TONY JONES:
The Treasurer Joe Hockey joins us now. Thanks for being here.
TREASURER:
Great to be with you Tony.
TONY JONES:
Okay, how much do you worry about this rising tide of intergenerational inequality; the multiple problems that young people face today trying to get a job, trying to get a house?
TREASURER:
I think it's a huge issue for Australia and that's why it's been the focus of this Intergenerational Report. Young Australians, as you point out, are more likely to be unemployed than many other Australians. They also face the challenge of having to pay back loans for university education or perhaps even trade training. And at the same time, they're expected to get into the housing market, and of course you have to have a much larger mortgage these days, even based on household income than you would've had 10 or 20 years ago.
TONY JONES:
So, would you regard this – as many would – particularly even if you were of that generation, as a crisis?
TREASURER:
No, it's not a crisis, but it is a concern, a major concern for policy makers…
TONY JONES:
Could I just put a couple of figures to you? These come from the Foundation for Young Australians. They say having so many young Australians out of work costs the economy half a billion lost hours of work this year – that's $13.6 billion lost in GDP. Has the Treasury done this sort of modelling for you?
TREASURER:
Well, it's obviously a major issue, but you know, when you talk about crisis, I'd say a crisis is 50 per cent youth unemployment, like Spain. Or you know, something much larger than what it is. Having said that, I'm not down playing it. But the question that I keep asking myself is: how are we going to make sure that younger Australians have the same opportunities that you and I have and you and I have better opportunities than our parents had before us? That's been the focus. Now, there's some fantastic statistical data in the Intergenerational Report that makes comparisons with other countries, it makes assumptions about longevity, which is really important, but it also encourages us to think about how we can delay the ageing process. That means longevity is one thing and age expectancy is one thing, that's terrific. But the other thing we need to think about is how active we are during the course of our lives.
TONY JONES:
But that's a message for them when they get old. I mean, if you're 18 years old, you haven't got a job now; you’ve got very few prospects of getting one, what's the message today? And I suppose going back to my question about is this a crisis, I mean, why don't you have some sort of national youth summit and try and bring all the forces together of politics, business and so on, to try and deal with this because otherwise we'll end up with a [inaudible] generation?
TREASURER:
Well, I think you're overplaying it. I think you're going too far in that regard. I don't see it as a crisis. I think it's something that we all need to work together on, particularly engaging employers, identifying where future job opportunities are. We've obviously got a major higher education reform bill before the Senate, which is strongly supported by almost all the university Chancellors. We’ve put in place…
TONY JONES:
But that places young people with the prospect of having even more expensive degrees. The very thing you’re talking about – larger debts as they leave university. That's why it won’t get through the Senate because some Senators have put their foot down over that.
TREASURER:
Not necessarily, Tony. In fact, it is actually providing more support for lower-income Australians that have the capacity to go to university than any scheme that has arguably ever existed. The universities themselves have said that. So, currently, lower-income Australians who go to university do end up with a HELP debt, but, under our scheme, those people may get full scholarships and a lot of them will get full scholarships in order to go to universities that are able to compete on an equal basis with some of the best in the world.
TONY JONES:
All right, let's go to your radical plan that allows or would allow young people to access their superannuation to buy a house. Now, you’ve ran it up the flagpole. It’s been riddled full of bullets since then. Have you pulled it back down now?
TREASURER:
Well no, I think it is an important debate to have. It links in with the issue about housing affordability, something that you just raised. And the question is: how can we ensure that for people getting into their first home, they've got every opportunity to have the same entry into the market that we had and our parents had?
TONY JONES:
Just confirm this, in spite of the fact that Peter Costello, that Malcolm Turnbull today, that Paul Keating earlier have come out and said this could ruin the superannuation system, what's your judgement by the way about Malcolm Turnbull coming out today…
TREASURER:
No, we wanted the debate.
TONY JONES:
Saying it's a thoroughly bad idea.
TREASURER:
We wanted a debate about this.
TONY JONES:
Did you want a debate in your own Cabinet?
