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Transcript of Dr John Hewson mp interview with Rod Henshaw

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Leader of the Opposition

25 November 1991 TRANS\0005BNE\NM


E & OE


The John Hewson juggernaut continues its whistlestop campaign to sell the taxation reform package. Dr Hewson is my studio guest in just a moment.

It's been a busy 3 or 4 days for Opposition Leader Dr John Hewson, who's been on the campaign trail selling his taxation reform package. Yesterday, the Gold Coast was targeted with addresses to pensioners and tourist authorities - two areas which have expressed some concerns over some of the contents

in the package. And of course today Dr Hewson is in Brisbane.

Dr Hewson, good morning. Thanks for coming in.


Good morning Rod. How are you?


Well thanks. You're having a dream run at the moment. It hasn't been all bad for you. We're all waiting for the

hiccup, I must admit, in a rather sadistic frame of mind. We're all waiting for you to go wrong somewhere. Where do you reckon you're most vulnerable if that was to happen?


We don't think we are. We've actually done an enormous amount of work in preparing for this package. I don't think ever in history has so much work been done by an Opposition with a package like this. In fact some people, I see in the press,

are saying that a government in Australia hasn't done this much work either.

We have put an enormous amount of time and effort into it. We have pulled in the very best people in Australia to do the work. We have worked very long hours, so we're quite

confident with what we've done.

Parliament House, Canberra, A.C.T. 2600 Phone 774022



In saying that, of course, there's a lot of controversy about some of the things we're saying. There's some pretty tough decisions in there but we feel that they are overwhelmingly in the best interests of Australia and we have to be prepared to

fight fur that, even though it might cause us some political difficulty.

I think our greatest danger, to answer your question, is dishonesty by the Government - the scare campaign.


By the same token, you're a former lecturer at university - I didn't get that far - but I remember my old english teacher saying you never get 10 out of 10 for an essay. There's

always got to be something wrong with it.


Obviously, some people will not like some things in the package. And there are always judgements in economics about what's important, and how to deal with particular issues. So there are a lot of judgements in here. They are based on a

different concept of the world, a different concept of the role of government, a different set of values from the government, so there's plenty of scope for them there to disagree. Really, there's a challenge there for them and that

is that we have put together a very integrated and effective package based on a particular point of view. I think the most productive response for the Prime Minister, from the point of view of what's in the interests of the country, is to come up with an alternative - put down a detailed alternative.


Which you've done...


Which we’ve challenged him to do, and I think that would be the most effective debate. He'll undoubtedly carp and whinge about this estimate and that estimate. Of course, if you change our assumptions, you get different numbers. But as far as we’re concerned our numbers are right. Our assumptions are

right. The ball's in his court. What's his vision for



What happens if he takes some of the rug from out under your feet and decides to go the same way between now and the next election? You've still got a fairly vast lead up time before you go to the polls.


We have. We recognise that's a risk, but I personally don't think that matters. I think if he does take the right

decisions for Australia, we'll be delighted.


Realistically, there must be problems along the way. Maybe you came upon a couple of those yesterday - pensioners and tourist authorities. They're both worried about the effects

of the package for different reasons. Pensioners first - people are still worried that they'll be worse off having to fork out an extra 15% for most things that they buy over the counter. A number of them rang Tim Fischer on this program

the other day, but he wasn't able to satisfy a lot of their concerns. Can you give us a quick and easy equation which will explain it to the listener out there?


Well, the price impact isn't 15%, because we are abolishing a number of other taxes. We're in fact abolishing seven other taxes, and some of those taxes have a very large effect on the prices of goods and services - particularly payroll tax, fuel

tax, sales tax are three very big items - I think the

Supermarket Institute of Australia came out the other day and said that on a basket of groceries, the price impact would be 3-5%. Now that's consistent with our estimate of 4.4%.

We think that the price effect on average is 4.4%, and on that basis we have overcompensated pensioners by an 8% increase in their pension, plus a host of other benefits, particularly the low to middle income pensioners which give them benefits way over and above what is necessary to compensate them for the

likely price effect. In those terms, pensioners have been specifically targeted to be made better off as a result of the package.


OK. Our Premier - moving on to another development over the weekend - our Premier has joined some tourist operators who are worried about the GST on airline tickets within Australia. Now you claim that the excise coming off fuel will offset the

GST on domestic tickets, but that really isn't the case, is it?


They've misrepresented the situation. It's not a 15% add-on again. The particular point, I guess, that Bryan Grey is focussing on is that avtour doesn't attract the excise at present, so therefore he won't benefit from that. But of course, the cost of his fuel will be refundable under the Goods and Services Tax. The GST on that fuel will be



refundable and in that sense he'll be better off, but that is not the only place that fuel alone impacts on the airline industry. Surely he uses a lot of other fuel, not just in planes, but elsewhere in relation to his business.

