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 15/06/2006

Interview with Alan Jones
2GB

Thursday, 15 June 2006
7.10 am

SUBJECTS: Ethanol, French economy, IR reform, Future Fund, carers

JONES:

The Treasurer is on the line, good morning.

TREASURER:

Good morning Alan, good to be with you.

JONES:

You too. Down to the guts of it, I mean our transport problem, our problem is transport energy not nuclear power isn’t it?

TREASURER:

Well I think that is what is hurting consumers much more. Nuclear energy is a long-term issue. Nothing is going to change tomorrow or even next year in relation to nuclear energy…

JONES:

No and it’s not going to help the immediate concern about greenhouse gases or the scarcity of oil so enter ethanol and biofuels. Now for a start surely this is the weakest policy imaginable that the Federal Government has got a strategy of 350 million litres of ethanol into petrol by 2010. I mean that is less than 1 per cent of the petrol usage.

TREASURER:

We have set a target that we think we can reach. We would be very happy if we exceeded it. But that is a target to encourage people to think about alternative fuels…

JONES:

Less than 1 per cent?

TREASURER:

We are on our way, my advice is that by 2010, that is a few years off, that we should be able to make it. We have given incentives to producers who want to investigate and produce these alternative fuels and we will see how that goes.

JONES:

But you knock, that is a bit disingenuous, I mean you knock off in this Fuel Tax Bill, those incentives are knocked off in 2011 where you put the local industry on the same footing as imported ethanol and biofuels and you start taxing the renewables. Now in the European Union, you have been to all of these places, France, Belgium, Italy, Brazil, Argentina, Thailand, India there are tariffs on renewable fuel imports. Some are nearly 200 per cent. We are going to remove those fuel import barriers and let open slather and you are going to knock off the local industry.

TREASURER:

Well, when we announced our changes which was about 2003 – 2004 I think we said that we would protect the local ethanol industry for 10 years and so the changes will gradually take place from 2011 onwards…

JONES:

Five years away?

TREASURER:

Yes, that’s right. That was to give…

JONES:

Five years?

TREASURER:

…local industry a start.

JONES:

But hang on, other countries are restricting imports so that they can grow their own renewable fuel energy, we are doing the opposite, I mean does the Federal Government not understand or is it just pig-headed?

TREASURER:

Well you will have to wait until we get to 2011…

JONES:

Oh there will be no industry. People now…hang on…you hang on. Peter you’re smart enough, you’re not going to invest money now when you know come 2011 it is open slather and Brazil can produce the rest.

TREASURER:

No because you would have to wait until we get to 2011. If there are Australian ethanol producers that are producing ethanol then that would most probably be a very competitive product…

JONES:

How on earth are you going…

TREASURER:

But let me finish this point. I do have to get a point in every now and then Alan.

JONES:

Peter you can be a bit facetious. You don’t have to be facetious about this.

TREASURER:

In 2011…

JONES:

Hang on, hang on Treasurer, don’t be a smart aleck about this. That is an objectionable comment to make. You have had plenty of opportunities to make points and the points you are making are in total contradistinction to every sentiment expressed by people who write to me. I am saying to you – you people are pig-headed and will not listen to the electorate and that is a prescription for political failure.

TREASURER:

When we get to 2011 it could well be that if people want to use ethanol and there isn’t enough volume in the industry, it could well be that it would be cheaper for them and they would have the option of taking imported ethanol. Now that would reduce their bills. If you don’t have enough…

JONES:

That is a nonsense argument…

TREASURER:

If you don’t have enough ethanol coming out of the Australian industry you would be faced with this choice – condemning those people to take higher petrol prices or giving the option of having lower petrol prices with imported ethanol.

JONES:

So why does the USA, why do the USA and Europe, I mean this is this know-all stuff that comes out of Canberra on so many issues, you people seem to believe you know better than everybody else – the USA, Europe, most countries in Asia have preferential treatment for domestically produced fuel and ethanol – no limit – over imported ethanol and here we are doing the exact opposite. Why?

TREASURER:

Well we have preferential treatment for domestic ethanol…

JONES:

You are ending it in 2011.

