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Transcripts from the Prime Ministers of Australia

Transcript 10897


Photo of Howard, John

Howard, John

Period of Service: 11/03/1996 to 03/12/2007

More information about Howard, John on The National Archive website.

Release Date: 14/08/1998

Release Type: Speech

Transcript ID: 10897


Well, thank you very much to John Olsen, the Premier of South Australia,

to your wife, Julie, to Martin Cameron, the President of the South

Australian Division, to my many Federal and State parliamentary colleagues,

ladies and gentlemen.

I am delighted to be amongst you on the first day of a bit of a trip

around Australia, talking about, explaining and answering questions

about the plan that was unveiled yesterday. I thank you most warmly,

John for your words of support. I am very proud of many things in

the tax plan, and one of the things of which I am particularly proud

is that we have after decades of rhetoric on the subject, we have

at last done something which will be of lasting and enduring value

in improving the balance of Commonwealth / State financial relations.

It's been around for years. It's dogged both sides of politics.

It has produced some of the less edifying political exchanges that

the Australian people have had to put up with over the years, and

at long last we've devised a plan and an approach that will give

to all of the States of Australia a tax that gives them the capacity

because of the growth in the economy to finance the things for which

they constitutionally responsible.

I think there is a degree of historic symbolism in the fact that in

the one week we have announced that there will be a seventh state

for a new century and that we have delivered a tax plan that, in so

many ways, will help to revitalise the Australian Federation.

I would like, ladies and gentlemen, for this tax plan not to be seen

in isolation. I don't want it to be seen as some kind of aberration

or abstraction, but rather I want it to be seen as the next logical,

albeit, very significant step that has to be taken in order to strengthen

the Australian economy. Some people say to me, things are difficult

in Asia, the world's a bit unsettled economically, Japan is going

through difficulty, other countries are going through difficulty,

this isn't the time to be embracing fundamental reform. Can I

say to those people, that they couldn't be more wrong. It is

because of what is happening in the Asian-Pacific region, that it

is all the more necessary that we go the next step, we travel the

additional distance that is needed to strengthen the Australian economy.

Over the last two-and-a-half years, we have done a number of quite

major things to strengthen and protect the Australian economy. We

inherited budget deficit of $10.5 billion, we put it into surplus

one year ahead of time. We are now very much back in the black. We

are now able to say that in the period of two years we have turned

that into a surplus. We have delivered the lowest interest rates that

Australia has had for thirty years. We have generated 300,000 new

jobs in just over two years. We have the lowest inflation rate in

the OECD area, we have a very high level of business investment. And

there are many other economic achievements of which I could speak.

But I mention those things very briefly because they provide the context

for what we have done in relation to taxation. Taxation is part of

that economic continuum. It's not something that is unrelated

to what we have done in other areas. It's all part of a steady

measured plan to strengthen and make modern the Australian economy,

to equip the Australian economy for the 21st century.

Now, I would be the last person in Australia to in any way under-sell

or under-describe the scale of the taxation plan that was unveiled

yesterday. It is, without argument, the most comprehensive reform

proposed to the Australian taxation system since World War II. It

is built upon a belief that we need a modern taxation system for the

21st century. It is not just a goods and services tax,

although that's an element. It's not just a revamping of

the Commonwealth / State financial relations, although that is an

element. It does not just involved major reductions in personal income

tax, that is also an element. But when you put it all together it

represents as a plan the investing in the Australian community of

an enormous amount of additional incentive to not only work harder

but to save and to invest.

Let me quote just one example of what I mean by that. You read a lot

in the newspapers of a thing called bracket creep. Now bracket creep

is where you earn a bit more but because of inflation you get sucked

into a higher tax bracket. But one of the particular features of this

tax package, is that between the income of $20,000 a year and the

income of $50,000 a year, and let me remind this audience that 80

per cent of wage and salary earners in Australia are at or below $50,000

a year, so when you talk about $50,000 a year, you are talking about

the overwhelming bulk of our fellow Australians. I think it's

important to keep these proportionalities in mind.

Now under this plan, you will be able to pass from $20,000 a year

to $50,000 a year and that would be the experience of the great bulk

of Australians during their working lives, and you won't go into

a higher tax bracket. Because what we have done is to introduce what

is effectively a marginal rate of 30 cents in the dollar for everybody

earning up to $50,000. Now that may not mean much to some people,

but can I say in terms of incentive it means an enormous amount to

the great bulk of our fellow Australians. How often do you hear the

complaint from some of your employees that it's not worth doing

some extra overtime because the tax man takes half of it. But what

you can now say to him or her that the tax man will only tax 30 cents

at most if the top income is over $50,000.