Payroll tax is a huge cost to the airline industry. There are a lot of other parts of the package. What they're trying to do is narrow it to tax. There are a host of other things in the package that will be of benefit to domestic aviation - more competition, which will lower prices, and we're going to

let Qantas and Air New Zealand carry domestic passengers; accelerate the construction of the third runway at Mascot; built a second airport in Sydney; privatise the airport terminals; change the industrial relations system so that the wage negotiations will give him a much better outcome in

relation to productivity.

You've got to look at the package as a whole, and the package as a whole is overwhelmingly in favour of Bryan Grey and in favour of tourism, and in favour of the airlines.


But admit it - you got it wrong in your package. On page 291, as I understand it...


Not at all.


. . .where you said that the lack of excise, or taking the excise off the fuel for aircraft would be a trade-off, or would be - 1 haven't got it in front of me - but it would be a trade-off to...


Some aircraft obviously - the smaller regional and rural aircraft...


They use avgas, for a start.


They use avgas, and they have a 27.1 cent per litre excise. They will benefit.


But with avtour, which Is mostly directed towards the tourist industry - not too many people go flying around in light aircraft.


No, but it’s not Just that cost. The cost of fuel feeds in to the final prices of a service a lot of times in Australia. It feeds into the final price of a lot of goods in Australia. It rolls over, it cascades as we say, through the system. They have just focussed on a particular situation with avtour, and not looked at the industry and not looked at the package. And

I challenge them to look at the package, because if you look at the package, you will see that it is overwhelmingly beneficial to the aviation industry and to tourism.


As I mentioned, the Premier, Wayne Goss, our Premier has joined tourist operators worried about that very aspect of it. The Premier is on the line with us at the moment. Mr Premier, good morning.


Good morning Rod.


Does that allay some of your fears?


No, not really. But I should say in fairness to Dr Hewson that it's a very detailed package. It's taken over a year for him and his colleagues to prepare it and we'll research it carefully to see what it means for Queensland. But on a quick

look at it over the last couple of days, we're very worried about the fine print down the back of the document in three areas.

One, the 5% cut in payments to the States, and therefore State services. Secondly, the fine print on the payroll tax, and lastly, on page 291 of the document that you've already referred to, Dr Hewson says that their commitment to remove all fuel excises, including on aviation gasoline will give a

substantial boost to tourism. Now Mr Grey has pointed out, and I think he's right, that Dr Hewson has made a mistake there because there is no fuel excise on the aviation gasoline that is used in Jet driven aircraft. It's only an area of

light aircraft that is given relief, but he claims, or presents a picture in the document that says he's removed all fuel excise on aviation gasoline. But for the bulk of our tourism industry, which is what concerns us in Queensland,



there is no fuel excise there so there is no relief been given. Yet they claim there is relief given.

I think we need to know - has Dr Hewson made a mistake, and is Mr Grey right?


Dr Hewson?


No, we haven't made a mistake. We are very conscious of the fact that avtour doesn't attract the excise. But that's not the only way in which fuel costs impact on tourism in

Queensland. The Premier knows that 80% of tourism in

Australia is domestic and 78% of that is done by private cars. So if you want to argue the case about tourism, you're going to see that the private car industry is going to have a

significant benefit from it.


Yes, but in these days of deregulation, it's almost cheaper to fly these days than it is to drive a car anywhere.


But you can't deny the numbers. 78% of people go on holidays by car...


But surely that's going to change? I mean, that is changing as we talk.


Well, in part it will change as the airfares come down and our total aviation package does lower airfares.


With respect, if they come down any further they'll be paying us to get on to aeroplanes, I think.


Well, there's been a bit of competition in recent days on some routes. But we're yet to see full-blown competition across the board. Anyone who denies that we can't do more to improve the aviation industry in Australia hasn't focussed on that



OK. Let me take the other point that Wayne Goss, and

something that was raised late last week in Adelaide, regarding the system of general purpose payments to the States. Initially, as I understand it, you told the Premiers everything would be hunky-dory and OK. But according to your package, those payments will be cut by 5%, which in Queensland terms means about $150 million.



Well we have, obviously, a number of changes in the package that impact on the States. The particular ones that I wrote to the Premiers about were two. One was our proposal to abolish payroll tax - fund the abolition of payroll tax to be correct, through a series of payroll tax compensation grants, and I think any Premier who's interested in jobs would be

interested in that proposal. A number of Mr Goss's Labor Party colleagues are on the record as supporting that.