TREASURER:

We have had it now since the imported ethanol had a tax of 38 cents per litre.

JONES:

I don’t believe I am listening to this and the public out there are laughing. I am telling you the public are laughing. Your ethanol component is, your quota, is less than 1 per cent of petrol by 2010. Less than 1 per cent, that will make no discernable difference to replacing our reliance on oil and petrol.

TREASURER:

When we announced the changes to give 10 years of preference to the Australian industry we announced that it would be tax free for another 10 years as against the international industry. We told the Australian industry that that would give them a head start to get up and to get going. We get to 2011, you may have this choice to make, there may not be enough domestic ethanol. You either keep ethanol out of the market and people pay higher prices or you have the option of allowing people to have lower prices at the bowser because they use some imported ethanol. That is the choice we may have to make in 2011.

JONES:

Are you serious that people are going to stick their hard earned money investing into ethanol distilleries when they know that it will be open slather in 2011 for imports and Brazil will be able to produce the stuff on our doorstep here more cheaply than we can because of wages, because of prices, all sorts of differentials and you are going to do the exact opposite of what the United States are doing, the European Union are doing, France are doing, Belgium, Italy and Brazil. How do we know better?

TREASURER:

Well I don’t think we are doing the exact opposite.

JONES:

You are. There are tariffs in all of those countries.

TREASURER:

Not in relation to ethanol.

JONES:

On all renewable fuel imports…

TREASURER:

You have difference subsidies for different countries, that is true, that is true…

JONES:

…on all renewable fuel imports…

TREASURER:

What we are trying to do is we are trying to give a tax holiday to the domestic industry as against petrol and as against any imported ethanol for over 10 years.

JONES:

It is 2006 we are talking 2011 that is five years to go…

TREASURER:

Five years to go.

JONES:

And the only incentive you have given…

TREASURER:

We gave it for 10 years…

JONES:

And the only incentive you have given in 2010 is 350 million litres.

TREASURER:

…subsidies and the subsidies were so they could do an investment. Now we gave them a long time frame, the time frame was to say please get on with it, use the subsidies, get the industry going. You know that by 2011 that if the Australian industry is producing, the Australian product will be soaked up. But let’s go to 2011. Suppose all of the Australian product is being soaked up in 2011, suppose the petrol price is double what it is now or even the same as it is now and suppose people have the option of having cheaper blends at the bowser using all of the Australian product and some part of the imported product. What should we say to them – pay higher prices at the bowser?

JONES:

Well go on, you are talking, nothing of what you are saying is making sense, I am just listening.

TREASURER:

Well that is the situation…

JONES:

There will be no domestic industry. There will be no domestic industry. Ask the experts out there. Do your reading on what is happening overseas and here. I am telling you now there will be no domestic industry. Why? Because you are only asking for 350 million litres by 2010 that is less than 1 per cent of the petrol quotient. Who on earth – are the oil companies falling into line? I mean 5½ months ago the major oil companies gave a commitment to meet this 350 million litre 2010 biofuel targets. They have done little if anything since. You are supposed to be having a review of that next week aren’t you?

TREASURER:

Well the advice that is to me is that we will meet it by 2010. Obviously we keep it under review. It is four years away and you have got to make certain expectations as to how much it would grow. But you see you get into this situation in 2011 as I said to you before – suppose all of the Australian production is going into blends in 2011, suppose the petrol price is as high as it is now or higher, and suppose that some component, imported component could go into a blend at say 10 per cent and bring prices down at the bowser. Would you say that people have to pay higher prices even though they could have lower prices?

JONES:

Well you see if Australians were given the chance whether it be butter or sugar or anything else, to promote an Australian industry so that one day we could proudly say we do have some things left that are Australian - under the so-called free trade agreement, it looks as though there won’t be much at all - we just open the markets to everybody else, yes my answer is that they would. If that scenario were applying it would apply. On the other hand if you created an incentive for that industry to keep going it would produce the ethanol that we require now. Unless you want to make the wage rates in Australia the same as they are in Brazil – do you want to do that?

TREASURER:

No I don’t want to do that.

