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Budget 98: Prime Minister praises the surplus; answers questions from the public.



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JOURNALIST:

 

Mr Howard, you got your surplus, but the dollar is still falling.  Is there no pleasing these financial markets?

 

PRIME MINISTER:

 

I think movements in the dollar are largely unrelated to that, the immediate movements.  I think long term though, financial markets will give a huge tick to this Budget.  I don’t normally comment on movements in the dollar and I certainly don’t want to break that rule on this occasion.  In the long term though this is a really classy Budget for the financial markets, because it is a genuine surplus.  The economic forecasts are full of integrity, there’s nothing overblown, they haven’t been manipulated by the Prime Minister’s office the way in which in certain estimates, in I think the One Nation statement of Mr Keating’s were some years ago.  They are genuine Treasury estimates, very conservative, and therefore they will give a lot of confidence to the financial markets. 

 

JOURNALIST:

 

But it’s only actually going to last for a few weeks isn’t it?  Because then you’ve got your tax package, Telstra social bonus which will blow these figures away.

 

PRIME MINISTER:

 

Matt, the quality and the strength of this Budget will last for years because what we have done is to achieve the most remarkable and historic fiscal turnaround of any government since WWII.  I mean, to turn a deficit annually of $10.5 billion, into a surplus of $2.7 billion in two years is a phenomenal achievement and it will help us lock in these low interest rates and low inflation rates.  I mean the lowest small business rates for 33 years, the lowest housing rates for 30 years, 280 000 new jobs in two-and-quarter years.  The lowest inflation rate for 30 years, we can look the nations of the Asia Pacific in the region and say we have got strong predictable reliable growth.  That is a tremendous economic report card.

 

JOURNALIST:

 

But we are still vulnerable to Asia though?

 

PRIME MINISTER:

 

Well just imagine where we would be if we had not done what we have done over the last two years.  Just imagine if we still had Mr Beazley’s black hole of $10.5 billion, if we’d taken Labor’s advice, and not cut the deficit. Just imagine where Australia’s economy would now be.  We would be bobbing around like a small cork on a very turbulent sea.

 

JOURNALIST:

 

What about the jobless figure, Mr Howard?

 

PRIME MINISTER:

 

They are better now than they have been for eight years.

 

JOURNALIST:

 

But are you happy with it, that’s the question.

 

PRIME MINISTER:

 

Well look you can never be happy with a jobless figure while any Australian who wants a job is out of work.  I mean you never, you should never rest on that, but we have created 280 000 new jobs in just over two years.  It is the lowest in eight years, I repeat, the lowest in eight years.  It reached 11.2% when Mr Beazley was the Employment Minister, we now have it at 7.9%.

 

JOURNALIST:

 

Where it will stay?

 

PRIME MINISTER:

 

I beg your pardon?

 

JOURNALIST:

 

Where it is likely to stay?

 

PRIME MINISTER:

 

Well, I’m not as pessimistic as that.  We’ve put a conservative figure in, which says that you’ll be down to about 7.75% by the end of the coming financial year.  We’d like to see it better.  I can guarantee that we’ll follow the policies that will deliver the best prospect of it getting better but it is better now than what it was, measurably better than what it was when we came to office.

 

JOURNALIST:

 

Mr Howard, let’s take some calls.  Well, Prime Minister, it looks like we have a full board of calls. The first call goes to Richard Coole from Condingup in Western Australia.

 

CALLER:

 

Good morning Prime Minister.

 

PRIME MINISTER:

 

Good morning Richard.

 

CALLER:

 

As a farmer, I would like to congratulate you on your surplus budget but without trade surpluses as well, Budget surpluses in my opinion result in an inward looking, contractionary type economy.  Having just returned from China, where there is a $46 billion textile industry, and where our total wool exports are worth a mere $2.5 billion, surely your Government can help us perhaps with some innovative thinking, be a part of the Chinese action.

 

PRIME MINISTER:

 

Well, I think we’ve done a lot of that already.  Our economic relationship with China now is stronger than it has been for the last three or four years.  In fact, in the last two years, the improvement in economic and political relations between Australia and China has been one of the greater foreign policy successes of my Government and the economic linkages between the two countries, the fact that I understand China invests more in Australia than most other countries, the fact that we have just seen one of our major life insurance companies win a licence to do business in China and the fact that when I was in Shanghai and Beijing last year, I had one of the largest business delegations ever to visit that country and certainly the largest ever to accompany an Australian Prime Minister.  All of that is evidence of the fact that our economic and business links with China are growing very strongly. It’s a market of $1.2 billion, and we have followed a very pragmatic mix of economics and politics in order to build the sort of relationship with China that I think your question suggests. 

