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1997/98 Budget, National Press Club, 1.00pm, 14 May 1997: transcript.


TREASURER: Thank you, Ken, and thank you to those of you who are here today at the National Press Club.

Last night, we brought down our second budget and we confirmed the goal that this Government had of putting the Australian accounts into surplus over the course of our first term of government.

And the big story of economic policy in the last two years has been how this Government took a $10.3 billion deficit and it turned it into a surplus and it did it over three years and it did it without increasing income tax, company tax, wholesale sales tax or the petrol excise and it put Australia on a path by which between when we came to office and the year 2000 the Commonwealth debt to GDP ratio will halve.

This has been a massive turnaround in Australia's economic future and we've done it by keeping the revenue to GDP level more or less constant under 25 per cent. But over the course of those five years, the outlays to GDP will go back from 27 per cent to GDP to around 23 per cent - an outlays to GDP ratio which we have not seen since the mid 1970s.

This has been an enormous turnaround on the outlays side of the budget. And we're doing that on the outlays side of the budget because it's our goal to ensure that the Commonwealth Government does not run down savings over the course of the economic cycle. We want to make sure that the Commonwealth over the course of the economic cycle is not a net drain on savings.

This is a budget which was all about delivering the Commonwealth Government from a debtor to a saving position and in this financial year, as a result of the asset sales programme that the Government has, we will retire $5 billion worth of debt. $5 billion worth of debt this year, $5 billion worth of debt next year and continuing debt retirement up until the turn of the century.

We're pleased however, that we've been able to engineer that massive turnaround in relation to the budget whilst at the same time not just not increasing taxes but delivering significant tax relief. In last year's budget, it was the family tax initiative and it was the bonus for taking out private health insurance which will be available to families, individuals and couples on the 1st of July this year.

This year the centrepiece of the tax relief which our Government has offered is the 15 per cent rebate in relation to savings. Savings is the theme of this budget - saving by government and now saving by individuals. We wanted to do that savings initiative in a way that made it universal in its application and universal in relation to the products concerned.

The savings initiative gives people choice. Our Government's watchwords in relation to savings are incentive and choice. Previous schemes which had said that only one vehicle of superannuation savings would be tax-preferred did not give people the choice to manage their own life cycle savings needs. By offering a rebate which applies to all kinds of savings, people make their own individual choices.

It enhances the lifetime savings cycle. If you happen to be a young couple that's saving for a deposit on your first home and you put the money in the bank, it's the interest income which would qualify for a savings rebate. For the first time, the Australian taxation system would say savings gets a break. The tax system would discriminate in favour of savings. If you're saving to put your children through school or into tertiary education and you're putting money aside, you can access the savings rebate. If you're saving for your retirement at the end of your working career, you can access the savings retirement. You can access it in banks, in building societies, in credit unions. If you want to put your savings into equities, you have choices to do that as well. And of course if you want to put it into superannuation you have choices to do that as well. In fact, in superannuation if you happen to be in the workforce it is still a very, very competitive product because the savings rebate of 15 per cent applies to contributions, non-deducted contributions, that you put into superannuation funds.

This savings rebate is also very progressive. It's progressive because it's a flat 15 per cent rebate off the marginal tax rate. If you happen to be on a 20 per cent tax rate, three quarters of the tax on savings is abolished. Three quarters of the tax on savings if you're on the 20 per cent marginal tax rate is abolished. If you happen to be on the 48 per cent tax rate, 15 per cent of 48 is 33. You get that benefit. But it's not the kind of benefit - it doesn't skew down to the lower income earner to the same extent.

It is also progressive because it's capped. It's capped at $3,000 which means above $3,000 those who have higher savings or higher superannuation contributions will not qualify for the savings rebate.

This is a major initiative in the Australian taxation system. It's not been done before. For the first time our tax system says it's good to save. Not only has this Government moved from borrowing to saving, what we now want to do with tax incentives, with choices open to people, is we want to give encouragement to savings as well.

In relation to the budget measures, we've also been able to focus and target significant benefits to key constituencies which we believe will create economic growth and job development over the course of coming years. It's the small business community which is going to be the net generator of jobs in this community. We're all familiar with large companies beginning to down-size but it's small business that is increasing employment and giving opportunities. Our small business initiatives already to date since our Government came into office: for capital gains tax rollover relief, for the reduction in the provisional tax uplift factor, to kick half of small businesses paying fringe benefits tax out of the account keeping requirements and last night an announcement that for small business that withhold $25,000 or less in a year a quarterly remittance - $500 million of cash bonus in 1998-9 - a quarterly remittance to reduce their dealings with the Australian Taxation Office.

