E&OE................................................................................................
PRIME MINISTER:
Ladies and gentlemen, the Treasurer and I have called this press conference
to announce that the Government and the Australian Democrats have
concluded an agreement which will secure the passage of the Government's
historic reforms to change and modernise and improve Australia's taxation
system. This is a truly historic moment in the economic modernisation
of Australia. We will have, after the passage of the legislation,
a new tax system for a new century.
The agreement follows lengthy discussions between the Treasurer and
myself on behalf of the Government and Senator Meg Lees and Senator
Andrew Murray on behalf of the Australian Democrats and at various
stages my colleagues, John Anderson and Robert Hill, were also involved.
All major elements of the original plan remain. The principal changes
are the exclusion of basic food and the restructuring of proposals
concerning diesel fuel in response to some strongly put views by the
Australian Democrats on environmental issues.
The full measure of the income tax cuts for middle Australia contained
in the original plan have been preserved. That means that 80 per cent
of Australian taxpayers will after the 1st of July next
year pay a marginal rate of income tax of no higher than 30 per cent.
It will represent a massive injection of incentive into middle Australia.
It will reward the hardworking backbone of the Australian nation which
represents those families in particular.
The family benefits have been maintained in full. The special savings
bonus for self-funded retirees will now be available to self-funded
retirees from the age of 55. The compensation arrangements under the
original plan have been strengthened. The generational reform of the
Commonwealth/State financial accord remains. The States will, as promised,
receive the full revenue from the GST. There has been some rescheduling
and deferral of a number of the indirect taxes. But the abolition,
of course, of the wholesale sales tax will go ahead and the deferral
will be in relation to the bank account debits tax, a small deferral
of six months in relation to the financial institutions duty, the
abolition of stamp duty on share transactions and bed taxes will go
ahead as announced in the ANTS package.
It was in this room on the 13th of August 1997 that I announced
that the Government would commence the reform process for the Australian
taxation system. And now and almost two years later that process is
in reach of finalisation. I set out then in August of 1997 five principles.
Every one of those principles has been met. There has been no increase
in the overall tax burden, there have been significant income tax
cuts particularly for Australians raising children. We have introduced
a broad-based indirect tax to replace the wholesales sales tax and
other indirect taxes. There has been very appropriate compensation
for those deserving of special consideration and there has been a
truly historic reform of Commonwealth/State financial relations.
I express an undisguised pleasure at today's outcome. It has been
a very long process. We have been able to achieve, I believe, 85 to
90 per cent of the plan that was endorsed by the Australian people.
It was inevitable after the indication from Senator Harradine that
some adjustment would be needed. I believe nonetheless and the Government
believes very strongly that there are enormous benefits for the Australian
community as a result of the agreement that has been concluded today.
I would like to record my appreciation of the role adopted by the
Leader of the Australian Democrats, Senator Meg Lees. At all stages
I have found her forthright, honest, candid, adopting a sensible no
nonsense approach to the discussions, recognising differences where
they exist but seeking common ground where that has been possible
to achieve. And I do particularly want to record my appreciation for
the very constructive attitude that she has adopted.
I also want to record my particular appreciation, not only over the
past week but also over the last two years of the role played by the
Treasurer who is with me tonight. He has been a source of constant
support. He has displayed a great skill and mastery of the detail
of what after all has been the biggest and most complex economic reform
that any government has embraced for many decades.
I would also take the opportunity of recording my appreciation to
Arthur Sinodinos, my Chief of Staff who has played an invaluable role
over the last week in particular in liaison with the Australian Democrats;
Michael L'Estrange the head of the Cabinet Office and from my own
Department, Ian Watt and Patricia Scott. And I know that the Treasurer
will want to say something about the Treasury taskforce at the head
of his Department.
But it is a great breakthrough for Australia. The Australian Democrats
over the last week have displayed a commitment to the national interest.
And that is in stark contrast to the official opposition and that
is the Australian Labor Party who's vituperative negativity has confirmed
their continuing irrelevance from major policy debate in this country.
They stand condemned for that. I thank the Australian Democrats for
putting the national interests ahead of partisan political point scoring
and I believe that the Australian people will pay them true respect
and true regard.
But above all, this is a great outcome for middle Australia. They
have a big tax cut, they have a new tax system, they have a generational
change in Commonwealth/State financial relations and more importantly
they're facing the capacity of the political process to deliver enduring
outcomes across occasionally political divides has been restored in
a quite dramatic way.
JOURNALIST:
Prime Minister, does the Senate need reforming so this doesn't happen
again?
PRIME MINISTER:
Oh, look, I don't have Senate reform on my mind.
JOURNALIST:
Will you bring the Parliament back early next week?
