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 12/04/2005

Treasurer

Doorstop Interview

Senate Courtyard
Parliament House, Canberra

Tuesday, 12 April 2005
2.30 pm

 

SUBJECTS: Productivity Commission Report on Ageing, Budget, NAB Survey, Dalrymple Bay, PBS, GST, IGA

TREASURER:

The Productivity Commission has today handed down a very, very important report which should be of interest for all Australians. It’s on the way in which our society is going to change over the next forty years and, in particular, how the demographic changes which started in the 1970s are going to work through our society.

Demography is destiny and the changes which started thirty years ago are going to work through our society over the next forty years and produce a different kind of Australia. It’s going to be an Australia where there is a larger proportion of people over 65, but about the same number of people at workforce age. It means that there’s going to be a much heavier draw down on services, particularly health services, but the same number of people of working age in the workforce paying the taxes to fund these services.

What we know in relation to health is that if you’re over 65, your draw down on health costs is about four times that of people of working age. If you’re a male over 65 your draw down on pharmaceutical benefits is about 18 times the level of somebody who’s in their twenties. And so, with many more proportionately older people drawing down much more heavily we’re going to have this big mismatch growing between revenue and expenses.

Now, this mismatch will either be filled by massive increases in taxes or, as I want to do, by putting our expenditures on a sustainable basis and so growing our economy so we can meet that challenge. And, this is the long term structural challenge for Australia. How we are going to meet that challenge which we know is coming. Now, we will have to meet it one way or another. We will either have to meet it with draconian steps in ten or twenty years time or start meeting it now with small steps.

But meet it we will have to do. The choice for Australia is whether we get on this agenda now, get on with small steps making government sustainable and government services sustainable now, or if we don’t be forced into much more draconian, much more difficult, much more extreme measures in the years which lie ahead.

JOURNALIST:

Would one of those steps include lifting the retirement age?

TREASURER:

Well, we are going to lift the retirement age for women the retirement age for women is currently 60 and we’ve laid down a program to lift that to 65. The same as for men. When I talk about encouraging mature age workers to continue in the workforce I’m talking about encouraging people, giving them the choice really, to stay in the workforce until 65. There’s a lot of people who leave the workforce before retirement age which is 65.

JOURNALIST:

What about beyond 65?

TREASURER:

Well, no I’m not focusing on that at all. I think it would be a great achievement if we could just give people choice and opportunity to stay until retirement age, to the current retirement age. There’s an awful lot of men in particular that don’t stay in the workforce until retirement age which in Australia is 65. So, before you start talking about increasing retirement ages, let’s just focus on encouraging people, giving them the choice to stay to the existing retirement age.

JOURNALIST:

Does one of those other small steps involve lifting the threshold for the Medicare safety net. You after all did want it higher when you initially started negotiating with the Senate?

TREASURER:

Well look, I am not going into specific measures today because as you know when we go up to a Budget, a lot of propositions are put to us and we don't confirm or deny and that is for obvious reasons, but I am going to make this point, that it is important to get health and particularly, pharmaceuticals onto a sustainable basis. Now, why do I say that, because if your health is not put on a sustainable basis, the system will break, standards will fall. If your pharmaceuticals is not put onto a sustainable basis, you won’t get new drugs.

JOURNALIST:

Is that just code for funding cuts...?

TREASURER:

No, no, it is putting things onto a sustainable basis. This is the point I made when I announced changes back in 2002. I said that if we get this pharmaceutical benefits scheme sustainable, when new drugs are invented they will be available. But if it is not sustainable, when new drugs are invented they won’t be available. It is the same with health care. Let me make this point, we can treat diseases today which couldn’t be cured ten years ago and people can live longer to take available of those treatments. Now, how are you going to make those treatments available? People are going to want them, they deserve them, but you have got to make sure that you can fund them in a sustainable way. And I keep coming back to this point. A productive economy is the best way of ensuring that we can sustain these services.

JOURNALIST:

Is the safety net sustainable at the moment?

