MITCHELL:
But first today in our Canberra studio is the Prime Minister, Mr Howard, good morning.
PRIME MINISTER:
Good morning Neil.
MITCHELL:
First Prime Minister, an Australian soldier killed in the Solomons, do you have any information on who he was or what happened?
PRIME MINISTER:
I can't talk about his identity at this stage, the family has not wanted his name released, I can only say to them and his mates in the Army how very sorry I am. The information at present is that it was an accident, there's no suggestion that he was fired at or pushed by opponents of the Australian involvement in the Solomons. Apparently he was on a patrol and fell down a shaft which was about 15 metres deep and died from his injuries. Now whatever the circumstances, he was over there on our behalf serving the interests of Australia and I really am dreadfully sorry and extend my sympathy to his family.
MITCHELL:
It underlines the dangers in that area...
PRIME MINISTER:
It does, of course it does. Any military involvement anywhere in the world has an element of danger, the Solomons, we've sadly now lost a police officer who was murdered by people who've been captured and now through this tragic accident, an Australian soldier, it just reminds all of us that these people are doing our work for us, it's dangerous and they therefore deserve a special level of understanding and a special level of support from all of the Australian community.
MITCHELL:
Prime Minister, something else which is just emerging now, an incident with the Wollongong, up north, where they've taken on an Indonesian fishing vessel fitted with spikes, crew wielding machetes, guarded by pit bull terriers and are unable to do anything about it, unable to stop it. Are you looking at giving the Australian vessels greater power in handling these illegal fishing vessels?
PRIME MINISTER:
Well I wouldn't want to respond to that on the run, I want some more information about that particular incident, it just again underlines that from time to time we can get complacent about these sorts of things but there are always people trying to get through the protective arrangements that we have around Australia, it's obviously not anything other than abhorrent and one-off behaviour by individuals, they certainly don't represent the attitude of their country of origin in Australia. But if there are any changed responses to those sorts of things needed then they would result from a careful examination of the circumstances and not something I would just announce on the run.
MITCHELL:
Fair enough. This was a nasty incident though.
PRIME MINISTER:
A very nasty incident. Well again in the same, another example of the sort of things our soldiers and other service personnel overseas and indeed domestically sometimes, our police have to put up with.
MITCHELL:
Prime Minister, something else, a young Melbourne man missing in Costa Rica, Brendan Dobbins, has vanished, the US officials are refusing to help, the Canadians are trying to do something, will the Australian Government send somebody into the region to help?
PRIME MINISTER:
Yes, we have already made arrangements for the Consul from Mexico to go there to help. He may already be on the ground, I'm not quite sure but he at the very least is on his way. We do not have diplomatic representation in Costa Rica, the Canadians under these normal responsibility sharing arrangements look after our interests and I understand the Canadians have already, as you say, been trying to help. But we are sending our man from Mexico and he's either there now or will be there very shortly and do everything he can to help the family. I understand the young man's father has left Melbourne to go and assist with the search and we hope it turns out to be successful.
MITCHELL:
Presumably we can prevail on the Americans to help if we need to?
PRIME MINISTER:
Well if we need to we will. I mean there's nothing better than having an Australian representative on the ground, we can't obviously have diplomatic representation in every country, the Canadians do a good job when they look after our interests, as indeed we from time to time look after their interests and as I say the bloke is going from Mexico and I expect he is already there or will be there very shortly.
MITCHELL:
Prime Minister, tax.
PRIME MINISTER:
Yes.
MITCHELL:
Do you believe the states are being greedy with a land tax? Do you support the land tax?
PRIME MINISTER:
Well what I support is a taxation regime in this country where the levels of government that are responsible for certain things make provision for those things and stop blaming other levels of government. The question of whether states have land tax or not is a matter for them to decide, certainly I am very aware of the escalation of land tax in Victoria. I guess the true answer to these things is it depends on the level and it depends on the circumstances.
MITCHELL:
Well it's driving business...
PRIME MINISTER:
I know that. I think the land tax in Victoria is akin to the increases in property tax in New South Wales [inaudible] where you are creating discrepancies between the states and it's been more attractive for people to move from one state to another. Now my basic position as Prime Minister is that I don't play favourites between the states and the question of whether business investment occurs in New South Wales or Victoria is of no consequence to me. But it ought to be of consequence to Victorians and I ought to be of consequence to people who live in New South Wales. If the taxes levied by their state governments disadvantage their states and it ought to be of concern to the voters at elections in those two states, as indeed should tax levels in any states be of concern to voters in those states as well.
MITCHELL:
Would the land tax issue be on the table when the GST discussions are underway?