Now, I dragged that out of the myriad detail of the package to drive

home the point that this is very much a taxation reform for middle

Australia. We have devised tax scales for families for middle Australia

and for the Australian battlers. And I am quite unashamed about that.

Because they are the people who need help. They are the people who

deserve reassurance and they are the people who can be easily frightened

by a dishonest fear campaign about the operation of the goods and

services tax.

I know that in an audience such as this, I probably don't need

to extol the fundamental virtues for business of a goods and services

tax. But let me nonetheless remind you of some of the benefits of

it that are perhaps over looked because they're taken for granted.

I mean every single business operator in Australia because of the

way in which a GST operates will find that the cost of fuel will fall

by 7 cents a litre, because the way we've structured the fuel

taxes is that you'll reduce the excise on fuel by the necessary

amount to allow in the 10 per cent GST so that there is no increase

in the pump price for any person who purchases fuel. And because the

GST is fully rebatable on your business inputs, the net effect of

that, of course is, that you end up that your fuel, and this has got

nothing to do with your fuel concessions which I will come to in a

moment, but because of the way in which the system works, you end

up with a 7 cent reduction a litre in a the cost of all the fuel that

is used.

We have calculated that the introduction of the new system will reduce

the operating costs of Australian business by about $10,000 million

a year because of your capacity to recover tax payed on business inputs.

We've also calculated that it is going to reduce the cost of

exports by in the order of $4.5 billion a year. Now at a time when

Australia must more than ever trade successfully abroad, I can't

think of a more beneficial generic gift to the Australian economy

than a $4.5 billion reduction in the costs of burdening exporters.

We calculated the overall cost reduction for Australian business will

be in the order of 3.5 per cent. We believe that there are very significant

cash flow benefits, particularly for small and medium sized firm.

Any firm with a turnover of less than $20 million a year will be only

required to remit on a three monthly basis. And that will represent

on average that the amount of the GST collected by those firms will

be held on an interest free basis for a period on average of 66 days.

Now that does represent, particularly when compared with the existing

arrangements in relation to wholesales sales tax, which have frequently

been criticised, that represents a very significant improvement so

far as the cash flow situation is concerned.

There will, of course, be a one off price impact of the introduction

of the goods and services tax. Some prices will go up, some will go

down. A South Australian audience will know that one of the important

prices for Australians that will go down, will be the price of the

family motor car. And that is certainly going to fall very significantly.

And there will be transitional measures introduced so that the abrupt

drop in the price of things like cars will not occur so that there

will be an adverse effect, expectation wise, in the operations of

that industry. And I think the transitional arrangements that we're

going to propose in that area will be of very, very considerable benefit.

Ladies and gentlemen, this is one of those once in a lifetime opportunities

that a Prime Minister or a government has to put down a plan that

has a long-term, visionary, positive impact for the benefit of the

country. And the greatest enthusiasm I have for this plan, the greatest

passion I have for it, the greatest commitment I have for it, is not

born out of a narrow political context, it is born out of a deep personal

belief that if this plan can win the support and the approval of the

Australian people, it will be of lasting benefit and it will deliver

lasting improvement to our entire nation.

And that is why I ask you to give it your very strong and your very

active support. Of course it is a mixture of economic vision, of economic

reform and economic improvement and political judgement. There has

never been a successful reform plan put to the Australian people or

any other country in the democratic world that isn't a mixture

of the two. Anybody who tries to sell pure economic theory is doomed

to rejection. And anybody who simply operates on the basis of political

advantage and political expediency deserves to be repudiated by the

public. And what you need is a sensible amalgam of the two.

And what I think, and I direct these remarks particularly to a Liberal

supporting audience, and what we now have on the Australian political

scene, we have a government, a Coalition Government, that has been

willing to tackle some of the fundamental areas that have needed change.

We've encountered some barriers along the way. We've encountered

opposition. We have been grievously hamstrung by the fact that we

don't control the Senate. We have had the Labor Party and the

Australian Democrats and others in the Senate throwing dirt in the

face of the Australian people in terms of rejecting for which they

voted at the last election. But despite that we have continued on

our reform path. And the greatest example of that reform path, is

of course the plan that was unveiled yesterday. And the response of

the Opposition has even been by the standards of automatic opposition

in Australian political history, particularly pathetic and particularly

negative. I thought Mr Beazley's response yesterday was even

uninspired in its negativism. To say that something was the most unfair

thing that has ever been dumped on the Australian public, when even

some of the Government's other strident critics have at least

been willing to acknowledge that there is some merit in it was a,

I think, a particularly pathetic demonstration of automatic knee-jerk

opposition from the Opposition.

