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Transcript of phone in questions and answers with Dr John Hewson MP leader of the opposition and Neil Mitchell Radio 3AW Melbourne

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Leader of the Opposition

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SUBJECTS: GST, effects on savings, single-income families, exemptions, hidden sales tax, compensation, launch date


Twenty-eight past nine. We're taking calls for the Opposition Leader, Dr John Hewson. John, good morning.


G o o d morning. Look, Dr Hewson, I support a consumption tax, given that its part of the, or one component in the sort of package you've described. But I do worry about the lot of socially responsible people who in the past have deferred consumption and saved. The purchasing power, you know, of money saved will drop and I don't quite see how its going to

be politically feasible to compensate these people. You can hardly have, you know, giving these people an additional sum of money. What do you intend doing about that one.


well it depends, of course, good morning, John, I should say. It depends of course on precisely how much impact there is on the price level as a result of your package. And one of the elements of the debate right now is that the government is exaggerating the extent to which the price level may go up as a result of the various proposals that are around. Secondly,

its got to be looked at in the context of the tax changes that are made and people who save may be compensated through the nature of the changes to the personal tax system. And that's the direction, if you like, we're taking as we look at that



I suppose the point John's making is the effect on savings. If you've got fifty grand in the bank and suddenly everything goes up twenty per cent, you're left with forty grand.

Parliament House, Canberra, A.C.T. 2600 Phone 77 4022 COMMONWEALTH PARLIAMENTARY LIBRARY MlCAH


Well, not quite# but I mean, your numbers, but the point is that we are trying to build an environment in which we

encourage saving because we, in simple terms, we borrow everyone else's savings around the world when we have $165 billion worth of debt to prove it. And the tax changes that we are looking at would be designed, or are being

designed to work to remove the disincentive to save that exists in our tax system. Now its not just tax that causes people not to save, but in an environment where you get inflation down, for example, and you change the tax system, it

is possible to encourage people to save and you can work to cushion any effect of any price change on those savings. And I think it will be important for people to wait and see just how our tax changes will stack up against the concern that John has expressed about the possible impact on savings. Now, be clear, we are addressing this issue. In 1985 Paul Keating

just told people to lump it.



Maryanne, good morning.

Maryanne *


Mr Hews on, could you tell me how you will compensate those one-income families not receiving benefits of any kind, but supporting a larger number of dependents, such as spouse and three or four more children. Neil Mitchell quoted somebody

standing outside the supermarket with a tin of tomatoes, imagine if you have to repeat that operation five or six times. These are the people who have already borne the burden of the unfair tax system. What are you going to do to

compensate them.


Well, it will depend, of course, on their income structure. But the sort of exercise we have done has been to identify a whole range of different groups of families and family structures. We have, in effect, modelled the impact of the change in consumption tax at a particular level on the costs, or the expenditure, if you like, of those individual families against their income structure and then looked at how you can compensate them, either by increasing the value of benefits

they do receive, or changing the tax structure so that they are compensated. Now, it will depend very much on their income level as to how they would be compensated. But most likely the group you've described would get the benefits through the tax system.


Mitchellz .

Are you looking at exemptions on food.


No. I mean# people have put the argument that we should exempt a lot of things. Our view has been that we will be as broadly based as we can. There are some things that are very difficult to include in the base and most countries have excluded them. But the real debate, so far, with us, has

focussed on three things. People have put arguments to us about exempting some food. Arguments to us about exempting education and arguments to us about exempting health. And we, as I've said recently in an Interview, we have obviously assessed that very carefully, but the principle has to be, the starting poing has to be that the base should be as broad as possible. Its the fairest way to do it and it allows you to

get by with the lowest possible rate to do the job that you want to be done.

And when you start, the overseas experience is that as you start to give exemptions you create an enormous lot of, amount of problems for yourself, so for example, in some places they exempt bread but you go next door to buy a sandwich and you pay the tax. So I mean, you build all these anomalies into the system and it is fairer to be across the board and then to make sure that your compensation addresses that issue.


So you've looked at the arguments for exemptions on food, education and health. You've assessed them. You've rejected them.

Hewson t

Well people have put a, we haven't announced the decision on it yet, but people have put arguments to us quite frankly, Neil, on thousands individual exemptions and, you know, we've addressed those. We've looked at the New Zealand experience most recently where they had thousands and thousands of

individual considerations of items that should be in and out, and in many cases we've addressed those too.


Richard, good morning.



Good morning Dr Heweon.

Hewson *

Morning Richard.


I'm an owner-operator in partnership in a email supermarket and I don't think the majority of people realise how many items attract the sales tax now. Also I was just wondering whether there'd be a consumption tax charged at the point of

sale or would I pay a consumption tax to the wholesaler, and then just have a fixed, like 15 per cent, over the range of the products.

Hewson i

Well, on your first point, its very true that people have no idea how much tax they pay and, indeed, some supermarket operators around Australia have started to draw the attention of their customers to that very fact And, you know, its on a

lot of basic household items that people wouldn't contemplate, like toothpaste and dishwashing liquid, shampoo, toilet paper, so on, which, you know, are all at at least 20 per cent rates and part of what we've got to do is educate people about how much tax they're already paying and the fact that that tax will be abolished as part of the process of introducing a

broader based goods and services tax.

