MURRAY:
Good day, Peter.
TREASURER:
Good morning, Paul.
MURRAY:
Fan club waiting for you.
TREASURER:
Yes. Good to be with you. I am sorry I was a little bit late. We were talking at a breakfast this morning.
MURRAY:
Okay. Look, I will get to the nub of the Budget, some Budget issues that are still coming up, shortly. But as has just been announced on our news, the Commonwealth Bank this morning is saying that it's going to axe 1600 positions. There has already been debate around the place that Telstra's looking at 10,000 jobs to go, 4,000 probably in the short term. In the Budget, you projected the same unemployment as last year, 6 per cent. So you weren't going to make any inroads into unemployment. Would these put a hole in those figures? Would these losses put a hole in those figures? That's the first point. The other is, is this a sign of a good economy?
TREASURER:
Well, these figures would not cause us to change our estimates. Last year, 230,000 new jobs were created in the Australian economy. So, you need a couple of hundred thousand new jobs each year just to take new entrants to the workforce and to keep the unemployment rate steady. Now, obviously, the Commonwealth Bank employees and Telstra employees, those that are affected, I have a great deal of feeling for them. And it is up to the Commonwealth Bank, and it is up to Telstra, to announce what is motivating it, and what it is going to put in place for those employees, in the way of entitlements on so on. But the important thing is to keep an economy growing so that we get new job opportunities. And, as I said, we need a couple of hundred thousand each year in Australia just to keep those new entrants with job opportunities coming into the workforce. Let me put it in context, since the Government was elected in 1996, there have been about 1.2 million new jobs created in Australia. So that is the order of the dimension of net new jobs in the country. Some people put off labour, but if you can encourage business to create new jobs, overall you can create better opportunities.
MURRAY:
What we are seeing in the banking sector is increased profitability and declining jobs. I mean, is there a responsibility on companies that are doing well to employee Australians?
TREASURER:
Oh, I think that Australian companies should always employ Australians. Yes, of course I do. And that is part of the reason why I think it is important that we have head offices here in Australia. And I have been very strong on that. That is part of the reason why we want to reform taxation, so that Australian companies can remain headquartered in Australia, notwithstanding the fact that they are seeking investment opportunities offshore. But what you are seeing in relation to the banking sector, is new technologies coming through, which are changing the nature of banking. One of the biggest changes, of course, was automatic tellers. That was one of the big changes that we saw in relation to banking. Obviously, banks try and make use of those new technologies. But at the end of the day, it is up to the Commonwealth Bank to explain its decisions. David Murray can announce and explain his decision. It is not my duty to announce or explain decisions of the Commonwealth Bank. It is a privatised bank. It is not owned by the Commonwealth. People know that.
MURRAY:
Yes, sure. But you have a banking policy which limits competition in the banking sector to some extent and, you know, it's a matter very much under your control.
TREASURER:
We do not want to limit competition in the banking sector. Let me be entirely clear about this. We want to promote competition in the banking sector. Some of the things that we have done, for example, is, we gave credit unions the right to issue cheques. We are giving credit unions access to the payment system. We are encouraging organisations like the Bendigo Bank, which is now starting community branches. We want more competition in the banking sector, certainly not less. Let me give you another example, which is going on right at this moment. The Government has announced reforms which will cut the major international credit card providers, Visa and Mastercard, from setting interchange fees which we think are too high. The Government is being sued, or the Reserve Bank is being sued, I should say, in the courts at this moment because we are cutting those fees and trying to promote competition. So our policy is actually to promote competition in the banking sector.
JOURNALIST:
I just want to raise with you an issue which didn't get much coverage, hardly any at all, out of the Federal Budget, and that's the issue of superannuation. Over the past year or so, you've outlined the problems faced by our ageing population in your Intergenerational Report. You've told us we need to look after ourselves more in our retirement. Many people feel that they've been herded into superannuation and that now super is failing them. Why didn't you address broad superannuation reform in the Budget?
