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  Interview: Malcolm Turnbull May 18, 2008  Watch our reportOur political guest will be federal opposition treasury spokesman Malcolm Turnbull, talking to Laurie Oakes about the opposition's response to the budget. LO: Mr Turnbull, welcome to the program. MT: Morning Laurie. LO: The free kick, first, the newspapers today are reporting a Price Waterhouse Coopers survey done for the health insurance industry , an audit rather, that suggests Treasury got its sums wrong on the Medicare surcharge levy change in the budget, do you think Treasury could be that incompetent? MT; Well it appears they have been incompetent in that respect or mistaken. I mean these forecasts are always difficult at the best of times. You now, but the issue of principle here is that the Rudd government has decided to basically drive people out or encourage people to go out of the private health insurance system which can only have two consequences, and the only question is how big those consequences are. Firstly there will be fewer people on private health insurance which will mean a lot more pressure on an already stretched public hospital system. Secondly, because there will be fewer people in the private health insurance pool, the cost of private health insurance for everybody else will go up. Now it is just a question of how far does it go up and how much more stress on the public hospital system, but whichever way you cut it … LO: That’s one issue of principle, but isn’t the other issue of principle that this Medicare surcharge was introduced to force high income earners to join the private health insurance system, was never intended to low and average income earners and now it does? MT: Well Laurie that is the argument but of course in the Budget, courtesy of Peter Costello and John Howard's tax cut policy last year, there are tax cuts right across the board for low and middle-income earners, so it is not as though low and middle income earners were being hit by the tax policies of the previous government, but you now we have got to look at the consequences here, we have a public hospital system that is crumbling because of demand being greater than what it can - the services it can deliver, and what Kevin Rudd and Wayne Swan are doing is putting more pressure on it. You know, a very large percentage, 27%, of people in private health insurance earn less than $48,000 a year. Their private health insurance premiums are going to go up significantly as a result of this measure. So, you know, this is a very misguided measure. It will put a lot of stress on the public health system. It will put up the cost of private health insurance for the people that really need it, and who are struggling now to pay the cost already. LO: But the Opposition squeals about a $150,000 a year threshold for means-testing some things in the community, but you are saying $100,000 is too high a threshold for a means test on this surcharge. That's inconsistent. MT: Laurie, it's not inconsistent at all. I mean what we're trying to do with the whole private health insurance policies, the rebate, the surcharge, everything. Bear in mind - look, what the Government has had in the past and will continue, but to a lesser degree in the future, is both a carrot and a stick. We want to encourage people to take out private health insurance because we want to promote self-reliance and independence in terms of how people deal with the great challenges in their lives. Those people that can afford to take out private health insurance should do so. It's prudent to do so. Now what happens is a lot of young people - and we've all been in this position ourselves, Laurie - when you're young, you think you will never get sick and you will live forever, but it is very important to encourage people, particularly when they're young, to take out private health insurance. It's good for them, but it's particularly important for the whole of the community because the more people in the pool, generally the lower the health insurance premiums will be. LO: Well, let's talk about the Coalition's alternative Budget. The two big-ticket items in Dr Brendan Nelson' speech on Thursday night were a 5 cent a litre cut in fuel excise and a proposal to block the excise increase on pre-mixed spirit drinks. Where is the money coming from? MT: Well, it could come, if nothing else is done, it will obviously come out of the surplus. What we've said is that if we were in government, we would fund that out of savings elsewhere, but we're not in government, so it's ... LO: Will you say where the savings would be? MT: No, because we're not in government, Laurie. It is the same, the Labor Party did the same thing when they were in Opposition. We get presented with the Budget papers, we get just like you, we get three or four hours to read them. We come up with some concrete suggestions but what we're saying is as a matter of principle, when we go to the next election, we will have a proposal to cut the fuel excise and we will fund that out of savings elsewhere. LO: But I recall Peter Costello at every Budget time, demanding that the then Opposition cost its promises, say where the money is coming from, and on occasions Labor tried to do that. You've made no attempt. There is not a single suggestion in Dr Nelson's speech of a saving. MT: No, that's true. There is no suggestion of a saving there, that's right, and it is simply because, as Dr Nelson has said, we are in Opposition. If we are in government, we will find savings, but where they are, it's very hard to do that unless you're in a position to go through every single line item in the Budget, which is enormous, and then make a series of decisions, and it may be there is a big item of savings, or it may be there is a whole lot of little ones which add up to the total you're seeking. LO: But just those two items alone add up to something like $8 billion in lost fuel excise and GST, $3 billion for the alcopop tax. I mean that's a massive amount of money. You can't just say, "Oh, we'll look later in see if we can find how to pay for it." MT: Well it is a massive amount of money but what we are saying is that if we were in government, Laurie, and we're not, and we can't be in government until the next election, so we won't be in government for several years at the very least. If we were in government or going into government, we would have that fully costed. LO: But in the meantime, you're prepared to have a big hole punched in the surplus? MT: Look Laurie, it is not a question of a hole. I mean when you talking about holes in Budgets, you're talking about Budgets going into deficit. This Budget is solidly in surplus. It will be solidly in surplus if the fuel excise is cut by 5 cents and if the additional tax on alcohol is not imposed. The real asset must be on the Rudd government, this is a government that said it would bring down petrol prices. All they've done is set up a petrol commissioner and a FuelWatch to watch the prices go up. Now what we've