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Transcripts from the Prime Ministers of Australia

Transcript 11944

Interview with Neil Mitchell, Radio 3AW

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: 23/05/2001

Release Type: Interview

Transcript ID: 11944

Subjects: Federal Budget.

E&OE................................

MITCHELL:

Mr Howard good morning.

PRIME MINISTER:

Good morning, Neil.

MITCHELL:

Is it the 'I'm sorry Budget, we got it wrong'?

PRIME MINISTER:

No, it's not. It's a Budget that is made possible by the good housekeeping of the past. The real message out of this Budget is that if you repay debt, if you run a good economic ship, if you do the right thing then you get a dividend and that dividend gives you the wherewithal to invest in the country's future.

MITCHELL:

So why is the dividend, or the benefits from the dividend targeted at pensioners and self-funded retirees if you didn't get the figures wrong on the GST compensation?

PRIME MINISTER:

Because Neil it's wrong to say this Budget only targets those people.

MITCHELL:

But that's the main part of it isn't it?

PRIME MINISTER:

Well it's a big part of it .

MITCHELL:

So why did you do it?

PRIME MINISTER:

. but, well they have an entitlement .

MITCHELL:

Of course but only have an entitlement because you mucked up the figures.

PRIME MINISTER:

No that's not the case at all.

MITCHELL:

So why have they got the entitlement?

PRIME MINISTER:

Well because, they have the entitlement by virtue of what they've contributed to this country in earlier years. But what you overlook is the investment of $900 million in strengthening Medicare and the investment in strengthening our defences, the investment in a whole lot of other things. You see what you've got to do is see, certainly see a Budget as being the prime economic instrument of a government during a year but you've got to look at all the economic decisions that the government has taken. And over the last six months we've had a big investment in roads, we've had a big investment in science and innovation, we've had a big investment in defence, we announced last night a further $1 billion over the next five years in the environment via the Natural Heritage Trust.

MITCHELL:

We've also in the last six months had a big change on the beer excise and the petrol excise and that's fair enough .

PRIME MINISTER:

Well these .

MITCHELL:

But isn't this [inaudible] the trifecta? This is the third leg of saying, here's pain we didn't expect from the GST, here is your compensation?

PRIME MINISTER:

No I don't accept that.

MITCHELL:

Okay. Some of your ministers, ..

PRIME MINISTER:

Well I don't .

MITCHELL:

Tony Abbott is saying .

PRIME MINISTER:

Well I don't accept that for a moment. I go back to my earlier point that you've got to look at the continuity of government decisions over the last six months. And I mean .

MITCHELL:

So is anybody .

PRIME MINISTER:

No, just let me finish .

MITCHELL:

I am sorry.

PRIME MINISTER:

. is anybody suggesting that we shouldn't have invested money in strengthening our defences? I mean it's all very .

MITCHELL:

But I am asking .

PRIME MINISTER:

But we do .

MITCHELL:

But I am asking you why now $300?

PRIME MINISTER:

There does come a time when you have to look at the quality and the merit of a decision as well as the political background to it as you are endeavouring to do. Now I challenge anybody listening to your programme to say that it is a wrong allocation of the resources of the Commonwealth to make the changes we have made in relation to self-funded retirees, to make the changes .

MITCHELL:

But I am not saying it's wrong .

PRIME MINISTER:

Well.

MITCHELL:

. but why?

PRIME MINISTER:

The reason we're doing it is we believe that people are entitled to have it. And the country can afford to .

MITCHELL:

But I am saying are they not more entitled now then they were before the GST?

PRIME MINISTER:

Well we are in a position to do now what we have done because of the good housekeeping of the past, including the introduction of a new taxation system.

MITCHELL:

But that's understanding why, explaining why you're able to do it, it does not explain the philosophy behind doing it. Now what .

PRIME MINISTER:

The philosophy behind doing it is we believe they deserve it.
MITCHELL:

Do they deserve it more now than they did before the GST?

