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Prime Minister discusses stamp duty; housing industry; GST; disability allowance; and primary carers.



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PRIME MINISTER

4 August 2003

TRANSCRIPT OF THE PRIME MINISTER THE HON JOHN HOWARD MP INTERVIEW WITH ALAN JONES, RADIO 2GB

Subjects: Stamp duty; housing industry; GST; disability allowanc; primary carers.

E&OE…………………………………………………………………………………….

JONES:

PM, good morning.

PRIME MINISTER:

Good morning Alan.

JONES:

Why will it take the Productivity Commission until next March to work all this out, do you think?

PRIME MINISTER:

Well because they’ve got to, in order to be transparent and avoid any unfair criticism that it’s just a charade, they’ve got to listen to what people have got to say and analyse it. And they’re entitled to have submissions from State Governments and from local councils and all the other bodies whose policies have an impact on the price of the first home. If they can have it all done by the end of March, that will be a very good job.

JONES:

Will the public get a chance to have an input?

PRIME MINISTER:

Yes. The Productivity Commission will take submissions. They will work out exactly how they process them, but there is no reason why the public won’t. In fact I’ll pass on the view that the public should be entitled to make it.

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JONES:

Yes, see in New South Wales - I know you’re most probably aware of this but for the benefit of my listeners and just to get a response from you, our number one citizen - in New South Wales you pay $1,990 stamp duty on a $100,000 house, but double the price of the house and you triple the price of the stamp duty - $5,490. I mean, double the house from 200 to $400,000 which is double the price of a house and you go from $5,490 stamp duty to $13,490. I mean…

PRIME MINISTER:

It is a real killer, and I noticed over the weekend some Premiers were saying oh well we might have stamp duty but the Federal Government has got the GST. What they didn’t say was that when we introduced the GST, we brought in a first homeowners scheme to help offset the cost of the GST. I’ll say that again - when the GST was brought in, we brought in a first homeowner’s scheme. We hadn’t had a homeowner’s scheme in this country for 20 or more years. We brought one in to offset the impact of the GST, and in fact when there was a slump in the housing industry at the end of 2000, we doubled the first homeowners grant for new homes. And I wrote to all the Premiers at the time I did that and said would you make your contribution to reviving the housing industry by cutting stamp duty, and they all wrote back and said oh no, we’re not going to do that. But they’re perfectly happy to get the extra stamp duty revenue which flowed to their coffers when the housing industry revived as a result of us doubling the first homeowners grant. So let’s not have this argument that the GST at a federal level equals the stamp duty at a state level, because the GST was accompanied by a first homeowners scheme in order to help offset the cost of it.

JONES:

Surely if you budget for stamp duty at a state level, as has happened in New South Wales in the financial year before the one just ended, for $3.5 billion and you get in $4.5 billion - that’s one and a bit billion dollars that you weren’t budgeting for - surely the obligation would be to give some of that back.

PRIME MINISTER:

Well I mean that’s, you know I have to say to be objective that from time to time all governments will budget on a certain amount of revenue from a source and it will either come in or go over, and it’s not the invariable practice to hand it back to the particular source. It does tend to go on general revenue purposes. But having acknowledged that in an objective way, it doesn’t alter the force of the argument that stamp duty is a real killer. Now, we have to be realistic about this issue. Owning a property is the most valuable asset. The property people own, their family home, is the most valuable asset that most of us have. It’s certainly mine. And in most cases, it’s about the only asset that people have. And people who own homes are not complaining that they have become more valuable. You have to keep a sense of realism. I don’t get people stopping me in the street and saying John, I’m angry with you because the value of my house has increased too much. They’re not saying that. It’s a problem for people who are trying for the first time to get into the market.

JONES:

That’s right.

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PRIME MINISTER:

That is the problem. It’s not a problem for people who have got it. In fact, they have found with low interest rates that they can pay off their houses. Once you get in, you can pay the loan off more quickly than ever before because interest rates are so low and indeed, one of the reasons why the price of houses has gone up and their value has increased is that interest rates are so low…

JONES:

That’s true.

PRIME MINISTER:

… and people can therefore afford to borrow a lot more and buy a more expensive house because they can service it with these very low interest rates.

JONES:

Plus of course there are more people in the market so that pushes up the price.

PRIME MINISTER:

Of course it does.

JONES:

Could you also say perhaps though that the first homeowners grant may have been a little bit self-defeating because it pumped more money into the property market and therefore inflated demand and therefore price.

PRIME MINISTER:

Well it depends what your goal is. Two years ago when there was a bit of a slump in the home building industry, everybody’s goal was to revive the industry because it employs people.

JONES:

It kept the economy alive.

PRIME MINISTER:

It kept the economy going and the return that we received for that additional investment was enormous. It retrieved the industry. It gave a lot of employment. And of course incidentally it provided a lot of extra revenue for state governments by a boost in stamp duty.