JONES:

Absolutely. Now don’t ask the Australian industry to compete.

TREASURER:

Well the Australian industry can compete Alan. I don’t agree with this proposition that Australian industry can’t compete. I think Australian industry can compete very well. I think Australian industry competes very well. I think our agricultural producers compete very well on the world market. I think our car industry competes very well. This idea that Australians can’t compete with the rest of the world…

JONES:

We are not saying all Australians…

TREASURER:

Wrong, wrong, wrong Alan.

JONES:

…at the end of the day you will finish up with no agriculture in this country, that is where we are heading, and we talked about this yesterday…

TREASURER:

I can’t disagree more.

JONES:

I know you can’t.

TREASURER:

I couldn’t disagree with you more.

JONES:

I know you can’t…but you people down there are out of touch with the electorate.

TREASURER:

Well the Australian agricultural industry is one of the greatest industries in the world. It can compete with anybody. We are at the moment…

JONES:

Talk to the apple farmers at Bathurst.

TREASURER:

Well you talk to the wheat farmers…

JONES:

Well you talk to the apple farmers.

TREASURER:

…who have just opened new markets in India with the only country in the world that can meet the Indian standard on a global market, discussions that (inaudible) involved in.

JONES:

You choose…

TREASURER:

You talk to the dairy market…

JONES:

The dairy market.

TREASURER:

…which is now opening a market to Asia.

JONES:

Your dairy markets…

TREASURER:

This idea that Australia can’t compete, this idea that we are somehow second best, we aren’t Alan, we are good, we are good at competing.

JONES:

And if you go down to the Southern Highlands…

TREASURER:

We need a bit of pride in our country because our country is good at production and it is good on the international market and Australians are as good as anybody else, and Australians can compete, we are going to compete in West Germany not because we have got some protection – they don’t give Australia a two goal start in a soccer match and say get on to the field because you are Australians and you can’t compete. We go out into the world, we compete and we can do it and I don’t accept for a moment this proposition that Australians are somehow lesser than other countries.

JONES:

Well I am afraid the people listening to you, I am simply saying to you unless they are writing one story to me and one story to you the people listening to you at the moment simply don’t believe that proposition. Pascal Lamy is now head of the WTO and only some years ago Pascal Lamy was asked how he could defend what they were doing for European agriculture.

It is 7.30 but I will keep the Treasurer if he doesn’t mind, he said this, “My primary task is to defend European interests. We in Europe have made a political choice to support our agriculture because it is not just another economic activity, it plays a part in conserving the environment in food safety and in animal welfare.” He said: “In Europe we have 7 million farmers that we believe have another function other than just producing food, these people are useful for our environment, they are important for family structure, for our society, they are important for our landscape. We have to pay for that. Our taxpayers agree to pay for these extra functions which our farms bring to our society. We want to keep these farms by keeping the sort of protection through subsidies we give to our farmers. If we apply the market rules they will disappear and we will have problems which in our view would be more costly to society.” You talk Peter Costello to some of the people west of the Great Dividing Range about what they see their future to be in agriculture and they will express that very same view.

TREASURER:

Well I wouldn’t agree with anything Pascal Lamy said.

JONES:

I know him.

TREASURER:

One of the reasons why France has unemployment of 11 per cent is they have views like that.

JONES:

In France if agriculture went down the drain there would be one big city, it would be Paris. Look we don’t agree. If I could move on.

TREASURER:

No, no, no, if I could finish this…

JONES:

You may.

TREASURER:

France is not an economy to be held up as an example. In France they have mass unemployment of 11 per cent, they have huge Budget deficits, they have stagnant industry, they have riots of young youths in the street because they have no prospects at all and one of the reasons why France is the country it is, is people like Pascal Lamy run propositions like that. Alan believe me you don’t want Australia to be like France. We are much better than France, we are much better in agriculture we are much better in industry we have lower unemployment, we have balanced Budgets, we have no debt. Please, there are countries in the world that do better than us but they don’t include France.

