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Prime Minister discusses problems with the introduction of the GST and its effect on pensioners and childcare.



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30 June 2000

TRANSCRIPT OF THE PRIME MINISTER

THE HON JOHN HOWARD MP

RADIO INTERVIEW WITH JOHN MILLER, RADIO 4BC Subjects: Tax reform; petrol, self-funded retirees; childcare.

E&OE……………………………………………………………………………………….

MILLER:

The Prime Minister joins us from Sydney, Prime Minister good morning.

PRIME MINISTER:

Good morning John, very nice to be with you again.

MILLER:

Prime Minister if I beg your indulgence for just a moment, we thought we were going to have you between eight and eight-thirty, so I made a commitment that I am going to have to fulfil and when you hear it, I’m sure you won’t mind. Today is a very special day for a lovely lady, Mrs Edwards from St. Kevin’s Catholic Primary School at Geebung in Brisbane. Mrs Edwards of the staff retires today. She has been teaching at St. Kevin’s for 18 years. This morning the school community got together and they gave her a limousine ride to school and right now our broadcast is being played through the school’s public address system. As they farewell this lady, a special day for the school and I’m sure one that is tinged with a little bit of sadness as well. She apparently is just a wonderful woman who has been so good to the little grade one kids over many, many years. So we wish her well, Mrs Edwards from all of us at 4BC and from the Prime Minister himself.

PRIME MINISTER:

Yes Mrs Edwards, this a surprise pleasure. Can I say to you and I know I speak for all the children and

parents of both current and past at St. Kevin’s. What a wonderful job I believe teachers generally do and I know from what John Miller’s told me what a fantastic job you have done at St. Kevin’s over 18 years and how widely respected indeed loved you are by the school community. Thank you for what you have done and whatever your plans are for the future, I wish you every happiness.

MILLER:

That’s very nice of you Prime Minister, thank you for doing that and allowing us to honour that commitment to the kids at St. Kevin’s Catholic School. Have a great day kids and you have a great retirement Mrs Edwards.

Prime Minister, let’s get in to it. Today is the eve of the introduction of not just the GST but a whole new tax system in Australia. And I think you would appreciate that there is a lot of uncertainty, a lot of anxiety and even a touch of anger out there in some respects.

PRIME MINISTER:

John, it is a big change in time it will be seen as a hugely beneficial change but I have always understood that the transition period would have it’s difficulties, it’s glitches and I ask people to give it a fair go. I ask people to see it as a total change. It’s not a GST being added to the existing taxes, it’s a GST replacing the wholesale sales tax, replacing other indirect taxes. But it’s also the biggest income tax cut Australia has ever seen. And in the days and weeks ahead, workers all around Australia will find they’ve got more money in their pay packets because their tax will be lower and when you add that additional money to the increases in family benefits that they will also get if they have got children, they will in my view - when they do their sums - they will find so far from being worse off, they are better off. And I ask people to take both things in to account. Don’t judge the change just on the prices you pay in the shops tomorrow morning.

Many Australians do the bulk of their shopping at the weekend, not all of them, but many of them do and therefore this weekend, this Saturday and Sunday will be the first experience that hundreds of thousands of Australians, indeed millions will have of a new system and you will find three things about prices. You will find the price of some things have gone up and we’ve never disguised that. Things like clothing will go up in price. You will find some things will remain the same and you will also find in relation to electrical goods, some of which have already fallen like white goods and others will come down even further. You will find variations all around. You will find basic food stuffs so far from going up in price, some of them might if fall a touch because of the removal of embedded wholesale sales taxes. So it will be a very mixed picture. Not everything is going up and I invite you to have a look at your supermarket bills after you have got your goods and whatever you are going to buy for the next few days or for the next week and compare it with last week and you may find that things are not as bad as you have been told by some people who want to scare the daylights out of everybody.

MILLER:

Well in spite of all the anomalies pointed out, things like, when is it a hot chook or when is it a cold chook. In spite of the gaps like dare I mention a bottleshop. You still maintain that we have nothing to fear from this at the end of the day we will be better off?

PRIME MINISTER:

Well I do. There are anomalies, but those anomalies were forced on us, because we couldn’t get it through

the Senate in the form that we took to the people, you know that. But we would have wished it otherwise then, but that’s now behind us. We’ve got it in this form. We don’t intend to tinker with it . We don’t intend to revisit it. I don’t think anybody wants it rolled back. They don’t want that, they want the new system to work fairly and I believe it will.

