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Transcript of press conference: Monday 24 February 2003: Parliament House, Canberra: budget priorities.

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Subject: Budget priorities

MCMULLAN: The Treasurer’s comments at the doorstop this morning confirm that the first casualty of the cost of the war looks like being Medicare. This Government is already the highest taxing Government in history, and now it is about to get a massive short-term windfall in revenue from higher petrol prices. There is no doubt the Government can use that money to fund Medicare. If it allows issues like bulk billing to continue to collapse, it is a policy choice by the Government. It can’t be explained by a lack of tax - it is the highest taxing Government in history, and it is going to get hundreds of millions, some people say a billion, dollars extra in revenue because of higher oil prices.

So, it is clear from what the Treasurer said this morning and from what Senator Patterson failed to say on the weekend, that the risk to Medicare is serious, that the Government has no commitment to funding bulk billing -- and that is putting extra pressure on families, it is putting extra pressure on public hospitals. And if they continue to fail to act to rescue Medicare, it is a policy choice by the Government, not a lack of tax revenue - they are the highest taxing Government in history.

JOURNALIST: The Government has consistently said that the war is going to cost hundreds of millions of dollars. Obviously we are coming up to Budget time - what do you think the implications will be of that?

MCMULLAN: Well, the Government has made a choice about a massive commitment to the war in Iraq. That is a policy choice by the Government. They were aware of the cost when they made it. It is 2 ½ times the commitment that the Hawke Government made to the first Iraq war. So what I am saying is, if they make hard choices not to fund other priorities, it is a result of Government policy choices, not lack of revenue. And it is a result of past Government profligacy, because when you are the highest taxing Government in history, you should be able to meet -- and when you are getting a massive tax windfall of hundreds of millions of dollars -- you should be able to meet short-term contingencies such as that in Iraq, and continue to fund key social programs like Medicare.

JOURNALIST: You are talking $600 million from petroleum windfall. The Government has already estimated the cost of the drought in terms of extra payments of $900 million - hundreds of millions of extra dollars for the war. You are saying

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that they are overspending, but not using that money wisely enough but there looks as though there is enough drain on the Government’s budget line at this stage?

MCMULLAN: With the massive tax revenue that the Government is getting, and its extra windfall, any reasonably well-managed budget should be able to fund the understandable and necessary commitments to the drought. No one questions that there should be extra money for that, and the commitment to the war, and fund social programs. Previous Governments have been able to do it without the level of massive tax-take that this Government is taking, and without the benefit of the hundreds of millions of dollars of extra revenue they are going to get in the short term because of the impact of higher oil prices.

JOURNALIST: Do you still believe that the deployment in the Middle East should be cut back, that there is actually a saving to the Budget to be made there by not putting as many troops there?

MCMULLAN: Whether you can cut it back is another question that other people are more expert than me - once you have made the commitment there are strategic and human implications, maybe even implications for the safety of the personnel concerned that impact on whether you can cut it back. I am not the Party’s defence spokesperson but I do know, and it is obvious, that the Government’s

decision to deploy based on the scale that might be required for the Coalition of the Willing rather than the scale that will be required for UN has led to a massively increased commitment at massively increased cost. But that doesn’t mean you can subsequently cut it back, because that might have implications for the safety of the troops and nobody would do that.

JOURNALIST: So where in the Government’s budget should they be cutting to get the money to do those three things you have identified - defence, social funding and the drought?

MCMULLAN: Well, we will see when the Budget comes out exactly where their priorities are. But the Government, as you know, was wildly profligate in 2001 and ran the Budget into deficit notwithstanding a record level of revenue. They are now getting higher revenue, and a windfall - it is clear they should be able to fund all these things. We don’t know what all the commitments the Government will make, how they will be reflected in the Budget until Budget night. But we do see them continuing to be self-indulgent, spending $20 million on sending out fridge magnets and those sorts of ridiculous priorities, when there are serious social questions to be faced. But we will have a look on Budget night at the priorities and we will be making our comments in detail.

JOURNALIST: So there’s nothing that can be cut?

MCMULLAN: Well, we have some views about priorities and they will be being reflected in our commitment. We have made quite clear, for example, that we think the Baby Bonus is an inefficient and unfair expenditure, and that money should be reallocated elsewhere, but in other ways of supporting families. So, we certainly have a conflict of priorities in spending with the Government. But for the moment my concern is that the Treasurer this morning has reinforced my concern that the


Government has no commitment to Medicare, and they are going to use their commitment to the war to cover the fact that they are going to allow bulk billing to collapse, and the death of Medicare might be a consequence of the Government’s commitment to the war in Iraq. And that is a very serious problem for Australian families and for Australian society, and it is going to put a lot more pressure on our public hospitals.

JOURNALIST: Mr Costello was quick to shrug off responsibility for rising petrol prices. Is that just something that families are going to have to wear the strain on their budgets?

MCMULLAN: Some part of the price of petrol that people pay at the bowser can be attributed to the Government, because the GST is proportionate: when the price goes up, the GST take goes up even more. Of course, other than in a very small way, as a contributor to the war concern, the Government is not responsible for international oil prices, but it does contribute to its policies on the war in a small way. But it can’t wash its hands of all the impact of the price of petrol at the pump because the GST is directly proportionate: when the price goes up, the Government’s take goes up. It is exactly designed to do that, it is doing it, and the Government is raking in hundreds of millions extra.

JOURNALIST: Are you able to put a figure on how much extra it is raking in? There have been estimates that people are spending $18.00 a month more now on fuel. What would that translate into what the Government is taking?

MCMULLAN: The annual numbers that we have got on two taxes that the Government gets when the price of petrol goes up - the GST and the Petroleum Resource Rent Tax -- is between $600 and $700 million in terms of the short-term windfall. I notice that the Automobile Association estimated it at a billion dollars. It is hard for us to be precise without all the data, but that is the range of estimates. Our figures are between $600 and $700 million this financial year.

JOURNALIST: Coming back to Sid’s questions, if you say the Government has been wildly profligate in the past, aren’t you under some obligation to say where you would actually cut spending and not just redirect it?

MCMULLAN: In the course of this term of the Parliament we will certainly be having something to say about the Government’s spending priorities and our competing priorities. That is not the story I am here to propose today, and we haven’t made our final decisions about that. But yes, that is one of the key issues that Oppositions need to do - to reflect their different priorities, and during the course of this term, we will be doing that.

JOURNALIST: Just on that $600 to $700 million. How does that compare with last year or previous years when war wasn’t an issue?

MCMULLAN: It is $600 million extra. The windfall is $600 to $700 million.