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Simon Crean - Australia Short-Changed Wednesday, 23 May 2001

Australia Short-Changed Simon Crean - Shadow Treasurer

Media Statement - 22 May 2001

Tonight's Budget confirms:

Whatever this Government gives with one hand it will take with the other; ● The GST has mugged the economy and hurt ordinary Australians; ● Telstra will be sold if the Howard/Costello Government is re-elected; and ● The Howard/Costello Government has no vision for Australia's future. ●

Tonight's Federal Budget proves that nothing the Howard Government promises can be believed, and whatever it gives voters with one hand it will snatch back with the other.

Just look at the income tax cuts promised last year as compensation for the pain of the GST - they are gone in this Budget. (See Attachment A) But the GST is with us forever.

There is nothing in this Budget for struggling families and nothing to compensate small business for the GST compliance burden.

Tonight's Budget confirms the real cost of the GST. It has mugged the economy ahead of any international economic downturn.

Tonight the report card is in on the GST. The result is unemployment up, growth cut in half and investment down. (See Attachment B)

All those who were hurt by the GST are still hurting.

All those left behind by the GST are still left behind.

Pensioners, promised $1,000 to help compensate them for the GST, are now expected to be thankful for $300.

Labor will support this urgent initiative to help those hit hardest by the GST, but why wouldn't the Government keep its election promise and pay the full $1,000? This year's surplus shows it could be afforded.

It's just another example of how this Government will say or do anything to win re-election, but the Budget exposes its true colours:

If the Howard Government is re-elected, Telstra will be sold - it's in the Budget; ● For the 65,000 Australians prescribed cholesterol-lowering drugs by their GPs who will now have to pay full price for their prescriptions; ●

For Australians outside the major cities again offered nothing by the Howard Government to revitalise the regions; ●

For patients in public hospitals short-changed $215 million; ● And for older Australians in nursing homes, who lose $70 million. ●

Peter Costello promised a Budget for Australia's future.

It is clear from his Budget speech that education, innovation - making Australia the Knowledge Nation -have no part in his vision for Australia's future.

This is a Budget empty of vision. It has no plan for Australia's future.

This Budget is about Peter Costello's future, not that of the nation.

Attachment A

Tax Cuts Gone

Last year, Treasurer Costello claimed that his Budget delivered:

" …the largest personal income tax cuts in Australia's history" [2000-01 Budget Paper No. 1, p.1-3] ●

This year's Budget reveals that the income tax cuts have been grabbed back after only one year.

Worse still, only one year later Australian taxpayers will be paying $12.1 billion more than now - and they will continue to have to pay the GST.

Forward Estimates of Revenue ($ billions)

  1999-00* 2000-01 2001-02 2002-03 2003-04

Individual income tax 82.5 76.8 82.8 88.9 96.6

Change on previous year Na -6.9% +7.8% +11.9% +12.2%

Budget Paper No.1 2001-02 page 5-26.

*Final Budget Outcome, 2000-01. Note 3, page 27.

Mr Costello's version of Australians paying less income tax

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Attachment B

Budget Confirms: GST Mugged The Economy

John Howard and Peter Costello told Australians to vote for the GST because it would:

1. lift economic growth ● 2. be good for jobs ● 3. leave all Australians better off ● 4. hardly affect housing ●

5. lift investment ●

This Budget confirms the Government has broken its GST promises.

Economic Growth Falters Under The GST; And It's Domestic-Driven

Why is the Government putting forward a whole new tax system for Australia? Well, one of the reasons we are doing this is to boost growth in the Australian economy. I don't think anybody has contested the point by the way that a new tax system will boost the Australian economy. There's an argument about how much. There are some people who are saying that you will boost growth by 1 % and some 2%. [Peter Costello 21 September, 1999]


Now, I think all of the evidence says that this will boost Australian GDP, and it's one of the reasons why we did it. [Peter Costello, 14 August 1998]


Reality: Economic growth turns negative after the GST.

Economic growth - falls after the GST

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As the Australian Statistician has revealed, (see graph below) the fall in Australia's growth was self-inflicted. Even Peter Costello's Budget finally admits that the GST slowed the Australian economy in the second half of 2000 as a result of the GST.

Domestic demand hit by GST

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GST Proves To Be Bad For Jobs And Unemployment Rises

We also have plan that is going to strengthen the economy, our tax plan, and it's going to lay the foundation of greater job generation in the years to come. So we are pretty enthusiastic. John Howard 7 September, 1998


Reality: employment growth more than halved; full-time jobs destroyed.

Growth rate of employment more than halved since GST introduced

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It's very important that we have a tax system which can drive the Australian economy into higher growth and create jobs and that's what this is all about. [Peter Costello 18 September 1998]


GST clobbers full-time jobs

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The Promise: All Australians Will Be Better Off Under The GST

All Australians, including residents of caravan parks, will be better off under The New Tax System. [Peter Costello, House of Representatives Hansard, 29 May 2000]


Reality: The latest AC Neilsen survey of this claim has highlighted how the GST has turned out to be a burden on ordinary Australians.

Only 10 per cent better off: How the GST failed to meet expectations!