PRIME MINISTER:
I doubt that it will directly... the argument that we're putting about the GST is that for decades state premiers of both persuasions said they didn't have enough money to pay for their police and their hospitals and their schools and they wanted access to a growth tax. We gave them access to a growth tax with the GST, it was such that it grew far more rapidly than any of us predicted a few years principally we are saying to the states firstly, don't keep blaming the Commonwealth for shortfalls in discharging your own responsibility like public hospitals because you have got more than enough money out of us to fund them and secondly, with all the additional money you have you ought be able to abolish more state taxes because you've got more revenue via the GST than any of us ever dreamt.
MITCHELL:
Well surely, by any definition, the GST has failed because you're not happy with it, the states aren't happy with it, the public's not happy with it. You have not delivered the tax reform you promised.
PRIME MINISTER:
I don't think the GST's failed, I think the use of the GST of the states has failed.
MITCHELL:
But you promised tax reform through the GST.
PRIME MINISTER:
Yes I did.
MITCHELL:
Well where is it, we're paying more tax, the states aren't spending it properly, you're not happy with it and the states aren't happy with it.
PRIME MINISTER:
Well when I say, I didn't say I was unhappy with it, I was unhappy with what the states were doing with the additional revenue.
MITCHELL:
Well that means it's not working.
PRIME MINISTER:
No, no.
MITCHELL:
We're paying it, and you're saying the states aren't spending it properly.
PRIME MINISTER:
Well we're also as taxpayers not paying other taxes, we're not paying wholesale sales tax, there's no doubt that the introduction of the GST has been an advantage to business because they're able to rebate all of their input taxes in producing their goods and services, there's no doubt the GST has been of benefit to exporters because you don't pay it on exports. There's no doubt the GST has been of assistance in relation to personal income tax relief because part of the tax package was that 80 per cent of Australians would pay a top marginal tax rate of no more than 30 per cent and that has been maintained.
MITCHELL:
But it has not...
PRIME MINISTER:
Particularly as a result of the changes that were introduced in the last Budget.
MITCHELL:
It has not delivered the tax reform you promised, is the system simpler? No. Is it fairer? Debatable, at the very least. Is it working? By your own definition and by the state's definition, they are not happy either, it's not. [inaudible] tax reform.
PRIME MINISTER:
Well I don't agree with that as an overall conclusion, I agree with you that the state side of it is not working as well as it should, that's our argument. Our argument is that the states now have more money than ever before but they still unfairly blame the Commonwealth when there is a shortfall in the delivery of their service responsibilities. Now there's nothing I can do about that and that is something that is in the hands of the opposition parties and of voters in state elections. We have a federal system in this country and we have certain responsibilities and the states have certain responsibilities. One of the aims of the GST was to fund the states with a growth tax so that no longer could they every year say we could provide more schools in Werribee or in Box Hill if only we had more money from the Commonwealth. Now the Commonwealth has given them more money, in fact more money than we promised them all would be, and yet they still blame us.
MITCHELL:
But this is so frustrating.
PRIME MINISTER:
Yes it is.
MITCHELL:
You're blaming the states, the states are blaming you.
PRIME MINISTER:
No, no.
MITCHELL:
We're the bunnies in the middle paying the tax.
PRIME MINISTER:
No I am just asking you, asking your listeners, to just examine what the facts are, now nobody can deny that the states are better off as a result of the GST, that is an undeniable...
MITCHELL:
Is this the tax reform that you promised?
PRIME MINISTER:
To the extent that it has fallen short of that goal, it is because the states have failed to live up to their share of the bargain.
MITCHELL:
Did you accept that the personal taxation level has increased in Australia as the OECD reported?
PRIME MINISTER:
The OECD report has two serious mistakes.
MITCHELL:
Does that affect the levels they estimate of personal taxation?
PRIME MINISTER:
If you don't take account in relation to families of the value of family tax benefits, yes. If you do take account of those, the answer is no.
MITCHELL:
Does that still not show that the level of personal taxation in this country has increased significantly while most of the rest of the developed countries have gone back?
PRIME MINISTER:
I don't think Neil that it is fair to limit an analysis of something like this just to the strict level of personal income tax.
MITCHELL:
That's what matters to us Prime Minister.
PRIME MINISTER:
No, well.
MITCHELL:
People listening now are worried about their personal income tax.
PRIME MINISTER:
Yes, they are also, the people listening now would also be worried about their purchasing power, and if you are a family, that purchasing power is influenced by two things, after your wage of course. It is influenced by the level of personal tax and it's also influenced by the Family Tax Benefits you receive and this very OECD report shows that a one-earner family with two children, when you take into account the Family Tax Benefits, that their burden, their tax burden has fallen from 16.1 per cent in 1995 to 12.8 per cent in 2004. Now the reason why I insist that you have to include those Family Tax Benefits is because most Australians take their Family Tax Benefits by way of fortnightly payments from the Family Tax Office, they are recorded on the expenditure side of the budget and not the tax side of the budget and therefore in a literal sense the personal tax burden is not reduced by those family tax payments but in a real sense, what ends up in a bloke's pocket or a person's pocket is not only what he gets after personal tax but also what he gets by way of Family Tax Benefits.