It's those kinds of incentives to the small business community to give them that kind of certainty and reduced compliance costs, coupled with a strong fiscal policy which is delivering benefits in reductions in interest rates, that is going to create the window of opportunity for employment and growth over the course of the next year.

And as we look over the course of the next year and the years beyond, we are beginning to set up the opportunities for very significant improvements in Australia. I'm not going to stand here and say all of the work is done. We have come a very long way. But as we look down the track, in relation to the forecasts and the position that we are working to get ourselves towards, we see very strong opportunities ahead. We see growth picking up over the course of this next year. We see employment picking up over the course of this next year. We see unemployment reducing. We see a Commonwealth Government moving into a surplus situation. And I think what we should be aiming for, is we should be aiming for a very long run of sustainable economic growth in this country. The kind of long run of economic growth that we have not seen for a couple of decades. We should be setting that up on the basis of a sustained fiscal position, of a low inflation environment which we haven't seen since the 197()s. Of interest rates which are low by Australian standards, of reductions in long term interest rates as inflation prospects and Australia gets a reputation in relation to its inflation prospects of being again a low inflation country and as we begin to address our greatest economic problem over the last decade - our lack of national savings.

What Australia should be thinking about, what this Government is thinking about, is setting up the condition for a very long period of economic growth. Sustainable economic, low inflation growth as we build on savings and we build on the opportunities which we're setting up.

And some people will say, in relation to this budget, that outlays haven't been cut enough. Others would say that outlays have been cut too much. So let me address both points very briefly. The budget which we brought down in August of last year put $7.2 billion worth of savings, $4 billion in 1996/7 and over $3 billion in 1997/8. Those savings are still coming on stream. Additional savings in relation to 1997/98 would have been on top of those which were factored in and announced in last year's budget.

So as we sat down in May of this year our focus was not so much the 1997/98 financial year but our focus was on the 1998/99 financial year, that was where the work still had to be done to achieve our goal of getting to an underlying surplus over the term of this Government. And that's why we focused, in the policy decisions, on measures of about $1.9 billion in 1998/99 to achieve that position. That was a deliberate strategy. It's the way in which we intend to conduct economic policy, that we intend to do it on the medium term basis. This is a Government that intends to set goals and meet them. We set those goals in economic policy. We are going to work towards them and the people of Australia can know with certainty where we are going, and we'll meet them.

And that's why we took the opportunity that we did to lay down a plan for 1998/99 and beyond.

Others will say of course that outlays are still being cut too significantly, that they will in fact fall in real terms in 1997/98. Those outlays which we have addressed in the budget are those outlays where growth year on year was the fastest. And we addressed them in this budget because unless we addressed the rate of increase we wouldn't be able to sustain the expenditures. In relation to pharmaceutical benefits, you've got compounding factors driving increases year on year. You've got the ageing of the population, you've got technological breakthroughs, you've got increased sophistication in relation to pharmaceutical compounds and unless you take measures to restrain the growth year on year that system will not be able to sustain itself. So we sat down and we came up with a plan which will not reduce outlays, will not reduce it even in real terms, but it will reduce the rate of increase and make that a sustainable area of Commonwealth Government expenditure.

The same in relation to childcare assistance. In relation to childcare assistance, a relatively new area of Commonwealth spending but growing fastest year on year as a result of demographic changes, compositional changes in Australian society and as a result of the financial incentives that have been put in place, we sat down and we addressed it.

It will still rise in terms of expenditure, but it will not rise year on year with the acceleration that otherwise would have been the case and we've made that sustainable.

This is a budget which makes a sustainable contribution to Commonwealth outlays. This is a budget which delivers on our commitment to hold revenues. This is a budget that meets our medium term economic goals. This is a budget which delivers a new savings initiative to all Australians and this is a budget we can justifiably sit down and feel proud is going to address our debt and deficits position and set Australia up for what I believe will be some very, very good opportunities and possibilities.

CHAIR: Thank you very much, Treasurer. As I'm sure all our media members would understand the Treasurer has to leave early today to make Question Time in the House of Representatives so succinctness will be a great bonus in question asking today, the first question is from Phillip Hudson.

