Premiers’ Conference: Howard and Costello Press Conference

This is the text of the press conference held by the Prime Minister, John Howard, and the Treasurer, Peter Costello.

It follows the Premiers’ Conference which reached a new agreement on Commonwealth-State financial arrangements.

Text of John Howard and Peter Costello press conference.

PRIME MINISTER:

Ladies and gentlemen, today we have had an extraordinarily successful Premiers’ Conference. We’ve reached agreement on all outstanding matters relating to the financial agreement between the governments which has now been signed, sealed and delivered. And the last act in the dramatic transformation of Australia’s taxation system and the last deed required to take this country into the 21st Century with a financial and taxation system fit for the 21st Century is for the Australian Senate to take heed of what the governments of Australia, the Federal Government and the six State governments and the two Territorial governments of Australia have done.

It was a very good meeting, there was a bit of give and take. The Commonwealth was able to go part of the way in relation to the Queensland situation. We agreed with a number of the State requests in relation to the disputed items. We did not agree with one major request relating to the fringe benefits tax because that did not involve as alleged by the States any diminution at all of the goods and services tax. Overall it was an outstanding result. It speaks volumes for the constructive character of these meetings when they are backed by a decision of the Australian people. As one of the Premiers said today, the Federal Government has a mandate to implement taxation reform and of course we do. And the Premiers were recognising that and that is why they signed this agreement. But it would be wrong of us, of either of us, to discount the historic character of today’s agreement. This is the largest single transformation of Commonwealth-State financial relations at least since the end of World War II.

One of the ironic things to me about this whole tax debate is that the GST is the most pro-welfare sector tax system that this country could ever have. Because it’s through the GST going to the States that for the first time the States will have enough money to fund all of the services that they want to fund.

The other item that I’d like to mention is drugs. The Commonwealth has offered a new $220 million drug programme over a period of four years. This is over and above the $290 million under the Tough on Drugs strategy that I have progressively released over the last couple of years. The biggest single item in the new programme is a diversion strategy whereby the Federal Government will fund, we calculate up to 300,000 treatment places over a period of four years as part of a diversionary programme whereby people who have been apprehended by police that are not judged to be people who would benefit from going through the criminal justice system are offered the opportunity of going into treatment. And if, we believe that if we can through this approach divert a large number of those people into treatment facilities that will not only be of enormous long-term benefit to them but also to the community. The Commonwealth will provide the money, we will fund the places, the States and Territories will provide.

But it represents new money of $220 million over and above the $290 million which now takes to over $500 million the additional Commonwealth Government commitment to the war against drugs. We don’t argue for a moment that it provides all of the solutions but it will be another important building block. We have also indicated that we will to the best of our capacity at a federal level fast track the National Health and Medical Research Council consideration of the listing on the pharmaceutical benefits scheme list of Naltrexone and also when an application is made in relation to Buprenorphine we will adopt the same approach as well. That is the drug that has been mentioned by Mr Beattie, the Queensland Premier. And the Victorian Premier placed on the table for consideration by governments, and it will be a matter to which we will return later, the proposal to establish a national institute in relation to depression.

Overall, the drugs component of the conference was equally constructive. There’s a genuine desire Commonwealth and States across party lines to focus on our many common points of agreement and to make a further contribution towards fighting the scourge of drugs within our community. And I am particularly pleased at the very co-operative attitude displayed by everybody in relation to that.

JOURNALIST:

Mr Howard you mentioned give and take with the States on the tax deal. Are you ready to extend some give and take to the Senate in the form of enhancing the compensation package?

PRIME MINISTER:

Well, we think the compensation package is good. We think it has stood the test of scrutiny and examination and we look forward to the debate starting.

JOURNALIST:

Mr Howard can you guarantee that pensions under the GST will always be higher than they would otherwise have been without the GST?

PRIME MINISTER:

Well, I can repeat the guarantee that I gave in the election campaign and the guarantee on which we were elected and that is that under our arrangements people receiving the pension will always be in real terms 1.5 per cent ahead of the CPI. That was the guarantee I gave in the election.

JOURNALIST:

What about in relation to male average weekly earnings?

PRIME MINISTER:

Well, you know the arrangements in relation to male average weekly earnings. You know that as a result of our legislation there was a guarantee under that legislation that it would not fall below a certain percentage of male average weekly earnings and that’s always been the case. If as a consequence of the action of our proposals and our commitment pensioners are even better off, well that’s good.

