Subjects: Petrol prices; private health insurance rebate; Savings bonus; Premiers’ Conference; Minister Reith; banks; ADF Personnel
E&OE……………………………………………………………………………………
MURRAY:
Good morning Prime Minister.
PRIME MINISTER:
How are you Paul?
MURRAY:
Very well thanks.
PRIME MINISTER:
And while I am at it, congratulations for clocking up a half century recently.
MURRAY:
Thank you very much for your little message of support which came to me through Paul McKeogh. I must say I know you’ve nudged over fifty yourself and I appreciate the support from one who knows.
PRIME MINISTER:
Yes well keep going, you might reach me one day.
MURRAY:
I am sure I might. Prime Minister, I would like to start you this morning on petrol.
PRIME MINISTER:
Yes, sure.
MURRAY:
Fuel prices. The Australian Automobile Association today says you’ll make a windfall $780 million from a Petroleum Resource Rent Tax this year and it says that destroys your claim that you can’t afford to freeze petrol excise next February. What’s your response to that?
PRIME MINISTER:
Well we don’t agree with that. On Treasury advice we don’t agree with the calculation that the Australian Automobile Association has released a few moments ago. When the mid-year economic and financial overview which is really the six-monthly review of how the Budget’s going, comes out in a few weeks there’ll be total details of Treasury projections of what has happened. Let me make a couple of points about the AAA calculation, it is much more than on Treasury advice we believe will be any additional revenue from the Resource Rent Tax. We’ve always accepted incidentally that there would be some extra from the Resource Rent Tax, I’ve never denied that, but what of course we disagree with them about is firstly the amount they’ve talked about is much too high. And secondly they don’t make any allowance of course because they have a narrow focus, they don’t make any allowance for other items where we have to pay a lot more out. Now can I mention two? Far more people have taken out private health insurance than we calculated at the time of the Budget and current advice I have is about $400 million to $500 million more will have to be paid out for tax incentives and rebates for people who have taken out private health insurance. Now that’s a very good . . .
MURRAY:
That’s your Lifetime Health Care system?
PRIME MINISTER:
Well private health insurance. Everybody who takes out private health insurance now gets a 30% tax rebate from the Government. And at the time of the Budget we calculated that about 37% of the population would be taking out private health insurance. It’s been fantastically more successful than we expected and it’s over 41%, it might even go higher in the September quarter. Now that’s good news, it’s great news. It’s what we wanted people to do but it’s going to mean an extra $400 million to $500 million out of the Budget because all those extra people are entitled to claim the tax rebate.
MURRAY:
But I thought you did that to save yourself money from the health system?
PRIME MINISTER:
No, we did it in fact to help the states, help the states. Look Paul there’s no getting away for it, if 41-42% of people join private health insurance and your Budget calculations on the basis of 37%, a lot more people are going to be claiming the tax rebate. Now that is a very good thing but you’ve got offset that against any extra money you might collect in another area. I mean the Australian Automobile Association has the luxury of a total preoccupation with one issue, I don’t have that luxury.
MURRAY:
But you do concede you’re going make this windfall?
PRIME MINISTER:
No, I don’t. No I am not conceding, I mean you don’t have a windfall unless in net terms you’re ahead, do you?
MURRAY:
Well no, you have a windfall and then you decide where you’re going to spend it.
PRIME MINISTER:
No, no. Hang on . . .
MURRAY:
I accept your argument . . .
PRIME MINISTER:
Yes, but see the whole basis of this push is that we have got lots of extra money as a result of increased collections because the price of petrol is higher. Now to start with I don’t accept the calculation that’s been made in the Resource Rent Tax and secondly you’ve got to make allowance in other areas of the Budget for additional outlays such as the one on health insurance. And there’s another one, there are far more people taking up, and this is another good thing, there are far more people taking up the Savings Bonus for Self-Funded Retirees and Pensioners under the new tax system than was calculated at Budget time. And you’re looking there at an additional cost to the Budget of $500 to $600 million. Now it is a cost I am happy to see occurring, but we still have to take it into account. So if you add those two items alone together, and I am not saying they’re the whole picture, but if you add those two items together alone, you’re looking at more than $1 billion extra and a call on the Budget that wasn’t allowed for at the time the Budget was brought down. So that even if you were to collect a lot of extra money in another area, that extra $1 billion would have to be set off against it.
