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Transcript of interview John Laws program Dr John Hewson MP

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Leader of the Opposition


1 August 1991 REF: TRANSCR\DM\001



SUBJECTS: Tax reform: Australian Business article.


On the line is the leader of the Federal Opposition - good

morning John.

Hewson: ,

Good morning John, how are you?


Pretty good and you?


I'm very well thank y ou.


OK. We worry on and off, collectively, about the consumption tax - I was interested in an article in Australian Business Magazine this week that devotes a section to this, the most controversial of issues facing Australia at the moment and I must say dividing Australia - would you agree, its dividing Australia?

No I don't think it is. I think it is raising the issue ’ pf

tax reform as a key issue and that is very important and I

think that people - sure, they are taking different views - in that sense they are divided. But I think that in time they

will come together and agree that we really do need to reform the tax system in Australia and then there may be some debate about how best to do that. But I think that most people will end up agreeing that a goods and services tax is essential to that occurring.

Yeah. A lot think it won't happen - maybe it is wishful

thinking on the part of some, I don't know.,.



Parliament House, Canberra, A.C.T. 2600 Phone 77 4022



There's nothing to be afraid of, John - the key thing is we are about lowering tax and we're about changing the nature of the tax system so we give people an incentive to work or to save, what this country needs.


Have you seen the Australian Business Magazine article?


I've only seen a summary of it, John.


OK. Let me for the people who are listening to us and who

haven't seen it, let me tell you how Tim Blue says it in his

paper - payroll tax and wholesale taxes could be abolished and replaced by a broad-based consumption tax set at only 10%

according to a study commissioned by the Australian Chamber of Manufactures - the figure has surprised many in the light of comparable tax rates of 12.5% in New Zealand and 17% in

Britain. The study by Access Economics Consulting Group found that payroll tax could be ditched with the introduction of a consumption tax of 3.5% while a further 6.5% tax would enable the abolition of wholesale tax. Why 15% that we're hearing?


Well I think that people are looking beyond those sort of

changes. There are a lot of options as to what you can do

with the revenue raised by a goods and services tax. I think the article makes the point that if you simply replace the

wholesale sales tax with a goods and services tax, it requires a rate across the board of about 6 and a half per cent.

Anything that you do above that, the level to which you raise the tax rate above that, you gain the capacity to abolish other taxes or to lower personal tax.

Their proposal is of course is to abolish payroll tax and to set the rate at about 10%. You could not abolish payroll tax if you could set the rate anywhere from 6 and a half to say 15

and use the proceeds to lower personal tax. Thats the nature of the debate really, to get people to understand that we can make a dramatic change to the tax system in Australia - whether it is the abolition of the payroll tax, or the

abolition of the wholesale sales tax or the lowering of

personal tax or a completely new personal tax system.

That really is the essence of the point made by that article - I think it is a very good contribution to the debate.

L aws;


I think it is a very good contribution but then again Tim Blue is a fairly alert kind of character. Its a very good book and I think it is a very good piece if people are prepared to read

it and I commend it to them to make themselves aware. why

can't you abolish payroll tax?


Well you can John - it is an option. One of the problems with

payroll tax for businesses is that it is a state tax rather

than a federal tax. You'd have to come to an agreement with

state governments. Clearly, as part of this reform of

Commonwealth/State relations, issues like payroll tax must be addressed. In a country that is trying to create jobs its

rather novel that you tax employment. And in that sense there are compelling arguments for the abolition of payroll tax. In terms of the tax reform package you have got to decide what

your priorities are.


Yeah. I was talking to some people the other night -

admittedly they had different leanings politically than you - but one of them said to me and one whose opinion I think you

might respect even if you have to wait till we're in private to respect it - he did say to me, this fellow Hewson is a

fascinating character but I do worry that he also has the

facility to lose the unlosable.


I don't think thats right John. Sure, we will take bit of a

beating in the polls as we advocate major change, but we

believe that the Australian electorate is mature and that they will accept our package on Its merits. I'm not road John - I ' m not out there to destroy the well-being of average

Australians. I'm about improving it. In one recent radio

interview, they concluded that we are either stark raving mad or dinkumI Well the fact is, we are dinkum and we we'll end up convincing people of that. Look, as far as our party is

concerned, a large part of the credibility we have to build as the alternative government is simply based on our capacity to be honest, to tell it the way it is, to say what's got to be

done to fix our country and I'm prepared to fight the election on that basis. It's the only way to go.

