Subjects: GST; Tax Office; Timor Tax; Interest rates; excise on beer, petrol, tobacco; budget; payments to States in relation to hospitals; Banks; Reconciliation; Anzac Day; Legionnaires disease
E&OE……………………………………………………………………………………
MITCHELL:
Good morning. Well he is back in the country, straight back to work. We will take calls in a moment in our Sydney studio. The Prime Minister Mr John Howard, good morning.
PRIME MINISTER:
Good morning, how are you Neil?
MITCHELL:
I am well, welcome home.
PRIME MINISTER:
Thank you. Good to be back.
MITCHELL:
Always. Mr Howard do you accept that with the interest rate increases the tax savings for the average family have gone already?
PRIME MINISTER:
No I don’t, because if your comparing or setting off interest rate movements to tax changes then you have got to be fair and you have got to include the reductions in interest rates that have occurred at least since this government has been in office and if you take them in to account, people are still more than $200 a month better off.
MITCHELL:
Well, how far back are you going?
PRIME MINISTER:
Well I am prepared to accept the responsibility from the time I became Prime Minister.
MITCHELL:
But we could go back forever. The reality is far from... From July 1 when the tax cuts come through, there gone aren’t they?
PRIME MINISTER:
No, I don’t accept that for the reason I have just explained. I think it is reasonable. You are asking me, the current Prime Minister, it is reasonable for me to accept responsibility for the time I have been in Government and that is still a record of significant net reductions in interest rates. On top of that you will have the tax cuts coming into operation on the 1st July. Now I…
MITCHELL:
Do we look into the future because the interest rate rises will continue won’t they?
PRIME MINISTER:
Well you can only look at things that have happened.
MITCHELL:
How far ahead will people be if you say in your period of Government?
PRIME MINISTER:
I can’t predict that.
MITCHELL:
No no, but as of now.
PRIME MINISTER:
Well as of now, people are more than $200 a month better off with their mortgages than they were when they became Prime Minister and on top of that they are going to get tax cuts from the 1st of July, which after the introduction of the GST and allowing for the GST will still, depending upon their family structure and income level, leave them significantly better off. And on top of that workers have enjoyed real increases in their incomes because their nominal wages have risen faster than the rate of inflation. So on three scores, they are better off.
MITCHELL:
Okay, I don’t think that will help them find the money after July 1.
PRIME MINISTER:
Well when you say after July 1, you say find the money. They are going to be better off with tax cuts.
MITCHELL:
Now but the tax cuts have gone….Interest rate rises this year.
PRIME MINISTER:
I have just explained to you why I don’t accept that analysis and…
MITCHELL:
Do you accept that there will be other interest, more interest rate rises this year because the GST obviously is going to be inflationary. Therefore interest rate rises are inevitable?
PRIME MINISTER:
No I don’t accept that. I don’t that. I don’t try and speculate about future interest rate movements. There will be a once off impact from the introduction of the GST. It is not believed to have an ongoing inflationary impact. There will be a GST blip as a result of the increases in prices. We have always recognised that. But then as that is washed out of the system, then we return to a more normal level of inflation and as the tax cuts more than compensate employees and wage and salary earners for the impact of the GST, then there is no need for any permanent concern about inflation.
MITCHELL:
Are you aware of Access Economics’ modelling that suggest the excise taking in the result of the GST on beer petrol and tobacco will take an extra $500 million from consumers? $500 million?
PRIME MINISTER:
Well I am aware of a lot analysis.
MITCHELL:
Do you reject that?
PRIME MINISTER:
Well I would have to sort of see it. I haven’t actually read it. I have been away, but once again, you have got to go back to the basic point and that is that in net terms because of the tax cuts. I don’t think people will realise until they get them how big the tax cuts are.
MITCHELL:
Would you look at taking the GST impact out of the excise on beer, petrol and tobacco? So you would have your excise there but discount it for the GST?
PRIME MINISTER:
Well in relation to petrol pricing, we have already clearly demonstrated that our policy is that as a result of the introduction of the GST there need not be any increase in the price of petrol.
MITCHELL:
I can’t see how that will work when you put your excise on, when you have an inflationary effect which we know is going to be there from the GST. It has to put up the price of petrol.