MURRAY:
But you’re predicting a healthy surplus anyway, aren’t you?
PRIME MINISTER:
No we are . . . but you need a healthy surplus because the money doesn’t sit mouldering in the bank, it is used to repay Mr Beazley’s $10.5 billion deficit. It is used to retire Labor debt . . . well it is.
MURRAY:
Well I know but you’ve done a fairly good job on that already.
PRIME MINISTER:
Yes, but you have to and the last thing we should be doing at the moment if you want to keep interest rates down is running down the surplus. And can I say to the Labor Party, can I say to the AAA, can I say to every premier anywhere in Australia, any call you make to run down the Budget surplus you are effectively opting to put upward pressure on interest rates. And if I have got to make a choice as prime minister between a minor adjustment to indexation, to the excise on petrol and putting upward pressure on interest rates, I will always do what I can to keep downward pressure on interest rates. I mean premiers have the luxury of calling on the Federal Government to dip into its surplus and thereby put upward pressure on interest rates . . .
MURRAY:
But Prime Minister increased transport costs put upward pressure on interest rates and a 3 cent a litre increase in excise in February will do just that.
PRIME MINISTER:
But Paul what you are losing sight of is that the, there’s no guarantee you’re going to have a 3 cent, I mean I don’t know where that 3 cent figure came from. It certainly hasn’t come from the Federal Treasury. See what another thing that a lot of the critics are overlooking is that the CPI impact of the goods and services tax was less than had been predicted and that in turn will have an impact on the indexation factor in February. And a lot of the, a lot of the claims about windfalls were based on the belief that the CPI impact of the GST would be 3.75% whereas in reality it was under 3%. Now the point I am simply making to you Paul is that I don’t like high fuel prices. High fuel prices are a product of high world prices and the only way . . .
MURRAY:
And high taxation.
PRIME MINISTER:
Well the only way you can cut the price of petrol at the moment is for either the state government to give up some of its excise and the Western Australian Government for example gets an excise, we collect some fuel excise on their behalf and give it to them. I mean they, if they want to bring about some reduction they can do the same as Queensland has been doing for years and provide some kind of subsidy. But it’s convenient for state governments to call on us and run a populist campaign because they know that high fuel prices are unpopular.
MURRAY:
Well the premiers want to talk to you about that at COAG on Friday. Will you entertain that?
PRIME MINISTER:
Look it is not on the agenda, but of course premiers can say whatever they like at doorstops and so forth, but look it is a political stunt this because if the state governments were really serious they would look at their own capacity to give a rebate. See Queensland petrol is cheaper than it is in other states and that is because the state government there has chosen to subsidise and incidentally it wasn’t introduced by Mr Beattie, it was introduced by a former Queensland government. He in fact tried to get away with it, with abolishing the subsidy and there was such an outcry that he bought it back. Now if the other states believe they have the capacity to reduce the price of petrol, they want to reduce the price of petrol in their states, they have quite a capacity, several cents a litre to reduce the price of petrol by having a subsidy like Queensland. Now what they turn around and say is that we can’t afford that, well I mean that may or may not be right, but I am saying to you that right at the moment there is no hard evidence to us of a net windfall in relation to petrol. And even if there were extra revenue in relation to petrol you have to offset that against things like the extra $500 million on the private health insurance rebate and the extra $500 million to $600 million in relation to the Savings Bonus. So I would love to see the price of petrol come down and I think every person listening to you would love to see it come down.
MURRAY:
Yes and a lot of people in your Party Room . . .
PRIME MINISTER:
Look everybody would want to see it come down. But in the end the buck stops with me and the Treasurer. And we’ve got to decide whether we have the capacity. Now to have any noticeable impact on the price of petrol you’ve got to cut it by about five cents a litre. I think if you cut it by one cent a litre people would regard that as, I mean they’d welcome it, but to make any noticeable impact they’d say five. Do you know at 5 cents a litre that would take $1.7 billion out of the surplus. That would be $1.7 billion less of Mr Beazley’s debt we could pay off.
Now if you run down the surplus to the tune of $1.7 billion at the present time, that will put upward pressure on interest rates. And I think every motorist who’s got a mortgage would not thank you for that. I don’t think any of your listeners would thank you for that. Right at the moment avoiding any action that puts upward pressure on interest rates is right at the top of the list as far as I’m concerned. Premiers who run around asking us to run down our surplus irrespective of the financial consequences of that are really advocating that there be upward pressure on interest rates and we don’t agree with them and I don’t believe the majority of Australian’s agree with them either.