TREASURER:

Well I am not going into specifics as I said because I know, not you Dennis, but there are journalists that try and speculate and I am making the point however, and it is a much bigger point, it is not a point for today or next week, I am making a point for 2015, 2025, 2035 and 2045. That is what I am focusing on today. And I am saying now that if we begin this journey we can do it. Now, most of you here are going to be around in 2045. You are going to have a very big interest in the health services and the pharmaceutical services and what I am saying to you is if we can get the changes going now, you will get those health services in 2045 but if we don’t get going now, the options won’t be there.

JOURNALIST:

Treasurer, after ten Budgets, are you as Kim Beazley told the Press Club earlier, ‘a husk of a man?’

TREASURER:

Well I think Mr Beazley was a husk after one Budget wasn’t he? He was Finance Minister for the 1995 Budget and he said that Budget was a surplus when it was $10,000 million in deficit. That is the one thing that we can remember about his time as a Finance Minister. So, I don’t think too many people in Australia would be taking economic advice from Kim Beazley.

JOURNALIST:

That is him, what about you? Have you been over-ridden in the last seven Budgets by the Prime Minister as Beazley said?

TREASURER:

Well let’s go through it, I have done nine Budgets, seven surpluses, more than any other Treasurer in Australia’s history I think. We have now retired $73 billion of the Labor Party debt, cut the unemployment rate from 8.6 to 5.1 per cent, mortgage interest rates which were 10 per cent are now 7.1 per cent. Australia has moved up the international league tables in per capita income and recovered I think to fifth place, we have moved up the global competitiveness league ladders to one of the highest positions, we are either the highest or the second highest in terms of transparency as rated by Transparency International. We introduced a whole new corporations law, national corporations law which I see as under threat. Some of the prosecutions have been quite outstanding I think in recent times. We have been admitted to the G20 as one of the systemically important nations of the global financial architecture and our per capita growth has, I think exceeded practically every other country in the world…

JOURNALIST:

So, Treasurer…

TREASURER:

…the OECD countries have been through recession, the East Asian financial collapse took out Asia and America went into a 2001 recession. Australia has continued to grow, I mean how long have you got for this press conference?

JOURNALIST:

Treasurer, does this mean that you as Treasurer do all the work but as the AC Neilson poll found today the Prime Minister gets all the glory, all the credit?

TREASURER:

Look, the important thing is to keep the Australian economy growing which we have managed to do, America didn’t, Japan didn’t, France didn’t, Germany didn’t, Indonesia didn’t, Singapore didn’t, Hong Kong didn’t and get unemployment down. Which other countries, this is an interesting question, how many other countries would now have their unemployment at 30 year lows?

JOURNALIST:

Treasure what do you make of the NAB Business Survey released earlier today?

TREASURER:

Look, I think the NAB Business Survey released today showed that many indicators are slowing in the Australian economy and that is consistent with what we have said. We have said that the Australian economy would grow slower this year than it did last year and I see an economy which is still growing by world standards at a decent rate but is slowing by the very high levels of growth that we had say last financial year and the years before that.

JOURNALIST:

Treasurer you were speaking before of the role of older men in the workforce, the participation rate of older men in the workforce, probably in my category, that…

TREASURER:

How old are you?

JOURNALIST:

…old enough. 56. What do you make then of the Productivity Commission’s point that moving people, men off DSP won’t actually do much to enhance the economic performance of the nation?

TREASURER:

I don’t agree with that. I am not talking about today, I am talking about 10 years, 20 years, 30 years. We will be in a situation where there will be a large number of people retired and there will be a shortage of people of working age. So we have got to think to ourselves, where will we find more people of working age? And if you say to people who are capable of work, rather than taking a disability support pension, what about re-training, what about re-joining the workforce, that will actually make a contribution instead of drawing down they will be adding to the growth of the economy. So we have to benchmark ourselves in different areas. How do we compare, and one of the areas where we compare badly against developed countries is we do have an extraordinarily high rate, particularly of men in their fifties, on disability support pension. Now, predominantly these are men who may have been in manual jobs, may have had a back injury and gone on disability pension. So what we have got to think about for those men, is they can’t work a 40 hour week in a manual job - re-training, other job opportunities, part-time work - we are going to need these workers in the decades which lie ahead.