PRIME MINISTER:

Well there were other things that were given to them at the time of the GST. I mean people who were in the tax system got personal tax cuts. Pensioners who were not within the tax system got a 2% real increase in their pension over and above the cost impact of the introduction of the GST. Neil with respect you talk as if at the time of the introduction of the GST there were no accompanying tax cuts, there were no accompanying benefits, there was no accompanying compensation.

NMITCHELL:

Yes but I would suggest that the GST hurt pensioners and self-funded retirees far more than you expected and here, reasonably, you're trying to compensate for that.

PRIME MINISTER:

Well Neil ..

MITCHELL:

I can't see why there's a problem in accepting that.

PRIME MINISTER:

No well Neil, that's your . I mean look you will put whatever version you want to, as an independent commentator, on what my Government does and what the Opposition does. I can only explain to you as best I can the philosophy of the Budget. This is a Budget which invests in the future out of the good housekeeping proceeds of the past and if you run a good economic policy over a period of years you then have the resources to do things. And this Budget certainly contains a lot of benefits for retired Australians and one of the reasons we wanted to do that Neil because low interest rates are good for homebuyers, low interest rates are good for small busisness, but low interest rates are not good news for people who are living on fixed investments. And if you wanted, in terms of, as it were compensation, if you wanted an argument as to why you do this particularly now, you say because of the GST, can I say to you that one of the main reasons why I wanted to do something for self-funded retirees in this Budget and I've said this I think on your programme on a number of occasions that I've always recognised that self-funded retirees don't get the same benefit out of low interest rates as do people paying off a home or running a small business.

MITCHELL:

So if it's compensation, it's to compensate self-funded retirees for low interest rates?

PRIME MINISTER:

Well it's a recognition. It's a recognition of the impact in part of low interest rates .

MITCHELL:

Well what about $300 for pensioners? Why is that fair?

PRIME MINISTER:

Well the $300 for pensioners is a recognition of a couple of things that you are going to do in the name of equity if you're going to do something for another section of the community that's in the same age cohort, it is only reasonable you do something for pensioners. And the other advantage of the $300 bonus is that it does go to a group who's, as the economists call it, whose propensity to spend is very high and therefore it has a stimulatory impact on the economy and having a mild stimulus to consumption spending at the present time is no bad thing economically.

MITCHELL:

So still no GST impact on the $300?

PRIME MINISTER:

Well it will be spent.

MITCHELL:

But I mean I'm saying no GST impact in terms of compensation? No GST factor in the $300 compensation?

PRIME MINISTER:

Neil, I can only explain as best I can the reason behind it.

MITCHELL:

Okay fair enough.

PRIME MINISTER:

You will make whatever.

MITCHELL:

Can I just ask though, if it's part of the theory behind the $300 is it's only fair because you're giving to self-funded retirees. Well self-funded retirees benefit from the new threshold every year. The pensioners only get a one-off.

PRIME MINISTER:

Well yes but of course there's a regulator cost of living adjustment for pensions which will always as a result of the GST arrangements be 2% greater than it would have otherwise have been.

MITCHELL:

Everybody's obviously asking you Prime Minister if this means an early election I imagine. That's what they're asking?

PRIME MINISTER:

My current intention is to go the full term.

MITCHELL:

Can I put this to you? Sell it for a few weeks, see what the feeling is and then decide when you'll go. That'd be sensible.

PRIME MINISTER:

My current intention is to go the full term.

MITCHELL:

Will you be assessing the reaction to the budget and therefore reviewing your decision or your current intention?

PRIME MINISTER:

Can I be boring? My current intention is to go the full term. Of course I will assess the reaction to the budget. Of course I will. But I would expect the budget to be seen favourably because it is a good budget. It's economically very responsible. I mean people started talking about an election budget. An election budget is a budget where you go into the red in order to provide benefits. That's an election budget. A responsible budget, a good budget, is one where as a result of the good housekeeping of the past you're able to afford investment in the future and afford to provide benefits for sections of the community. And you see very interestingly people aren't saying there's anything wrong with the provisions of this budget. It's not being attacked economically. We've now been talking for a quarter of an hour and you're not firing questions at me based on economic criticism of the budget. I think that's very interesting.