MITCHELL:
What was the example you used then, single parents?
PRIME MINISTER:
No, with two children.
MITCHELL:
Single parent?
PRIME MINISTER:
Yes, single parent and that tax burden has fallen from 16.1 per cent in 1995 to 12.8 per cent.
MITCHELL:
What about everybody else?
PRIME MINISTER:
Well it will depend on your circumstances.
MITCHELL:
Well will you really tell me that in the other cases, the burden hasn't increased significance...?
PRIME MINISTER:
No, what I am arguing is that when you take the Family Tax Benefits into account, the situation is vastly different than has been represented by the OECD.
MITCHELL:
So would you seriously tell me most Australians are better off now under the tax system than they were eight years ago, the OECD's period of time. Would you seriously tell me that?
PRIME MINISTER:
I would seriously say to you everybody by definition is over-taxed and there is always the case of further reductions in taxation.
MITCHELL:
But the rest of the world has been going backwards, we haven't why?
PRIME MINISTER:
No, no I am sorry, I don't accept that for the reasons I have explained. The taxation tables, 10 of the tables in that report wrongly included state payroll [inaudible] taxes in 2002.
MITCHELL:
So that is not personal income tax.
PRIME MINISTER:
No, no I am sorry, the OECD included state payroll tax in 2002 onwards and it didn't include it previously back to 1995 and as a result...
MITCHELL:
It's not. State payroll tax is on a business.
PRIME MINISTER:
No, no of course that is why...
MITCHELL:
We are talking about individual taxes.
PRIME MINISTER:
Yes I know that, but I don't know why, therefore I don't know why it was included and the main tables which the newspapers ran off yesterday were based upon the inclusion of state payroll tax from 2002 onwards. Now Neil, I am, I freely acknowledge that there is always a case for further taxation relief and I am not suggesting that our taxation system is perfect but when you look in detail at this report you realise that most of the press coverage of it yesterday was based upon two, essentially two, omissions from the analysis, first the inclusion of the payroll tax, which for reasons I have explained completed distorted the picture and secondly there hasn't been allowance made for the Family Tax Benefits and I don't care what anybody says that when you add it in, Family Tax Benefits, and I am talking about people with children, I acknowledge that our tax system has been changed over the last eight or nine years to more greatly advantage families with young children, I acknowledge that and that's been done quite deliberately, but when you put that in, the picture changes and the very report and I tell you this, and this is very important to your listeners. The report shows that on a purchasing power basis, this is what matters to people, what they have available to spend on the things they need to buy for themselves and their families. The disposable income of the average Australian production worker is the second highest in the OECD. Now you have to, when looking at something like this, you have to look at the entire picture, you can't just...
MITCHELL:
And what is their taxation as a percentage of their income increased over the eight years?
PRIME MINISTER:
I can't tell you that.
MITCHELL:
I think that is relevant.
PRIME MINISTER:
Well I think all these things are relevant but I think the most relevant thing to your listeners is what they actually have in their pocket to buy the things they need and that is purchasing power, that is disposable income and disposable income, is your wages less tax, plus benefits, that's your disposable income and the point I am making is that according to this very report, the purchasing power of an average Australian production worker is the second highest in the OECD. Now I am not saying the system is perfect, I am not saying that at all, I am not willing to stand by and have the Government's handling of these issues criticised unfairly on the basis of incomplete or inaccurate analysis.
MITCHELL:
We need to take a break, just on the issue of tax is it correct you're looking at a far larger surplus in the budget than expected?
PRIME MINISTER:
This time of the year is always accompanied by speculation about what the surplus is. I don't know what the final surplus will be...
MITCHELL:
Not the final, it's looking at being bigger than predicted.
PRIME MINISTER:
Well it will certainly on present trends be what was predicted in the last Mid-Year Economic and Financial Outlook. Beyond that I'm not going to say.
MITCHELL:
A break then more, including calls for the Prime Minister.
[commercial break]
MITCHELL:
Seven to nine, the Prime Minister in our Canberra studio, a couple of calls, please keep the questions or the points quick because we're short of time. Ron, go ahead.
CALLER:
Thank you Neil, Mr Prime Minister. I'm 54, I started driving my own truck at the age of 19, all that time I drove my own truck, the GST came in, my fuel bill went through the roof, spare parts, servicing, and up until what just three years ago I ended up selling everything and just gone working for a boss, I just couldn't make a dollar on working big hours.
