The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 24/02/2005

Interview with Alan Jones
2GB

Thursday, 24 February 2005
7.15 am

 

SUBJECTS: Economy, health funding, First Home Owners Grant, leadership, infrastructure, fuels, Disability Support Pension, tax

JONES:

Treasurer good morning.

TREASURER:

Good morning to you Alan.

JONES:

I noticed yesterday the ABS wage price index was released yesterday, totally hourly rates of pay growing by 1 per cent, public sector wages 1.3, the rise is fairly moderate, is there a case for putting up interest rates?

TREASURER:

Well that is a moderate rise. We have seen over recent years that if wages rose around 4 per cent per annum and if inflation is going up say, 2 per cent per annum and the difference is made up by productivity then that is quite a good result, it is a good outcome. Wages are rising in real terms, they are not putting too much pressure on prices and that is consistent with a low inflation economy.

JONES:

Well a week ago the Governor of the Reserve Bank, Ian Macfarlane seemed to be giving notice that rising interest rates are on the way.

TREASURER:

Well he gave his testimony, I don’t want to add to it in any way, people…

JONES:

It means a lot to people out there listening to you though.

TREASURER:

…there is a whole industry that look at these words and write the meaning of every nuance. The only thing I would say is this, that our economy is growing with low inflation and that has been consistent with our low interest rate regime and obviously we want to keep that economy growing.

JONES:

Do you think though the Government has created a rod for its own back? We have had 14 years of uninterrupted growth, but Commonwealth spending has gone up 48 per cent in the last five years, last year federal taxes rose 7 per cent, personal income tax is now 34 per cent higher than the OECD average. Does the Federal Government need to tighten its belt?

TREASURER:

Well one of the things that the Reserve Bank Governor said in his testimony last week was that he is the envy of the central bankers of the world because he is lucky to have a Government that has run seven surplus Budgets. And he said, I think his phrase was, when he goes overseas all of his colleagues envy him because, let me tell you this Alan, we have now had seven surplus Budgets here in Australia. How many do you think the Americans have had? How many do you think the British have had? How many do you think the French have had, the Japanese, the Germans? We…

JONES:

Basically that means Treasurer you have raised more money from us than you need and people listening to you are saying, well why then isn’t the money for mental health, or oral health, or critical infrastructure, you yourself have talked about the problem with ports, you were up telling Dalyrmple people they have got to do something to clear that up at Mackay.

TREASURER:

Sure, absolutely. Well there is the money for mental health and we announced a very big increase in mental health funding…

JONES:

But it doesn’t meet the needs.

TREASURER:

…well, Alan, it has been rolled out. I don’t want anybody to think that the Government has somehow cut back on health expenditure – quite the reverse – the Government has significantly increased health expenditure.

JONES:

Well I don’t want to have that debate here because we will get sidetracked. But Macfarlane said, the Governor of the Reserve Bank, there was a disproportionate amount of our investment resources in housing. I guess he is talking about the First Home Owners Grant and the incentive that provided and people that have moved into that area. Do you think that that is a valid judgement to make?

TREASURER:

I think the First Home Buyers Grant has been a good scheme. It has given young people the opportunity to get into the market which they wouldn’t have had otherwise and it was my idea to introduce it so you would expect me to say that. I think it has been a good idea. I don’t think there is any evidence at all that the First Home…

JONES:

(inaudible) continue forever?

TREASURER:

…yes.

JONES:

Right. Okay.

TREASURER:

$7,000.

JONES:

Yes, but I am saying this will continue while ever you are Treasurer?

TREASURER:

Yes. I introduced it, it was my idea, I think it has been a good idea and I am not in the business of taking that $7,000 away from first home buyers, no.

JONES:

So even when you are bringing down your 13th Budget you will still have that there will you?

TREASURER:

As long as I am Treasurer, and I suspect even after I am Treasurer, people will conclude it is a good idea.

JONES:

There is some speculation about all that isn’t there, about you continuing as Treasurer and obviously that is always linked to this leadership issue. Every person in your position would want to be Prime Minister. Will you still be there after the next election if John Howard leads the Liberal Party into the next election?

TREASURER:

Look, I am at the moment, as Treasurer, I think as focused and as energetic and more confident than I have been for a very long period of time. And I will tell you I am staying in politics for the long haul.

JONES:

So if the Prime Minister leads the Party to the next election you will still be there as the Treasurer?