Secondly, we've said that we will use a value-added style tax. Goods and services tax is a value-added tax, rather than a retail turnover tax. So, as you described it, in you

question, you wouldn't be levying it at the cash register.


OK, Sam, good morning.


Good morning Dr Hewson.


Good morning Sam.



what you were saying before to Neil about you've got all the figures worked out. why don't you tell the people now what the personal income tax, or how much lower will it be so we can work out how much, what we're going to pay extra.


Well, simply because we want to do it in a way that gives you the best chance of getting all the information in the most effective way at the time time. we don't want to dribble it out in bits and pieces, we want want to just announce it at an appropriate time and provide people with all the information to sit down and. do it properly.

People have said to us why don't you release bits and pieces. Why don't you tell us the rate of the GST now. Why don't you come back next week and give us the tax cuts, and that sort of thing. Its not the way to go, simply because we want people

to see the benefits of the overall package and we're not holding back on this for any reason except that we want to get it right and we want to do it in a way that is going to

provide people with the correct information so they can make the decision that you are calling for.

Frankly, we're still eighteen months from the next election.


Could you still, you have got the figures there, haven't you. You've got them finalised.


Well, we've finalised the figures in the broad, I mean we still have to go through some of the decision-making processes of our Party. But very imporfcnt, an important part of that is just simply explaining the decisons that have been taken and making sure that people have got all the information. There's

a lot of work being done anticipating the sort of questions that people might want answered about what we have done and hopefully being able to provide them with that information from the beginning. Because once we've announced it, we want to be able to just go on and explain the package as a whole.


But is it a matter of political stage managing it, or these are more legitimate reason.


No, in part there's political stage management too. I mean, you could have just have imagined if a couple of months ago we'd planned to launch it in the weekend that, in the end, saw the leadership challenge in the ALP. I mean, we would have

lost our opportunity to market it in the most effective way. Equally now, coming up to the Budget, there is going to be a natural focus on the Budget, so it would be very difficult for us to bring the announcement out a few days before the Budget

and, you know, have it swamped by the Budget a couple of days later.



We've got the Budget, then we've got the VFL grand final, and the rugby league grand final.


Well, I don't think I'll announce it at the VFL grand final.

Mitchell *

Well wait until after the Australian Open, or its going to be before Christmas... Melbourne Cup.


No, it will be before Christmas but we want to pick a time where we can. We are going to launch a massive national selling campaign which is going to involve all our people, hopefully at State and Federal level, and our Party

organisation. There will be individual household, individual brochures, sorry, brochures delivered to every house in Australia. There will be a lot of other information made available. It is a massive organisational task, if you think

about it, and that's really what we've been planning in great detail because we want to do it as effectively and as

efficiently as we can while making sure, as I say, that people get the information they deserve. We're not going to go off half-cocked. We want to make sure the figures are right, we want to put the information in a form that is most useful to



October is a pretty quiet month.


when we're ready, we'll do it.


We'll take one more call and then we'd better, Dr Hewson has to move on. Our next caller is Joyce, good morning.

Joyce *

Good morning Dr Hewson.

Hewson *

Good morning Joyce, nice to hear from you.


You always say what you will do to help the aged pensioner with that consumption tax but you never ever mention what you will do for the people who are on superannuation pension and who make up their income by their investments. We go to the

doctor, we pay $27.00, we go to the chemist, we pay $15.00. You put that tax on, we're still going to pay full price for everything.


OK, the superannuant.


Well, its wrong Joyce to say that I never address that issue because on many occasions, including one major television appearance, I actually quite honestly said that that group has been the focus of a lot of attention on our part because they

are a more difficult group to deal with. Those who are not part or full pensioners but, as you say, live on their

superannuation benefits or other investments, are difficult to Identify in the same easy manner that pensioners are and therefore you don't know so readily their income and

expenditure patterns. But, we're done a lot of work on that group, we've talked to a lot of people about it. People who know about it.



Some of the compensation for that group will clearly come through the tax system because they are paying tax and can get the benefit directed in that way. However, it may be

necessary that other forms of compensation be given, be targetted at that group and so its wrong to say we have

ignored it. I see it as a very important groups, as you would rightly say, they are the salt of this earth in the sense that they've made their contribution to Australia. They are not a drain on the government system or the tax system of others,

they are not drawing a pension. They are supporting

themselves and we are very concerned to make sure that group is compensated.


Dr Hewson, just finally, as you, I know you must leave, I read in the Sydney papers in particular about a bathtub curve. We've forgotten the J-curve, we've got the bathtub curve. is the, this economy turning around. Are we coming out of the


Hewson *

Look, I don't think we are. I think that some sectors will look better, like housing. There is a little bit of

stockbuilding going on, but to get our economy up and moving properly we will be still held back by the world economy slowing down, by our rural crisis still flowing through and having its impact and I think, most importantly, because the business sector is not investing and will not invest for the next twelve or eighteen months. And in that sense, while parts of the economy will pick up and look a little better, we won't have a widespread recovery and I think unemployment will

stick somewhere between 9,5 and 10.5 per cent for the next two to three years.


Thanks for your time. Can I book you for October 26, the day of the launch of the consumption tax.

Hewson *

What else is on October 26.

Mitchell *

Thanks for your time.



Thanks Neil.


The Opposition Leader, Dr John Heweon.