JONES:

Have we reached the point where we might have to consider differential tax rates, depending on where you live in this country. I mean, if you’ve got first homebuyers…

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PRIME MINISTER:

[inaudible] very very difficult constitutionally, if you were disposed to do it.

JONES:

Sure. But when you look at the statistic which suggests that first homebuyers now in Sydney make up only 30 per cent of homebuyers, which is an all time record low, you worry about the city becoming a haven for the rich and the old.

PRIME MINISTER:

Yes Alan, I think trying to have differential tax rates, quite apart from constitutional barriers is fraught with danger because while the concern of today may be the cost of housing, on another occasion the concern will be the additional cost imposed by distance. We have regular debates understandably with people living in rural areas about the fact that a lot of things are more expensive. That is true. They are a lot more expensive because of the cost of transporting to country areas certain things. By contrast, something like housing is less expensive in rural areas for the reasons that we have just been describing. And what is a reason for a tax break in one area, you will find a different reason for a tax break in another area.

JONES:

Of course you’ve got the tax on tax thing as well, haven’t you? The stamp duty that is imposed on the house, the GST then on the house and the stamp duty. Is there an argument…

PRIME MINISTER:

Well the GST of course, let me remind your listeners, does not apply to an existing dwelling.

JONES:

No.

PRIME MINISTER:

That’s another very important difference between the GST and stamp duty.

JONES:

But after… see you control the GST, I mean New South Wales I see got $9 billion in GST.

PRIME MINISTER:

Well we might… you say that we control it, well it is federally collected but it all goes to the states. And we can’t vary it, vary any aspect of it. We have no intention, let me say, of increasing the rate. Let me make that very clear. But we can’t vary its application or its incidence without the agreement of the states. That was the deal that was made when it was introduced. But all of the GST money when collected by us is given to the states.

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JONES:

$81.4 billion up to June 2003.

PRIME MINISTER:

That’s right. Every last cent of it goes to the states. And by I think the year 2006/07, every single state will be better off as a result of GST collections than they would have been if the revenue sharing formula that we inherited in 1996 had been continued. And as I speak, both Queensland and I think the two territories are already better off than what they would have been under the old arrangement.

JONES:

PM, at what point do you start calling a government heartless when it tells a mother of 11 year old twin girls, one nearly legally blind, her sister visually impaired with awful developmental problems, that the mum receiving $89 a fortnight for each girl from the Federal Government in recognition of her status as a primary carer for a sick or disabled dependent, has been told that the benefit for one, though nearly legally blind, who is unable to even cross the street alone or perform anything other than basic tasks, that benefit, carer benefit, has been terminated by Amanda Vanstone.

PRIME MINISTER:

Well Alan, I know the case you are referring to and in fact Senator Vanstone spoke to me about that and related issues last night, and she is quite concerned about some aspects of what is occurring, and we are going to have a look at this.

JONES:

Are you aware though that a series of illnesses which include cystic fibrosis and Down syndrome, have now been removed by Senator Vanstone from the list of conditions that automatically qualify parents for the payments.

PRIME MINISTER:

I am aware of some changes that were made in relation to the then future operation of these benefits about five or six years ago.

JONES:

Cystic fibrosis and Down syndrome - of course conditions that never improve.

PRIME MINISTER:

No, no, I understand that.

JONES:

Well why would they be taken off a list?

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PRIME MINISTER:

Well Alan, there were changes made five or six years ago and in relation to people newly applying for those benefits and in relation to those people who were already on the benefits. There was to be a review after a period of five years and it’s the operation of that review which is causing a number of questions to be asked.

JONES:

Why would you review the payment of a benefit to someone for cystic fibrosis and Down syndrome when that condition will never improve.

PRIME MINISTER:

Well Alan, without having all of the material in front of me…

JONES:

Could you get us an answer?

PRIME MINISTER:

… on which the decision was based, I can’t answer that question. What I’m saying is that the Minister raised the issue with me last night because she is concerned about the operation of aspects of it, and the Government is going to look at it. It’s going to look at it in the next week.

JONES:

I have written to her too many times to even count about 162,000 primary carers responsible for 24-hour care in this country who have no respite care - that’s 24 hours a day, 7 days a week, 52 weeks a year. She just has no response to that.

PRIME MINISTER:

Well I’d have to ask her about that. I mean I can’t comment about… Alan, as you can understand…

JONES:

I can. I’m just asking you to take it aboard, the issue.

PRIME MINISTER:

Well can I say in defence of Senator Vanstone, she spoke to me about this matter last night. She is concerned about the operation of aspects of this review and the Government is going to have a look at it.

JONES:

Okay.

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PRIME MINISTER:

So don’t… I mean, I don’t want your listeners to think that Senator Vanstone is insensitive to this, because that is not the picture.

JONES:

Okay. I thank you for your time.

PRIME MINISTER:

Okay.

[ends]