TREASURER:

My position is always the same which is I am going to stay in politics whilst there are things to be done and I can make a contribution and I am going to make that contribution.

JONES:

Talking about things to be done therefore, when do you think we are going to embrace through you, the Treasury or the Government this notion to re-build Australia? Our infrastructure really has fallen down around us in many ways, we don’t have the kind of thing we need to re-generate water supplies in this country. One wonders whether the Snowy Mountains Scheme would have been built if the same approach to infrastructure were taken now. Should we be issuing some infrastructure bonds and saying to the private sector, ‘look, will you get behind re-building the country with us?’

TREASURER:

Well Alan, anybody could do that any day. Any private sector…

JONES:

Is there merit?

TREASURER:

…well look, you have got an election going on in Western Australia on this very point at the moment right? The company Tenix, private sector company, says that it wants to build a water canal. I imagine that the way it would finance that would be through issuing bonds. Now, the people of Western Australia will vote on that particular issue - and other issues of course - this weekend but the point I am trying to draw out of this is that any day, any private company that wants to get into the business of infrastructure can issue bonds to do so.

JONES:

Should the leadership for that come from the national government in terms of where our priorities might lie. For example, housing in this city is just beyond the capacity of this young man to afford, Ross (inaudible), I mean he has got to work here in the middle of the city but he has got to live way out there. He can’t afford a house, housing or land here. Now there is a stack of it half way between here and Canberra. Do we need a very fast train for example to overcome the problems of housing and land prices?

TREASURER:

Well I think one of the things that you probably need to overcome the problem of prices, particularly in Sydney, is you probably need more land release.

JONES:

You do.

TREASURER:

That is one of the things that we have looked at and we have recommended to the State Government. If you want to lock up all of the land, that land which is available for housing is going to become more expensive. You know, Economics 101.

JONES:

But as you know, once you get to Campbelltown here, and you have driven this route to Canberra many times, then there are acres and acres and acres of land but the problem is whether those people can get from there to here in time to get to work. A very fast train in part of the kind of infrastructure tomorrow might need.

TREASURER:

Well it may well. But let me make another point Alan because I have driven that road. If you drive that road now - and I did it the other day from Central Sydney - you can come down the Airport road, you go underneath the airport, you go through a tunnel and onto a freeway, you can drive down there without hitting a traffic light. Why?

JONES:

True.

TREASURER:

Because the infrastructure which is there…

JONES:

Don’t go too far down this observation by the way, there are people listening to you who are stuck out there in Bob Carr’s car park with two lanes either way, no lights and they are not moving.

TREASURER:

…alright.

JONES:

It is hopelessly congested…

TREASURER:

…what I was about to say. No, I was about to…

JONES:

I was saving you there…

TREASURER:

…thank you, thank you very much.

JONES:

Now oil prices…

TREASURER:

Can I ask the questions, you might give the answers from now on?

JONES:

…no, you are a Victorian, you are entitled not to know those (inaudible). Oil prices are going to sit around US $50 a barrel. We still have the Federal Government seemingly frightened to mandate ethanol. When is that going to happen and when are we going to get into a debate about say nuclear power?

TREASURER:

Well we can have a debate about nuclear power any time. It is quite feasible that with the Kyoto and the worry about greenhouse gases that nuclear power will come right back on the agenda. Australia has uranium, we are in fact selling it at the moment. A lot of Japan’s electricity is generated from nuclear power supplied by Australian uranium.

JONES:

Should we have led that fuel cycle by you not being so ready to allow the Xstrata bid to be given to the go-ahead? We could have led that nuclear fuel cycle, 40 per cent of the world’s uranium, well you could have maintained control of it?

TREASURER:

Look it is a fair question and I have thought about this very carefully. And when I looked at it very carefully Alan, and at the legal situation, it became clear to me that regardless of who owns Australian uranium the Government controls every step in the process. You cannot dig uranium without a Government permit. You cannot store it without a Government permit, you cannot transport it without a Government permit, you cannot export it without a Government permit, you cannot send it to a country that doesn’t have an agreement with the Australian Government…

JONES:

Alright.

TREASURER:

…you have to provide your contracts to the Australian Government. Let me tell you, who owns it is not nearly so important as who governs every single step in the mining and production chain and that cannot be done by anybody without Government control. It is the most regulated industry in the country…

JONES:

Okay, let’s go back to alternative fuels, because that is an alternative. 225 million cars in America driving on mandated ethanol fuel, there is a mandated content, why wouldn’t we mandate? That would provide relief for the sugar cane industry up there, perhaps the corn grower as well, and provide an alterative to these fossil fuels which under Kyoto are polluting the environment so we are told?