 

JOURNALIST:

 

Okay Prime Minister can we move onto Darwin now. We have Mick on the line.

 

CALLER: :

 

Good morning Mr Howard.  I have a question which was mentioned last night by Mr Costello in his speech, reference the commitment that the Australian soldiers had made to the country and now it was about time that the Australian country repaid it to the servicemen in issuing the Gold Card.  Why does this not include Vietnam Veterans?

 

PRIME MINISTER:

 

Well, what we’ve done is in relation to WWII veterans is we’ve applied the same approach that we applied in relation to WWI veterans, that is about 55 years after the end of the hostilities.  Obviously I can say right now that Korean and Vietnam veterans will be treated at least as generously as WWI and WWII veterans.  It may turn out in the fullness of time to be even more than that, but I’m not promising that.  I would remind you of course that any veteran from Korea or Vietnam who has any war related disability is already getting the benefit of the Gold Card.  I mean, this extension that was announced last night was for about 50 000 veterans of WWII who are not now enjoying the benefits of the Gold Card, in other words, are not now judged to have a war related disability but who saw active service in hostile circumstances overseas in WWII.  So, I think there are already 180 000 or perhaps 170 000 WWII veterans who have the Gold Card because of a War related disability. We are including it now for another 50 000 who don’t have any war related disability but nonetheless saw active service abroad and I can assure you that Vietnam and Korean Veterans will be treated at least as generously as we treated WWI and WWII Veterans.

 

JOURNALIST:

 

A call from Queensland now.  Mr N Williams, from Tewantin.

 

CALLER:

 

Mr Howard, good morning, and thanks for the chance to speak to you.  First, congratulations on the surplus, it is wonderful.  I hate paying rent and I hate us paying interest.  But the question I had was, I agree with your fact that the tax system is presently not fair, your comment I know.  Please could your staff look at a debits tax, which really does seem to be fair right across the board?

 

PRIME MINISTER:

 

Well, there was a brief examination of that by a former Coalition Government.  Can I say it won’t work.  If it did work it would have been introduced in many other countries.  It will distort the whole financial system, it will impose unreasonable burdens on some sections of the community and no burdens on others.  It does not properly measure economic activity so that you can have a fair tax base.  It is my understanding that it was briefly tried in one country about 30 years ago, namely Sri Lanka and then abandoned. So, it has been looked at in the past and I’m sorry Mr Williams, it doesn’t work.

 

JOURNALIST:

 

Prime Minister our next caller is from NSW.  His name is Matt.  He says he is the President of the NSW Young ALP.

 

CALLER:

 

Good morning Prime Minister.

 

PRIME MINISTER:

 

Good morning Matt.  Two Matts in a morning.

 

CALLER:

 

As a young Australian in constant contact with a lot of youth organisations and student groups, I must say that for young Australians I think last night’s federal budget was a major disappointment, and my question to you is why has your Government failed to throw a life line to young Australians, and ease their suffering after two years of successive cuts to services and programmes when you ...(inaudible)... with a $2.7 billion surplus?

 

PRIME MINISTER:

 

Well, I don’t accept that, and I appreciate the fact that you are honest enough to disclose your political affiliation.  But, can I just say something about the surplus.  Surpluses don’t just sit there.  Surpluses when built up, are used to repay previously accumulated debt and what we are doing this year is that we are going to collect a $2.7 billion more than we spend, but that’s not going to go mouldy in the Treasurer’s bank.  What it’s going to do is be used to repay the $95 billion of deficits that the previous Labor Government ran up in the early years of the nineties.  And every time you pay a dollar off the country’s debt, you further entrench low inflation and low interest rates.  And you talk about young people.  Young people want jobs, in time they may want to buy homes and have families, and if you provide better business conditions and if you have low inflation and low interest rates, small business will do more and employ more people.  And also if you have low interest rates, you will make it easier for young people to buy homes.  We have made changes to the education system.  I think the changes we’ve made at a tertiary level have made the system fairer.  I might also point out that in the changes that we’ve made to Commonwealth spending, we deliberately quarantine from any spending cuts at all, the support the Federal Government gives to schools in Australia. I remember when we had our discussion on education right at the beginning of the ERC proceedings two years ago, and I said from the very start, I’m not going to have any reductions in the basic recurrent funding that we give to schools, both the Government schools and also what I might call the more modest independent schools particularly in the, but not only in the Catholic sector.  Now, I think given all the constraints that we faced as a Government, we have been very fair and very reasonable in the changes we’ve made and the beauty of being back in the black is that there are limitless possibilities opened up for the future.  When you’ve paid off the mortgage you can turn your horizons to something else, something more creative, something more innovative, something more for the future, both in terms of a reformed taxation system and also other creative areas of social spending.