You mentioned yesterday, okay, somebody at the checkout double counted it. Righto. I acknowledge that, those sorts of things happen, they are human beings, we all are. The interesting thing was that even, you know, when that was corrected, the addition was about $1.50 and the owner of the bottle shop, the point I suppose missed in all of that was that he said he was not going to bother increasing his prices. He is going to hold them for a month and see what happens and that’s pretty good. And when you take in to account that people buying at that and indeed at other shops around Australia are going to have a tax cut in their pocket within a few days, two weeks at the maximum, it will turn out to be far better in my opinion than people have predicted. But I have to be judged on that.

The Australian people are intelligent enough and independent enough to say, okay we’ve heard from you and we have heard from the doomsayers, we’ve heard from Mr Beazley saying that sky is going fall in tomorrow, we’ve heard all of that, but we just put all of that aside and we’ll make up our own mind. And they will make up their own mind. Australians are very good at saying, okay leave us alone fellas, we’ll make up our own mind and that is exactly what they are going to do and whatever decisions they make over the next few months about this new system, naturally I will accept. But I believe it will be a positive one.

MILLER:

What is the suggestion out there? Is it not that this will be your Government’s Waterloo?

PRIME MINISTER:

Waterloo? Well which side do you reckon I am on?

MILLER:

Well I think it’s obviously you know the one I mean.

PRIME MINISTER:

Well I know too. I reckon, I reckon I’m going to in the end I think the public will accept it. But it doesn’t really matter whether, you shouldn’t see this in terms of victory or defeat for the Labor Party or the Liberal Party. It’s a question of whether it’s a victory or defeat for the Australian people.

MILLER:

Quite so.

PRIME MINISTER:

And the reason I have done this and I have taken the risk and I have put my head on the block and accept it, is that I believe that it is good for the country and I’ve invested a lot in it, not for some kind of ego trip of my own. I could have easily adopted a more accommodating political path I suppose and said it was all just too hard, but I believe that it is very necessary for Australia’s future that we keep on taking steps that make us stronger.

We are a stronger country now than we were when I became Prime Minister. Our economy is much stronger. There is no argument about that. I mean not even the Labor Party in their wildest moments can seriously suggest that we haven’t got 712,000 more jobs and we haven’t got lower interest rates, we haven’t got the budget back in robust surplus, we haven’t got strong business investment. I mean, we are a very strong country now, but that hasn’t happened by accident and unless we are prepared to continue to make changes, even if they’re hard and unpopular, we won’t continue progressing. You have got two choices as a nation. You can’t mark time. You either keep going forward, or through inaction you slide backwards. Now I don’t think any Australian wants that to happen to our country.

MILLER:

Prime Minister, a little while ago, in fact about 20-25 minutes ago, I received a call from a very angry fellow who said, look I fix cars I am not an accountant and he says I am going to have the devil’s own job coping with this. I am going to have to go to my accountant three to four times a year. There is that feeling out there that this is way too complex for small businesses to cope with.

PRIME MINISTER:

Well the present system is complex. Well I don’t know what his situation is with the wholesale sales tax but I do know this..

MILLER:

Well for starters he said he couldn’t get compliance forms.

PRIME MINISTER:

Well I mean, I would have to, to hear a proper answer to that I would have to sort of know all the details. I mean sometimes people sort of ring up and say things, I am not saying in the case of your caller, but I have known people to actually ring up and say things that didn’t entirely happen because they are trying to make a political point.

John there are inevitable teething troubles with this and inevitably you have got to go through a process of adjustment and that is where helping people cope with that is where most of the money that we have spent over the last few weeks and months on getting ready for the new system has gone through booklets and seminars. There have been 150,000 thousand individual visitations to businesses by the tax office. 150,000. And one of the things the tax office has been willing to do, is that if somebody has got a problem, they’re actually willing to send somebody out to talk to you. Now they have gone to great lengths and I know it’s easy for people to say well look, I have got to do this, I have to do that, some people have of course left it to the last minute to get ready. Others on the other hand have been prepared for months. I mean I talk to small business men and women all the time. Most of the ones I talk to say they’re ready, some say they’ve left it a bit late and they’re scurrying around now. I understand that but you know we are all a bit like that on occasions, but I don’t think anybody can say that we haven’t tried to give people ample warning.

And the other thing I want to say is that if people in small business make innocent mistakes, no body is going to jump on them. I don’t want people to think there is some great meat cleaver with tax office written on it, ready to come down if some small business through inadvertent error doesn’t comply. If people aren’t out to beat the system, nobody is going to belt them and that’s not the game the government is in or the tax office is in but you will understand it is a new system and the tax office has the responsibility of ensuring compliance and one of the great things about this new system is that a lot of people who haven’t

been paying their fair share in the past are going to have to in the future. And that has got to be good for you and me and all your listeners who’ve always contributed their fair share.