JOURNALIST: Treasurer, you've set the savings rebate of $450, that's come under criticism today that the benefit is actually being overstated for what most Australians can get. Kim Beazley says the average family with about $3,000 in the bank is only going to get about $13 which is nowhere near that $450 and yet they'll pay more for some medicines and other services. Why didn't you make the first $3,000 or $ 1,000 in total interest income totally tax free to encourage people to reach a higher level of savings?

TREASURER: Well, I wouldn't for a moment rely on Mr Beazley's figures. If Mr Beazley were right, if he were right, the Commonwealth budget was in surplus two years ago. And you might actually recall after the election there was no deficit. The Labor Party said there was, I don't know what we're all running around trying to fill because they said there was in fact no deficit in 1996/97. Mr Beazley in relation to the conduct of finance policy I think bears one of the heaviest responsibilities of a Finance Minister ever in Australian history - I'll just, think that's quite objectively provable.

In relation to the savings rebate, what we wanted to do was provide an incentive to superannuation contributions. Superannuation is still the best advantaged savings vehicle under this proposal. The reason for that is that on the contributions you can claim the rebate. So you can claim the rebate on $3,000 of contributions, whereas in relation to other forms of saving it's $3,000 of earnings, if it's interest in credit unions or banks or equities or whatever. So superannuation is still the best tax preferred vehicle. Now bear in mind that the superannuation contributions that you make on your own behalf have already been taxed - they've been taxed at the marginal rate - it's contributions out of your after tax earnings and last year you will recall that we took some measures which evened up the tax concession for employer contributions which was pre-individuals tax earnings. So we wanted to have a decent incentive in there for a decent amount - an amount of up to $3,000 - as I said before it's progressive by reason of the fact that it's capped and by reason of the fact that it's a rebate.

But we also wanted to allow the opportunity for people who weren't going to go into superannuation and choose otherwise the opportunity to claim it in relation to their savings - retirees are a classic example. If you said to retirees who have invested quite commonly sums of $40,0()0, $50,000, $60,000 that you were going to cap at $ 1,000 or beneath, the advantage that would flow to them would not be nearly as significant. And we are trying to say to those people who have retired on their own savings that they will be rewarded. Bear in mind their savings which they have accumulated was taxed at marginal rates when they earned it as income. This is now the earnings on the capital which they have accumulated after marginal tax rates. And this is a very focused and generous rebate of $3,000 at 15 per cent. It's meaty. It's meaty, and it's universal, that's the other thing about it. So it's targeted to be simple and easy to administer, to be meaty, to be universal and to offer real choices. That's why I think it's very well designed.

JOURNALIST: Malcolm Farr from The Daily Telegraph. You reaffirmed last night that the two pillars of your job creation strategy were economic growth and industrial reform or labour market reform. You say you've got exceptional growth coming up. You've got a budget moving into surplus, but you still have 8% unemployment. Does that indicate that the Government is heading towards more industrial relations reform and given that 8% I'm sure would be intolerable to you, could one say that attempt at further reform will be in this first term of your Government.

TREASURER: I think the important thing about labour market reform is to give the reforms that we've enacted a chance to take effect. Those legislative reforms only started becoming available as from 1 January and I think some were even staggered back until March. What are we now - May. We've got to give these reforms the opportunity to work. They are very significant reforms in making the labour market more flexible. And it's not just a question of enacting them. It's then an educational process, I think. It's an educational process for employees and it's an educational process for employers. Let me cover both.

I think probably under a more flexible labour market, the new responsibilities are heavier on the employer than the employee. There are many employers, who've not been used to negotiation - not been used to entering into workplace agreements, who've been members of industry associations which have not been used to it and it's a whole new way of dealing for them. They will have to get used to and comfortable with the system before they can access it. For employees also, there's an educational role in relation to what sort of outcomes you would expect. Here we are in Australia when we've got an inflation and CPI rate which is down in the one's: an underlying inflation rate which is in the two's, the low two's and we read in the paper of people with 5% or 8% wage claims. On a 2% inflation rate, an 8% wage claim is a recipe for unemployment. It's not a wage claim to keep up the cost of living. That's about all it can be. And you'd have to say, it would be a very funny employment situation where with 8% unemployment and inflation at 2%, you're getting wage claims for 8%, which could only worsen a bad employment situation.