PRIME MINISTER:
No, not because of the GST. Because what you are going to do, is you are going to abate the excise to the extent necessary to accommodate the increase in the GST and where there is a price deferential because of distance or remoteness there’s going to be a special rebate to dissolve that away so people won’t be any worse off as a result of the GST. The price of petrol will fluctuate according to the world price of crude oil. We can’t control that and we have never represented that we would. The one thing we said we would do is prevent an increase as a result of the GST.
MITCHELL:
But you are going to take more excise?
PRIME MINISTER:
We inherit it and we are continuing indexation arrangements and we are not denying that. We are talking here about whether because of the operation of the GST, there would be an increase in the price of petrol and the answer to that is no.
MITCHELL:
But what if, bear with me if you don’t mind.
PRIME MINISTER:
Sure.
MITCHELL:
The GST we accept is going to be inflationary.
PRIME MINISTER:
No I don’t accept that.
MITCHELL:
Well one-off?
PRIME MINISTER:
But that is not inflationary. I mean..
MITCHELL:
But it’s going to reflect in the figures isn’t it?
PRIME MINISTER:
The CPI will be higher for a limited period of time and then it will go right back.
MITCHELL:
Well, the CPI. Your excise is linked to the CPI.
PRIME MINISTER:
Yeah look I accept that.
MITCHELL:
Therefore you are going to increase your excise take. Therefore it’s going to effect petrol, beer and tobacco.
PRIME MINISTER:
Yes but the price of those things is not rising as a result of the GST.
MITCHELL:
No, it’s a result of the excise you are taking which is linked to the impact of the GST.
PRIME MINISTER:
Well I can only repeat what I said in the election campaign and what we are guaranteeing to do and we are going to deliver on that in full.
MITCHELL:
Okay, Mr Howard do you accept that this is almost an air of panic in the tax department over the GST. Its now worsened because industrial action starts next week by tax office staff which could delay all manner of things including Australian Business Numbers.
PRIME MINISTER:
Well I don’t accept that there is an air of panic. No I don’t and only yesterday I had somebody go into some detail about a conversation he had with a man in small business in Sydney with about 18 employees congratulating the tax department on all the help he was given and how he was ready to go. He has got his systems in place. No problem with the GST, thought it would be a boom for him in the longer term.
MITCHELL:
Will the industrial action effect it?
PRIME MINISTER:
Well that is something that is being handled by the tax office. Industrial action is always a nuisance and you can’t blame the tax office for that. And you can’t blame the government. You might..
MITCHELL:
I am looking for impact, rather than blame.
PRIME MINISTER:
Well all I would say is that clearly it would not be helpful at this time for there to be industrial action in the tax office. But the actual negotiations I have got to leave to the ATO, but can I say to the men and women of the Australian Taxation Office, the Government knows that you are under a great deal of strain because it’s a big new system. I thank you very warmly for the work that you have done. It’s not easy to introduce the biggest tax change in Australia’s history and the Government and the Treasurer and I and the Commissioner are very conscious of that. We have total confidence in Mr Carmody. He is doing a very good job and I just appeal to people not to engage in industrial action at this time. Am I confident the thing is going to be introduced smoothly yes, on the information available to me. But Neil, this is a big operation.
MITCHELL:
Sure, are you aware of suggestions that some of the electronically registered ABN numbers have gone missing. Been lost in the ether?
PRIME MINISTER:
No, well I would have to refer that to the Tax Commission. I do know this that the take up rate of the ABN numbers is accelerated expedientially over the last few weeks as I knew it would and now people are talking quite confidently. Human nature, you put these things off don’t you? And you say, the new tax system, oh that is not until the first of July and that’s what people were doing up until a few weeks ago but now they realise it’s the first week of May and wow we’d better do something about it.
MITCHELL:
…. that the changes that have been made along the lines of GST are causing some angst in the department. Are there any more changes coming or is this the end of it?
PRIME MINISTER:
Well there was always going to be some fine tuning changes.
MITCHELL:
There is some this week though isn’t there?
PRIME MINISTER:
Yeah well that’s normal.
MITCHELL:
Peter Costello said it was finished, done all over.
PRIME MINISTER:
No, he never ruled out fine tuning and Neil I’ve actually had a look since getting back, at the changes that he announced and when you look at magnitude of the reform they are fine-tuning and why wouldn’t you change things even after it’s been introduced if there was some fine tuning needed. He’s not changing the rates, he’s not changing the structure, I mean, all of that’s been well and truly in place.