TREASURER:

Well I would say that anybody who wants to buy a blend of ethanol can in Australia and many people do and there was some very bad publicity that was put out against those blends…

JONES:

Yes and they shoved the signs up on the bowsers.

TREASURER:

…and you know, as far as I know, and I am no great technical expert, but as far as I know, a blend of ethanol is quite safe for your car.

JONES:

Yes so why wouldn’t you mandate it?

TREASURER:

Well mandate is another thing. Mandate is going one step further, it is not just saying you can choose here…

JONES:

Well America does it, Brazil does it.

TREASURER:

It is saying you have to do it by law.

JONES:

Because it is renewable…

TREASURER:

By law.

JONES:

…these things are non-renewable.

TREASURER:

Yes well, I don’t actually think that the Government should step in and by law force people to use a product if they don’t want to use it.

JONES:

Well we have got to do something, we can’t go on with fossil fuels for the rest of our lives, this is an alternative bio-fuel which does the environmental job. Your obligation as you say, well how do you encourage us to move from the non-renewable to the renewable?

TREASURER:

And I think encouragement is right and we do do that and the way that we encourage it is we have a lot lower tax, in fact at the moment we have no tax on these alternatives…

JONES:

You knocked off the ethanol bounty, Paul Keating put an ethanol bounty on about 18 cents a litre to grow ethanol, the ethanol product, you knocked that off. That was an incentive for people to grow a bio-fuel, an alternative, wasn’t it?

TREASURER:

But we do have an incentive and the incentive is that if you buy petrol it is taxed with an excise of 38 cents a litre and there is no such excise on ethanol. There will be a lesser excise on ethanol in the future but there will always be a big tax advantage on using ethanol.

JONES:

Okay, let me ask you this, we raised $100 million a year in personal tax, give back $80 billion in welfare. Now, you have had a lot of debate in the last couple of days about this relationship between welfare and tax, when you have got a tax free threshold of $6,000 but the person in work then after $6,000 has to pay tax, the person on welfare gets $12,000 if he is single with no tax at all, aren’t we making it unattractive for the person to move from welfare to work?

TREASURER:

Well look, Alan to answer your question, I think we have to do what we can to encourage people who are on welfare to get work, I really do. And the fastest growing area of people who are on welfare and not at work is the Disability Support Pension. I am not talking about people who are seriously disabled but there are a lot of people who are going on the Disability Support Pension because they have got bad backs or because they have psychiatric problems or depression problems…

JONES:

But shouldn’t…

TREASURER:

…and a lot of those people should be encouraged to get back into work. Why? Because it will actually be good for them.

JONES:

…but shouldn’t public policy make it infinitely more attractive to be in work than to be on welfare? It should be such that you could never be better off on welfare. Irene says to me, ‘I earn $21,000 a year and have to pay tax on this, I have been saying there should be a tax free threshold of at least $15,000. I was on a single mother’s pension, I am 51 now, I was far better off with the concession card and the health card than I was on a single mothers pension. I have two boys at university, granted one of them is on Austudy, but there is not a lot of incentive to go off welfare especially if you have a housing commission house and you only pay a quarter of your welfare in rent and never have to fork out to even change a tap washer. I have a house and all the maintenance is paid by me, my sewerage needs replacing which will cost me at least $2,500, I have to pay this myself, please can we have a higher tax free threshold?’

TREASURER:

Well, I would say to Irene, that there is a benefit for single mothers and they are provided with welfare whilst their kids are growing up. But if your kids have grown up and there is no reason why you shouldn’t go out into the workforce and there shouldn’t be a benefit once your kids have left school.

JONES:

But why tax a bloke to make him poor and then because he is poor pay him welfare? Why don’t we say, we will raise the threshold to a point whereby it will always be more attractive to be in work?

TREASURER:

Yes, well I think we should and actually I think that when you look at people who are capable of doing work, it is always more attractive for them to be in work. Now, what they say sometimes is ‘not attractive enough’. Not attractive enough.

JONES:

Alright, we always run out of time but we will make more time down the track, thank you for being with us.

TREASURER:

It is great to be with you Alan and congratulations to you on your recent achievements.

JONES:

Thank you.