 

JOURNALIST:

 

Prime Minister we could move I think now to South Australia.  We have Dean Dowling from Glenelg East on the line.

 

CALLER:

 

Right, okay, look when we had 35+ years of Federal Budget deficits since the war, to whom does the - two questions I’ve got - to whom does the Government owe the apparent debts and when must the apparent debts be repaid?  The second question is, now you’ve got a budget surplus, in which bank are you going to put the surplus and at what rate of interest? Is the answer to the first question, no money was ever paid to anyone, they were just left as figures in the budget papers. Nothing was borrowed.

 

PRIME MINISTER:

 

Okay, are you finished?

 

CALLER:

 

Yes.

 

PRIME MINISTER:

 

Well, what happens when you accumulate, accrue a surplus is that the Commonwealth Government borrows the money, it borrows the money from individuals, it borrows the money sometimes domestically, sometimes overseas to make up the shortfall, and when it borrows the money it issues bonds and those bonds carry an interest rate and you’ve got to pay interest on the borrowing and eventually when the bonds fall due you’ve got to redeem the loan from the individual, and so when we get a surplus, we use that to repay previously incurred debt, and the beauty of what has happened over the last two years is that in 1995 about 20% of our GDP, our debt to GDP ratio is about 20%. By the turn of the century it will be down to 10% and if we go ahead with, which we intend to, the sale of the remaining part of Telstra it could be down to 1.5%.  Now that will lift an enormous load off the shoulders, off the back, and off the worrying minds of all Australians because we’ll be able to breathe easily in the next millennium, because we’ll enter it essentially debt free.

 

JOURNALIST:

 

Prime Minister, a call now from Patrick Morrisey of Federal in NSW.

 

CALLER:

 

Good morning Mr Howard.  I’d like to ask how can the Government ensure the tax rebates given to farmers for soil conservation actually facilitate more sustainable land use rather than propping up unsustainable enterprises?

 

PRIME MINISTER:

 

Well, I believe in the main, the rebate will be used in that way.  It will be subject to appropriate criteria when the legislation is drawn up.  Whenever you give a tax rebate, people say, well how can you be certain that it is used in the right way, but my experience in relation to those sorts of rebates in the past is that they are used effectively and certainly there’s a very strong grass roots support for landcare in the Australian community.  I went to the annual landcare awards ceremony in Canberra a few weeks ago and I was tremendously impressed about the community based character of the movement and it’s one of those things that’s brought together farmers, conservationists, community leaders, people right across the political and social spectrum because they all have a vested future interest in restoration of the quality of our land.

 

JOURNALIST:

 

A call from Sydney now. Bill of Kensington.

 

CALLER:

 

Good morning Mr Howard.  Hello?

 

PRIME MINISTER:

 

Good morning Bill.

 

CALLER:

 

Good morning.  Thank you very much for putting us in the black again.  It’s been a long time coming, and thank you for that.  I just want to ask you quite a simple question.  Why can’t we make contributions to health funds tax deductible like they were in the 70s, again ensure against a gap, which Bob Hawke took off, and then, if this is attractive to people, and I’m sure a lot more people would be attracted to the funds.