TREASURER:
Well there will be, there’s a difference of views – of course there is. On the one hand, you want to have a national conversation about these sorts of issues. On the other, whenever there are contrasting views, you want to form a political comment about the contrasting views. I don't see it that way. I think it is hugely important, Tony, that we do have a range of different views and recognise, okay, well if the superannuation system, which was built in 1992, when life expectancy was around 74, and today life expectancy is 81, and it's going up to the 90s, the question is: is the superannuation system doing all that we want it to do, in retirement savings? And interacting with the aged pension system – sorry let me finish – let alone the changing patterns of life behaviour? If we are going to end up with a world, which we are likely to do, by the middle of this century where life expectancy is 100, the old traditional paradigm of studying when you're young, working until you're 65 or 67 or 70, and then retiring is not going to be there. It's going to change.
TONY JONES:
But I'm going to put the arguments to you because the debate has gone on for a little while and it’s gone a little along these lines. You're going to put a big hole in the compound interest that makes these super nest eggs grow and if you did that at an early stage they'll grow more slowly and there'd be less in it when they do come to retire. So, that will be destroying in some respects, according to some, the very system you're trying to preserve?
TREASURER:
Well, that may be a reasonable point but it's also a reasonable point there are schemes in other countries that focus on helping people into their first home, using the equivalent to superannuation savings. Now, those schemes vary as every housing market does. Ultimately, Malcolm Turnbull was absolutely right – the best thing you can do for the housing market is to increase supply.
TONY JONES:
But Malcolm Turnbull…
TREASURER:
Hang on, hang on….
TONY JONES:
No, no, but let's stick with what Malcolm Turnbull actually said because he’s talking about your plan. He said it's a thoroughly bad idea.
TREASURER:
Hang on, hang on. It's not my plan; it's been floated by numerous people in the community.
TONY JONES
But you're the one who raised it; you're the Treasurer, you're out there spruiking it, saying it's a good idea.
TREASURER:
I’m sorry, you're exaggerating. I’m not spruiking it. I raised the idea in relation to superannuation arguing the point that we have to, in the context of a longer lifespan, think about how we can maintain a reasonable quality of life throughout our life, with various points in our life when we're in and out of work. Now, at various points when we are in and out of work and we are changing careers, we may go back to study or to retrain. During those periods, we still have to pay the bills, we still have to pay the mortgage, we still have to pay to raise families and so on. But we are going to have multiple careers during the course of our life, and that will go on longer, longer over the years.
TONY JONES:
It does suggest you're going to need a bigger superannuation nest egg.
TREASURER:
Well, that may well be the case….
TONY JONES:
Here's the other side of the ledger: You will be throwing fuel on an already overheated property market and the money these people take out of their super funds could be eaten up by the increase in the prices of the houses when you overheat the market further. How about that argument?
TREASURER:
You've also got the argument that they get capital gain, and the capital gain may well be far greater than anything they get on their return in existing superannuation funds. So, you know, no one's taking a clip along the way if it's their own home. So, there are lots of arguments both ways. Seriously, I'm not advocating that position, other than to say: please let's have a measured, considered, bipartisan discussion about how we are going to maintain and improve our quality of life.
TONY JONES:
When you're virtually the only advocate for this idea from inside the Government and you're the Treasurer...
TREASURER:
No, I’m not. I don’t accept that.
TONY JONES:
Well, I mean, the Prime Minister did give you some qualified support I suppose, but was he just getting your back, as it were?
TREASURER:
No, no, Tony, I mean, you're drifting into political commentary now. I would just say to you this: we need to have these sorts of debates because what they do is they raise the issues that are relevant to individual groups of Australians and access to the home market is a big issue, a big issue, and particularly if you're living in the cities. The biggest demographic change we've seen since Peter Costello launched that first Intergenerational Report…
TONY JONES:
Peter Costello – the same man who says don't do this, by the way.
TREASURER:
…2002, when he launched that report, Facebook hadn't even been thought of, social media wasn't there, many Australians – no-one had smart phones and so on. Things have changed.
TONY JONES:
Okay.
TREASURER:
As things change, what I can assure you is if we want to stay the same, if we want to maintain our quality of life today, we have to change.
TONY JONES:
All right, you mentioned Facebook, and of course, Facebook is sending us questions at the moment. Jacqueline Allen sent us a Facebook question: ‘Will you consider removing negative gearing and stop giving tax breaks to retail landlords with empty premises holding out for inflated rents?’