MITCHELL:
Is the fine tuning finished?
PRIME MINISTER:
Well you can never say fine tuning is finished no. No I’m not prepared to say that, that will be silly because somebody might come along with something which makes perfect sense to be adjusted and what I turn around and say hang on I closed the book on fine tuning so it can’t fix your problem. You’d be into me quite rightly if I did say that wouldn’t you?
MITCHELL:
I would.
PRIME MINISTER:
Yes right. On the subject of being into me. No, no . . . you haven’t done anything wrong at all in fact you have been the conduit for me providing some good information. Epworth Private hospital. Can I say to Mr Hogg that the payments that we’re going to make to the States in relation to the Government hospitals, those payments will be available for not for profit hospitals such as his.
MITCHELL:
Good. What through the State Government?
PRIME MINISTER:
No, we’ll find a way of paying it directly to the hospital and we’ll work that out. But he did write to me, he raised a legitimate concern, I had it investigated yesterday and I can tell you now that I’ll be writing to Mr Hogg in the next few days and although the $17,000 cap will apply to him as to his hospital, as it will the Government hospital, public hospital. There will be three year phase-in period during which compensatory payments will be made either to the States in relation to public hospitals or directly to the not-for profit hospitals. Though can I say Mr Hogg if you are listening you raised a fair point, that is the response, that was the intention and I’ll write to you in the next week or so confirming what I’m saying now.
MITCHELL:
That’s a good result. It did seem a bit silly that AFL footballers for example had the benefit but not doctors in non-profit . . .
PRIME MINISTER:
Well the rule of the $17,000 cap is still there, that’s not different, but what is different or what perhaps might not have been clear, or whatever and I now make very clear is that the compensation payments will be available for people and hospitals in the situation of Mr Hogg’s Epworth hospital as they will for Government hospitals.
MITCHELL:
And that’s above the $240 million put aside for Government hospitals?
PRIME MINISTER:
Well it’s all, it covers both. But they were always intended to be included.
MITCHELL:
Ok, so they get some of the $240 million?
PRIME MINISTER:
They will be treated exactly the same as the Government hospitals. That’s my point.
MITCHELL:
Good thank you. Darren, go ahead please.
CALLER:
Good morning thank you for taking the call. What I wanted to raise as an item in relation to provisional tax being demolished and pay as you go tax being introduced. At the time of the last election, I thought that was a fantastic promise then last week I received an information package from the tax office detailing the arrangements for pay as you go tax and I read through it carefully and the difference that I could pick up was that as it applied to my circumstances was that provisional tax due on the 10 April and pay as you go tax will be due on the 21 April and upwards factor would be removed. Now my concern was that doesn’t quite equal being abolished which was what was promised prior to the election and I didn’t really vote for a change of name, I did vote for it to be abolished.
PRIME MINISTER:
Well, Darren is it?
CALLER:
That’s right.
PRIME MINISTER:
I, as with so many of things, I am not running away from the question but it is very hard for me to know whether that exactly replicates your position, your description of it without knowing your own personal circumstances and I’m not asking you to give them over the radio. The purpose of the reform was to enable people to pay as they went rather than to pay in effect as most people thought with provisional tax, in advance. Now certainly the uplift factor is gone and we think the new system puts previous, or what will be previous, provisional tax payers as close as possible and on the same footing as pay as you earn tax payers. That remains the position, of whether your position is as you describe or not I can’t really say without knowing a little more about the details of that.
MITCHELL:
Darren keep an ear on things, we’ll have somebody in the tax office in next week and you can speak to them directly.
MITCHELL:
Ian. Go ahead please Ian. Quickly please.
CALLER:
Yes Mr Howard. I was listening to your reasoning with what Neil was talking about with the tax breaks with the housing loans. With someone like me who’s just bought a house your $200 goes out the door, it doesn’t even exist to me. Your reasoning to me is no good. It doesn’t apply to someone like myself and secondly you’re talking about tax cuts. I pay 20 per cent fee fares now, under your new tax system I pay less than one per cent [inaudible] I’ll be paying 19.04 per cent tax. If I get as one per cent saving then I’ve got to pay GST. How’s . . . I don’t care about the rest of the country. I care about me.
PRIME MINISTER:
Well I’m sure that’s true and apart from the fact that I’ve pointed out that ‘me’, if you’re worried about ‘me’ you wouldn’t worry about the interest, taking into account the income tax cuts you’ll get.