JOURNALIST:

Is your drugs policy predicated on zero tolerance especially in schools?

PRIME MINISTER:

Look our drugs policy is not predicated and never has been predicated upon a particular description. Everybody around that table today is united in the view that there is no place for drugs in the schools in Australia, and that we will give the principals, the parents and the school communities every support in pursuing that objective. Some people like myself call that zero tolerance. Others might call it something else. But the name is not as important as the commitment, and the commitment is that there is no place for drugs in our schools full stop.

JOURNALIST:

On radio this morning you spoke of an element of compulsion for this treatment…

PRIME MINISTER:

Yes there is. There is an element of compulsion. I mean what happens is that if somebody is apprehended they have to be assessed. They might then decide not to comply with the, or enter into the treatment to which they have been assessed. But of consequence of that could be that they slip back into the criminal justice system.

JOURNALIST:

Mr Costello how important was your conversation with Senator Colston in arranging the extra money for Queensland and how important do you think your future dealings will be with him in terms of arranging passage of the GST legislation?

TREASURER:

Well it’s very important. Senator Colston had previously made representations to us concerning additional funds for Queensland. He’s a Senator from Queensland and I think he’s got the interests of Queensland at heart. I rang him again this morning. We had a discussion about compensation. He put his view to me and as it turned out the Commonwealth and Queensland compromised. Queensland had been seeking an additional top-up after the first year and we agreed to give a top-up after the second year. And so we met the Queensland demand half way. But Senator Colston was very important to that and I recognise the submissions that he made and they proved very successful, very good for Queensland if I may say so today.

JOURNALIST:

And what about the future of the GST? Did he express or do you expect to discuss with him any question of compensation for the poor under the GST plan?

TREASURER:

Well I think Senator Colston’s made the point before, that he respects the Government’s mandate in relation to GST. By the way it wasn’t just Senator Colston. Premier Beattie made the same point today. He accepts the Government’s mandate in relation to GST. We went to an election. We received a mandate and those people that recognise the outcome of elections, and that governments ought to be allowed to govern on the basis of their policy recognise that. And Senator Colston’s made that point previously I believe.

JOURNALIST:

Treasurer, the States, Premier Beattie…

PRIME MINISTER:

Speak up George. I can’t hear you and I always like to know what you’re saying.

JOURNALIST:

You said Peter Beattie respects your mandate but that still didn’t stop you from kicking in a bit of extra money. The Senate, even if it did respect your mandate, would be demanding extra compensation. Is that now the reality that we are in? That having compromised with the States, that we are looking at some sort of compromise with the Senate to get the package through?

TREASURER:

Let me make the point about Queensland’s claim. Queensland’s claim was that the GST revenue ought to be distributed on a pure horizontal fiscal equalisation basis which would deliver them a bonus over and above the minimum guarantee, the current system. And they said that they should be entitled to that from the beginning. Our argument was that that money should be used to make the minimum guaranteed payment to the other States and that for the first three years any bonuses should be redistributed into the pool. Now we came to a compromise with Queensland so that Queensland gets the benefit after the two years. It wasn’t fully what they were seeking but it was a compromise. Now you’re asking about the Senate and compensation. The first point I make, and I think the Prime Minister said it, the Senate is the States’ House. It would be a funny day wouldn’t it if the Senate tried to vote down something that’s just been agreed by the Commonwealth’s six States and two Territories. And you may well ask…

JOURNALIST:

But on their assumption, pensioners get 30 cents in some cases.

TREASURER:

Well depending on the assumptions you make George, but I think I’m right in saying, and I think this has been accepted by Warren and Harding, and by anybody that’s looked at it, on all reasonable assumptions, under tax reform all identified category and classes are still winners – are still winners. In other words if tax reform were defeated they would go backwards. Now I know there are a lot of arguments that got around about additional compensation but that’s sort of premised on the fact of identifying people who would be worse off. We have still not, and none of our political opponents, and none of the modellers, have yet identified a category of person that is worse off.

JOURNALIST:

So are you ruling out additional compensation, Mr Costello?

TREASURER:

I’m saying that no additional compensation is required if all categories of person on all possible analyses, with all reasonable assumptions, are still winners.

JOURNALIST:

Does that mean you are ruling it out?

TREASURER:

Well I gave you the answer …

JOURNALIST:

At least three of the States are reviewing National Competition policy. Do you view that with favour and what is your concern about it?

PRIME MINISTER:

It wasn’t discussed. Nobody raised it with us.

