BARRIE CASSIDY:
Treasurer, thanks for joining us this morning; appreciate it.
TREASURER:
Great to be with you Barrie.
BARRIE CASSIDY:
Now you've been working on developing the G20 agenda for Brisbane, how are those commitments to the 2 per cent growth rate over 5 years holding up?
TREASURER:
Well the proposals put forward by nations so far have been unacceptable and they only meet 10 per cent of our goal. And what we have pledged to each other is that by the time we meet in Cairns in September and before the leaders meet, later in the year in Brisbane, we will have real and effective plans to lift the global economy by a further 2 per cent, creating 22 million new jobs and giving people hope that tomorrow will be much better than today.
BARRIE CASSIDY:
But only 10 per cent, that's a long way short?
TREASURER:
Well it is Barrie, but there was a very frank discussion about the fact that they have to be real and new commitments. It's not good enough for some countries just to reheat previous announcements. You need to actually do the heavy lifting and it illustrates the great challenge at the moment, Barrie.
Monetary policy is inevitably at a low point for much of the world so its capacity to generate growth going forward is very limited. Fiscal policy, that is Budget policy, is very weak. We've all got deficits and we need to get them to surplus so we haven't got capacity to use fiscal policy to stimulate growth. So we need to have structural reforms, real reforms to our economies in order to lift the overall level of growth and therefore everyone will benefit and that means making hard decisions.
BARRIE CASSIDY:
Okay, but if they're reheating some initiatives and then, on the other hand, any plans they come up with are then subject over time to domestic pressures back home, it doesn't sound all that encouraging?
TREASURER:
Well it has to be encouraging because we have no choice. If we do not have structural reform in areas such as competition policy, such as labour market reform, freer trade. If we do not have structural reform to deal with some of the systemic challenges we have such as an ageing population; if the globe doesn't deal with these issues now, then the pain in a few years' time is going to be much, much greater.
BARRIE CASSIDY:
Back home on Australia's economy, the latest IMF report suggests that Australia might be the one out of step in terms of spending. They pointed out that Australia posted the fastest Budget deterioration over the past 6 months of any of the 29 most advanced economies. Now, you're in office for all of those 6 months?
TREASURER:
Well Barrie, yes that's what we inherited; that's right. We've inherited, according to the IMF, the fastest growth in government expenditure of the top 17 surveyed nations in the world. And that growth in expenditure, which Labor promised would be 2 per cent, is actually 3.5 per cent per annum, and particularly it grows significantly in 2017-18, the year that happened to be left out of their last Budget forecasts. Now, the fact is, we've been given a mandate to fix the Budget and we are trying to fix the Budget. If there was genuine concern about the state of the Budget from the Labor Party, then you can ask them why they're opposing $20 billion of savings we've already put to the Senate and they have blocked, including, alarmingly, $5 billion of savings that they announced themselves which they've changed their mind on and now want to stop.
BARRIE CASSIDY:
But part of that deterioration though, surely, has got to be that $9 billion that went to the Reserve Bank, and you've lowered forecast for economic growth and therefore, revenue?
TREASURER:
Well the $9 billion that has gone to the Reserve Bank should have gone under Labor. It should have gone under previous government when they took out dividends from the Reserve Bank. And it remains within the public sector so that doesn't have a material impact on economic growth. The bottom line is, the Reserve Bank would have retained future dividends as far as the eye could see to gain that $9 billion. The reality is that we have to make sure that all our institutions are at their strongest to deal with whatever arises in the future, and now is the time for us to build resilience; now is the time for us to deal with structural problems in the Budget and we've been up-front about this, Barrie.
You know, when we released the Mid Year Economic Update at the end of last year everyone said we were too pessimistic with our Budget forecast and yet the IMF and every independent economist, together with the Secretary of the Treasury have all said, that their realistic forecasts, so let's have a realistic response to what are realistic forecasts about the economy.
BARRIE CASSIDY:
But when you look at our jobs figures just the other day, it may be that some of those forecasts are too pessimistic?
TREASURER:
Well, if things come out better that's terrific. I'd celebrate that, but if things come out worse then our responses will be inadequate. So the fundamental point is, that in relation to jobless numbers, they bounce around from month-to-month. A couple of months ago, Bill Shorten was running around like a headless chook saying that there were a record number of job losses in the economy since we came to Government and now if you take last month's data, we're doing a great job. We're actually getting unemployment down but frankly we've got to look at the longer-term challenge and the longer-term challenge is that we have a falling participation rate, partly because of the ageing of the population.
We need more Australians to have an opportunity to work, as long as they want to work and for as long as they want to work, and that means that we've got to undertake change.
BARRIE CASSIDY:
Now that the WA Senate election is out of the way, will you or when will you, release the Commission of Audit Report, and surely that it an essential narrative in framing the pre- Budget debate?
TREASURER:
Well Barrie, the West Australian Senate election didn't have an impact on the timing of the release of the Report. The simple fact is that we received a massive report. It was a report to the Government, not of the Government, and because it was a report to the Government we've got to carefully consider the details. Now, we will release it in good time before the Budget is delivered on 13 May. Everyone will see it in its very raw form and they will then understand that in the Budget, we must start the process of responding to the great detail of the Commission of Audit Report.
BARRIE CASSIDY:
Now you are talking in Washington about the safety net and the cargo net and that Australia's Welfare System, I presume you're saying, is already becoming a cargo net in some cases. Is that correct?
