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Deputy Leader of the Opposition comments on the probability of tax increases

PRU GOWARD: And now to the Governor of the Reserve Bank's urgings for tax increases. Treasurer, Ralph Willis, isn't speaking this morning, but his Opposition counterpart, Peter Costello, joins us now.

Well, is Bernie Fraser right? Should taxes go up?

PETER COSTELLO: Well, that's not precisely what Bernie Fraser said. What Bernie Fraser said is the deficit should come down. The deficit can come down either by reducing expenditure or by increasing taxes. But Michelle Grattan was quite right, of course, Pru, that Bernie Fraser has been warning the Government about its economic policy in bureau speak - quite polite, but for those that can read it, quite clear. He's obviously decided that full frontal is now required to rub some sense into Mr Willis and Mr Keating, and he's come out with his speech which is as strong a condemnation of the Government's economic policy as you'll ever find.

PRU GOWARD: But he had a bit of a nudge for you, too. I mean, he makes the point that tax increases can help to manage private spending through the cycle and that people who talk about cutting the budget deficit but aren't prepared to contemplate increases in taxes don't deserve to be taken seriously. Now, that's you, isn't it?

PETER COSTELLO: Well, it's not, it's not, because he went on to say that people who aren't responsible about the deficits were the people that he was aiming at. I rather took it as the Australian Democrats, to be frank. But the point is that deficits can be cut in two ways. They can be cut by reducing expenditure; they can be cut by increasing taxes. We've always argued that reducing expenditure is the way to go, and that's how Mr Keating got himself into problems, by increasing expenditure in an un-funded way. All of those increases - we made the point at the time that they were wrong. We've consistently argued this. We've been out there long before Bernie Fraser and we welcome him - we welcome him to endorse the approach that we've been taking, and it's really just confirmation of how utterly wrong the Government has got its economic policy.

PRU GOWARD: All right. So you're sticking to your line. You don't believe that taxes should be increased.

PETER COSTELLO: Well, it's not our line, Pru. The fact is that in the last election, Mr Keating was elected, not on a promise to reduce taxes but on legislated tax cuts which he now intends to steal from the Australian public. That's what he's going to do. He's going to steal them back. The fraud will be fully exposed when the income tax cuts that were legislated for January 1966 are taken away. And what do we find him doing instead? - trying to increase taxes. Now, you can't excuse that kind of thing. I mean, this is the ultimate Richardson, if you like - the great electoral fraud of the 1993 election. The Opposition will make the point on behalf of the people of Australia, as it is bound to do, that we will hold governments accountable for lies and fraud.

PRU GOWARD: Well, Peter Costello, if tax increases are off the agenda, nominate where you think spending should be cut.

PETER COSTELLO: Well, I don't think that tax increases are off the agenda of the Government, by the way. It's another point that I've been making over recent weeks. They're looking at services taxes, they're looking at carbon taxes, they're increasing fringe benefit taxes, and that's the point I make about the ultimate fraud. Having been elected on legislated tax cuts, in fact, they are going the opposite way.

Now, the expenditures that we've been saying all along as they come up, that are un-funded, and been raising the questions, are things like the arts statement. It's a point we made in relation to the arts statement - a lot of people running around saying 'Oh, what a clever Prime Minister giving out $250 million to his rich friends in the artistic community with the Creative Artists Fellowships', but where was the money coming from? What a clever Prime Minister to run around with his promises to improve the view from Kirribilli House by abolishing the Cahill Expressway, but where was the money coming from? These were the points that we've been making all along. These were the points that were unanswered.

Now, the fact is Bernie Fraser has now belled the cat and you see that Mr Keating is an emperor with no clothes. All of those promises are now exposed.

PRU GOWARD: So how highly do you rate the prospects of a raft of tax increases that will bring the deficit down?

PETER COSTELLO: Well, Mr Willis is unquestionably working up plans for increased taxes. Every time you ask him about that, you know, he gets coy. He refuses to rule them out. You've just got to go around the business community and they'll tell you how the Government and its Treasury officials have been sidling up to them, saying what about this tax or what about that tax. I can't tell you the precise one but I know they've been floating a services tax, of all things - a services tax, mind you - on the business community, and unquestionably, that's the way they're going. They're going that way because although Ralph Willis knows expenditure should be reduced, he can't stand up to Mr Keating. In the face of Mr Keating, of course, poor old Ralph can't carry the Cabinet so that's the only alternative that's left.

PRU GOWARD: How much should the deficit come down by?

PETER COSTELLO: Well, you see, you get an idea of this if you go back and you look at the 'One Nation' statement. The 'One Nation' statement - which again was the electoral platform ....

PRU GOWARD: No, no. How much does the Opposition believe the deficit should come down by?

PETER COSTELLO: No, no, no - let me make this point. The 'One Nation' statement was what the Government said it would reduce the deficit by. You know how much it's missed? It's missed by $41 billion on it's own 'One Nation' statement. So plainly, if they'd have done the 'One Nation' statement they wouldn't have got into this kind of situation. Plainly, they've got to try and get back a lower deficit and they've got to try and get into surplus ....

PRU GOWARD: All right. So you think we should be cutting the Budget by $41 billion.

PETER COSTELLO: No, no, no. I'm saying that's what the Government promised to do.

PRU GOWARD: And what do you think?

PETER COSTELLO: That will give you a yardstick of how great their failure was. Well look, plainly Pru, they can't do it now.

PRU GOWARD: No, but what do you think they should do?

PETER COSTELLO: Plainly, the tragedy for Australia now is that the Government, having missed it by so much, it can't be got back. That's the tragedy for Australia, that the economy has so been mismanaged that you can't get back to that. And now, it's a question of just starting where you can and making as much progress as you can.

PRU GOWARD: I'll just put it once more. What does the Opposition think should be the cut in the budget deficit?

PETER COSTELLO: Well, Pru, it's got to be greater than $11.7 billion this year, and it's got to be greater than the deficit next year.

PRU GOWARD: Peter Costello, thank you for your time, this morning. Deputy Leader, Peter Costello.