CALLER:
What one per cent?
PRIME MINISTER:
You’re talking about proscribed payments.
CALLER:
Yeah and under your new system and pay as you go, I’ll pay 19.04 per cent. I’m currently paying 20 per cent so I ain’t gaining not even one per cent less in tax. That’s what I’m gaining and I’ve got to pay 10 per cent GST, so I’m no better off, I’m worse off.
PRIME MINISTER:
What about your income tax?
CALLER:
That’s my income tax, that’s what I pay to you people.
PRIME MINISTER:
[Inaudible] can I just . . . well can I get a word in or are we just going to have a monologue?
CALLER:
You’re reasoning . . .
PRIME MINISTER:
No we are going to have a monologue, okay alright I’ll . . .
MITCHELL:
We’ve gone through the reasoning now let’s get the answers from the Prime Minister please.
PRIME MINISTER:
You raised first of all interest rates and my answer to you is the cuts that since we came into Government are irrelevant to you, they’re not irrelevant to you. If the interest rates structure that existed in March 1996 still existed you’d be paying much more for your mortgage so it’s just not fair or accurate . . .
CALLER:
So Neil’s reasoning will be correct, not yours.
PRIME MINISTER:
No in fact mine have been correct.
MITCHELL:
I don’t know about that.
PRIME MINISTER:
I’m not saying Neil’s wrong. I mean I . . .
CALLER:
I think you’re wrong . . .
PRIME MINISTER:
The answer goes to the other . . . look people ring up and they give a snap shot of their circumstances and unless I know all of the details it’s impossible for me to say yes or no to the figuring and once again, if you want to, and I don’t think you will want to provide me with all of the details.
MITCHELL:
We don’t want to go into . . .
PRIME MINISTER:
I just can’t do that.
MITCHELL:
Ok thanks Ian. Now just quickly the Timor tax, I know it’s probably in the Budget, it’s going to happen, you mightn’t tell me, will it come off?
PRIME MINISTER:
Neil I’m not going to comment on Budget speculation.
MITCHELL:
I notice it’s, that a Senate Committee in [inaudible] Defence Department saying they’ve handed back money from the Timor allocation, is that right?
PRIME MINISTER:
Well I saw that report. I mean there may have been a slight variation in the overall cost. There could have been, I haven’t checked that out. But it was still a very expensive operation, very expensive. I’m not sorry for that because it was very necessary and very justified but it was an expensive operation.
MITCHELL:
I know you won’t tell me what’s in the Budget but can you give me the philosophy, the headline, what’s the headline for the Budget?
PRIME MINISTER:
No, I don’t think it’s fair at this stage. The Treasurer’s got his announcement to make on Tuesday night and he’ll do it with great skill and there’ll be you know, he’ll have something to say.
MITCHELL:
Surprises?
PRIME MINISTER:
There’s always a few surprises in a budget.
MITCHELL:
Can you tell us who it’s targeted at?
PRIME MINISTER:
The Australian people, their economic and social well-being.
MITCHELL:
Well it’s tough economic times ahead, does it take account of that?
PRIME MINISTER:
Well we have always tried to provide for the rainy day to use an old-fashioned but very understandable expression. It will be… we’re very proud of the fact that we got the budget back into balance, and into surplus and we’ll certainly be aiming for a surplus budget. It’s very important that we do it and we’re not very interested in lectures from Mr Beazley who left us with a $10.5 billion deficit and went flat out from the time he became Opposition Leader to stop us getting rid of it. We’ll be exercising good housekeeping but you know there are a lot of other responsibilities you have as well but I think the Australian people will see it as a fair, sensible, responsible budget and it will be very much in the groove of earlier budgets.
MITCHELL:
We will take a quick break and come back with more of the Prime Minister.
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MITCHELL:
It’s seven to nine, a number of issues I want to raise so I’ll try to be quick with the Prime Minister. Mr Howard you and the Government encouraged people into the Telstra share issue, the shares are now down in fact they’re at an eighteen month low, do you feel some guilt about encouraging people and now they’re going to lose money?
