If you run down the surplus you put added pressure on interest rates. And that makes no sense. And I think middle Australia listening to me this morning would nod their heads in agreement.
MITCHELL:
The Reserve Bank says that current interest rate levels are not unduly restraining the economy. Do you agree with that?
PRIME MINISTER:
You get a variety of views on the economy. The Reserve Bank has the view that the economy is still growing at about the pace it was a year ago. Generally speaking the Australian economy, in my opinion and my experience based on anecdotes as well as official advice, it’s still running very strongly. I think the Treasury prediction of it coming off just a touch is probably accurate but it’s very hard to make a predication.
MITCHELL:
Do you agree, well when you read the Reserve Bank quarterly statements do you agree that they’re suggesting interest rates could increase again?
PRIME MINISTER:
I don’t want to get into that. What I say about interest rates can have a sensitive impact and I’d rather not do so. What I would like to do is do the right thing to keep interest rate pressures down in those areas over which I have control.
MITCHELL:
Such as?
PRIME MINISTER:
The size of the budget surplus.
MITCHELL:
Anything else?
PRIME MINISTER:
Well anything that has an impact on the strength of fiscal policy. The more pressure you put on fiscal policy the more likely you are to have higher interest rates. And when I hear people calling for discretionary cuts in excise on petrol without telling where the money’s coming from that really is bad news for interest rates.
MITCHELL:
Yeah but the petrol price in itself is inflationary.
PRIME MINISTER:
Yes and that’s due to the world price of petrol. Look this is not easy, Neil you’re right, I mean if you look at it in isolation you’re absolutely right. And if I had no responsibility other than to focus the mind of the public on the price of petrol I like the motoring organisations and like state premiers I could run a very effective campaign. But I have a broader responsibility than that. I’m the person in the end who’s got to say why you can’t change policy and defend what the government is doing. Now I don’t like petrol prices going up. I know very well from long life experience that petrol prices are sensitive to the Australian motorist and I don’t like to see them go up. But I’ve got responsibility to work out how I might get them down consistent with my other responsibilities. And for the reasons I’ve explained I don’t see my way clear to doing that.
MITCHELL:
Has the tax take on petrol been at 50% per litre before.
PRIME MINISTER:
Well I’d have to check the figures on that. Look Neil I’m not denying that the tax take is significant. But in the end when you’re a prime minister you’ve got to get revenue from somewhere. And we have cut income tax by $12 billion a year. We have made diesel fuel excise a lot cheaper. We’ve done a lot of things to prevent the price of fuel being higher than it would otherwise be and in the end its dominated overwhelmingly by world influences.
MITCHELL:
Just back to the Reserve Bank quarterly statement they seem to be suggesting that the inflation dragon is not dead. Well I think it’s 3% they’re predicting when they remove the GST impact. Are they right or is Peter Costello right?
PRIME MINISTER:
Well I don’t think they challenged Peter’s…
MITCHELL:
No they don’t.
PRIME MINISTER:
…remarks…
MITCHELL:
They’re suggesting it isn’t dead, it’s breathing.
PRIME MINISTER:
Well there have been a couple of factors. I hope they’re one off. They’ve added to the inflation but it’s still very low by historical standards, very low indeed.
MITCHELL:
We’ll take a quick break and come back with more from the Prime Minister.
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MITCHELL:
The Prime Minister is with us. Mr Howard your IVF legislation that’s reported today means that defacto couples could be refused IVF. Is that your intention?
PRIME MINISTER:
No and that won’t happen. No state does that.
MITCHELL:
No but the legislation according to Mr Williams that’s deliberate.
PRIME MINISTER:
It’s not deliberate, that’s not correct. That’s not what he said. The legislation is based upon the fact that there is no state in Australia that bans the availability of this to people who are living in a bona fide defacto relationship with a man and that’s not the purpose of the legislation at all. I can’t conceive of any state wanting to do that.