MITCHELL:

Well you haven't gone into deficit but you've certainly got a much small surplus than you were planning.

PRIME MINISTER:

But that is entirely justified.

MITCHELL:

Well fair enough but you spent more money or you've got a smaller surplus than was intended.

PRIME MINISTER:

But Neil, the economy's growing at a slightly slower rate now than it was a year ago. So our revenues are a touch softer as a consequence. But you don't need a big surplus when you've repaid so much debt. I mean we have repaid, at the end of this budget we will have repaid $58 billion of the $96 billion of debt that was there when we became the government courtesy of Mr Beazley's last five very profligate budgets. All of which were heavily in deficit. Okay we've had our fifth successive surplus, that's one of the reasons why the average family is paying $300 a month less on their mortgage bill than they were in March of 1996.

MITCHELL:

We need to take a break and a lot of people would like to speak to you. Prime Minister just one question before the break, do you think this kills the impression, the Shane Stone impression, that you're a tricky and mean government? Is that finished?

PRIME MINISTER:

Well I never believed for a moment we were a tricky or mean government. People may have said that. I guess at some stage people say that of all governments. But I never believed for a moment that this was either a tricky or a mean government. In fact if you look at the social welfare provisions of this government we have been more generous to pensioners than was Labor when it was in office. We provided pensioners with a guaranteed link to male average weekly earnings. And can I also say one thing, when Mr Keating was re-elected in 1993 without warning and without a mandate he massively increased indirect taxes and he provided no compensation at all to the pensioners of Australia for that massive increase in indirect taxation. If you look at the record of this government in relation to its treatment of pensioners, you will find it is a more generous record then the record of the former government. So no I have never seen this government as being mean or tricky.

MITCHELL:

We will take a break and come back with more, including some calls for the Prime
Minister.

[COMMERCIAL BREAK]

MITCHELL:

The Prime Minister in our Canberra studio. I'll take a couple of calls. Tony, go ahead please.

CALLER:

Yeah G-day, I'd just like to say, Mr Howard you've done nothing for the average wage earner again. I'm on an income of say $40,000. Petrol's gone up, everything's gone up over the last, since the GST's been in, 18 months or so. I don't think it's a tricky Government, I reckon you've just lied to us all along, given us nothing and now you're just trying to soften up the older people. But the average person isn't going to take that.

MITCHELL:

Ok Mr Howard.

PRIME MINISTER:

Well, can I say in response to that, that what have we done for the average wage and salary earner? Well, we've done three things. We have delivered you historically lower interest rates. If you're paying off a home then your mortgage bill is $300 a month lower than what it was when Mr Beazley was there. The second thing is that we have increased real wages by a greater rate than did wages go up under the Labor Governments because through higher productivity as a result of our industrial relations approach people can actually get higher nominal wages not at the cost of higher unemployment. And thirdly, if you're one of the 825,000 Australians who've found a job for the first time over the last few years you've also benefited. You are right to complain about the high price of petrol, I'm aware of that. You are wrong to blame that on the GST. The price of petrol in Australia now is high because the price of crude oil is high. We did cut petrol excise by one and a half cents a litre and this budget confirmed that and also the abolition of the automatic half-yearly tax increases on petrol first introduced by the Hawke Government in 1983.

MITCHELL:

Part of what hasn't been addressed through that, and you can accept that there isn't really much in here for the average family or the average income earner on 40 or 50,000 is there? There's not much here.

