LAWS:
Peter Costello, good morning.
TREASURER:
Good morning John.
LAWS:
Are you well?
TREASURER:
I am very well and I hope you are too.
LAWS:
I am terrifically well, thank you. Is Australia entirely dependent on the continuing effort of pension aged workers?
TREASURER:
With people living longer and with a smaller fertility rate, the proportion of our population that is going to be older is growing, you know, it is going to be a larger proportion of our total. And it will help if people do continue in the workforce longer than they have in the past and with life expectancy and better health standards they will be able to do that we think.
LAWS:
Okay. But if they do do it, if they don’t choose to take retirement but maybe take the long-awaited trip around the world or whatever it might be that they have planned for their retirement, what concessions will you give them?
TREASURER:
Well, we have announced a big change to superannuation so that if you are over 60 from 1 July you won’t pay any tax on your superannuation pension or even lump sum where you are in a taxed fund which most people are. So, this will be an enormous benefit for those taking superannuation and what we hope will happen is that people might take a pension which will be tax free and say, keep on in the workforce part-time and that will engage them in the workforce a bit longer.
LAWS:
Okay, will you do anything then for the employer who is prepared to employ these older people? Will you offer them some kind of tax break or some kind of subsidy?
TREASURER:
Yes there is a thing called the Mature Aged Worker Tax Offset which also gives them a reduction on their tax.
LAWS:
The employer?
TREASURER:
The worker themselves. With the employer, what we want to encourage employers to do is to consider the abilities and the attributes of more mature workers and I think employers need an attitude change, there has been an attitude in the past that says, you know, once you are 40 or 50 you are getting a bit too old. But we want to change all of those attitudes and say look, with life expectancy increasing, with better health standards people are very, very willing and able and good workers in their 50s and their 60s and public education of employers is going to be a big part of this.
LAWS:
Now, we have what you currently called the (inaudible) arrangements that you pay superannuation up until the age of 75…
TREASURER:
Yes.
LAWS:
Now, if these people continue to work after the age of 75, are they going to be able to put any money aside in super?
TREASURER:
Well, we have lifted the age as you say, the laws have raised it to 75, now, I don’t think there would be that many working after 75. But look, it is something you can always keep an eye on, if things change, but to get it up to 75 has been a very welcome increase.
LAWS:
Well yes, I think it has, I think it has been wonderful and very, very important. But just back to the employer, to encourage employers to employ people who are older would it not be possible to offer some kind of incentive?
TREASURER:
Well, the incentives are going to the employee, to encourage the employee to come into the workforce. I am not sure about giving an incentive to an employer which would make it more lucrative or more economic to employ an older person as against a younger person. Younger people might say that is a bit of discrimination…
LAWS:
Well it would be.
TREASURER:
…and that may be a little unfair on the younger people. I think it is better if you actually give the benefits to the person themselves. We do give them a benefit with superannuation, we give them a benefit with Mature Age Worker Tax Offset.
LAWS:
The thing that worries me, in the State of New South Wales if you are foolish enough to employ another Australian according to New South Wales Government, you pay payroll tax.
TREASURER:
Yes.
LAWS:
I mean that is (inaudible) to everybody. Why should you be punished because you employ another Australian?
TREASURER:
Yes I know. Well what happens is there is a threshold, I can’t tell you the precise amount because it is a state tax, I have got a feeling it is around about $500,000 or something and once you put on another person you go across that threshold you come into payroll tax which is a tax on employing people. No, it is not a very good tax, that is for sure.
LAWS:
It is an awful tax, it really is a dreadful tax and we have been stupid enough to re-elect the government in New South Wales who continue with that tax, can’t believe it.
TREASURER:
Well I know, it is, I think there was a lot of depression around last weekend and you have a look at what has happened since the election, it is not a very good start for the new State Government.
LAWS:
It certainly is not. Will you keep the pressure on the States to abolish the payroll tax?
TREASURER:
Look, John, I was the person that was responsible for introducing the new tax system which is 10 per cent GST, all of which goes to State Government.
LAWS:
And they were supposed to drop the other taxes.
TREASURER:
That is right and in return to that, they pledged to get rid of a whole raft of other taxes. Now, some of them, after pushing and pulling, some of them have been abolished. We used to have Financial Institutions Duty and Government Debit Tax, remember those taxes on bank accounts – we got rid of them.
LAWS:
Yes.