JOURNALIST:

Should the Future Fund still be managed at arms-length from the Government?

TREASURER:

Well look, I have announced our policy in relation to the Future Fund during the election campaign and the further details will be announced in the Budget.

JOURNALIST:

With regard to the bottleneck at the Dalrymple Bay…

TREASURER:

Let’s go one, two, three and then we will finish.

JOURNALIST:

…with regard to the bottleneck at the Dalrymple Bay about which you, coal-loader terminal, which you have spoken a lot about, the Queensland Competition Authority Board is meeting on Thursday, do you think they would have any excuse not to have finalised this matter which as you have said delayed 20 months on Thursday?

TREASURER:

This has been going for 20 months. Fifty ships have been lined up outside one of Australia’s major coal export facilities and this decision has been going for 20 months. Even if it ended this week, and I hope it does, and building began the next day, it is two years before you get another loader. This is the decision we should have had 20 months ago so that the two years of construction was coming to an end now. Not the two years of construction coming to a start now. And of course the worst possible result would be if when the decision comes down the parties for some reason still don’t get on with the building. Look, Dalrymple Bay has been mismanaged from start to end. What we have got to make sure is that there are no more Dalrymple Bays. We can’t afford it anywhere else in Australia. I’m sorry, one, two.

JOURNALIST:

On pharmaceuticals Treasurer, is the PBS out of control, what do we need to do to contain it and are you concerned about the generic side, are you looking at higher co-payments, can you expand a little?

TREASURER:

Well look, I think it has got to be attacked on a multitude of fronts. I announced higher co-payments, we managed finally to get those through the Senate sometime last year I believe. We need to ensure that there is rigorous cost benefit analysis before are drugs are listed. We need to be careful about advertising, you know, one of the heaviest advertised drugs in this country was Celebrex, and the demand for Celebrex was pumped up very significantly over a short period of time. We need to encourage generics. We need to make sure that the retailing is such that things are delivered to people at the lowest possible price. This is a multi-faceted industry, we need to protect the Commonwealth’s buying position, we need to use our buying position very, very carefully to get the best prices. This is not a one-sliver bullet reform on the PBS, this is a full-court press, to use a basketball term, full-court press across many fields. Sorry.

JOURNALIST:

Thanks Treasurer, with regards to your fisticuffs with the States over taxation, would you be prepared and could you tear up the Intergovernmental…

TREASURER:

Sorry, there have been no fisticuffs. Look, there have been no fisticuffs. Let me make this point. The GST was introduced to abolish other taxes. Everybody in Australia knows that.

JOURNALIST:

…but would you withhold the GST funding if they don’t get rid of those taxes?

TREASURER:

Hang on, the GST was introduced to abolish other taxes. Now that it has been introduced and the revenues are more than anyone expected, the other taxes should be abolished. I don’t think anyone could argue with that.

JOURNALIST:

They try to.

TREASURER:

We campaigned on that basis. Now, you know, the State Premiers might not remember that because I don’t remember any of them campaigning for the introduction of the GST…

JOURNALIST:

But will you and can you rip up the Agreement?

TREASURER:

…but what I have said to the States is this, those taxes have to be abolished. We have put forward a proposal as to timing and sequencing, if they have a counter-proposal on timing and sequencing we are open to hear it. But it is not an option to have the GST and the taxes which it is designed to abolish. That is not an option. The GST is introduced to abolish other taxes. And I think the Premiers know that, I think the States know that and I will tell you something, I think the public of Australia knows that because wherever I go people say to me, ‘hey, you told us the GST would lead to the abolition of other taxes,’ and we say, ‘yes we did.’ And they say, ‘what are you doing about it?’ Well we are working on it and we are maintaining that agreement and we are maintaining faith with the Australian public, that is what we told them would happen, we want to deliver on that. I think you are quite wrong if you think this is an issue between the Commonwealth and the States, this is an issue between Commonwealth and State Governments keeping faith with the Australian people. That is what this issue is about. The Australian people were told that these taxes would be abolished and both levels of government, Commonwealth and State, have to keep faith with the Australian people. Thank you.