So there's a whole cultural shift, there's a whole understanding, the message to employees is this. You don't need wage increases to chase prices. Prices aren't moving. What wage increases are now for is if you can enhance the productivity of the business, and they can only be based on the enhanced productivity of the business because a more productive business can employ more people. This is the big message that we've got to pump out. Now, in relation to labour market flexibility over the course of this year, we've got to give these reforms an opportunity to work. They are significant reforms and, if we can encourage people to take them up, they will make an improvement.

JOURNALIST: Stephanie Kennedy from Channel 10 News. Treasurer, with your savings plan, it is unlikely that many of the so called Howard battlers that voted for your Government last year will benefit, considering they'll need something in the area of $60,000 in savings to reap the $450 benefit rebate. Also the need to put $3000 into super which I would assume most Howard battlers couldn't afford. Would it appear that this plan, which is the centrepiece of your budget, is really targeted at middle to high income earners, and how are you going to convince the Howard battlers, that you haven't left them behind in this budget?

TREASURER: Well, I just want to make the obvious point that you get it for $1 of saving - you don't need $3000 worth of saving. You get a tax rebate on $ 1 instead of paying at the marginal tax rate on your interest income or your superannuation contribution on $1, you get a 15% rebate. Now, what we've said is you can't get a rebate for more than $3000. You get it for every sum up and to that. It's quite, it's misleading to say that you have got to have $3000 to profit. With $1 of interest income you will benefit, $10 will benefit, $100 will benefit, $1,000, $3,000 will benefit but $3,001 will only benefit for $3,000. $10,000 will only benefit for $3,000. $100,000 will only benefit for $3,000. And what it says to those people who do have savings, instead of seeing their interest income rolling in and paying 20% tax on their interest income, they are paying a 5% tax. Now, as of this budget announcement, they are much better off than they were before hand because the tax system for the first time gives you a discount to save. And as you develop your savings, you don't see on a 20% tax rate, one fifth of the interest go off to the Tax Commissioner. And I think it does have, I really do think it does have behavioural effects. The number of people that will say to you "I've put my money in the bank and what happens, what good does it do? My earnings go up, I pay in tax, I might as well spend it."

Well, what good it does now is that 3/4 of the tax on the 20% marginal rate that would have gone off, now doesn't. That's the benefit. And people do save, they save for deposits on houses. They save for children's education. They save for their own retirement. They live on their savings in retirement even with these eligible termination payments and redundancy payments. They live on their savings in their retirement. And of course, if you want to look at it the other way, it's a very big incentive to make your own contributions into superannuation. The $3000 is just the cap. It qualifies on the first dollar right up to the three thousandth dollar.

JOURNALIST: Andrew Butcher from The Herald Sun. You were overruled by Mr Howard in the ERC on several savings initiatives that you'd planned and you were known to vigorously oppose that intervention late in the budget process. What were the measures that you would have liked to have had in that aren't in there and is the budget an indication of Mr Howard's influence over it in its modest deficit cutting target?

TREASURER: Well I'm sure you were expecting a real bombshell in the answer to that question. I've said to Mr Butcher before that he is a real news hound, Mr Butcher, because he can report meetings that he was not present at and that's shows a real entrepreneurial activity, if I may say so. Of course the source of the story was you. So when you get up and say, given reports that, you are saying, given my story in the Herald Sun that - what have you got to say about it? Now I know Andrew I've spoken to you privately about this story and I wouldn't have to say it publicly would I?

JOURNALIST: Peter O'Connor, Bridge News. Treasurer, would you like to say something more to him now or....

TREASURER: I don't think he'd want me to say it on national television.

JOURNALIST: Treasurer last week in his testimony to a Parliamentary Committee, Ian Macfarlane, the Governor of the Reserve Bank agreed that the economy could grow at 4% this year. He later on said at the same testimony that he believed the economy could sustain growth rates of 4% or above. A majority of private sector economists see growth rates of 4% in the next fiscal year and many of them much above 4%. What are the particular factors that lead the Government to be less optimistic than the Reserve Bank of Australia and the majority of the private sector economists'?