TREASURER:
Stamp duties on shares. But some of them they still haven’t abolished. And this is why I push and I push and I push, it is not a Commonwealth versus State thing, it is a matter of fairness to the Australian public. The Australian public was promised in return for GST they would have ten State taxes abolished and as far as I am concerned, they should have them abolished. And I am not going to give up on that, I am going to keep faith with the Australian people, I am going to make sure they have got the deal they were promised.
LAWS:
I hope they do because they were promised.
TREASURER:
They were promised, absolutely. And I am still around and I have been around long enough to remember what the promise was and I am going to push and push and push and make sure people get what they were promised.
LAWS:
Well I will give you a hand wherever I can because they should be kicked into shape, I mean it is just lying to say that you will do it and not do it. Just could you take me through the projections in terms of the number of younger workers who will be forced to support the retiring Baby Boomers?
TREASURER:
Yes, what is happening is that because we are living longer and because parents are having a substantially lower number of children than they were say, in the 40s and the 50s and the 60s – the post-war Baby Boom – we are going to have fewer people of working age supporting more people of retirement age. And life expectancy is now going out to about 90. So you are going to have lots of people who are well past retirement age into their 80s and their 90s. Now, we know that as you get older you need better medical care and better pharmaceutical care so we are going to have a large proportion of people needing that care with a smaller proportion of taxpayers, less people of working age in the workforce. And this is the message I keep on making – this is a great demographic change – the ageing of the population. It is going to happen from 2010 on, that is only in three years time and we have got to start preparing for it. We have got to prepare for it by – as I have argued – lifting fertility rates (inaudible). And you remember I coined that phrase, one for Mum, one for Dad and one for the country.
LAWS:
And one bloke wanted to give it back to you.
TREASURER:
He did I think and perhaps so do a few other fathers, and maybe some mothers, but no returns here. The other thing was keeping people engaged in the workforce and helping them do that with our superannuation changes. Another part of it is making sure that we can properly fund healthcare and pharmaceutical care and the age pension. And you know, I am thinking of where we are going to be in 20 and 30 and 40 years time. This is why I lay down these reports, try and to explain to people what we have to do now because the future of our society is 10, 20, 30 and 40 years time, I want to make sure we have got the best healthcare system in the world and we can afford it.
LAWS:
We are in good shape now, there is no doubt about that, but much of this is off the back of the resources boom, how long will that last?
TREASURER:
Well, resource prices have been very strong in the last 3 or 4 years, but you know, we were strong before that John. The truth of the matter is Australia’s strength began as we came through the Asian Financial Crisis back long before the resources boom and the last three or so years resource prices have helped us. I don’t think it will last forever, I think China will be strong and China will put a lot of demand for resources but what will happen is countries around the world will increase production. They will increase production of resources in Argentina, Brazil, in India and as world production increases the price will come back. It is always the case. So we think that prices will moderate over the next two or three years actually.
LAWS:
Okay, you can’t be too happy with the polls the way they are popping out at the moment?
TREASURER:
Well John, there is no doubt that Labor at the moment is enjoying a bit of a honeymoon…
LAWS:
(inaudible) for a while.
TREASURER:
Yes, but I think that as time goes by and the press gets more searching of Mr Rudd then you will find that public opinions will gradually begin to change. And I think at the moment that he is not under a great deal of scrutiny and he is avoiding scrutiny, he is avoiding press conferences but…
LAWS:
That is clever though, isn’t it?
TREASURER:
Well it has worked for him to date. You would have to say that avoiding press scrutiny has worked for him. And that is why his public relations advisers keep saying to him, ‘no, keep away from scrutiny, don’t put yourself up for questioning, don’t let them ask you about practical measures or economic measures and those sorts of things.’ So you have got to say it has been good advice. But when you are running for Prime Minister you have got to put yourself under scrutiny and eventually they will put him under scrutiny and I think at that point people will take a much closer view.
LAWS:
Will we see an interest rate rise tomorrow? What is your feeling on that?
TREASURER:
Well John, because I am the Treasurer I don’t speculate on these matters. There is nothing I can say usefully that can’t be misinterpreted so I don’t speculate.
LAWS:
(inaudible).
TREASURER:
Well I have done that for the last 10 years. The Board is an independent board, it will make its decision and it will announce it.
LAWS:
Yes, I just think it is likely with the consumer spending we have seen.
TREASURER:
Well, (inaudible), we will see.
LAWS:
Okay, Peter thank you very much for your time. As usual it is a pleasure to talk to you.
TREASURER:
It is great to be with you John and all the best to you and your listeners.
LAWS:
Thank you very much indeed.
TREASURER:
Thanks.