PRIME MINISTER:
The understanding between us, which will be revealed in all the documentation
we'll make available, the understanding is that the Democrats
will support passage of the legislation by the 30th of
June. And that was the understanding at the beginning of the discussions,
and I should say that the measures you will see indicate a very strong
investment and commitment to environmental issues, which I believe
will receive very wide support in the Australian community. And there
has been a proper regard paid in the discussions that we've had
for the concerns of the Australian Democrats about elements of the
original package. But we have agreed that we will pass it by the 30th
of June.
JOURNALIST:
Is the compensation...
PRIME MINISTER:
Well given everything it's excellent. You have a look at it.
It's a world beater.
JOURNALIST:
What does this mean for the budget forecasts? Will these be changed
by the package?
PRIME MINISTER:
Well obviously the budget is about next year. This doesn't start
until the 1st of July the following year. Peter may want
to something.
TREASURER:
In relation to that the budget for 1999-2000, which is the budget
we brought down two weeks ago, is essentially unchanged. The cost
of the measures, and the offsets will have some affect on the budget
position in the following year, 2000-2001. But it's imminently
affordable. It is of the order of the package which was put together
for Senator Harradine. And it is consistent with our strategy to keep
delivering surplus budgets while the Australian economy grows, and
to retire and reduce debt.
JOURNALIST:
Prime Minister, you and the Treasurer have previously said it wasn't
possible to remove from the tax. Why wasn't it possible before
and it's possible now?
PRIME MINISTER:
Well our preference always was to have the original package, and everything
I've said, and the Treasurer has said in relation to that is
entirely consistent with that position. But that became impossible
of achievement two weeks ago.
JOURNALIST:
How are you going to fix the compliance nightmare...?
PRIME MINISTER:
Well there will be consultations with those involved, in applying
the tax on some of their items and not on others. There obviously
will be challenges in that area and we'll be consulting on that.
But in the end with these things you have to make a judgement. Is
it in the national interest to walk away because you don't get
100%, or is it in the national interest to strive and persevere and
try and get 85-90%? Now the answer to that is overwhelmingly obvious.
And that is to do what we tried to do and we succeeded in doing, and
succeeded against the expectations of our political opponents who
are now marooned in their irrelevance.
JOURNALIST:
[inaudible]
PRIME MINISTER:
It is very pro environmental, and importantly it preserves benefits
for the bush contained in the last package. And in one area, namely
the extension of the concessional excise rate for off road purposes
to rail, it actually enhances the benefits for the bush.
JOURNALIST:
So is it a better outcome than your original plan?
PRIME MINISTER:
Well there are in environmental respects, the outcome is better. Obviously
in relation to the total uniformity of the application of the GST
you know our preference. I mean, we're not pretending that we
didn't have a preference for the former plan, we did. And that's
the one we won the election on and that's the one we would have
liked to have put through but we found out two weeks ago that we couldn't
do that and then we decided to talk to the Australian Democrats. And
that was the correct sequence in which to handle things.
JOURNALIST:
Is the outcome better, Prime Minister, on fairness in terms of the
original design of the compensation measures and relying heavily on
indirect taxes?
PRIME MINISTER:
They were both fair, both fair.
JOURNALIST:
Is this fairer?
PRIME MINISTER:
Well, you can make a judgement about that, Paul. I certainly believe
if you have a package where your tax breaks for middle Australia and
low-income earners are preserved and you've enhanced the compensation,
I don't think anybody could argue that fairness has been neglected.
I think it's a very I mean, the original package was fair
but this is super fair.
JOURNALIST:
Will you need to call the Premiers together now to discuss it?
PRIME MINISTER:
Oh, you don't need a Premiers' Conference. I mean, I will
get in touch with the Premiers and there are a few, you know, changes
their funding arrangements remain in tact. They still get the
same deal. I mean, they will love it because it will give them a growth
tax. And the sensible welfare people will love it too because this
Government has provided a long-term lifeline for the funding of welfare
in Australia and it's giving a growth tax to the States. No other
government has achieved that. And Premiers of both political persuasions
have been screaming for that for decades.
JOURNALIST:
Prime Minister, given that you said the tax cuts will remain in their
entirety, how are you going to pay for removing food?
PRIME MINISTER:
Well, I said that those under 50,000, there's been a shaving
in relation to the 47 cent rate, instead of coming in at 75,000 will
come in at 60 and the 40 cent rate at 50 will go to 42 but everything
under 50 remains completely in tact. I think you ought to have a look
at the document. You'll see it all set out there.
JOURNALIST:
Are you prepared to go through this sort of agony for every other
piece of your reform programme - industrial relations, sale of Telstra
- between now and the next election?
PRIME MINISTER:
Tonight is not agony. It's sweet political enjoyment of the most
exotic kind.
JOURNALIST:
Would you [inaudible] thermometer?
TREASURER:
Look, the truth of the matter is that there'll be more complexity
in operating a GST which has exemption for some foods. And as we say
in our package, that will require additional costs. We think for the
Tax Office that will require about an extra $60 million a year. That
is one of the consequences of having a less comprehensive base so
we'll need more people to enforce it. But we still have time
to, respecting the principles that we've agreed to, to make sure
that the legislation is as simple as possible. We'll be trying
to draw clear lines of delineation in doing that.