MITCHELL:
But the legislation does allow discrimination on the basis of marital status which surely opens …
PRIME MINISTER:
That’s an interpretation. Excuse me, that’s an interpretation that’s been placed on it by its critics and that is not the intent of the legislation. That’s not the government’s view. What the government has set out to do very simply is to say that it is not inconsistent with the Sex Discrimination Act for these procedures to be denied to single women and women that are living in a lesbian association and that’s the purpose. It is not the purpose of the legislation, it’s not the desire of the government to say that these procedures should be unavailable to people living in a defacto relationship with a man.
MITCHELL:
Well if that is the effect of the legislation will it be changed?
PRIME MINISTER:
Well I want to analyse the arguments that have been put. I’m not making any on the run changes except to make it very clear that the intention is not in any way to make a judgement in relation to these practices. That is between married women and those living in a bona fide defacto relationship. That’s never been the intention. And the critics know that. This is an attempt to sort of, by the Labor Party to divert attention from considerable differences of opinion within their own ranks. And can I make the point Neil that none of the states have legislation to the effect you’re talking about and I can’t conceive given current community attitudes, whatever personal views people may have I can’t imagine that that would ever happen.
MITCHELL:
Okay we’ll take a call and then some other questions to the Prime Minister. Greg go ahead please.
CALLER:
Yes, Prime Minister I’d like to thank the station for the chance to talk to you like this. I run a supported residential service for people with disabilities, like disorders, intellectual disabilities, that sort of situation.
PRIME MINISTER:
Is it a, it’s a support service is it?
CALLER:
Yes, it’s a home for people who basically can’t look after themselves. Some of them are aged, some of them are not. Now we’ve just received yesterday information from Bronwyn Bishop’s department that we can be GST-free if we meet a certain criteria. The difficulty is most of our people will never meet that criteria and also there is a section in it that says that we have to have night staff stand up which will increase our costs a thousand dollars a week.
MITCHELL:
Yeah, well what’s the effect Greg… .
CALLER:
We can’t do that and therefore we’ll have to charge our residents GST and that will reduce their expendable income by 63%. So what you’ve got is a guy who used to have, before the pension went up, $27.50 in his pocket and now he’ll have $17.50 in his pocket.
PRIME MINISTER:
Well, can I, the thousand dollars a week sounds a bit hard to accept on first blush. Could I possibly through the station have all of the details of it? I can’t give you an answer without checking it all and I will write back to you as soon as I can.
MITCHELL:
Hold on Greg. Mr Howard, Steve Bracks has raised again the possibility of heroin trials in Victoria. Is there any chance of a rethink on that?
PRIME MINISTER:
No, not from our point of view.
MITCHELL:
Sir James Gobbo was being, will be replaced as Governor of Victoria. Is there any possibility of him being considered as the next Governor-General?
PRIME MINISTER:
I am not going to speculate on who I might recommend as the next Governor-General. Separately from that can I say I have an enormous regard for him. I thought he did an outstandingly and impeccably bi-partisan job as Governor of Victoria. And I always found on my frequent visits to Victoria if I was with him, or he and his wife, they were charming, they did the job extremely well, always courteous to everybody, never a hint of partisanship. I think he was a terrific Governor of this state and I wish he and his wife all the very best in the future. And I don’t say that incidentally, with any hint of criticism of his successor. John Landy is something of a sporting icon to many Australians and I am sure he will do the job with a great deal of commitment.
MITCHELL:
Laurie, go ahead. Quickly please Laurie.
CALLER:
Yes, good morning Neil, Mr Howard. Regarding the price of petrol, I would like to know why we’re charged so much when we have approximately 70% of our own crude oil for fuel. And I feel that it’s just an excuse for a rip-off. Mr Howard, I’ve been a Liberal voter my whole life, but you’re pushing me to the limit.