TREASURER:
Well, we have got a number of measures in the Parliament, as we speak…
JOURNALIST:
From the last Budget, yes.
TREASURER:
Not only from the last Budget, Paul, but from 1997. In 1997, we adopted a policy of allowing freedom of choice so that employees, if they did not like their superannuation fund, could take their money out and put it in a different one. That has been in the Parliament since 1997. The Labor Party, because it is beholden to the unions and industry superannuation funds, is opposing it. We have legislation in the Parliament, as we speak, to cut the superannuation surcharge. Labor is opposing. We have legislation in the Parliament to increase the ability for husbands to make payments into superannuation on behalf of their wives, as we speak. We have a very broad agenda.
JOURNALIST:
But Labor says those changes advantage the rich. They're offering tax cuts on super for everybody, from 15 per cent to 13 per cent. You didn't seek to do that.
TREASURER:
Labor would not know what they're saying. Ask Labor this question: Why can't people choose their superannuation fund? They will give you a complicated reason. But one of the things that is worrying people at the moment, Paul, is, they are getting negative returns. The equity markets are down and they are getting negative returns. Now, part of that, of course, is that the worldwide economy is down and equity of returns are down around the world, worse outside of Australia than inside Australia.
JOURNALIST:
But also because they've got limited flexibility and most super funds are tied to the stock market.
TREASURER:
Absolutely right. And if they do not like the performance of their fund, they can't even change it. This is the thing that amazes me. Imagine if you went to the bank and the bank said, you know that $100 that you deposited, well there is only $90 left. The first thing you would say, is, I am taking my money out. If you try and do that in superannuation, you are not even allowed to take your money out and put it in a new fund because there is no competition between these funds. Unions have set up these industry funds. If they make a negative return, bad luck. You cannot take your money out and put it in another fund. We have been trying since 1997 to give people freedom of choice. It is all blocked in the Senate. Part of the obstructionist Labor tactic.
JOURNALIST:
Well I'm sure, though, that what wouldn't get blocked in the Senate is a move to lower the taxation level on superannuation generally. As I understand it, the problem you've got in the Senate is that they think your changes advantage the rich and not the average income earner.
TREASURER:
No, the problem we have got in the Senate, is, that the Labor Party is beholden to the unions, which run the industry superannuation funds, and unless the unions approve, you can't get any legislation through. That is our problem.
JOURNALIST:
Well, even the Association of Superannuation Funds says about this Budget, it says you've failed to deliver on last year's Budget promises and that the Budget is a huge disappointment in that it offers no long term commitment or strategy to help people save for their retirement. That's what Philippa Smith says.
TREASURER:
Yes, well we have delivered in full on last year's Budget promises, and they are currently in the Senate awaiting legislation.
JOURNALIST:
But you don't deliver until they're through the Parliament, surely?
TREASURER:
Sure. I agree with that. I agree with that. Absolutely. Absolutely. And to get through the Parliament, they pass the House of Representatives and they have to pass the Senate. Now give me a clue, Paul. How do I get the Labor Party to pass our legislation in the Senate?
JOURNALIST:
Well, what the Association says, is, that it's time for the Government and the Opposition to step away from partisan politics in the Senate and to find a compromise solution that works in the interests of average Australians.
TREASURER:
Could not agree more. Don't you think the Government should be entitled to implement its election policy? You know, Paul, in a democratic society, you put your policy out and, if you are elected, you go and implement it. We put our superannuation policy out. We were elected. Labor lost the election. Shouldn't we be allowed to put in place our policy? What is our policy? Freedom of choice. What is our policy? Reduction in the superannuation surcharge. What is our policy? Allowing higher income earners in the family to make superannuation contributions on behalf of the lower income earners, mainly husbands in respect of wives. We have delivered in full. It is through the House of Representatives. It is in the Senate. Shouldn't we be allowed, having been elected, to get that legislation through? Surely.