JOURNALIST:
Will you be setting [inaudible] with thermometers?
TREASURER:
Oh, I think they can probably use their fingers, you know, much less
scientific than thermometers.
JOURNALIST:
Prime Minister, basic food, can you give a commitment or are you prepared
to say it's off the agenda permanently?
PRIME MINISTER:
Oh look, this is it.
JOURNALIST:
Has anything else exempted from the GST?
PRIME MINISTER:
Oh, there's a few of those panadols and so forth.
TREASURER:
And there's some minor ones in relation to health, in relation
to what's on the S2 list but other than that the base is more
or less in tact.
JOURNALIST:
[Inaudible] how closely does that stick to the Irish model that the
Democrats put up?
TREASURER:
Reasonably closely.
PRIME MINISTER:
Reasonably closely. I'm not saying it's a, it's not
a northern Irish model.
TREASURER:
Can I just interrupt there. The Prime Minister did advert earlier
and I would like to add my personal thanks to the Prime Minister for
the work he and his staff have done, to Senator Lees and Senator Murray
for their co-operation and particularly to my own staff, Phil Gaetjens
who headed-up the tax unit and the Treasury people, Greg Smith and
his team who've done a terrific job and they really have worked
incredibly hard. And the truth of the matter is, as the Prime Minister
says, 85 per cent of the biggest tax reform in Australia's history
is worth it and it sure beats zero per cent. And we come out of this
with tax reform which has eluded previous governments. We don't
come out with everything we wanted or everything we put to the Australian
people but 85 per cent of Australia's biggest tax reform ever
is something that I think we can all say was worth it for our country.
JOURNALIST:
Mr Costello, do you have a new-found respect for the Democrats economically?
TREASURER:
Look, I have a respect for the way in which they have sat down and
brought their minds to bear on this and I think done something important
for our country. And I just contrast that with the Labor Party. What
is the Labor Party's view on this? The Labor Party's view
on this is, let them fix the tax system and then we Labor will try
and take advantage of it. And the thing about the Democrats, where
they stand miles in front, the Australian Democrats, is they were
part of making it happen. They didn't want to just come along
and gratuitously fall into the benefits. They were prepared to be
part of making it happen and I pay tribute to them for doing that.
JOURNALIST:
Prime Minister, is there a mechanism to lock in the food exemption
for all time?
PRIME MINISTER:
This is it.
JOURNALIST:
Mr Howard, when did you decide that exempting food would be a fair
price to pay for...
PRIME MINISTER:
When did I decide? Well, I had hoped, Denis, until two weeks ago that
I could have got the original package. Now, when Brian Harradine said
that he could not I then set about talking to the Australian Democrats.
I mean, we did canvass with them whether they would be agreeable to
have a lower rate for food. That was one of the items. And they made
it clear that they wouldn't. I mean, I knew once we entered the
negotiation, like any negotiation, there had to be some give and take
on both sides. There had to be an acceptance on their part of the
centrality to our thinking and our goals of tax relief for middle
Australia. Equally, we knew how strongly they felt about basic food
and about a number of the environmental aspects of the package. And
it was an honourably brokered compromise and it delivered, as Peter
said, 85 to 90 per cent of what we set out to do. And given some of
the vagaries of the Australian parliamentary and electoral process,
in an area as complex and difficult and an area that has defeated
government after government on both sides of Australian politics for
the last 25 years, it's an extraordinary outcome. I mean, Ken
Asprey started the process in 1975 when he delivered his report to
the Fraser Government. That was just a year after I came into Parliament.
And at long last we have within grasp an historic reform of Australia's
taxation system. Now, it was worth toiling for, it was worth working
for. It wouldn't have been possible without the constructive
national interest approach of the Australian Democrats. It wouldn't
have been possible without all the effort and sweat of my colleague,
the Treasurer, and all of us over the last couple of years. But you
are in government to do good things for the country. You are in government
to make reforms to improve. Once you lose the zeal and the drive to
do that, and that applies both in opposition as in government, you
become an irrelevance and that has a message for the Australian Labor
Party. They are nowhere in this debate. What do they believe in? What
do they stand for? They just tried to drag things down, frustrate
and impede and destroy. And they're not an alternative government.
JOURNALIST:
Prime Minister, what assurance can you give regional Australian, Prime
Minister, that they won't be worse off under this version of
the package than they would have been under the original?
PRIME MINISTER:
Well, they will be better off.
JOURNALIST:
How?
PRIME MINISTER:
Well, have a look at it, Karen. I mean, to start with, the rail thing
is well, you'll get it as soon as it's over
exactly, your deadline's much easier the extension of
the off-road for rail is, for example, is something that wasn't
in the original package. Now, I think that's about it. I think
Senator Lees wants to have a talk to you. Thank you very, very much