Laws i

Yeah well I think you are a very brave man and I also know you

are not a fool and I also know that any politician to become a politician must have a sizeable ego thats a very important thing. And if you have a sizeable ego you want to succeed you don't want run in there to be simply defeated. Obviously you believe you can win, as well as improve the country at the

same time. It must be a combination of both things,



Thats right. I came in to actually do a job - as a

professional economist I knew we could do it better. I feel very strongly that the country was missing a lot of

opportunities and our performance was sliding back relative to a lot of the countries with which we trade. In those

circumstances, I decided to get involved in the process and try and make change. Now, to do that, we need a mandate at

the next election where the electorate says, look, John, we want you and your team to make these changes and to rebuild

our economy. And that is what we are about - we want an open,

honest and mature debate.

I am disappointed that the Prime Minister has decided to adopt a scare-mongering approach, particularly on a policy that he himself advocated in 1985. But I put it to you that the

electorate will not be fooled or influenced by a scare­

monger ing campaign. They will assess our package on its

merits and they will see it will be to the overwhelming

benefit of average Australians.


Well I don't think they will be impressed by a scare-mongering campaign when that scare-mongering is also totally

hypocritical. when the Prime Minister said the other day

every time you go to the supermarket you'll be paying a visit to the tax office, I mean, that was hypocrisy at it worst.

Because, the fact is, you are doing it now - some items that

you buy at the supermarket are already taxed at 30%. At least your tax will be lower than that.


Exactly. People are starting to realise as part of this

education process that already pay a large amount of tax, that the prices on a lot of items will fall if you work to a lower

rate of tax.

Now, we ought to be able to address issues like that in a

country which is in the worst recession its been in for 50 or 60 years. We have to something fundamentally different to what we have been doing.

Our approach is quite simply, John, that if we improve our

performance, as individuals, if we work or save more

effectively, then of course we should benefit and the country will benefit.

That is our basic approach. There are no magic puddings - if there are any easy solutions, Bob Hawke would have used them years agot

Laws s


Y es!


The tough decisions have got to be taken and we have got to

demonstrate a capacity to take those decisions.


Do you have a burning desire to be Prime Minister of



Only to make the changes that I believe have to be made. I

don't think this government will ever do it. I'm embarrassed that in the past we haven't done it. But I believe those

changes can be made. I think there is an electoral mood to

make them and it is not an end in itself - it is a means to

that end. I think I can make a contribution to Australia in

that sense. We are working very hard to ensure that the

people of Australia get as much information as they can and to help them to make a reasonable choice.


OK. Just vert quickly, I have always found it a good idea

when endeavouring to sell things to have something positive to say about it, now, pensioners and people at the lower end of the scale - obviously would suffer under a consumption tax - those on fixed incomes, Are you going to look after them?


Yes - they won't, they won't suffer John. What we have done is to design a system to compensate them for any increase that they might feel as a result of the tax - we're not about

making their lives worse. We are obviously about looking

after them and...


Would you make their lives better?


Well, we may actually. We are yet to determine that but we

certainly won't be making them any worse off and we are

looking at the whole area really to ensure that we effectively cushion these people from any tax changes. I mean, they have made substantial contributions to the country over many years. The last thing they want in the latter years of their lives is

for government to inflict any additional financial pain on them - and we are very conscious of that, and very concerned to ensure that they are compensated.


OK John - when will you be in town and when will you be able

to come in and spend maybe 30 minutes here and talk to some of the listeners - take calls and talk to them and hear their

worries and fears?

Hewson :

Next week John - I'm in Melbourne today, just off to the

Williamstown Dockyards. But next week I'll be able to come in on Tuesday or Wednesday and be happy to spend as much time as you want to give us.


OK well that would be great. Well if you could come in and we

could get our listeners to talk to you and if we could make it early, we could then talk to some of the country listeners, so that we can allay any fears that they might have, if, of

course, you are able to do that, they might, at the end of the program, still have those fears, but at least they would have the opportunity to talk to you about it.

Hewson: '

Country people do particularly well out of it, John - because most of them have businesses and they get a rebate on all the input taxes they pay which under the current sales tax system they don't - so they will be significantly better off.


OK well lets make it next Tuesday and we'll talk off the air

about times and everything and I'll look forward to seeing you.


OK John thanks a lot.


Good to talk to you. Dr John Hewson.

Laws i