JOURNALIST:
Well, that's an issue about the Senate, isn't it. Peter, there are callers lined up for you, to talk you. Humphrey is first up. Good day, Humphrey. Peter Costello's listening.
CALLER:
Good day Paul, good day Mr Costello. Mr Costello you might have noticed in the polls that we are more concerned about education than four bucks a week and apart from the glaring inequality of battlers like me paying for your free education, could you tell me why athletes are exempt and under the next Liberal Government, will the various institutes of sports around the country become fee paying institutions?
TREASURER:
Well thanks for that question Humphrey. I think that Australians are interested in keeping the tax burden as low as possible, and that's what the Government is doing in this budget. Not only have we introduced a surplus but we have returned to the taxpayers and you will have noticed that most of the State Labor Governments have been increasing taxes. We think it's important that we keep that tax burden as low as possible. Can I say in relation to Higher Education, that the taxpayers pay about three-quarters of the university course and the student pays about a quarter of the full cost of the course and they are given an interest-free loan, which is not repayable until, under our changes, the student goes above $30,000 worth of income. Now we think that's a fair distribution between the taxpayer and the student, it's still good value for the student and this was a system that was as you know introduced by the Labor Party back in the mid-80's. It's one that we are preserving and building upon. We think it will make a more flexible higher education system.
MURRAY:
Thanks Humphrey, Liz Thompson, from the National Union of Students is on the line for you Treasurer. G'day Liz.
CALLER:
Hi, Mr Costello, I was just interested to hear your comments on the Business Council of Australia's report in August 2002, that demonstrated that Australia is in fact, a high user pays, low graduate benefit system compared to other countries in the OECD. You have graduates from a secondary school, sorry graduates from university earning on average an extra, 36 per cent income in Australia, when the OECD average is 60 per cent, and the UK 71 per cent, the USA 80 per cent, so in fact we are already facing a situation where graduates in Australia find it very difficult to earn a higher income despite the fact that they pay significantly higher fees than a lot of other OECD countries and I was very interested in your comments about, I think you would like to check your figures, first of all our figures demonstrate that students are paying more than 40 per cent for contribution towards their education, in some courses like Law, it's closer to 80 per cent. I was interested in your comment on…
MURRAY:
Is there a question in here anywhere Liz?
CALLER:
…yes certainly…
MURRAY:
Well let's get to it.
CALLER:
…in how you have said that there is going to be all this extra money for higher education, how do you justify, first of all you have taken out $1 billion, since…
TREASURER:
Well, I can answer that question because we haven't taken out $1 billion. In this Budget we actually announced a 7 ½ per cent increase in Commonwealth funding for universities. A 7 ½ per cent increase on the forward estimates, so Commonwealth expenditure is dramatically growing. The figures have been out for a very long period of time, they are published by the Government. Three quarters of a place is paid for by the taxpayer, and one quarter by the student. It is true, that what some of the universities do, is where they have high demand courses, sometimes they don't direct as much resources into those high demand courses, and they use high demand courses like Law, to subsidise other lower demand courses. But at the end of the day the taxpayer is still paying for three-quarters of the place. And you have got to remember this, that there will be a lot of people who will never get near a university, people who will be working in trades, or in service industries, who are paying taxes all of their lives, and they will be making a contribution to the students, which is three-quarters of the cost of the course and the student is asked to make a contribution which is one quarter, with an interest free loan. We think that is a fair system and a system that has been in place for quite a long time.
MURRAY:
Andrew from (inaudible). G'day Andrew.
CALLER:
Hi G'day Paul, Mr Costello…
TREASURER:
Good Morning Andrew.
CALLER:
I was just curious as to what you are saying about the industry-based super funds, I actually have one of those from a previous employer, and one currently with AMP. Now, the industry-based super fund is far and away out performing the AMP fund, with 7 ½ per cent better return last year…
TREASURER:
But that is a good thing, I mean I am not complaining about that. I am just saying if it were doing worse you should have a right to take your money out. If it is doing better you should have the right to leave your money in. My point is this, shouldn't you have the choice?