PRIME MINISTER:
No. As we all know share markets go up and down and the price of something today is not necessarily the price of something in six months time. The other point I’d make on Telstra is that we’ve had a report in the last few days from the rating agencies and one of the points made by those rating agencies is that it’s not good for Telstra or existing share holders that the Government continues to own 50.1%. And my message to everybody on this that it would be in everybody’s interests most particularly those existing shareholders if we could get the rest of Telstra sold. We can’t do that at the moment unless there’s a change on the part of the Democrats and Labor. I believe that will happen but it would be better if it happened sooner rather than later.
MITCHELL:
Is it correct the Government is urging health funds not to increase their fees for insurance?
PRIME MINISTER:
Well we always do that. We always encourage the health funds to keep their charges down and that’s what I imagine your listeners would want us to do. We don’t use any improper pressure but we are constantly saying to private health insurance funds that they ought to look to the interests of their members and we have provided a generous tax concession; we’ve provided lifetime health cover; we’ve provided other assistance in those circumstances. Of course we regularly say to private health insurance funds we do not like increases that are not absolutely necessary.
MITCHELL:
Are you going to say the same thing to the banks.
PRIME MINISTER:
Well I do say that.
MITCHELL:
21% increase in…
PRIME MINISTER:
Australian banks are strong, they’re well managed, they’re stable…
MITCHELL:
But they’re also very profitable.
PRIME MINISTER:
And they’re also very profitable and I have frequently said this including on your program and we do still need more competition in the Australian banking system. This is one of the reasons why the Government remains opposed to the merger of any of the four largest trading banks.
MITCHELL:
Malcolm Fraser ,though he didn’t use your name, it was pretty obvious he was speaking about the Government, speaking about you, says an apology is needed for the spirit, for the heart of reconciliation, he talks about the possibility of tragedy of losing the opportunity on reconciliation and more not Mr Fraser but Ms O’Donoghue was talking about transferring the emotion of Anzac Day if you like to the emotion of reconciliation. What’s your response to that?
PRIME MINISTER:
Well I think that a word like tragedy is a little excessive. The dispute here Neil is whether you have a situation where the government formally apologises for the policies of earlier generations. I don’t believe that should occur because we didn’t authorise or carry out those policies. I’m perfectly happy as an individual and many Australians are very happy and very readily expressed their sorrow and distress and sadness at past practices. To tender an apology assumes responsibility and that is a different thing and that is the real sort of area of difference. It doesn’t go beyond that. Some people see that as a big area of difference.
MITCHELL:
What about Dr O’Donoghue, she’s thinking why can’t he use the same sort of sympathetic words that he used in relation to Anzac Day and other places that he strutted the world stage?
PRIME MINISTER:
Well I didn’t strut the world stage I went to Anzac Cove on behalf of all the Australian people.
MITCHELL:
Do you see a link?
PRIME MINISTER:
No, no I don’t I…
MITCHELL:
I don’t see the link.
PRIME MINISTER:
No well I don’t either, I don’t see any link at all. I mean all Australians fought in the wars and the role of indigenous Australians in the war was magnificent and they’re all part of the legend of Anzac, they’re all part of the tradition. I don’t think there is a link and I think it’s unfortunate there’s an attempt being made to draw a link between the two things. Of course I feel emotion about Anzac Day and I feel that on behalf of all the Australian people but there is no question of… I think she actually said that I was giving apologies. Well I didn’t apologise at any stage during my visit to Turkey, heavens above.
MITCHELL:
Was it an emotional trip?
PRIME MINISTER:
Very, very emotional and what was magnificent was the participation of thousands of young Australians. They were there in their thousands and their emotions were a mixture of pride and sense of history and involvement and ownership. They behaved in a very impressive, dignified yet relaxed, informal Australian fashion and it was a very uplifting experience to both spend the day before Anzac Day going around and meeting so many at the different spots and then at the dawn service.
MITCHELL:
You were a bit like a pop star. Everywhere you went on television I saw people greeting you and hugging you and…
PRIME MINISTER:
Well it was a very, it was a fascinating day and Australians are very proud of this and there’s a new interest on the part of the young in what we have done and what we did of course was absolutely magnificent.
MITCHELL:
Can I just ask you very quickly there were some reports here about your visit to the aquarium that Mrs Howard had been tested for legionnaires.
PRIME MINISTER:
No she hasn’t been but she did have a bad cold which turned into an ear infection but no trace of legionnaires disease. But I am very sorry that it has taken a toll of some other people, it’s very disturbing.
MITCHELL:
Tragic. Thank you very much for your time. Welcome back.
[ends]