MITCHELL:
And you're blaming the GST?
CALLER:
My word I am, yeah I know the difference?
PRIME MINISTER:
Well sir, that is not the majority experience that's reported to me. I can't argue with the recital of your circumstances. I might point out that increases in the price of fuel have not been the result of the GST...
MITCHELL:
It hasn't helped.
PRIME MINISTER:
No, well hang on...
MITCHELL:
...tax on a tax.
PRIME MINISTER:
But we've reduced the excise on fuel, I'm sorry, yes we did reduce the excise nearly three years ago on fuel and...
MITCHELL:
But the GST still is (inaudible)...
PRIME MINISTER:
But we also abolished automatic indexation and when you tax fuel excise, when you take both of those things into account nobody can demonstrate that the GST has added. The price of fuel now and at various stages over the last few years has been very high because the world price of oil has been high and that's not due to the GST.
MITCHELL:
John, go ahead please John.
CALLER:
Good morning. I just think we live in a tax country, you know I got a bill the other day for superannuation tax on top of the other taxes I'm paying and I just think it's going a bit out of hand. I would like to know what the Prime Minister thinks of superannuation tax?
PRIME MINISTER:
Well sir, of course we have a lot of taxes in this country, we also have a lot of services and we have a lot of things that people want, people want more health services, they want more education services, they want more money spent on defence, on roads, on infrastructure, on training, and obviously it's a question of how you effectively strike the balance and there's always a case for reducing tax and I would be the last person in Australia to argue against governments reducing taxes when they have the opportunity to do so. But there is never going to be a situation where people are perfectly happy with the overall taxation burden and can I just for the record say that since 1996-97 the overall tax burden of the Commonwealth has fallen from 23.8 per cent of GDP to 21.2. Now people will argue the toss about how you arrive at, they're the figures that I'm given by the Treasury, people will argue the toss about the combination of taxes and which is a better tax or which is a worse tax and I think that argument will go on for a long time. But we do live in a society where you need a certain amount of revenue because of the services that people require and there's an everlasting debate about what the balance is.
MITCHELL:
Prime Minister, something else quickly, Gallipoli, did the Australiana Government ask for work to be done on the road there?
PRIME MINISTER:
Yes, they did ask for work to be done on one of the roads and I'm told that that was to really make it safer and better for the increasing number of people, particularly young Australians.
MITCHELL:
Are we now satisfied it's being done properly?
PRIME MINISTER:
Well we've been told by the Turkish authorities, and I'm satisfied on the advice I have that it is being done properly, that archaeological work had been carried out prior to the road works commencing and that no remains had been unearthed and the Turkish authorities have assured us that if any remains were unearthed then construction and work on the road would be stopped. I think the Turks are handling this in a sensitive manner. Bear in mind that 60,000 Turks died in Gallipoli and the idea that the Turks would be automatically insensitive to this matter is false.
MITCHELL:
The Government is supporting Gareth Evans for the United Nations job, supporting his integrity, isn't this the man who lied to Parliament direct?
PRIME MINISTER:
Well we've said that we don't have any objection and the Foreign Minister has written a letter, we're not actively canvassing for him.
MITCHELL:
I did read that I think the Foreign Minister was saying he's a man of great integrity, isn't this the man who lied directly to Parliament?
PRIME MINISTER:
Well Mr Downer wrote, I mean I don't look over the shoulder of Ministers when they write individual letters. I think it's important when overseas bodies are considering the applications of Australians that the Government of the day does not allow partisan politics in Australia to colour or reduce the opportunities of Australians to secure those positions. I mean I've had my differences with Gareth Evans and I still have. In the end I think if the Australian Government had not taken the attitude it has taken we would have been criticised as being churlish, as allowing the fact that he is a Member of the Labor Party and was a Labor Foreign Minister to influence our attitude. Governments are elected to govern for all Australians, for the people who voted for them and as well the people who voted against them and I think the Australian Government would have looked petty and childish if it had tried to stop Gareth Evans being successful. I don't know whether he'll be successful and I can indicate that we're not lying awake at night worrying about it and it's not the most important thing on Alexander Downer's agenda.
MITCHELL:
And just very quickly, a lot of attention on what the visit of the Prince of Wales cost, what about Mary and Frederick, what did that cost us?
PRIME MINISTER:
I can't tell you. Frankly I think criticisms of the cost of both visits are petty, cheap shots.
MITCHELL:
What did you think of the Foreign Minister in the celebrity race.
PRIME MINISTER:
Good.
MITCHELL:
Beat me.
PRIME MINISTER:
I didn't know that.
MITCHELL:
No. I did. Thank you very much for your time.
PRIME MINISTER:
Thank you.
[ends]