He knows, Gareth Evans knows. The former Labor Prime Minister, Mr

Keating knew, Mr Hawke knew. Anybody who has had any acquaintance

with the way this country operates in Government knows that we can't

go on forever with the existing taxation system. And sooner or later

we have got to change it. And how better than to try and change it

than from government. How better to do it than to lay the plan out

before the election, to involve people in it, to involve the States,

to bring them into the process, to offer them part of the action and

part of the reform and part of the change and to involve the entire

Australian community in the process and government is, in the end,

about taking the right decisions for the future. It is not just about

staying in government, comforting and nice as that may be, and much

in all as we'd like it to occur, in the end you are elected to

take decisions that are good for the country's future and that's

what we've tried to do.

When we came into office we took some decisions in getting the

budget back into balance which some people didn't like. But I'm

glad, I really am glad we took all of those decisions, every last

one of them, because given what has happened in Asia I'd rather

be in the black a year ahead of time than lagging behind against what

is now what we've tried to do.

When we came into office we took some decisions in getting the budget

back into balance which some people didn't like. But I'm

glad, I really am glad we took all of those decisions, every last

one of them, because given what has happened in Asia I'd rather

be in the black a year ahead of time than lagging behind against what

is now occurring. Yet, if we had listened to Mr Beazley, we'd

have read some of our press critics and listened to them and listened

to some others in the community, we would have soft pedalled on getting

the budget back into surplus. I think if we'd have done that

we'd have now been more vulnerable and more exposed to what has

happened in the Asia-Pacific region.

And that is why it's so important that we push ahead with this

taxation plan. You can't muck around if you're going to

have reform. People argued we should have left more things out. The

old dictum about taxation is that if you're going to change it,

the broader the base the lower the rate. If you start leaving food

out, then somebody will want clothing left out. If you leave that

out, you'll want something else left out and then it really isn't

worth doing at all. And the best way to deal with low income earners

in the Australian community is to give them adequate compensation

through the social security and the taxation system and that is what

we've done because one of the many outstanding elements of this

package is that we have embraced some quite fundamental reform of

the social security system. We have given low income earners more

incentive to work rather than to stay on benefits. We have altered

the taper rates, we've increased the levels at which welfare

benefits begin to phase out, because under the existing arrangements

there are some family groupings who find it hardly worthwhile being

in work because the level of social security benefits are so high

and those sorts of incentives to stay out of the workforce are bad

policy and they're bad for our society.

So it's a plan, ladies and gentlemen, which is not just about

taxation. It certainly not a plan which is just about a goods and

services tax. It fundamentally changes the way our taxation system

operates. It is of enormous ongoing benefit to the business community,

it will operate more efficiently and more fairly than the present

system, it does contain major personal tax cuts and they are quite

deliberately skewed in favour of those who have the responsibility

of raising children and I make no apology for that, in fact, it's

one of the proud features so far as I am concerned, of this policy.

It also brings back something that many Australians believe should

never have gone and that is for most Australians effective full tax

deductibility of private health insurance premiums. And that measure

is available free of income tests and anybody, irrespective of income,

will be able to claim either through their tax system or by way of

a direct payment from the government 30 per cent of their health insurance


And the final thing that I'd particularly like to mention is,

of course, that this plan is of special benefit, not in an unreasonable

way, but quite importantly, given the significance of it to the national

economy, this plan is of particular benefit to the bush or country

Australia or rural Australia or whatever definition one might like

to use because the changes that we propose in the area of excise on

diesel, not only have we maintained and slightly extended the full

rebate in relation to off-road use of diesel, but we have also introduced

what is effectively a reduction of 25 cents a litre from 43 down to

18 cents a litre in relation to heavy transport and rail use of diesel

and when you combine that with the fact that every business in Australia

will be able to buy all of their fuel effectively 7 cents a litre

cheaper, it all adds up to something like a $3.5 billion reduction

in fuel costs throughout Australia.