PRIME MINISTER:
I don’t always except those sorts of tag lines as being completely accurate. But, look you made the point that we have 70% self-sufficiency. The reason, or one of the main reasons is that we do price our fuel at the world level and that has provided over the years an incentive for people to invest in exploration which in turn has given us the 70% self-sufficiency. Now you’ve got to, you’ve got to look at the whole picture. If you have a price regime in this country that denies explorers an incentive to look for reserves of crude oil and thereby maintain our self-sufficiency then you’re putting at risk that very self-sufficiency that gives you the 70% which you say should be a reason why we should cut loose from the world price. You can’t do that.
MITCHELL:
Mr Howard, a couple of tax matters. A group headed by the Anglican Church wants a higher tax on cask wine, because they think it’s being abused. Would you consider that?
PRIME MINISTER:
Well, we spent months looking at the tax regime for wine and I’ve got to say with respect, we don’t propose at this stage to make any further changes. I really, I really don’t, I mean I think there are reasons unrelated to the tax on wine why some people may abuse it.
MITCHELL:
Another tax issue, I’ve no doubt you’ve read about this. A decision in Western Australia where a drug dealer had $200,000 in earnings buried in the backyard, it was stolen from him and it was considered to be a tax deduction. Something wrong with the law.
PRIME MINISTER:
Well, I’ve, without being a cop-out merchant on that, I will have to say that’s a decision of the courts and the Tax Office.
MITCHELL:
The third issue that has been raised with your Government, the luxury car tax as applying to cars being auctioned for charities. It’s hurting a lot of charities, will you review it?
PRIME MINISTER:
Well, I think it’s too early to say that it’s hurting. I mean we’ve been in, the things been operation for seven [weeks] and I think there’s an argument in favour of the regime that’s in operation, we’ll watch it carefully, I am not making any promises. After all, you are dealing with a lot of auctions where the people who bid successfully are you know, I think capable of . . .
MITCHELL:
Come on, we’re talking about charity, we’re talking about raffles too. Previously they didn’t pay a luxury car tax, now they do. So they’re paying more for the car, they’ve got to sell more tickets to make the money.
PRIME MINISTER:
Well, that’s, but there are – look I think, I think the regime we’ve put in place for charities has been, is pretty reasonable. It’s like all of these things, we will, we will monitor it and we’ll be sensible and fair, but I don’t want to give the impression that we’re just going to amend every time somebody raises something. I think we have to let it bed down for a little while and see how it works out.
MITCHELL:
Has Australia offered any help or any involvement in the issue of the Russian submarine?
PRIME MINISTER:
No. I think, I mean everybody is just mortified about the sight, the very thought of being at the bottom of the sea in a, in an overturned submarine is just horrific. We haven’t from a practical point of view, we’re so far away. I mean even the British and the Norwegians which are very close, it’s going to be Saturday morning before that British rescue mission can get into action. I think all of us have got our fingers crossed. But, I feel very deeply for the parents of those young blokes, it’s terrible.
MITCHELL:
Extraordinary. Did you feel deeply too, watching the funeral of that Australian soldier yesterday?
PRIME MINISTER:
I did. I, the Government’s two Ministers, John Moore and also Peter Reith were representing the Government. But it’s very gripping and it’s just a reminder that it is still a very dangerous operation. We still have 1,500 men and women in East Timor. We tend to forget it because the immediate heat and everything has gone out of it. But, the militia is still there. They’re still quite threatening. They still have sense of revenge. And it’s something that we will bear in mind.
MITCHELL:
Thank you for your time. Sir Donald Bradman, now if we were going to have a president, he’d be a good president, wouldn’t he?
PRIME MINISTER:
Well, he’s certainly a very . . . you’re really trying to get me now.
MITCHELL:
That’s true.
PRIME MINISTER:
Look, he is an extraordinary figure. I think many people regard him as the greatest living Australian. It is just amazing the impact he’s had on this country. For two thirds of the time that we’ve been a federated nation, he’s really been the dominant celebrity in our lives.
MITCHELL:
Thank you very much for your time.
PRIME MINISTER:
Thank you.
[Ends]