said is there it one way the Federal Government can cut petrol prices and that is by cutting the excise. Here is a modest cut, 5 cents, how about it? And the Rudd Government claims to be economically literate, claims to have all of this talent at its disposal, it cannot find a way to take 5 cents off the petrol excise. What does that say about their capacity and their … LO: You can't find a way to pay for it either. $8 billion. When Brendan Nelson announced this, he even forgot about the GST component which suggests incompetence as well as irresponsibility in not trying to pay for it. MT: Well let me come to the defence of Brendan there, Laurie. The GST obviously, if you cut the excise by 5 cents that also reduces GST receipts, because the GST is levied on the excise as well. However, you've got to recognise and this is obviously what Brendan had in mind, is that the GST is raised by the Commonwealth and then goes straight out to the states. So a cut in GST receipts doesn't affect the actual bottom-line outcome for the Commonwealth. LO: So he is prepared to screw the states? MT: Well the states have benefited Laurie massively from the rise in petrol prices. I mean every time petrol goes up the states get a bit more, when it comes down the get a bit less, so there are swings and roundabouts. They've been doing pretty well out of the GST, believe me. LO: What about pensions? Why didn't Dr Nelson promise in his speech to increase the rate of pensions? MT: Well we are having a very close look at the pension - the position of pensioners. There is clearly a lot of pain being felt by pensioners. We see that. We see it in our own communities when we talk to people and pensioners - they are struggling, but what is important at this stage and our being in Opposition for five months, is that we look very carefully at this and we're reviewing this very carefully and will be coming out with concrete proposals on pensions in the lead-up to the next election. But at the moment we not... LO: Well your Shadow minister said on Friday that you are committed to an increase in the base rate of pensions and she is circulating a petition demanding that the Government do that. You've had to disown her. It is a bit of a rabble on your side, isn't it, on all these financial matters? MT: Well look Laurie, that's not right. I mean Margaret may - I didn't see exactly what she said, the full context of what she said. LO: I think she used the word "absolutely". MT: Well, I can tell you we have not made a policy decision to increase pensions from our part, but we are very focused on it and we will have a proposal for pensioners when we go into the next election. Just remember, pensioners would not be getting the seniors bonus, they would not be getting that $500 in this Budget had it not been for the advocacy, for the argument, for the battle that we waged on their behalf earlier this year. LO: Well let's look at the alcopops issue. The formal liberal minister John Herron, has written to Kevin Rudd congratulating him on the alcopops excise increase. That makes the Coalition stance a bit weak doesn’t it? MT: No, I don't think so. Laurie, there is a universal support across the community for battling excessive drinking by every age group, but particularly by young people. And there is no doubt that a number of these ready-to-mix drinks, particularly those based on white spirits, are targeted at young people, no question at all. We are very committed to reducing that. The question is: Does this new tax have that effect? Now, what we saw in the Budget papers was that revenue from the new tax would increase from $600 million additional in year one to over $800 million in year 4, and we said, "Hang on, you say this is going to bring down consumption, but your tax receipts are going up. Consumption is increasing." So Labor then came back and said, "Oh, but they will be less than they otherwise would be." Do you know how much less, Laurie? 4%. LO: Treasury said it would slow consumption by that amount. If I can quote Dr Heron. He now of course is the chairman of the National Council on Drugs. He had said in his letter. "Utilising the taxation system is one of the most effective measures we have for reducing alcohol related harm and problems to both individuals and communities." Now you are you saying he doesn't know what he is talking about? MT: No, I'm saying that, I’m saying Laurie, that the economic evidence is that demand for alcohol is actually inelastic. That means that if you put the price up on one form of alcohol, people will move to another, and you are seeing that liquor stores now. They are selling fewer RTDs, not many fewer, but fewer, and they are selling more spirits and soft drinks. But the real point is this - just consider this. Let's imagine you and I walked into the Cabinet room and said, "We've got a great anti-drinking campaign. We want you to give us $100 million to campaign, to persuade young people to stop drinking." And if Mr Rudd said, "Well, guys, what's is going to cut boozing by young people by?" And we said 4%, we would be laughed it at. This is a totally ineffective measure in terms of combating youth drinking. It is very effective in terms of raising revenue for the Government. LO: This is an anomaly, though. You have to agree that people who drink pre-mixed spirituous drinks pay less excise than people who buy spirits and mix them themselves, that is an issue of equity. Why was that an anomaly inserted by your government, Peter Costello and John Howard in 2000 when they brought in the GST. Why did they drop the price of these drinks? MT: Well Laurie, it was done to correct another anomaly. Let me be very candid with you. The taxation of alcohol is full of anomalies. I mean, either wine is taxed differently to spirits which is taxed differently to beer. There is not a uniform tax per litre of alcohol. So it is full of anomalies, but the fact is, as Joe Hockey pointed out in Parliament last week, what we've got - we've got a situation now where there is a higher tax on a spirit-based mixed drink than on a wine-based mixed drink which has twice the alcoholic content. So this has created more anomalies, and more - well, just more anomalies, but is the whole system of taxing alcohol full of anomalies and inconsistencies and contradictions? Yes, it is you're quite right. LO: So why not fix this one? MT: Well, I think what you need to fix it right across the board, I mean we are looking at a review of the whole tax system. I mean the review I set up back in March under Henry Urgas is going to look to inform our policy development, the whole of Australia’s tax system, federal, State and local and one of the areas to look at naturally, is excises which are a significant source of tax revenue and we've got to look at where the inconsistency are, how that system can become more efficient and have fewer anomalies of the kind we are discussing. LO: Mr Turnbull, we're out of time, we thank you. MT: Thanks, Laurie. |
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