Now, not surprisingly, that's a very special benefit to rural

Australia and deservedly so, because the cost of transportation bears

very heavily on people who live in the non metropolitan areas of Australia

and I said last night, and I will repeat it here today, that I can't

wait for Monday to come when I can get to Queensland, and I can start

pointing out to the people of Queensland – which is not only

a large State but also the most decentralised State in Australia –

that in relative terms it will probably gain more and the people of

Queensland will gain more from that diesel fuel change than any other

part of Australia.

And how on earth the new Premier of Queensland, Mr Beattie, can keep

a straight face in opposing the government's plan is completely

beyond me.

My friends, this has been a very important week in the life of the

government. It's been a week in which the government has kept

face with the commitment that I made on its behalf when it was elected

and that is that we would govern for all Australians. Only the blinkered

and the mean-minded and those of narrow understanding could possibly

argue that the tax package delivered yesterday was a package for the

rich or a package for the privileged.

It was a plan and a package for all Australians. First and foremost,

it's given to the country the prospect and the hope of a taxation

arrangement that will boost the economic growth of the country and

generate more jobs. It's offered the Australian people a tax

plan for the 21st century. It proposes to sweep away a

ramshackle, unfair, inefficient, lopsided indirect tax system and

replace it with a modern, comprehensive one.

It offers the biggest personal tax cuts in decades. It offers a radical

and beneficial overhaul of Commonwealth/State relations and will at

long last deliver to the States of the Australian federation an arrangement

to which they have long been entitled, but equally long denied.

And most importantly of all, it offers to the Australian people the

next necessary building block in further strengthening our economy

against the difficult years that lie ahead, particularly in our part

of the world.

It is a comprehensive plan. It's an integrated plan, it's

not one that can be subject to a process of put and take which undoubtedly

our opponents will endeavour to do. I don't underestimate the

challenge ahead of me and ahead of the government in explaining and

advocating and winning support for the plan. It's had a good

response – of course it has. It's early days and all of

us who believe in it and all of us who want tax reform for Australia,

let me say one thing to you. This is the best opportunity this country

has had for fundamental tax reform at any time since I have been in

politics, and that goes back to 1974.

I saw attempts in the last 1970's – I was part of them.

I was part of attempts in the early 1980's, I watched the former

Labor government try it in the mid 1980's, I was part of the

Opposition in 1993 that tried it then. Now all of those attempts have

failed. This attempt, I believe will succeed. It will succeed because

I think the economic and political balance in this plan is better

than any that have been offered in the past. It will succeed because

it is being offered from the vantage point of government. It will

succeed because I think there is a greater understanding in the Australian

community now that we do need tax reform and I think it will also

succeed because there is a sense in the Australian community if we

don't achieve it this time, it's going to allude us in the

lifetime of most people in this room.

But having said all of those things, it remains a very very big challenge.

And if you want it, if the business community of Australia wants it

and supports it, we need your help energetically to go out and advocate

the cause of taxation reform. Because it does matter to all of you,

you all benefit but most importantly, our country benefits and the

great single justification for this plan above all other plans is

that it will be good for the entire nation. I have always believed

that if you can persuade the Australian people of two things in relation

to a reform – the first is that it's good for Australia

and the second thing is that it's fair to them – then they

will embrace it and they will support it.

And I believe that this plan meets those two criteria and I believe

it will be good for Australia, it will be fair to all Australians

and I ask you to give it your very strong and active support. Thank


A couple of questions. Any questions? Yes?




He wants to know how I am going to make him pass on the price cuts,

is that right? Well, now that you've tempted me, I, well we have,

there are a number of ways in which that will occur. The first and

most obvious one is that when this new plan comes into operation,

there will be a very finely-tuned and heightened sense of individual

scrutiny on the part of every consumer in Australia. They will all

know, they will have their lists and if I know the media of Australia,

they will publish before and after prices. I think you will find the

‘Tiser' and the ‘Telegraph' and

the Melbourne ‘Sun' will have lists. One on the 30th

of June 2000, showing the prices of all the things you buy pre-GST

and the prices of what they ought to be afterwards and I think a lot

of Australians will carry those lists around, that's the first

comment I'd make. Second comment I make is that the natural forces

of competition will work to ensure it happens and I hear a lot of

men and women in business tell me these days that the competitive

pressures have never been as strong. I understand that. And thirdly,

we are going to invite the ACCC to adopt a surveillance role and to

invest it with some authority in relation to that to ensure that the

full measure of the changes that ought to occur, do in fact occur.

Now, there will be some in the community who will try and behave in

an unscrupulous fashion, they won't have any sympathy from us,

they won't h

Transcript 10897