Secondly, we wrote to them about tax sharing. Tax sharing is a proposal that we put quite some time ago as the most

effective way of giving the States access to a stable revenue base.

They were the two issues we raised. There are other elements in the package that actually go the other way with Premiers. In some cases, in some States, we are giving them payments in relation to the franchise fee base they lose when we abolish fuel excise. Sure, there are some cuts in the general purpose payments to the States as well. That has been a feature of

fiscal policy in Australia for the last several years under this Government as well, as they've sought to...


Do you agree it could be $150 million worth?


I'm not sure what the number is for Queensland, I'd be happy to look at it. I'd be happy to look at that.


Premier Goss?


It's very interesting that Dr Hewson says he doesn't know what Queensland would lose. He'd be happy to have a look at it. I think that's something he...


Don't misrepresent It Wayne. I'm just saying that I don't carry that number around In my head.


Well, I'll tell you. It's $150 million that's got to come off our schools, hospitals and police and that's something that we're going to find very hard to do, and indeed every other State is going to find very hard to, and I'm just very

disappointed that when you talk about a non-political, or a new way of debating the issues, that you didn't mention that when you wrote to me in Adelaide last Friday. I think it was

very important then that it would have been included in your letter if you were going to be upfront about it, because we really can’t afford to cut $150 million off our school, hospital and polices services. We just can't afford it.


Listen Wayne. I think it would be fair to tell the full story of this whole package. There's a lot in this package for education. We've got a $3 billion education program. There's a significant cost advantage to education because we have zero-rated education in the GST. The costs of education and health will fall as a result of that change alone.

You need to look, as you correctly said - you haven't read the document - if you look through the whole package, you will see that there are lots of benefits that flow to a State as well as a number of disadvantages. I don't deny that we intend to

cut the general purpose payments to the States as part of the package, but there are a lot of other features of the package that - in a full-blown discussion with the Premiers I'd be happy to look at the pluses and minuses.

But we are about making substantial change in Australia. I am about boosting the quality of education and health in Australia and in doing that, of course, there are some tough decisions. And it's very simplistic to pick just one element

and say we're going to cut back on education in Queensland. We've doubled the capital grants, for example, to

non-government schools. We've committed a lot of money to the development of TAFE colleges which the States are not prepared to fund.


Well, if we're going to go by Wayne Goss's figure though, Dr Hewson, it's still $150 million this State is not going to get.



Well, there would be cuts in general purpose payments to the States, but that $150 million pales into insignificance compared to the benefits to Queensland in this pa'";.age.

A simple question for Wayne Goss. Do you, or do you not

support the abolition of payroll tax? Do you, or do you not want jobs in Queensland?

Goss: .

Let me say Rod, I absolutely support the abolition of payroll tax. What concerns me is the fine print and what concerns me is that the great majority of Queensland firms do not pay payroll tax at the present time, yet they are going to have a goods and services tax imposed on top of their products and services which is going to be a tax on employment. I mean, the GST is a tax on employment and for all those businesses - the great majority in Queensland that don't pay payroll tax at

the present time - they're going to get an extra 15% whacked on the top and that is going to reduce the employment that they'll be able to make.

The problem with this, and what concerns me is the fine print. Dr Hewson is talking about what we'll all get, but down in the fine print at the back is the pain and who pays for it. And it seems to me we need to debate that a bit more.


In my position is very clear Wayne. I'm more than happy to talk to the Premiers, unlike our Prime Minister. I'm happy to talk across the board about this package and put our case to you. It is wrong though to keep representing it as a 15% add­ on when the inflation effect across the board is 4.4. The abolition of seven taxes really is very important in

calculating the price effect. Business is going to be significantly better off. We're unashamedly pro-business, small and large business. We're taking $20 billion of tax off the business community. Business inputs will not be taxed as a result of this 15% surcharge. In most cases it will be a

refundable amount to the business community. So the business community is decidedly better off, either directly because of payroll tax or indirectly, directly because of fuel costs or indirectly, directly because of sales tax or indirectly.

I'm sure that the Premier has seen how widespread the support from the business community has been, because it is

overwhelmingly in favour of business. You've got to rebuild business to get jobs in Australia. It's a simple proposition and that's what w e 're about.



Wayne Goss, would you be happy to meet with Dr Hewson and the other Premiers on this?

Goss :

Well, the attitude of all the Premiers in Adelaide, including the only Liberal Premier, was that this is a matter where we deal with governments, not with oppositions. Dr Hewson has got to run his own election campaign.

Just on a final point however, I'd just like to ask Dr Hewson is it right that the great majority of Queensland businesses do not pay payroll tax at the present time? Do you admit that?