PRIME MINISTER:

Well you've got to take into account the benefits for those people in areas other than taxation. You've got to look at the contribution this makes to the maintenance of lower interest rates and that's important if you're paying off a home. And the $900 million spending, Neil, on initial health things like Asthma and Diabetes, Mental Illness, Cervical Cancer, those things in one way or another effect most average families, they really do. And this is an important point. you've got to look at the, you've got to look at the totality of what a Government delivers. not only services but also through taxation. You've also got to remember that that group is benefiting from the lower income tax cuts that came in at the time of the introduction of the GST.

MITCHELL:

But income tax cuts are a fraud Prime Minister.

PRIME MINISTER:

That is not right.

MITCHELL:

I mean there's a $22 billion increase in income tax take in the next three years. $22 billion from 74 to 96.

PRIME MINISTER:

There are more people in work.

MITCHELL:

Oh they're not paying $22 billion extra.

PRIME MINISTER:

Oh you say it's a fraud. I mean it is not a fraud.

MITCHELL:

Until you index tax rates.

PRIME MINISTER:

Well I'm sorry, can I deal with the indexation point. As a result of our new tax scales you can go from earning an income of $20,000 a year to an income of $50,000 without going into a higher tax bracket. So I say that again. therefore.

MITCHELL:

Minus $22 billion extra. You tax money, that comes out of our pockets in the next three years. $22 billion extra.

PRIME MINISTER:

Neil, I'll answer that question when I've repeated my point and that is that you can go from 20 to 50,000 without passing into a higher tax bracket. Now the degree of bracket creep, which is what you're referring to, that is the impact on a progressive tax scale of rising nominal incomes. I understand the point you're making. That is significantly lessoned when you have a situation where 80% of people who are on the top marginal rate of 30 cents in the dollar and you can in fact pass from 20,000 to 50,000 without going into a higher tax bracket.

MITCHELL:

The reality is.

PRIME MINISTER:

Significantly. There is always an increase, there is always an increase because people are getting higher nominal incomes. It doesn't alter the veracity of what I've said.

MITCHELL:

$22 billion extra in tax, income tax will be paid by Australians in three years. that's a fact too.

PRIME MINISTER:

Because people are going into, because of rising nominal incomes, it does have an impact on the tax take but it is a far lesser impact because if you go from $20,000 to $50,000 without any increase in the tax rate that significantly reduces the impact of that bracket creep.

MITCHELL:

Well take another call. Martin, go ahead please.

CALLER:

Hi Mr Howard I'd like to ask you about what your Government's done regarding something euphemistically called the 'termination payment surcharge'.

MITCHELL:

Goodness me, what's that?

CALLER:

Well I was retrenched 18 months ago, received a significant pay out on which tax had been deducted by my employer. I was unable to get unemployment benefits until I had consumed my total pay out. About 4 months ago I received a letter from the ATO, the Australian Taxation Office, asking me to pay $11,477 within 14 days the 'termination payment surcharge'. When I queried them and my employer I was told that this was something introduced by the Howard Government and it is not a tax it is a surcharge and that's why no one is being told about it. That's why it wasn't deducted from my pay out when I received it. That's why my employer didn't tell me about it. The interesting thing was I couldn't get unemployment benefits until I spent all of my pay out, including the $11,000 that supposedly I was meant to know about, but no one told me about. And in the end to pay out I actually had to cash in my superannuation and then pay, I assume, some time down the track another surcharge on that. Have you done anything at all Mr Howard to correct this bastardry?

PRIME MINISTER:

Yes.

CALLER:

What?

PRIME MINISTER:

Well, if you. we have made a number of changes in that area. We have proposed a number of changes that will I think largely eliminate the impact in relation to retrenchment situations of the superannuation surcharge on termination payments and we have also proposed some changes in relation to the impact of marginal tax rates on those payments so that people won't be paying more than their marginal tax rate. I wonder if you, I mean you may not care to do this, but if you wanted to provide your name and telephone number and address to the programme I could get somebody from my office to speak to you. And I think you will find that in relation to situations like yours in the future we have done something that will go at least some way towards addressing the concern that you raised.