MURRAY:
Okay Prime Minister. Lot’s of 6PR listeners would like to talk to you this morning. If it’s OK with you we’ll just take a break and we’ll come back with their calls. We’ve got your chance now to talk to Prime Minister John Howard. If you’d like to talk to him this morning, 9221 1233. You’re with Paul Murray on the morning show on 882 6PR.
We’re talking to Prime Minister John Howard. Good morning Richard.
CALLER:
Good morning John, Mr Howard. I’m not sure whether you’ve already been asked this this morning but I’m wondering when it is that you guys in Canberra are going to wake up about holding back on the increase on fuel excise. You always strike me as a sort of ordinary bloke, a man of the people, and I’m just wondering whether you are listening to what’s going on out there.
PRIME MINISTER:
Well I am Richard. I know that people resent the fact that fuel has become so expensive. But I have to say that the reason it’s become so expensive is that the world price of fuel has gone up and the only way that we here in Australia can cut the price of fuel, given the high world price, is to cut the excise. Now if you want a decent reduction, one that you’d notice, say five cents a litre in excise, that would cost $1.7 billion. If you run the Budget surplus down by that amount at the moment and you may well have to do that in order to give a five cent reduction, that would put upward pressure on interest rates. Faced with a choice between putting upward pressure on interest rates or cutting the excise on fuel, I have to reluctantly say, because I know how people resent the high price, that I will always opt not to put upward pressure on interest rates. Richard, I know people don’t like the high price of fuel but I ask them to accept, because it’s the truth, that the principal reason for this is the high world price.
MURRAY:
Thanks Richard. Patrick’s on the line Prime Minister. Good morning Patrick.
CALLER:
Good morning Paul. Good morning Prime Minister.
PRIME MINISTER:
Hello Patrick.
CALLER:
Two questions for you Mr Prime Minister. The first one is regarding the GST. I’m bringing your attention back to the fact that the last Federal election, when you introduced this policy, you stated that no pensioner would be worse off under a GST. You promised to increase pensions in line with the basic male weekly average earnings. I’m currently on a disability …
PRIME MINISTER:
Well, that’s. Sorry.
CALLER:
…support pension and my pension is gone before I even get hit with increased fuel costs, my rent’s gone up, everything else has gone up – electricity and gas. The second part of my question is will you stand down the Minister, Mr Reith, regarding this telecard business?
PRIME MINISTER:
Well what I promised at the last election, and we’ve delivered in full on this, is that we would increase pensions by four per cent upfront and maintain a real increase over and above what would have otherwise have been your increase of two percent in real terms thereafter. In fact, because the CPI effect of the GST has been lower than we anticipated the value of that upfront increase of four percent is higher than what we allowed for at the time of the Budget. So it’s not true to say that we’ve in any way walked away from that commitment.
In relation to Mr Reith, Mr Reith made the mistake back in 1994 before he was a Minister, before I was Leader, in providing those details to his son. He has met in full the ultimate financial cost of that although he’s not legally liable to do so and although there is no evidence and there’s no suggestion that he’s behaved in any criminal or culpable way, but he’s paid it in full. Now the answer is I won’t stand him down. When you’ve paid something you’re not liable to pay – and it’s almost $50,000 – and you’ve paid it in full, you have paid something of a price. A pretty high price. Now he knows that he made an error and he’s dealt with that in I think a quite upfront way in the Parliament this week. He has been a good Minister. He made this mistake before he became a Minister, before I was Prime Minister and I made the judgement in May of this year that because of that, I was not for that reason alone going to stand him down. And nothing else has emerged to shake his story or to dent the credibility of what he told me in May of this year. And he’s paid the money in full. I repeat that – there’s not one cent missing as far as the taxpayer is concerned. He’s paid it in full, even though that $47,000 was not run up by him and there’s no suggestion it was run up by his son. It was run up by people who one way or another got hold of those details. Now he knows he shouldn’t have given the details in the first place to his son and he’s paying a very heavy price for that error and he’s aware of that. But I’m not going to sacrifice somebody who’s been a very good Minister, who’s been responsible for many courageous reforms. He’s made himself a lot of enemies as a result, in the union movement and elsewhere and no doubt a lot of people are paying back on him know, but that’s the nature of life. He’s wearing that but he’s been a very good Minister. Having met in full what were not his legal obligations, I think he’s entitled to remain.
