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Summer 2001 cover

National Observer Home > No. 47 - Summer 2001 > Editorial Comment

Mr Peter Reith and the Liberal Succession

The choice of Prime Minister is one of the most critical for the Australian national interest.  As has been commented before, although criticisms may be made of some aspects of Mr. John Howard's leadership, he appears to be distinctly preferable to each of the present alternatives.1

In particular Mr. Kim Beazley has shown himself so far to be unduly erratic as Leader of the Opposition.  This is not to say that Mr. Beazley may not acquire greater standing in the future.  He needs above all to be calmer and more deliberate, and also more sceptical towards the demands of some of his associates and electorates, particularly in regard to matters affecting the economy, the environment and the agenda of the politically correct.

Mr. Howard is now clearly the preferable person to lead the Federal Coalition, and it would be most unfortunate if he were replaced whilst he remains vigorous.  However when he is eventually replaced, if there is a choice between Mr. Peter Reith and Mr. Peter Costello, there are increasing grounds for favouring Mr. Reith.

Mr. Reith has acted conscientiously in carrying out government policy in regard to industrial relations.  He has been hamstrung by an unfavourable Senate, and hence not through his own fault has  been unable to bring about a number of important reforms. For example, Australia's unfair dismissal laws, which fall particularly harshly on small business, are an obstacle to efficiency, and it is a scandal that the Senate has not permitted their amelioration.

Recently Mr. Reith has shown more intelligence that Mr. Costello on taxation issues. On 11 October 2000 Mr. Costello released draft legislation attacking family trusts, as used by small businessmen, farmers and small investors.  The draft legislation did not accord with prior announcements it would exempt fixed trusts and would not in fact tax trusts like companies and represented the highly ideological left-of-centre philosophies that have become expected from the Australian Taxation Office.2

Although this curious draft legislation was strongly supported by Mr. Costello, Mr. Reith was one of those who expressed opposition, on 22 November 2000, and was reported as saying that "he was unimpressed by the trust taxation proposal because it exempted everyone except small businesses".3

This comment by Mr. Reith went to the heart of the problem.  Many of Mr. Costello's tax proposals on the whole they represent changes and not real reform4  have fallen hard upon small businesses, including farmers.  Family trusts, for example, are a staple of small business, whereas fixed trusts (to be exempted under Mr. Costello's October 2000 proposal) are more likely to be availed of by big business. Indeed, the fact that the draft legislation was released at all by Mr. Costello demonstrates the extent to which he has been influenced by unsatisfactory A.T.O. advice.

Mr. Costello's promotion of this ideological draft was highly misleading. His press release of 11 October 2000 was headed "Taxing Trusts like Companies ...", which was false. In fact under the proposal (1) only a limited class of trusts family trusts were attacked (many other classes were exempted) and (2) these trusts would not be taxed like companies unique, draconian rules would apply instead. These rules were quite absurd.

Much credit is due to Mr. John Anderson, as leader of the National Party, for opposing Mr. Costello's inappropriate actions. Similarly an ad hoc Committee of the National Party (comprising Mr. Stuart St. Clair, Mr. John Forrest and Mrs. De-Anne Kelly) which considered this matter is to be complimented for not allowing itself to be pressured into accepting unsound arguments from Mr. Costello. It appears now that in view of Mr. Costello's unfortunate influence it is the National Party, not the Liberal Party, on which small business must rely today.

Indeed, there is much to be said for the view that Mr. Reith should succeed Mr. Costello and take his turn as Treasurer. First, this would be likely to give rise to more moderate legislation and to a reduced influence by A.T.O. officers.  Secondly, although Mr. Reith's experience has been very broad, as a potential future Prime Minister it would be desirable that there be mutually beneficial inter-action between him and the Department of the Treasury.

National Observer No. 47 - Summer 2001