 

PRIME MINISTER:

 

Well, you can.  It’s a question of whether the resources needed to do it are available.  We already of course do have a tax break.  If you are earning under about $70 000 a year and you’ve got a family, you get $450 a year off your health insurance.  For a couple it’s $250 a year, and that normally, but not only, is taken as a tax break.  What you are recommending is that we go further, and that we really increase the generosity of that tax deduction.  Now, that is something that has to be set off against other calls that might be made on the resources that would be involved in that extension, and whether the use of those resources in some other way to support private health insurance, or support the health system would be more desirable.  The gap is something that is under fairly constant debate.  I understand the argument and I do know that it is an irritant to people who have private health insurance that they can’t insure against the gap.  I also know that it is an irritant that they, if somebody goes into hospital they not only have their private health insurance cover but they also then get some bills on top of that, and they think in a sense that they’ve paid three times.  They’ve paid the Medicare levy, they’ve paid their private health contribution, and then they’ve got to pay some bills.  Now, moves are already under way to try and eliminate that irritant of getting bills on top of, or getting a series of bills.  I think it is fair of me to say to you Bill, that improving the health system and improving the attractiveness of the health system is something that is always on the Government’s action agenda.  You never close the book on health policy.  I’ve not known a Government in Australia in the last 25 years, that’s sort of closed the book on health policy and said well, no further changes are needed.  It’s a very important, very sensitive area of Government policy.  With all its faults, the Australian health system is more economical and of a higher quality than any in the Western world, and conversations with Canadians and people from Britain and people from the United States will remind you of that.  I had a conversation with such a group only a few days ago on the subject of health systems and with all the criticism that is made of ours, we have an infinitely better and more economically run system and a higher quality of health care delivery than most countries in the world.

 

JOURNALIST:

 

But Prime Minister, Matt Peacock here, if I could just add to that, isn’t the private health insurance scheme still running down.  I mean the trend is still there.

 

PRIME MINISTER:

 

It is lower than we would like.  It would have been much wor se if we had not provided the tax rebates that we have provided.  The haemorrhaging has been certainly slowed down, we would want to see the impact of the high income tax surcharge.  I think there are a lot of people in the, for couples over $100 000 a year bracket still don’t realise that if you don’t have private health insurance, then you pay another one percent on the Medicare levy and when that really bites in, and I don’t think that will be until people start filling in their tax returns after the 30th June this year, there will be I am sure a new influx of people into private health insurance.  Matt, it is not satisfactory.  It is better than it would have been if we hadn’t have acted.  It should have been fixed six or eight years ago when Graham Richardson as Labor’s Health Minister said, once you get below about 40% you start to have a problem.  And he wanted something like we did, done then, and the Labor Government refused to do it.  Matt, it is something that remains under constant review.

 

JOURNALIST:

 

Prime Minister, we have a few more listeners in.  We have Rachel from Yallunda in South Australia on the line.

 

CALLER:

 

Good morning Mr Prime Minister. 

 

PRIME MINISTER:

 

Good morning Rachel.

 

CALLER:

 

Good morning.  Regarding the Gold Cards for WWII veterans.  Is this only for men and women returned from active service?

 

PRIME MINISTER:

 

At this stage...I’m sorry, at this stage yes it is.  It’s people who were, who faced the description is - hostilities on active service.

 

CALLER:

 

Another call from South Australia, Prime Minister.  Andrew, from Adelaide.

 

CALLER:

 

Hello Mr Howard.  I was just wondering why, with all the reductions in the Federal Public Service, why there hasn’t been the same reductions to the number of politicians because they wouldn’t have the workload that they once had, because of the reduction in the amount of people they are supervising?

 

PRIME MINISTER:

 

Well, you don’t measure the responsibilities of Government according to the number of people on the Government pay roll.  You measure the responsibilities of Government according to a whole range of things.  But don’t blame me, I voted against an increase in the size of the Federal Parliament back in 1983.  The Liberal Party voted against the increase from 124 House of Representatives members to 148, and we also voted against increasing the size of the Senate from 64 or 62 as it then was, to 76 and can you say, I think it was a great shame and I say this with some feeling given the voting system in the Senate, I think it was an enormous shame that the size of the Parliament was increased back in 1983 and that was done by the Hawke Labor Government just after it was elected without having told the Australian public that it was going to do it and I’m very proud to say that as Deputy Leader of the Liberal Party at that stage, Andrew Peacock was Leader, we fought against that increase and we voted against it.  So don’t blame me, I voted for a smaller number of politicians.

 

JOURNALIST:

 

Prime Minister, we won’t blame you.  We are out of time, thank you very much for coming in this morning.

 

PRIME MINISTER:  

 

Okay.  Thanks.