MURRAY:
Thanks Patrick. Prime Minister Frank’s on the line from Busselton in the South West. Good morning Frank.
CALLER:
Good morning Paul. Good morning Mr Howard.
PRIME MINISTER:
Good morning Frank.
CALLER:
You’ll have to excuse my voice at the moment.
PRIME MINISTER:
Nothing wrong with your voice. I can hear it very clearly.
CALLER:
Oh well that’s good. What I’d like to know is when are you going to help these people out in the country with your petrol prices. I know it’s been a subject that’s been hanging around but not so long ago Mr Court put up our petrol up 4 cents a litre. Then there was a court ruling saying….
PRIME MINISTER:
Mr Court put it up by 4 cents a litre?
CALLER:
Yes.
MURRAY:
A road campaign here in Western Australia [inaudible].
PRIME MINISTER:
Yeah okay.
CALLER:
Then it went to the Court of Arbitration where it was deemed that the States cannot claim tax or [inaudible] for petrol.
PRIME MINISTER:
Well we collect the fuel tax on their behalf.
CALLER:
Can I just finish please Mr Howard?
PRIME MINISTER:
Yeah sure.
CALLER:
So therefore you’ve got 4 cents a litre of ours that you shouldn’t have. When are we going to get….
PRIME MINISTER:
No no, we send it back to you.
CALLER:
When?
PRIME MINISTER:
We have, we do now.
CALLER:
Well Mr Court says….
PRIME MINISTER:
No no. I mean unless we’re talking at cross purposes, but under the existing arrangements we paid the State of Western Australia this year $313 million out of the fuel excise that we now collect on behalf of the States because the High Court held that these franchise fees were unconstitutional.
MURRAY:
That’s how I understand it Prime Minister.
PRIME MINISTER:
And there’s a total amount of $1680 million, that’s $1.7 billion which is available to the States and it is within the capacity of the State of Western Australia to do what the State of Queensland does and that is use that money to reduce, to rebate to the motorists in Western Australia several cents. I mean they have, out of the money we collect on their behalf and give to them I’ve been told by the Treasury that they have 6.2 cents a litre which is available and if they wanted to use that as a subsidy for motorists in Western Australia they could.
MURRAY:
Okay thanks very much Frank. Hello Humphrey, Paul Murray here with the Prime Minister.
CALLER:
G’day Paul, g’day Mr Howard.
PRIME MINISTER:
How are you?
CALLER:
Yeah good thanks. Listen, Mr Howard, you must be aware there’s a perception in the community that politicians are out of touch with the ordinary people’s lives. Could you answer two questions please. I’d like to know when was the last time you put your hand in your own pocket and pay for a) your own fuel, b) your own phone bill?
PRIME MINISTER:
Well I’ve been living in an official residence for a number of years and there is a phone provided there. I’ve put my hand in my pocket a number of occasions to help pay some fuel bills of my children. I ride around in a car that is provided by the taxpayer. I think you know that. As does Mr Beazley, because that is part of what is provided in my job. But if you infer from that that I don’t have any understanding at all of the cost of fuel well you’re wrong. I mean it’s part of my job. I don’t disguise the fact that I’m provided with a chauffer driven car as is Mr Beazley. He was when he was in government and he does now as he’s Opposition Leader, as does Senator Lees, as does the Premier of Western Australia. I mean there’s nothing unusual about that. It’s just a statement of fact. But if you infer from that that I don’t understand that people are unhappy about the price of fuel then you’re wrong. I mean that doesn’t follow at all.
CALLER:
I think you’ve answered the question. Thanks very much.
MURRAY:
Okay good on you Humphrey. Thanks a lot. Hello Caroline.
CALLER:
Yes, good morning Paul, good morning Prime Minister. I would just like to know what happens to the money, who gets the money when the banks put up their interest rates?
PRIME MINISTER:
Well the bank uses that money in a number of ways. I mean we don’t get it. The bank gets it and I can’t answer for each bank but I’ll have a punt. But I think what the bank does with it is it uses it to in part to service the slightly higher interest rates it’s got to pay people who deposit money. Because when, I mean there are always two sides to the interest rates coin. If you are a borrower you don’t like paying higher interest rates but if you are a lender and a depositor you like to get higher interest rates.