TREASURER: Well, let me say, we put down a forecast for 3 and 3/4. If it comes in at 4 nobody will be happier than us. If there's an upside risk, that's the kind of risk that you'd like and let me make it clear that if the Government sees the opportunity for 4% growth, we would welcome it, absolutely, welcomed. Now, you are sitting around and you are trying to figure out between July 1997 and June 1998 whether GDP will grow by 3.75% or 4% or it may even be narrower. When you're reporting in quarters, you might be trying to work out whether it's 3.8 or 3.9. It's very hard to be finite to that kind of dimension in relation to GDP forecasts.

The factors that have influenced us we've put here in the budget. We think the things that will be positive for growth will be a good international climate including the Japanese economy picking up, we think that the housing cycle is starting to trend upwards again and we've been waiting for that to kick in for quite some time. We think that private final demand will be stronger, we think that public demand will be, because of fiscal consolidation, not so strong, and we've layed out in our budget all of the factors. We have the benefits in the forthcoming year of the interest rate reductions which have already been put in place, a good deal of which is still really to kick in. Some of those reductions were delayed by banks 60 days and are only now being felt by the people who've taken out those interest rates. So we see it as a very positive climate. We've said 3 3/4 the bank said 4, there is also a timing factor in a lot of this, it's whether you think some of the pick-ups going to be in this financial year or next financial year. You can actually have the same growth over two years and report one year as 3 1/4 and another as 3 3/4 or you can report one as 3 and one as 4. It's a timing thing and when you're looking at those sorts of outcomes it's very hard to be all that precise. But if it were 4 it would be better, it wouldn't make a very big difference to revenues or outlays, it wouldn't make that big a difference to the budget bottom lines that we've brought down in relation to this particular document, but of course stronger growth is always welcome.

JOURNALIST: Treasurer, Bradley Perrett from Reuters. I don't want this question to sound churlish because you did achieve $7 billion in cuts last year and you've added another 2 billion this year, but I think you'd agree that budget isn't in structural balance now is it, that is to say that a budget that gets in to surplus, a small surplus in the 7th year of an economic recovery isn't going to average a surplus through the ups and downs of an economic cycle.

TREASURER: Oh well, of course, it depends how long the economic cycle is. That's the answer to that question. But last year it was a $7 billion reduction in outlays. That was the big structural yank. We took it from a $ 10 billion deficit and we moved it $7 billion over 2 years. Now the 2 years include 1997/98 and the next year 1998/99 is where we've focused our further outlays measures. Now I know you can always say that you could have done more, and people regularly do, but if I may say so sometimes the financial journalists get carried away with their own commentators, there have been various commentators I've heard who've been giving wildly optimistic scenarios and dare I say even some journalists who might be here today go back and have a look at their copy a couple of days ago, now when I made the point and I think I did make the point on Sunday that we expected the outcome in 1997/98 to be more or less in line with the mid-year review. Some of you were more inclined to believe the commentators than what we'd said. As it turned out that was the best hint you could possibly have had, and what it also shows is the point that I've been trying to stress, that whilst we're doing continuous reporting we're almost like a company that's making continual disclosure to the stock exchange.

Under the Charter of Budget Honesty we are making a real two year full report with forecasts and outcomes and projections. This has not been done before. And the last one you had was in January. You shouldn't have expected that much movement between January and May, and in fact there wasn't and I think probably the only thing that would've caught you by surprise and you wouldn't have had the capacity to know, was the point I made last night about the Reserve Bank dividend, which I think was last year 2.2 billion, this year 1.2 billion, if it had been the same dividend you would've been surprised because the outcome, the out turn in 1997/8 would have been a billion dollars less. That's the only surprise that the commentators couldn't have picked up. But compare it by international standards this is a good effort, this is a very good effort if you compare it with the industrial world, with the OECD world, this is a good effort, and I don't want you to say oh well he's given up, he thinks he's done as much as can possibly be done, no we're going to keep working at it. But gee, to take $10.3 billion and turn it in to a $1.6 billion surplus over 3 years without increasing the share of revenue to GDP, if I'd have said that 12 months ago nobody would have believed it could be done, and it will be done, and let's just acknowledge that point before we move the high jump bar up to 8 foot high jumps.

JOURNALIST: Mr Costello, Ian Davis from The Canberra Times. Most governments acknowledge that they can't precisely hit their economic growth forecasts, you've as much as acknowledged that here today, given that you undershot your original economic growth forecast for this year by 1/4 of a per cent, and that bought in jobs growth at 1 1/4 rather than 1 1/2% as you'd already forecast it. Why has the Government decided to build its budget around an economic growth forecast this year, in the 3-4% range rather than in 4-5% range, which probably would've given small business, the unemployed and consumers a higher degree of confidence about the outlook for the economy than is probably the case under the present growth forecast.