JOURNALIST:

Premier Beattie…

PRIME MINISTER:

Well he didn’t raise it. I mean people can always, you know, have reviews in their minds and amongst themselves but they didn’t raise it with us.

JOURNALIST:

How much is the total value of the compromises you had to give today to get the States on board. They were asking $800-odd million, was it a figure of $600-odd?

PRIME MINISTER:

Nothing like that.

TREASURER:

The largest item of the claim from the States was a claim on fringe benefits tax of $750 million over three years which is not accepted.

PRIME MINISTER:

But look, can I just say in relation to that – it was give and take. And one or two of the items that the States put forward had merit and we agreed to them.

JOURNALIST:

But how much did you end up giving?

PRIME MINISTER:

Much less than they asked for. The precise amount I don’t remember, Paul.

JOURNALIST:

Was it $819 million over three years?

PRIME MINISTER:

Well, I haven’t done the calculation. We agreed to give, I think it was about $70 million a year in relation to the local government and then there was a certain amount going to Queensland and there was some in relation to housing and the tax equivalent payments.

JOURNALIST:

Would it have been more than you expected?

PRIME MINISTER:

No. It was about what we thought – look, you may find it very hard to accept but we actually did try and analyse the merit of the argument. And there was some merit in the Queensland argument, some merit, not as much as Queensland claimed. There was certainly some merit in relation to the local government argument. There was no merit in relation to the fringe benefits tax argument, none at all. There was some merit in relation to housing and some in relation to the tax equivalent regime. So we are reasonable men and we settled in a reasonable fashion.

JOURNALIST:

Given that, then one could assume if there were any merit in the arguments put by the Senate you’d have a little (inaudible)

PRIME MINISTER:

Well, we had an argument about merit last October and we were judged the more meritorious of the two teams and that’s why we won.

JOURNALIST:

Given the defeat on FBT is Victoria the only State that’s lost?

TREASURER:

The defeat on FBT doesn’t produce any loss in Victoria.

PRIME MINISTER:

No.

TREASURER:

But the claim on FBT by the States was that because the gross up factor will be increased as a result of the GST, that revenue should go to the States and not the Commonwealth. The Commonwealth position is and was that fringe benefits tax, which is an adjunct to the income tax system, is a Commonwealth tax base and GST is a State tax base and that the States were not entitled to any of the proceeds off the Commonwealth tax base. That was that argument. The argument by Victoria that they haven’t done well is an argument in relation to the funding for 1999/2000. It’s not an argument about the distribution of funds under the new tax system. It’s an argument about the distribution of funds under the current tax system with the relativities as set by the Commonwealth Grants Commission. It’s the last argument of the ancient regime, that argument. And since they now have a guaranteed tax base in the future we don’t have to have those arguments anymore because they’ve got a guaranteed share of the goods and…

JOURNALIST:

Did Victoria go it alone on FBT or did the other States support…

TREASURER:

It was put forward this morning as a joint demand.

JOURNALIST:

Mr Howard, if the Senate continues to refuse to accept your tax package in its current form, now that the States have signed off on it, and if the Senate still refuses, will you consider a double dissolution election, now that you have the backing of the…

PRIME MINISTER:

Oh look, as I’ve said before, it’s not long since I was re-elected and I’ve got no desire to race back to the polls. I remain positive. I remain hopeful. I believe that today’s outcome sends a loud, unmistakable, powerful and emphatic message to the Senate – get on with it, do the will, do the bidding of the Australian people; do the will, do the bidding of the Australian States. I mean, if you can get Bob Carr and Jeff Kennett and Peter Beattie and Richard Court and John Olsen and Jim Bacon, all of them – three Labor, three Liberal – to sign up and to say this is the tax system for the new century, how on earth can the Senate hold out and preserve any sense of credibility. I mean, here you’ve got the most recently successful Labor leader in Australia, he’s offered Della yet again to visit Canberra…

TREASURER:PRIME MINISTER:

Which we accepted. The most recently successful Labor leader in Australia, the two most recent leaders – I mean, Beattie and Carr have won elections and those who have lost elections on the Labor side should take a bit of notice of those who’ve won elections on the Labor side and they should heed their message. But we will just take the Senate in its stride. The debate starts soon. We’ll listen to the debate. We’ll talk to people. We believe the Senate should do the will of the Australian people and I have no intention of hypothesising and speculating about entirely hypothetical situations.

Thank you very much.

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