JONES:

If I can just move on, the business community we all know are opposed to the Kim Beazley proposition and his proposal to abolish workplace agreements to businesses. People have spoken. But the Office of Employment Advocate which is the Government’s own office argues that of 6,263 agreements lodge since the new legislation WorkChoices took effect 64 per cent remove leave loadings 63 per cent cut penalty rates, 52 per cent of the new agreements cut workers’ shift loadings, 40 per cent strip staff of public holidays, all removed at least one award condition and 16 per cent removed all of them. Now this is the Office of Employment Advocate. Is there a generation entering the workforce who will now never get leave loading or penalty rates or be recompensed for working on a public holiday?

TREASURER:

Well they might, but if they don’t they will get higher wages because what we are allowing is, we are allowing a situation for employers and employees to agree. For many people who want flexible hours they are quite happy to work on weekends but they want higher wages and what this office reports is yes, sure, sometimes these conditions are cashed out and they are cashed out for increases in wages.

JONES:

How does the person with no skill negotiate his position with a very powerful employer, this is the Spotlight story which has been trotted around almost to the point of boredom, that a woman really lost conditions worth $90 a week and had her pay increased by 2 cents an hour.

TREASURER:

Well Alan under the new laws, these are the laws that have applied from March, we have a Fair Pay Commission which sets basic rates of pay and other minimum conditions below which you can not go, above which you can go. So the person who has a lack of bargaining power still has the Fair Pay Commission standard. Now the other point to bear to in mind…

JONES:

What happened to this woman, she got 2 cents an hour extra and lost 90 dollars worth of benefits, what happens to her?

TREASURER:

Well I think the Spotlight case has still got to be worked out. But I think one of the things, one of the points that was made in relation to that particular contract was, it was giving, it was an offer, but you have to bear in mind…

JONES:

But the Spotlight workers had overtime, penalty rates, public holidays, rest breaks and a set of payments allowances, bonuses and annual leave loadings that were all removed. How do you sell a policy like that to the electorate?

TREASURER:

You have to bear in mind this Alan, that if you have an inflexible system of wage arbitration it might be good for those who are in it but it locks people who are not in it on to the unemployment benefit and the unemployment benefit is a lot, lot lower than the Fair Pay Commission. The object here is to create more jobs. As Tony Blair the British Prime Minister said, justice in the workplace begins with the chance of a job.

JONES:

We understand that but I have had young blokes come to see me here to say, if I don’t get penalty rates and I am not given overtime my current take home pay will drop by 40 per cent and I can’t survive, what do you say to that person?

TREASURER:

I have no doubt that in a growing economy with a better system of industrial relations those people will have a better chance of a job and higher wages.

JONES:

He has got a job.

TREASURER:

There is no doubt in my mind…

JONES:

He has got a job.

TREASURER:

…that in a growing economy with profitable companies those people will have higher wages.

JONES:

The bloke stands in front of me Peter and says my weekly take home pay is going to drop by 40 per cent what do you say to him?

TREASURER:

Well I would have to have a very close look at his contract, what I would say…

JONES:

He has not got a contract he was just given a job and he works on Saturday but because he works on Saturday …

TREASURER

He has to have a contract.

JONES:

Well he is now, but…

TREASURER:

If he is currently on an award he stays on an award, the only way he can change is if he is entering into some other contract.

JONES:

The new contract you say…

TREASURER:

That’s right.

JONES:

…well you won’t get the penalty on Saturday that they are currently getting.

TREASURER:

That is why I say I have got to have a look at his contract, because if there is no contract he is on the award so there is no change. There is no change, what you have got you keep if you are on the award. Now…

JONES:

The change is that he is getting 40 per cent less.

TREASURER:

…the only circumstance in which it could change is if he decides to go on to a contract. The contract has to recognise the minimum and it can go over the minimum.

JONES:

But he can, he will be paid less.

TREASURER:

Yes, I have no doubt that as time goes by in a profitable economy that man’s wages under a contract will grow faster they would have under an award, because under an award in a stagnant economy…

JONES:

He has to make his mortgage payment next week.

TREASURER:

…he will not have the same opportunity.