CALLER:
Yes but most people are on the borrowing end of it aren’t they?
PRIME MINISTER:
Well no, it depends what age cohort you’re in. A lot of retired people are on the other side.
CALLER:
Well I think what happens with…..
PRIME MINISTER:
Look can I just say, and look I’m not here to advocate the banks’ cause. I’m not an advocate of the banks. If you are concerned about what in individual bank does well….
CALLER:
I’m concerned about what all banks are doing because they way they have increased their charges and the way interest rates are beginning to creep up….
PRIME MINISTER:
Well look I don’t like, and that is in fact feeds right back into the argument that I was addressing a few moments ago in relation to petrol prices. People in the community who are advocating that we run down our surplus by about $1.7 billion or even more a year, which many people are, in order to cut fuel prices by say 5 cents a litre or a bit more, they don’t realise that if we just reduce the surplus by that we will put upward pressure on interest rates. And I agree with you that the concern about holding interest rates at an acceptable level, and they are much lower now than they were when we came to power, much lower, even though they’ve gone up a bit over the last year, that is a major concern of mine. It’s one of the reasons why I’m resisting some of the populist calls that are being made on the Government at the present time.
MURRAY:
Just on banks Prime Minister, yesterday in the Age Stephen Bartholomeusz argued that banks didn’t have any social obligations. But he put this argument – he said the federal government subsidises access to telecommunications for some through it’s funding of the community service obligation. It would be a relatively simple matter to specify a basic banking package for pensioners and low income groups and then put the provision of that package up for tender on the basis of the subsidy required. Are you interested in that proposition?
PRIME MINISTER:
I’ll analyse it. I didn’t read that article. I haven’t actually heard that suggestion made before. It doesn’t sound quite as simple as he suggests. But without…. If so many of these things were quite as simple as they’re explained it would have been done 50 years ago.
MURRAY:
Yes because there’s this argument about whether banks do have a community service [inaudible].
PRIME MINISTER:
I think any major financial or corporate institution has some social obligations. I’ve always argued that. Banks have licences, they have privileges. They have great privileges banks and Australian banks are very profitable.
MURRAY:
It would be within your width of course to do exactly as Stephen Bartholomeusz….
PRIME MINISTER:
Well I’ll analyse the article. I don’t want to be heard to be saying yes to it. I will analyse it. That’s all I can say.
MURRAY:
Okay. Thanks for that. Ken on the line. Hello.
CALLER:
Good morning Prime Minister.
PRIME MINISTER:
Hello Ken.
CALLER:
In regard to the petrol prices many people are now selling their cars so we can’t predict what way it’s going to go. But as far as you’re suggesting to State government that they lay the first bridge in dropping prices, I agree with you although I disagree with many of your policies. And I think the old biblical term of what you think would be – let he who without sin caste the first stone.
PRIME MINISTER:
Well I agree with you. I am saying to the States that if you believe governments should take action to cut excise look to your own capacity first before coming to us and saying you should do it. I mean it’s the easiest thing in the world for four or five Premiers to troop into a meeting on Friday and point a finger at the Commonwealth and say you’ve got to cut your excise. I mean all of them have a capacity to do what Queensland has done and I don’t know why they don’t do it if they feel that way.
CALLER:
Exactly and thank you very much.
MURRAY:
Okay thanks a lot for that Ken. Just finally Prime Minister, it’s reported today that the Australian Defence Force has launched an internal investigation into allegations that the Special Air Service based here in Perth, some of their soldiers tortured prisoners in East Timor. Are you concerned about these reports?
PRIME MINISTER:
Well I’m always concerned about reports of that kind. I’m told that there is an investigation under way. I’m also told that a number of the allegations could be without substance. But I’m not prepared to be any more definitive than that until the investigation is completed. I’ve been assured that a thorough investigation is being made into these allegations. That is not the Australian way but I’m not suggesting that the allegations are true. I don’t know. What you do in a situation like this is is you have an investigation carried out and the Army accepts that and it is being done and I’m assured that it’s a thorough investigation involving the right people with the right experience and the right commitment.
MURRAY:
Prime Minister, very good to talk to you again.
PRIME MINISTER:
Thank you.
[ends]