TREASURER: Yeah well I think your point is perhaps you're a little touch optimistic last year and you're a touch cautious this year. Time will tell. I think we gave the best estimate last year. It turned out to be a little optimistic, I don't think we anticipated the weakness in consumer spending in that December quarter, and I think we've given the best estimate this time, but your point is right if growth turns out to be 4% so much the better. But I am not sure I agree with your other point, which is if you put a number 4 in the budget rather than 33/4 everybody feels much better. I'm not sure that it actually changes behaviour and I'm not sure that it should. Whether it's 3 3/4 or whether it's 4 what does it say. It says that this is good growth and solid growth and growth sufficient to make an indentation in relation to unemployment, that's what it says. But it also says that until we address these big structural problems we're not going to be able to break the 4 barrier and sustain it. Every time we've broken the 4 barrier in the past we've run into the current account deficit problem, and unless we address the savings problem we'll run into it again. Now the good thing is that we are sustaining that growth and at the same time remedying the savings problem. That's the story of this budget. And after we've done that that will take some more years after we've done it, we can set up the situation where we can break and sustain the break in that barrier to growth. That's why I say if we can hold this picture together this low inflation decent growth fiscal consolidation, saving, repayment of debt picture together, baring absolutely, baring unforseen events internationally we should be aiming at a very long run and we are aiming at a very long run.

JOURNALIST: Paul Clearly, Sydney Morning Herald. Mr Costello, not withstanding what you have said may or may not have happened in the final weeks of the ERC round, doesn't the fact that you've got an almost negligible improvement in the budget bottom line make this more of a Howard budget than a Costello budget?

TREASURER: Well all budgets are both. They're both, and not just Costello, and not just Howard, but Fahey and Kemp and Fischer and Wooldridge and everybody's budget. This is a Government budget. This is signed off by the Cabinet and it's the Cabinet which takes responsibility but I come back to my point. Last year, we did two budgets in one. We not only put in place the first round of measures for 1996-97, we put in place the second round of measures for 1997-98. We have over 3 billion kicking-in in 1997-98 before we started. Now, we took that up a notch, but we're also aiming in 1998-99. I don't want to be here by the way after the next budget, having put, you know, another 2 billion in place for 1998-99 still waiting to kick in, you're going to say oh, you didn't kick enough in, in 1998. Mark my words. l warned you 12 months in advance. We were putting down in this budget for 1998-99 as well. This is a medium term strategy and the good thing about that is it sets it out, people know where we're going. They know what our goals are and we're going to meet them. The days of, you know, trying to cajole the Press Gallery into thinking something and then doing the opposite are over. We're not running economic policy like some others did in the past.

JOURNALIST: Treasurer, Ben Pedley from Dow Jones News Services. Treasurer this next fiscal year, you'll be conducting a float of one third of Telstra Corp. The Government has said that it expects to receive in the order of $8 billion from that one third sale, that's at the lower end of analysts' expectations. Should the Government receive more than that, what would those extra proceeds be used to do'? Would it be used to retire further debt or would it be used for other policy measures, ie the Federation Fund?

TREASURER: No. It'll be used to retire debt. Any additional asset sales from now on retires debt. Because we're already retiring $5 billion this year and $5 billion next year. If we get further proceeds, they go straight into the retirement of debt. And we've already factored in those retirements after funding the Federation Fund. Everything that's announced is fully funded and we are repaying debt. You know, if Labor had been around, they'd be reporting a $6 billion surplus. That's the way they'd be reporting it. Because they used to report their asset sales and their bottom line. What I do is I report an underlying deficit but the proceeds of the privatisation go to retiring debt this year, next year, the year after that and the year after that and any additional money goes straight into that as well.

CHAIR: Given the Treasurer's time constraints, this next question will have to be our last today. This is from Owen Brown.

JOURNALIST: Owen Brown, AAP. You've made much of the fact that with the build up to surpluses, by the year 200 we'll have halved our debt ratio, but what guarantee is there that with those surpluses coming into the next election campaign, they won't be blown away on vote buying tax cuts?

TREASURER: The guarantee is that there'll be good policy while a good Government is still in office. Thanks very much.