CLARK:
Mr Costello, good afternoon to you.
TREASURER:
Good afternoon Philip.
CLARK:
Welcome to a brand new week and all that.
TREASURER:
Thank you very much, good to be with you.
CLARK:
Australia, you say, is going to face a budget shortfall of $35 billion every year by the 2047, we are thinking of long-term horizons these days and with the population aged, in other words you say, the ageing population is going to send us broke.
TREASURER:
Yes, if we don’t change policy, it will.
CLARK:
Why and how?
TREASURER:
On our current estimates the spending, the additional spending required to look after the aged population by 2047 would be such that the difference between spending and revenue would be about $35 billion per annum unless we take measures to stop it. The good news is that this is better than we projected in our last Intergenerational Report so we have improved but we have got a long way to go.
CLARK:
This is money that is required for aged care and for health all of those things.
TREASURER:
The thing is that as the fertility rates have declined and as people are living longer, the proportion of the population that is going to be above 65 compared to the proportion of the population that is going to be of working age is going to increase. So you are going to have a smaller number of people of working age supporting a greater number of people of retirement age. So that means that your tax base is shrinking proportionately and your expenses are increasing because of aged care, the pension and health costs.
CLARK:
A couple of things here, I mean the changes to superannuation is very important, that is just more and more important, isn’t it, this notion that people are going to have to provide for themselves and whether or not it is (inaudible) compulsory super contributions are a big part of it and the other thing is the nature (inaudible) of retirement. We have grown up with two generations of thinking retirement is a great thing at a certain age and that is going to have to change, isn’t it?
TREASURER:
I think it is. Superannuation is being encouraged, you have got the compulsory component as you know, we have got co-contributions scheme where people who are lower income earners may be outside the workforce can have some money put into superannuation on their behalf, we have changed tax arrangements and we are allowing people to stay in superannuation longer. So we are encouraging people through superannuation to look after themselves rather than rely on the aged pension to the same degree. And the other thing, you are quite right, we are going to live longer and we are going to be healthier. So, the opportunity to stay in the workforce should be greater and we need to encourage people to do it. The days of early retirement Philip, of taking your (inaudible), we have got to encourage people to stay in the workforce. Even if it is just part-time, a lot longer than that.
CLARK:
Well you have got a few things to get over and one is get a willingness from employers to employ older people and the prejudices against them. (inaudible) to anybody over 50 how you are going looking for a job, I (inaudible) people saying impossible.
TREASURER:
I think there is a lot of prejudice and the message that we are putting to employers is older workers are reliable, they have got experience, they have got skills and with improved health standards they are in better shape than ever before and I think we went through a bad time in our country in the 80s and the 90s when a lot of people were put off, mid-management people by large corporations, particularly banks and I think the banks are now realising that if they want more face to face banking they have got to bring these people back in, a lot of the banks are actually recruiting people who were put off by them some time ago. And they are also realising that where unemployment is low and bear in mind unemployment is lower than it has been in 30 years, getting good workers is much harder these days and that mature workers are good workers.
CLARK:
Yes, well, all of that is true but these are all changes which are (inaudible) and were taken (inaudible) the last time I looked I said, yes, (inaudible) on retirement was something like $40,000, it was ridiculously low. Now that is going to change over time, when do you, when does your modelling tell you that it will ever get to a point where people will actually look after themselves? At the moment you need at least 200, well no one has got anywhere near that.
TREASURER:
Well I think for people who have been in the workforce for 40 years of contributions or even 30 years of contributions, so the people that will be retiring in 2015, 2020 will be in a better position. And bear this in mind Philip, that if you only had a small sum in superannuation you would get a part-pension as well. So you have got to bear in mind that you get a full pension if you have no super, you have got small super you will get a part-pension, we are encouraging more and more people to try and fully fund their superannuation. But you have got to bear in mind if you can’t fully fund your superannuation there is a part-pension to fall back on as well and we are actually improving the assets test to make a part-pension more meaningful for people as well.
CLARK:
Now despite the fact that you wanted to get our people, to get people out there and watch the Sunday night movie, go to bed early and produce one for the country, they haven’t been doing so good. Now, whether that is due to your (inaudible) or not, I am not sure, but the replacement rate for Australians, women are still not having enough babies, are they, we are not even replacing ourselves?
TREASURER:
That is right. We have improved, by the way. We had 40 years of decline from the 1960s and it looked like it was just going to go into continuous decline, this is the rate of children per female. But interestingly enough over the last five years the decline halted and the rate of children increased. In fact last year we had the largest number of babies born for something like 30 years. So that is good. The rate has increased, that is good. But you are completely right, the rate of increase is still not back to replacement levels so at these levels we are still not replacing ourselves and we could afford to actually pick that fertility rate up a bit more.
CLARK:
Alright, I mean women will say and particularly a working woman will say, unless you do something about the cost of childcare, it is never going to happen because we can’t afford it.
TREASURER:
Well see, what we have done is we have…
CLARK:
We know what you have done, but it is not enough, is it?
TREASURER:
Well actually we could be the most successful western country in the world because in every other country it is still falling whereas in Australia it has increased but only slightly as I say. So we have the Baby Bonus, we have more childcare places, we have family benefits and I think the combination of all of those things has improved the situation for parents with children.
CLARK:
Alright just a couple of other things before you go, you have asked Graeme Samuel of the ACCC to look at petrol prices because we are given (inaudible) Easter-road-motorist gouge when petrol stations will literally shake motorists upside down.
TREASURER:
Yes…
CLARK:
So (inaudible) stand by and let it happen, you can’t do anything about it either, can you?
TREASURER:
Well what we can do is we can prosecute anybody who is colluding. If we find anybody you know, who is in the league with a competitor and have decided to push up prices, we can do something about that, we have prosecuted people in the past, we have had millions of dollars of fines imposed on them and my message to the service station operators is don’t ever try and collude with any of your competitors because the ACCC will be out looking for you.
CLARK:
Graeme Samuel doesn’t believe there is any colluding, he (inaudible) petrol pricing (inaudible) there is nothing wrong, it is just a normal price cycle, do you share that view?
TREASURER:
Well you see, there are different factors that influence petrol price – there is the world oil price, then there is the world refined price, then you have got shipping costs and exchange rates…
CLARK:
(inaudible) relation as you know, to the price at the pump.
TREASURER:
That is right, but then you get right down the retail level and if there is any colluding of those retailing that is illegal and Graeme Samuel is tasked and funded to find that out and prosecute it.
CLARK:
Alright well, I don’t think any of us will be (inaudible) I must say. Interest rates on Wednesday, would you like to make a prediction as the Federal Treasurer for the first time ever?
TREASURER:
Well as you, as the (inaudible) you know I will never comment on the future movements of interest rates.
CLARK:
Yes alright. Good to talk with you.
TREASURER:
Good to be with you.
CLARK:
Thanks.