JONES:

The PM said to me in August , “I mean some people are going to have to work public holidays, it would be absurd and unfair and unreasonable if somebody has to work on a public holiday but that person isn’t compensated by being paid whatever it is, the double time or the time and half, those arrangements are going to continue”. Now the young man that came to me yesterday said in him they are not going to continue.

TREASURER:

Well if the young man continues on the award what he has he keeps…

JONES:

He is not being paid the award, he is being paid above the award.

TREASURER:

… and if the young man young man takes up a contract then the minimum conditions which are the pay rates of the award have to be observed plus the other minimum conditions and he has the opportunity to have more over and above that and I have no doubt that in a growing economy his chances of keeping a job and pay increases will be much greater…

JONES:

I don’t think you understand the point.

TREASURER:

…than in an economy.

JONES:

You don’t understand the point. He loses penalty rates and overtime Peter, he loses, can I emphasis penalty rates and overtime, that is what he is going to lose and therefore his pay is going to be 40 per cent less, it is in penalty rates and overtime, that many of these blokes today are making a liveable wage, that is how they get it. That is how they better themselves and afford the mortgage. That’s out, they have been traded off and what he gets in return is not equal to what he was getting before. And he has got no bargaining power, he is just a labourer.

TREASURER:

Well Alan can I say in our economy by the way with labour shortages in many of our big cities, labourers have a lot of bargaining power. Can I tell you this Alan, labourers have more bargaining power today than they have had in the last thirty years. Unemployment is at 4.9 per cent…

JONES:

Peter, if he has got a mortgage at Ryde he doesn’t have a lot of bargaining power with better wages of Cessnock. He has got the place in Ryde, he has got his kids in a school at Ryde, he doesn’t have a lot of bargaining power he does not have a lot of mobility, he is stuck there.

TREASURER:

If you are unemployed how much bargaining power have you got?

JONES:

He is not unemployed. He is worrying whether this circumstance will reduce his entitlement.

TREASURER:

Let me tell you, in an economy which is not efficient and growing he will be unemployed. That is the point. Unemployment in this country used to be 11 per cent. It is now 4.9 per cent.

JONES:

Well done, we have given you plenty of wraps for that.

TREASURER:

It is now 4.9 per cent and if we want our labourer at Ryde to be able to stay in work then we have got to keep it at 4.9 per cent, if we want people who are currently unemployed we have got to get it lower than 4.9 per cent. You can only do that in a growing economy, you can only have a growing economy if it is well run. You can only have a well run economy if you have industrial relations reforms, these things all hang together.

JONES:

Life is about the real world and there are people in the real world who are asking the questions that I am asking you and they are not satisfied with the answer. This bloke is going to get less pay full stop. His mortgage is a commitment beyond what he can then afford.

TREASURER:

Well in the real world the guarantee of a job is a growing economy.

JONES:

Peter McIlwain, the Government’s employment advocate told a Senate Estimates Committee hearing on Monday evening that employers had been quick to take maximum advantage of the new laws, his words. He said a majority of 250 agreements sampled by his office signed away penalty rates and shift and leave loadings. One in six agreements signed away all previously protected conditions, that means those people are going to get less money.

TREASURER:

No they signed them away for increases in pay Alan, that is the point, for increases in pay. Let me tell you, there are many people who would like a larger weekly wage without having to account for different hours on different days. Cash them all in and give me more, give me more for working my weekly wage. Don’t give me a lower weekly wage and then say I will try and bring it back up to that larger amount by accounting for different hours…

JONES:

…unskilled and vulnerable…

TREASURER:

…and let me say this suits a lot of people.

JONES:

It does, it does, it does, but there (inaudible)

TREASURER:

There are a lot of people who like to work on the weekend, there are a lot of students for example they are at university from Monday to Friday…

JONES:

The unskilled…

TREASURER:

…they like to work on the weekend. One of the problems you have is if you say you can only work on the weekend at larger penalty rates you lock a lot of those people out of the opportunity of getting jobs.