CALLER:
Yes, for sure you should have the choice. What my question was, was is there going to be some sort of regulatory body that investigates why a company like AMP, who was obviously, should have better financial advisers, is so badly under performing in comparison to a super fund which you would assume would have a generic type financial adviser, doing bulk deals?
TREASURER:
Well, I think the fact that AMP has performed so badly is a disappointment to everybody, especially its shareholders, but they have now got rid of previous Chief Executives, and Board Member. They are now attempting to restructure themselves, I think as the Chairman of the AMP said in a moment of candour, at the annual general meeting, they were in the wrong business, in the wrong country, at the wrong time. They were a company that mucked it up. And now they are trying to restructure themselves, and perform better for their shareholders, and if I was a shareholder in AMP I would be pretty angry about that, but unfortunately that is what happens in the business world. Some people run companies well and some run them badly. And if you are a shareholder, the trick is to try and pick the good Directors and the good Chief Executives who are going to run companies that get you a better return rather than a loss on your share income.
MURRAY:
Alan from (inaudible) on the line for you Peter. G'day Alan.
CALLER:
Good Morning Mr Costello.
TREASURER:
Morning.
CALLER:
I am president of the EDA, War Veterans EDA Society which is the most disabled war veterans of all, no matter who you speak to, as has been accepted by the Vets Affairs and we are. When are you going to give GST free cars (inaudible) of TPI. A number of people of the Second World War like myself, cannot get a TPI because we are over 65 years. We paid tax all our lives and we do not, get any of the benefits of the TPI, when are you going to get us a GST free car?
TREASURER:
Well, look I would actually have to have a look at, and speak to the Veterans Affairs Minister in relation to the entitlements, but as far as I know the War Veterans who have seen active service are entitled to full medical health, they are entitled to a Veterans pension, and they are entitled to a additional benefits, I can't tell you every precise one and I'm not quite sure of the age limit that you refer to, but I will take it on board and we will come back to your association and I will speak to the Veterans Affairs Minister and see what we can do.
MURRAY:
Ok, thanks for that call Alan. Peter yesterday you drew a crowd of about 500 to the 500 Club, a fund raising outfit for the liberal Party, I know that the Liberal Party were putting great stock in getting you here to raise some money for them. It does raise the question about an early election and that the party is trying to get some sort of war chest up. I mean there's almost, well there's certainly a $900,000 debt in the Liberal Party here in WA. What are the chances of an early election, I mean you certainly have no shortage of triggers?
TREASURER:
Well, we would like the Senate to pass our legislation, because I think the public feels that you elect a government - you have only got a three year term, the States have got four year terms, we have only got a three year term - elect a government, they want us to get on with governing. Now as you know, the Constitution says that if the Senate becomes obstructionist and defeats too much government legislation, it's up to the government what it would want to do about that. But I hope it doesn't come to that. We don't need an early election, what we need is, we need the government to be able to pass its legislative program. Now you ask me about, meetings, we have had some terrific meetings here in Perth, I am always working as hard as I can to help the local organisation, we had a terrific lunch yesterday, if it raises money well and good, but you shouldn't read any particular election timing into that, Paul.
MURRAY:
The AC Nielsen poll says 77% of Australians would have rathered to have the tax cut money spent on health and education, a matter that you and I discussed the day after the budget. Would you really want to go to an early election on this Budget?
TREASURER:
I think that, this is a very responsible Budget, Paul. We balanced the budget, we funded a war, we funded the worst drought in Australia's history, we have upgraded Australia's security and we have reduced taxes. There aren't many countries around the world that would be in that position, not the Americans, not the British, not the Europeans, not the Japanese. In this country we can all look at things that we want improved, and there are many things can be improved, but let me say this Paul, if you want to compare where Australia is, to other countries around the world, other advanced industrial economies around the world, to be able to do all that puts us in a pretty special class.
MURRAY:
Good to talk to you, thanks for coming to see us today.
TREASURER:
Great to be here Paul.