MITCHELL:

Do you want to hold on, Martin?

CALLER:

No. Mr Howard, I wrote to you about this. I also wrote to the Treasurer. From an officer of your Department I got a letter saying that the matter was referred to the Treasurer and then it disappeared into the Liberal Party blackhole completely. I'm not a private business. I'm a small P-A-Y-E taxpayer.

PRIME MINISTER:

Well, you've asked me.I mean, you did ask the question whether we've done anything about it and I've said we have made a number of changes in last night's budget in relation to situations of your kind. I can't, without knowing all of your details, say yes or no, whether it would precisely fit your circumstances but I'm offering to help find out. If you don't want to take that offer up, that's fine, but I am offering to provide you with further information based on information you might give me. Now, that is an offer but whether you take that up, Martin, is a matter for you.

MITCHELL:

Okay. Hang on, Martin, if you want to leave the details off there. Mr Howard, there was a lot of speculation on the changes to the pharmaceutical benefits and the cholesterol, anti-cholesterol drugs, which I can't find explained anywhere. What happened?

PRIME MINISTER:

We are making those changes, yes.

MITCHELL:

So what does that mean?

PRIME MINISTER:

Well, that means that there will be some constraints put on the, what we believe, the overusage of these drugs and.

MITCHELL:

How will they work?

PRIME MINISTER:

Well there'll be, you know, there'll just be tighter constraints on the prescription of them in relation to the pharmaceutical benefits scheme.

MITCHELL:

So does that mean that the doctors will have different guidelines on how they're allowed to prescribe them?

PRIME MINISTER:

Well, I think there'll be different levels of benefit under the pharmaceutical benefits scheme. It's my understanding - I'd have to check the fine detail of it, I don't carry all that around in my head.

MITCHELL:

Do you know who pays more?

PRIME MINISTER:

Well, I think what it means is that there'll be a lesser incentive for people to use these drugs as an alternative to a somewhat more indulgent lifestyle.

MITCHELL:

But it will still be with the doctors to prescribe it.

PRIME MINISTER:

Well, yeah, there'll still be obviously discretion left to the doctors but, I mean, there is an argument that as well as appropriate anti-cholesterol drugs, there is an argument that a change in lifestyle and eating habits and diet is also an important element in tackling heart disease. I mean, we can't have a situation where you don't have an appropriate balance in our community between incentives in relation to the use of drugs but also they shouldn't be such as they encourage people to be lazy about their own health habits.

MITCHELL:

What will the impact of this budget be on interest rates, do you think?

PRIME MINISTER:

It will confirm a very low interest rate climate. I mean, we've got a surplus but not a big one. Growth is coming back. My expectation is that interest rates in Australia will remain low for a long time. I'm not going to put a figure on that. I don't know whether they will be further reduced. That's a matter for the bank. But they are at a 30-year low and they are a great bonanza for small business and home buyers, not so good for self-funded retirees and, as I said 10 minutes ago, that's one of the reasons we've acted in relation to that in the budget.

MITCHELL:

Just finally, Peter Costello's speech in the budget lock-up yesterday seemed almost reflective. Is this is last budget?

PRIME MINISTER:

I wasn't there.

MITCHELL:

Well, is it his last budget?

PRIME MINISTER:

Well, certainly if we win the election, if I've got anything to do with it, it won't be his last budget.

MITCHELL:

Oh, you'd keep him on as Treasurer if you win?

PRIME MINISTER:

Well, if he.I mean, the Deputy Leader of the Party has the right to choose his portfolio and I can't think of a better person to do the next most responsible job in the Government than Peter.

MITCHELL:

Okay, thank you very much. Is Dire Straits really your favourite pop group?

PRIME MINISTER:

I like them very much.

MITCHELL:

Thank you very much for your time.

PRIME MINISTER:

Okay.

[ends]

Transcript 11944