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Record Housing Collapse

…the climate for the housing industry at the moment has never been better. [John Howard, Neil Mitchell 3AW 14th August 1998] ●

Reality: Housing investment falls to a record low as a result of the GST.

Australian Housing Investment

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Australian Building Approvals

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click here.

GST Doesn't Lift Investment As Promised

A new tax system is vital if Australia is to encourage expanding, job-creating investment in our businesses, both large and small. [A New Tax System" p. 9 August 1998]


Reality: Investment fails to lift even 6 months after the GST, and Peter Costello's own Budget revises down business investment in machinery and equipment from 5 per cent to 3 per cent in 2001-02.

Real Private New Capital Expenditure

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Attachment C

Costello Relies On Asset Sales To Get Over The Line

Peter Costello used to say that you should not include asset sales in a Budget:

It is selling off an asset and using it for the year's income. No reputable company would be allowed to do that. That would not be permitted in a prospectus. Companies that start selling capital assets and applying them to current year income are generally marked down for receivership. Everybody knows that that is the last act of a company heading for receivership. (Peter Costello, Hansard, 30 August 1993)


Tonight's Budget includes $1.74 billion in asset sales for the Budget year, 2001-02, and $2.49 billion in asset sales in 2000-01. This means that, using Peter Costello's professed benchmark, his Budget would be in deficit for both financial years.

Budget Balance adjusted for asset sales

Budget ($b) 2000-01 2001-02 2002-03 2003-04

Underlying cash balance(1) 2.3 1.5 1.1 4.1

Asset sales(2) 2.49 1.74 0.66 0.7

Adjusted balance -0.19 -0.24 0.44 3.4

(1) Budget Paper No 1 2001-02 page 1-3; (2) Budget Paper No 1 2001-02page 9-6.

John Howard used to have a view on this too:

I have very very strong beliefs that what will happen is that the Government will bring in a phoney balance. It will produce a budget where there is a balance but it will arrive at that balance by including the proceeds of asset sales, which of course is a phoney way of arriving at a balance … I would imagine that the public will see through that and will be very angry at having been deceived by the Government. (John Howard, doorstop, 2 May 1995)


Attachment D

Honey, Costello Shrank The Surplus

Peter Costello makes much of his supposed fiscal virtues and credibility. His Budget tonight destroys both.

In the 1998-99 Budget, Peter Costello forecast that he would produce a budget surplus amounting to $14.56 billion for the Budget year 2001-02.

Just three years later, in a period of strong taxation revenue growth and where economic growth has exceeded forecasts (except for the period since the GST), the surplus for 2001-02 has fallen to $1.5 billion - saved from falling into deficit only by asset sales.

This represents a fiscal turnaround of $13 billion. So much for Peter Costello's fiscal virtue.

The Budget Papers confirm that this erosion has been dominated by a spending spree by the Howard-Costello Government associated with the GST.

The disappearing 2001-02 Surplus

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And the policy panic of the Howard-Costello Government since the release of the Mid Year Economic and Fiscal Outlook (MYEFO) in November last year has stripped the Budget surpluses right back. So

much for Peter Costello's fiscal credibility.

Costello's dwindling surplus forecasts in just 6 months

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Attachment E

Costello's High Taxing Record Confirmed

Tonight's Budget confirms Peter Costello as a high taxing Treasurer. It continues his deceit that the GST is not his tax. (1)

Unfortunately for him, every State and Territory Government, their Auditors-General, and the Australian Statistician classify the GST as a Commonwealth tax.

If we adjust for this Budget fiddle to reveal the truth, his high taxing record becomes clear as can be seen the following chart.

True Commonwealth tax revenue to GDP

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Figures from 2000-01 include an estimate of the net impact of not classifying the GST as a Commonwealth tax in order to make data comparable. See footnote (a) in BP No 1, page 11-14.

As the graph shows:

Peter Costello is the highest taxing Treasurer in more than a decade. ● The average tax burden under Peter Costello's six budgets is around 1.5 percentage points of GDP higher than in the previous six Labor Budgets. This amounts to around $10 billion per year in additional taxes for every year that Peter Costello has been Treasurer.


Max Walsh, writing in The Bulletin, on 13 March 2001 proclaimed Peter Costello as the highest taxing and highest spending Treasurer in Australia's history.

Attachment F

Debt-Man Costello

Debt continues to grow for Australian families and business under Peter Costello. The facts speak for themselves.

The Australian Statistician reveals that Peter Costello has racked up some impressive debt records:

Record high foreign debt; ● Record high household debt; ● Record high household debt ratio; and ● Record high credit card debt. ●

Peter Costello's Foreign Debt Record

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Australians owe more than they earn: Household debt and debt ratio soar

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Costello's record credit card debt credentials

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For all his hubris, Peter Costello has presided over a record debt burden on Australian households.


(1) The Commonwealth Statistician has exposed that lie and former Treasury Secretary, John Stone, has condemned it: "In truth, as every taxpaying man and woman in our Australian streets knows, in the coming financial year, Commonwealth taxes are going to rise" [Adelaide Review, May 2000] Authorised by Geoff Walsh, 19 National Circuit, Barton ACT 2600.

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