TREASURER:
Well that's the danger. The danger is that we have too many people falling to a reliance on government payments without the capacity to bounce back up and bounce away from relying on the Government, and being able to rely on themselves. Now obviously we've got to have sustainable Welfare System and there is a serious question as to whether our current Welfare System, which was designed in the 20th century, is sustainable in the 21st century when we have significant demographic challenges and when we're facing enormous competition for products and services in the global marketplace.
BARRIE CASSIDY:
And you've raised the issue of pensions. What are you looking at there? Are you looking at attacking the rate of the pension or is it about eligibility? Is it about an asset's test? What are the options?
TREASURER:
I am simply raising the issue that we need to have a sensible discussion about the sustainability of our entire quality of life. It's not just pensions and the sustainability of pensions, but it's our healthcare, the quality of our education; it's right across the board, Barrie that we now need to have a sensible discussion about the quality of life that we want to have into the future.
BARRIE CASSIDY:
You talk about at what age people should retire. Is it time to say to people your age not mine; but people your age that maybe by the time they retire, the retirement age might be 70, for example?
TREASURER:
Well, that's certainly one of the issues that needs to be addressed and it will affect my generation. It will affect my generation. This doesn't happen overnight, but it may be the case that my generation has to work for an extra 3 years, and don't forget that the Labor Party increased the retirement age from 65 to 67 from 2023-24 and the fact is that now, as in the United Kingdom, as is probably the case in Australia, that 1 in every 3 children born today will live to 100. So quite frankly, we need to redesign our systems to manage the fact, and celebrate the fact that we're all living longer and we want to maintain a good quality of life along the way.
BARRIE CASSIDY:
And 70 longer-term is not an unrealistic age?
TREASURER:
Well other countries have moved in that direction. The United Kingdom and a number of other countries, because how good is it Barrie, we're all living longer. But the fact is that if we're living longer, we need to have a Health and Welfare System that appropriately deals with the changing demographics of the nation.
BARRIE CASSIDY:
And of people aged over 65 with $1 million in assets, 80 per cent of them collect an aged pension. Again is that something you should be looking at?
TREASURER:
Well, it's something that we need to discuss, and we are discussing with the nation, and I welcome the fact that National Seniors, which is a major representative group of senior Australians, has recognised that we need to have a mature debate about the sustainability of our Pension System and our Aged Care System. This is not a battle between the generations. This is about the quality of life that we not only want to live ourselves, but what we want to leave to our children, and Australia's been blessed, we've had, for a lot of good reasons, 22 years of continuous economic growth. It's not an accident; it's come about because of hard work. That's one of the longest periods of economic growth in global history and the fact is, you can't bank that that's going to happen for another 22 years. So how are we going to design an economy that is going to sustain us through the difficult times and deliver us benefits through the good times? And that's what we're dealing with right now.
BARRIE CASSIDY:
You mentioned the National Seniors, and they have come out with quite a conciliatory statement, but they did say they would porch some adjustments, but they wanted to see Paid Parental Leave Scheme treated as well. Otherwise you would be pining one generation against another. So again, you see once again the Parental Leave Scheme comes up.
TREASURER:
The Parental Leave Scheme is about getting people back to work so they can pay for the pensions of tomorrow. That's what the Parental Leave Scheme is about. It is about people going back to work earning money, paying tax, and being able to afford the pension system and the aged care system and the health system that senior Australians and others want to have. You know Barrie, my parents often say to me we worked hard all our life to be - you know - we paid taxes all our life and we deserve to have entitlements now. I say yes you do, but the problem is everything you earned during your life is gone. There is no money left in the bank. In fact, if we don't fix the Budget now, we're going to end up with $667 billion of debt and therefore, we need to fix the Budget now, not only to maintain what you have now but importantly, to give everyone else a chance that follows, to have a decent quality of life.
BARRIE CASSIDY:
The one concern to pensioners I guess would be the rate - the rate of the pension. It is linked now to a percentage of male average earnings, if it was linked to the CPI that might mean real cuts. Are you considering linking it to the CPI or are you considering perhaps getting rid of indexation all together?
TREASURER:
Well I'm not going to speculate on the Budget but I will note something interesting that I found out over here. Over the last 40 years, 60 per cent of male workers in the US have had a real cut in their incomes. A real cut in their incomes. In Australia, we've been the beneficiaries of having real income increases. Now the pension is attached to male total average weekly earnings, which is a higher rate. But it's not always going to remain a higher rate. So we have to look at how sustainable pension increases are, but whatever the case, Barrie, the Budget is not going to target any one particular group. Every Australian is going to be asked to contribute to the Budget repair, including politicians. Everyone is going to be asked to contribute to the Budget repair and it's going to be as fair an ask as is possible under the circumstances.
BARRIE CASSIDY:
So you are absolutely determined, starting with this Budget, that the age of entitlements, as we've known it, has to go?
TREASURER:
We have no choice Barrie; there are no choices here. This is about the sustainability of our quality of life. It is about what we want to be in five, ten, twenty years time, and I often ask myself, if there was a drug that is going to save my child's life in 10 years time and I couldn't afford it, I would expect the Government to help me out. Now in 10 years time, is the Government going to have the money to be able to afford that drug? They might have it today but they won't have it tomorrow, unless we actually start fixing the Budget now, and if we fix it early, then the contribution everyone makes is going to be far less over time than trying to have remedial action down the track.
BARRIE CASSIDY:
Treasurer, thanks for your time.
TREASURER:
Thanks very much Barrie.