TREASURER:
There's two issues there; the first one about negative gearing. Of course, you’ll remember the debate about negative gearing back in the 80s under Bob Hawke. When he did abolish negative gearing, there was an argument that it increased rents because, of course, landlords, instead of offsetting the losses on their rental property against their primary income – therefore they've got lower rents – they then need to get a full return on their rental property, which in turn means they have to massively increase rents. Now, some people like Saul Eslake dispute that they're entitled to do that but…
TONY JONES:
Can I just ask you: do you have an open mind about getting rid of negative gearing and reining in the capital gains tax break that was given under the Howard Government?
TREASURER:
I would need to see a lot of evidence – and credible evidence – to even be persuaded on those sorts of things. Having said that, can I just say, we are releasing a taxation discussion paper in April, which is going to lay down the facts about where the taxation system is at the moment, particularly in comparison with other countries. One of the things there that needs to be considered is it's perfectly reasonable to speculate that over the next 20 to 30 years, company tax will not be around…
TONY JONES:
And the GST, you say?
TREASURER:
And maybe the GST won't be around either because of international trade.
TONY JONES:
Why not get rid of it now if it's not going to be around in 30 years?
TREASURER:
Because we haven't got any replacement taxes.
TONY JONES:
Because it's one of your biggest revenue raisers, that’s why. Most people want you to put it up on the economics side of the argument.
TREASURER:
For the states. For the states. Every dollar goes to the states.
TONY JONES:
Now, you once said – you said it on this program in fact, ‘the age of entitlement is over’. Does that include the $45 billion a year in superannuation tax concessions for already wealthy people?
TREASURER:
Hang on, $45 billion a year…
TONY JONES:
[Inaudible]
TREASURER:
…is not for already wealthy people. It's for everyone that has superannuation at the moment, which is not already wealthy people. I think the amount of money in superannuation for a lot of people is insufficient to meet their retirement needs. So, the interaction – and it is very interesting to look at the interaction between the superannuation system and the age pension system. Now, the age pension system at the moment, four out of five people over the age of 65 qualify for the age pension. In 40 years' time, it will be the same. Four out of five people qualify for the age pension. The issue will be that people are going from full pension to part pension and that's because of the increase in superannuation. So, superannuation does have a role to play, but it's not doing the sort of work that was expected when it was created.
TONY JONES:
The tax concessions for wealthy people –can you expect those to be reined in. Will that be the advice of your Tax White Paper?
TREASURER:
Well, if people have an argument about particular issues in relation to superannuation, they're welcome to put them.
TONY JONES:
But what's your opinion?
TREASURER:
Well, my opinion is, we promised that we would not be chopping and changing the superannuation system in this term of Government. We stand by that.
TONY JONES:
In this term of Government. I want to know what you’re opinion is on the principle of doing it over the long term?
TREASURER:
We're not even halfway through our first term.
TONY JONES:
Or you haven’t worked out a principle?
TREASURER:
The principle is that you want superannuation to serve the needs of the individual over the course of their life, particularly in retirement. Now, David Murray in his Murray Review suggested that it's important that we actually laid down a very clear goal for the superannuation system, and that is credible. I note that the Opposition, the Labor Party, have said that they want to be party to that. I'm prepared to discuss that with them. It’s great they’re prepared to be bipartisan.
TONY JONES:
We’re almost out of time. A final question. It's a hot issue. It has Budget implications too. Are aborigines living on their ancestral lands in remote communities making a lifestyle choice?
TREASURER:
Well, the answer is, in some cases, in remote areas, they are choosing to remain in a community that has no jobs and no education. And what the Prime Minister said, what we're all saying is, we cannot deliver a 21st Century lifestyle to people in really remote communities with the expectation that they're going to get jobs and that they're going to get education in those communities. Especially when they…
TONY JONES:
Seriously, we are just about out of time [inaudible] Are you talking about, in the end, forcing them out of those communities?
TREASURER:
Well, that's what the West Australian Government has talked to the communities about. They said they're going to consult with those communities, but bear in mind, I heard the statistics today. You're talking about 12,000 people in 240-odd communities, which is around 40 people per community. In some cases, those 40 people are 100 or 150 kilometres from the…
TONY JONES:
Sorry, we're on a tight budget here, I’m sorry to tell you that.
TREASURER:
We all have got budgets.
TONY JONES:
Well, maybe you'll get to deliver the next one. Thank you very much, Joe Hockey.
TREASURER:
You better hope so. Thanks Tony.