MILLER:

So a degree of leniency will be exercised, for what sort of time period do you think?

PRIME MINISTER:

Whatever is appropriate in the circumstances, John. I mean the message that I am trying to convey this in my address last night is that we understand that business has worked very hard, particularly in the small blokes to get ready for it. We understand that and we thank them for that. We also understand that people are going to make inadvertent errors and I want people to understand if inadvertent errors are made, they are not going to be penalised.

MILLER:

All right, let’s look now at pensioners where I have had enormous amount of uncertainty and you can understand it’s a very vulnerable sector of our community.

PRIME MINISTER:

I understand that I and if you as a pensioner you hear somebody on the radio saying you are going to be worse off, even if you don’t think it does unsettle you and I guess all I can ask of the pensioners in Australia, what happens, you will find on your first pension payday after today, that your pension will rise by four per cent and that increase will be back dated to commence from tomorrow. So that for every day that the GST is in operation, there will be this four per cent increase and then thereafter, and it’s already been paid in advance, it’s been paid up front before the price effect bites in full. The commitment is that they’re after, the pension will always be two per cent further ahead of the cost of living than it would otherwise have been. So that means that no matter what price effect the GST has, pensioners are going to be guaranteed two per cent well above it.

Now we will follow the impact very closely on pensioners, very closely and I want them to believe that and you will be listening to their reaction and trying to gauge the impact. We felt the original compensation measures were fair. We increased them on two occasions in the period that followed the election. So they’re certainly in advance of what we took to the election and we are going to monitor that very very closely. But I want them to understand that I am sensitive to their feeling of apprehension. When you are older, change is always more difficult and I understand that and I want them to understand that I am concerned about it and I want to see that’s it’s handled carefully and sensitively.

MILLER:

So if it becomes apparent then that pensioners are actually worse off in some circumstance, there would be adjustments made.

PRIME MINISTER:

Well John, we don’t want them to be worse off and we don’t believe they will be and we will be watching the thing very carefully.

MILLER:

Okay, let’s move on to the issues from other groups in society, particularly families. Now there has already been a problem has there not with childcare payments.

PRIME MINISTER:

Yes, there will be a delay of perhaps of a few days, no more than two weeks in making sure that the increases in childcare benefits. But this is an administrative glitch. I acknowledge it. I apologise for it. The system is to blame for it but these things do happen. And the important thing is it’s been fixed and people will get their benefits, their increased benefits in full and nobody’s going to lose out.

MILLER:

So again talking about families, we are confident are we not that the family, the average Australia, single income family, and there’s still a lot of us out there, are going to wind up being better off?

PRIME MINISTER:

Well they are, in my view with an increasingly with the greater the number of children they’re going to be, they are I think particularly well catered for because we have an additional loading. As well as the tax cuts and as well as the increase in the family benefits if you’ve got a child under five then there’s a further increase in the tax free threshold so that you’ve effectively got almost two tax free zones as if both the husband and wife were earning the income that only one of them is earning. And that’s always been an area, in my view of disadvantage suffered by single income families. And we’ve tried in the process of these changes to make them better off and in many cases people in the category you generally describe are going to have tax cuts and increased family benefits of $40 a week or more.

MILLER:

Shall we move on now to the area of the self… another area of our community where the people I think largely feel as if they’re ignored and that’s the self-funded retirees.

PRIME MINISTER:

Well I don’t think it’s fair to say that this Government’s ignored them. I would point out the changes we’ve made in relation to the pensioner card, the gold card. I would point out the changes we’ve made in relation to private health insurance, the 30% tax rebate. There have been as well as of course self-funded retirees are getting the benefit of tax cuts. We’re going to abolish provisional tax. That will help self-funded retirees. We’re going to introduce something called, I know it sounds a bit of a mouthful, but refundable tax imputation credits.

What happens at the moment is that many retired people have got shares and they get a dividend and tax is taken out of it at a higher rate than the tax that they themselves pay and they can’t retrieve the difference. Now we’re going to introduce a credit system that will allow them to do so. So that if tax is deducted at say thirty four cents in the dollar which the new company tax rate will be coming down to thirty. But the person’s tax is lower where that person will be able to get a refund of the difference. You can’t do that now. Now that is of enormous benefit to self-funded retirees who have modest share portfolios and who are missing out on that now.