JONES:

The unskilled and the vulnerable do not have that bargaining power. Just one final thing before you go you talk about the Future Fund and you reckon there will be $140 billion in it and $18 billion went into it a month ago and there are a mass of surpluses, you know that there are 2.6 million carers nationally who provide 1.2 million hours of informal care for the disabled, the elderly and the mentally ill? Access Economics says the carers are worth $31 billion a year, 50 per cent of these people are female, this is 24/7 stuff, 42 per cent look after a partner, 26 per cent look after a child, 170,000 are under 18, superannuation concessions mean nothing to them, tax cuts mean nothing to them, they have no income. They get $94.70 a fortnight means tested and assets tested. Do you understand what they are thinking as they listen to you talk about Future Funds paying public servants superannuation and these people are doing $31 billion worth of care for nothing on $94.70 a fortnight means tested and assets tested.

TREASURER:

I think they are some of the most magnificent people in our society Alan.

JONES:

Well why do you rack up in the $94.70?

TREASURER:

Well what we did in the Budget of course…

JONES:

You gave them 600 bucks.

TREASURER:

… $600 and a $1000 for the pension, a bonus, we did it last year and we did it the year before.

JONES:

Is that a lot of money?

TREASURER:

Well Alan you do what you can reasonably do for these people.

JONES:

You put $18 billion into the Future Fund, you should have been paying your public servants superannuation as you went along as every other employers has to do.

TREASURER:

Well of course we should have.

JONES:

That’s it (inaudible)

TREASURER:

Not me, since 1901.

JONES:

Since time immemorial.

TREASURER:

Since 1901.

JONES:

$94.70 a fortnight, may I leave you with that?

TREASURER:

Can I finish on the super. You said we should have been paying for them. We should have been, since 1901 and we didn’t and as a result the Government had a huge debt and until I started trying to do something about it the Government was just racking up these debts which it could not afford. Now we are trying to do something about that. In relation to the carers I do understand, that is why in the last three Budgets we have deliberately gone out after we have finished all of the sums of the Budget to do an increase, a taxable increase, a non-taxable increase to those particular people. We have done it to recognise them.

JONES:

And they get $94.70 a fortnight…

TREASURER:

And they do wonderful work and we thank them for it.

JONES:

170 of these are under 18, you have got kids under 18.

TREASURER:

Look I know carers.

JONES:

$94.70.

TREASURER:

Alan I know carers, I have people who I know who are precisely in this situation, you would too and this is a recognition that we made in this year’s Budget, in last year’s Budget and in the year before to actually recognise them.

JONES:

You’ve got to go, I’ve got to go, do you reckon your Fuel Tax Bill as it currently stands will get through the Senate?

TREASURER:

Can I say to you Alan all of the things we have discussed are not in this Fuel Tax Bill? I think it is a point worth making…

JONES:

(inaudible)

TREASURER:

…this Fuel Tax Bill doesn’t do any of these things.

JONES:

The Fuel Tax Bill from 2011 provides for a tax on biofuels and ethanol and it equates…

TREASURER:

It is an important point, the Bill that did all that was passed in 2004.

JONES:

These are changes, are they not, to the taxable fuel consumption?

TREASURER:

No the Bill that is before this Parliament does not affect any of those things that we discussed.

JONES:

So you are happy to have the law in place?

TREASURER:

It was legislated in 2004. The Bill that is going through the Parliament at the moment does one thing and that is; if you are excise free on petrol as some industries are it allows you to be able to claim that excise back at an earlier point, that is all this Bill does, it doesn’t do anything for ethanol, doesn’t do anything for imported…

JONES:

Anyway the public has heard you Peter and I have got tell you there is a feeling outside that there is a massive disconnect, you will dispute that, I can only go on what people are telling me and the correspondence they send to me, they just think there are people in Canberra who are just ploughing on their own way and they don’t really worry too much what the public think.

TREASURER:

Can I just leave you with one thought, all of those things are not in a Bill which is before Parliament.

JONES:

I’m just telling you, the overarching issue here is there is a massive disconnect out there, the things you are talking about are not the things that the electorate are talking about. Believe me, I answer over 120 letters a day, you don’t, you just sign them. I read them, ok, that’s the difference.

TREASURER:

I read all of my correspondence, including my correspondence with you, which I enjoy very much.

JONES:

That’s good, thank you for your time Peter.

TREASURER:

Thank you very much.