I don't know your State numbers. It's a $500,000 cut-off, as I understand it, at which the tax starts at about 3.5%. So all businesses with payrolls of more than $500,000 would pay It. Significant employers in Queensland - maybe a very significant percentage of the employment is by firms that do pay payroll tax. But it's not only that it impacts on them directly of course. It gets built into the prices of

everything else. So that as it cascades through the system, they may not pay it directly, they may pay it indirectly and that is the point which is very important.

If you look at the production of anything from the farm to the shop shelf, payroll tax and fuel tax and sales tax can go into that process a number of times and cascade through the system. By abolishing it, we are taking that base right out of the

system and giving business a chance to get on and do what they should be doing which is employing people and creating jobs.


Wayne Goss, many thanks for joining us this morning.


Good Rod.


Thank you very much for your time, but before you go Dr

Hewson, a couple of quick ones, if I could just throw these in. Bernie Fraser - he's not withdrawing from comments published in the Sydney Morning Herald I notice today, about your timing of the goods and services tax.



I must admit, I didn't read Bernie's comments that were reportedly made yesterday in the same way that the Australian did.


They were quite robust, as I read them this morning.


I think he' s saying that he made some comments in the past about a goods and services tax. He hasn't seen the package. He doesn't know the context of the package, so he's not commenting on us. I imagine in due course, when he looks at the package he'll perhaps take a different view. Our view is, though, that Mr Fraser was leading the vanguard back in 1985 when inflation was a lot higher than it is now for the

introduction of a broad based consumption tax. He was then in the Treasury running the place and advocating the tax at a time when inflation was much higher. Inflation is now much

lower. I put it to Mr Fraser that surely this is the best time to do it. It is an important change to make.

If you design your package correctly, and this is a very important point, it won't add permanently to the rate of inflation. You get an increase for 1 year in the price level, but by adequately compensating people - ensuring that average

families are compensated, farms are compensated, pensioners are compensated, there won't be any pressure on an additional wage increase because they're more than adequately


The average family, I think, is about $33 per week better off under this proposal.


How would Bernie Fraser fare under a Hewson Government? Would he have a job as Governor of the Reserve Bank?


We've always said that we will fill all our positions on the basis of merit. I personally know Bernie Fraser quite well. I had a lot to do with him when I worked for John Howard in the latter seventies and early eighties. I've always had the highest respect for Bernie Fraser. I've not attacked Bernie Fraser personally.

What I attack is the role that we think the Bank should be playing and in particular, the independence of the Reserve Bank and we have a specific proposal to make the Reserve Bank more independent and more publicly accountable. So from my point of view, I'm not against Bernie Fraser speaking out,



because under us he'd speak out on a regular basis. We'd have him into Canberra testifying before Parliamentary Committees and stating why he's done what he's done and where he thinks monetary policy has got to go and what's going to happen to

interest rates and so on and so forth, which has been a major failing of the system. There's been too much secrecy. We feel that while we'll give him more independence in running the Reserve Bank, we'd make him more publicly accountable. I don't fear public debate. I think it's quite a good thing.


Just a quick personal one. I was reading some commentator's comments this morning - it might have been over the weekend in fact. There's been so much on this thing since last Thursday. It was a personal dig at you for when you came up here last time and made what I think was referred to as a pretty dull, boring and fairly long speech. The point was made that you had certainly got your act together and polished your game. Has this been a boost to you personally? Have you had a



There was a speech quite some time ago - not the last time I came. I think the last time I came I spoke to a packed

audience at CEDA. They couldn't have got another person in the room. That was extremely well received. But there was an occasion nearly a year ago...


You were talking about the third runway for Sydney or a new airport or something.


Yes, the comment was made that I had spent too long on a

speech. I gave a serious speech on protection. It was the wrong speech for that audience, who had been there for some three and a half hours before 1 got on my feet. So I was

battling against a long lunch on Australia Day or thereabouts, so I could have done better on that occasion.


That's usually the most receptive audience in Brisbane.


I think perhaps on that occasion I should have told a few more Jokes and made a few less serious comments. Look, sometimes you pick your speech wrong for the audience at the time, and that was an occasion.


We are very pleased, obviously to be now on the front foot and being able to be positive and sell a vision of this country. We are not so worried about how people assess the package from their own point of view, although we recognise that's

important. The real Issue is how they assess from it the point of view of what’s good for their children and their grandchildren. Because it is a structural change that will last many years to rebuild a country that really will give their kids the same opportunity they themselves enjoyed.


John Hewson I appreciate your time. Thanks for coming in this morning.