MILLER:

Prime Minister all the way through we have been told the people who try to take advantage of this

situation, who try to bump up increases by 10% or more will be cracked down upon and yet we’ve seen the oil companies, the banks or at least one of them say to hell with that we’re going full steam ahead. And even the daily newspaper, the Courier Mail here in Brisbane going from 80 to 88 cents but of course when you round that up that’s effectively a 10 cent increase.

PRIME MINISTER:

Well all of these changes are, if they’re not in accordance with the guidelines and I’m not making a judgement about it because I don’t know the internal production costs of the Courier Mail. The Courier Mail would have had cost savings but I’m not making a judgement because I haven’t seen their books. But nobody should assume that if they have exploited the situation just because they’ve put the price up today that that’s the end of the matter. The power of the ACCC to take action under the trade practices act is not sort of, doesn’t end at midnight tonight, it goes on indefinitely. And you know, look, look obviously a lot of price increases are justified. I mean that’s, as I’ve said if you’re charging the consumer a 10% tax on something you’ve not previously charged him a 10% tax, I mean obviously the price of that item has got to go up but the important thing is you’ve got, in calculating the increase you’ve got to make allowances for the cost savings that you have or are likely to enjoy as a result of the abolition of other indirect taxes and also the removal of the embedded effect of the indirect taxes that have been removed further back in the production chain.

MILLER:

Sure, I guess the point that I was trying to make though is that when you have increases of this size and for example in motorway tolls where we no longer have a two cent coin so the amount has to be rounded up.

PRIME MINISTER:

Yes you will get a rounding up there, that is true but in, you know you know you talk about, if you go into the newsagent and if you only buy the paper but, yes, but if you buy something else there’s a rounding up incorporated obviously.

MILLER:

A GST inspired boom in sales of chewie!

PRIME MINISTER:

How’s that? I don’t know. But you’ve got John, I mean we could spend the whole day and you know I’m quite to happy to do so subject of my other media commitments.. but the tolerance factor of your listeners too. But sure if you look at it microscopically you can and you can always sort of find a question to ask and a criticism to make and I know you’re not being negative, you’re being very reasonable about the, sensible about whole thing. But I just ask people to look at the broader horizon, the overall picture. I mean think of the tax cuts you’re going to get. Think of the things that go down in price and think of the benefit for the country of having, after its been bedded down, a more efficient and workable taxation system. Our exporters will benefit from this. Our country people, very important in Queensland, a 24 cent a litre reduction in fuel, in diesel. That’s a huge thing. And anybody in business after tomorrow will be able to claim back for tax purposes the GST paid on petrol. But I know there’s been a lot of hoo haa about petrol prices about, essentially an argument between the Government and the oil companies about the capacity of the oil companies to pass on cost savings which, the margin of the impact of that dispute is in the margin of one plus cents per litre. But you as a business person will be able to claim back all of the GST paid on your

petrol bought for business purposes and that’s in the order of what eight cents a litre - so, depending on what the price of petrol is. It might be a bit below it might be a bit above, I just don’t know, I mean it fluctuates from day to day.

I mean that’s been totally lost sight of in all of this debate and that’s something new - you can’t do that now. You can’t claim back the excise off your tax but you will be able, because if your, if you use petrol for business purposes it’s an input and you’ll be able to claim back the GST component of the petrol you use. You can’t do that now and that is an enormous boost for people. I mean this applies you know your contractors who drives around, it applies to the doctor who drives around in his car. It applies to a whole host of people who use their vehicles for business purposes. And that is an enormous improvement.

MILLER:

Prime Minister the news is almost upon us and I know you have other commitments. Thank you for your time this morning. But just finally to sum up. You believe that if we give this a go, if we let it, if we watch it all come in, a couple of months down the track will we be saying what was all the fuss about?

PRIME MINISTER:

Well I believe it is good for Australia and I believe if people do get behind it and give it a fair go they will understand that and they will in time take the view that the Government at some risk and danger but always keeping the national interest in the fore front has done the right thing for Australia. That’s my very strong belief but I as always will accept the commonsense verdict of the Australian people.

MILLER:

So you’ll watch, wait and listen to what we have to say?

PRIME MINISTER:

Oh and continue to argue its merits and answer questions, of course.

MILLER:

All right. Prime Minister John Howard thank you very much for spending the time with us this morning and well I guess we’ve all got to say good luck haven’t we?

PRIME MINISTER:

Thank you. Well I think it’s good luck for Australia. That’s what matters.

MILLER:

Prime Minister Howard thank you once again.

[ends]

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