Interview with Alan Jones
2GB Radio, Syndey
2 February 2010
SUBJECTS: Intergenerational Report; CPRS
JONES:
The treasurer is on the line. Treasurer good morning.
TREASURER:
Good morning Alan. It's good to be with you.
JONES:
Happy New Year to you, and thankyou for your time.
TREASURER:
Happy New Year to you.
JONES:
In short-hand what's this about?
TREASURER:
Well, this paints, I think, a really important picture of what Australia will look like in 40 years time. I mean we will have an ageing population that will put pressures on our budgets, particularly our health budgets, and it also points to the impact of climate change as economic and social impact if we don't take some action there. So what it does it put the challenges before the Australian people, so I think we can have a mature conversation about how we deal with these challenges, because if we make relatively modest adjustments now we can have a very big impact and meet the challenge of an ageing population.
JONES:
Do you understand how the aged are starting to feel? I'm getting a stack of calls here and letters, and they are being made to feel by the Prime Ministers constant reference to them that they are a problem, and we may be going to ask them to work until they drop, or at least make them feel as though they're going to have to do more to pay their way when many of these people have paid all their health insurance for all of their lives…
TREASURER:
Certainly. Well, can I just say there is nothing in what the Prime Minister has said that should make them feel like that because the whole point of this report is to deal with this challenge so that all Australians, all Australians can support each other as we go through the next 40 or 50 years. But this Government respects the contribution that has been made by our seniors, they deserve dignity and respect in their retirement, and they also deserve to have a choice.
JONES:
They might have to work more.
TREASURER:
Not necessarily, and we're not saying that. There is nothing in anything that we have said that will force our seniors to work more if they don't want to. But what we say - and this is what national seniors says – is that there may be many who in their retirement decide that they want to work part-time, and what we want to do is provide those opportunities. For example I had a long discussion yesterday with Everald Crompton from National Seniors about the discrimination that many people face in the work force. This is not just people over 65, this is people in their late 50's and their early 60's before they reach the pension age. There is a big problem out there and what we are about is addressing that problem. Because if the population is ageing, this is what occurs Alan; at the moment we have something like 5 Australians of working age for every person that's aged 65 and over, in 2050 that will be 2.7. So that's the challenge and that's why we're talking about it, because if we meet this challenge we can continue to lift our living standards and still have a socially cohesive society. That's the theme of the report, how we all together can meet this challenge. So in no sense is the Government in anyway seeking to reflect on older people or their contribution. They've worked hard to make this country great, they deserve to have a choice in their retirement as to whether they want to spend their retirement years doing just that, playing golf or whatever - that's great - but if some of them want to work part-time that's great too. Where as some of them want to volunteer in our great community organisations we should be about facilitating that as well.
JONES:
Can you understand that people are saying, and have already said to me this morning, that when we talk about Australia to 2050 that this is a smoke screen to say we're addressing this problem into 2050. This is a smoke screen for the fact that at the end of two and a bit years the Rudd Government has had endless reviews, and grand ideas, and rhetoric and political speeches, and now we are talking about 2050. Someone who's written this says we know what's happening in 2050. It was only two years ago since an economic crisis was apparently breathing down our throats. No one in Treasury got a wiff of it, and there were even question marks as to whether the assessment they made of that so called crisis was accurate.
TREASURER:
Well, Alan lets just deal with the motivation behind this report. This report is the third Intergenerational Report as you indicated in your earlier remarks. And the fact is that it was put out there by the previous government out of good motivation. Our criticism of the previous government when they put forward the first two reports is that they then failed to act. Our critique of them when they brought out those reports was that they weren't making the necessary investments in infrastructure Alan, which is something you've spoken a lot about, the necessary investments in skills and so on, and economic reform which would support an ageing population. And what we are doing with this Intergenerational Report is pointing out that that challenge is still there. It's not quite as large as presented in the previous Intergenerational Report, so I can't understand why people like Mr Abbott and Bronwyn Bishop are making the reflections on us that they are, because they certainly didn't make those reflections when the previous two Intergenerational Reports came out. But what we're saying is people like Mr Abbott and Mrs Bishop sat around a Cabinet table when we had a strongly growing population and ageing population and didn't make the investments in infrastructure and in skills, and didn't deal with climate change. And what we're saying is this reinforces the need for us to continue with the agenda that we put to the people at the last election – more investment in infrastructure and so on.
JONES:
Let me just talk about that. You see, that's the issue though. I mean, these polls are not telling untruths. There is a real mood out there at the moment because you talked about failing to act or the agenda that you put to people at the last election. You put - oh you didn't - the Prime Minister, who is pretty good at sort of, making promises and doing nothing about them. He said that he'd reduce the petrol prices by introducing Fuel Watch - it didn't happen. He'd reduce grocery prices by having grocery watch - it didn't happen. He won't means test the baby bonus, he said, hand on heart. He won't means test private health insurance - hand on heart. We're going to take over public hospitals if their performance doesn't improve - nothing. We're going to stop Japanese whaling - nothing. We're going to take the President of Iran to the World Court - nothing. These haven't begun to…
TREASURER:
Can I just say on that, I mean, you'll have your critique of our record, and I could sit here and run through a very long list of very substantial reforms that we have made to this country. Whether it's in the taxation system, whether it's in the childcare system or whether it is in the increase in the base rate of pension. Some people say we're not respecting older Australians, that historic decision to increase the base rate of pension by $30 plus was the single biggest increase in the base rate of pension in many generations, something the previous Government couldn't find the time to do. But you've also mentioned…
JONES:
Is that the high point?
TREASURER:
Well, it's a very important adjustment to the age pension.
JONES:
But see, he apologised to the aborigines alright. Now he said, the Prime Minister said that he's going to build 750 new houses. I mean, you've got to look at this in the light of what you're saying…
TREASURER:
Alan..
JONES:
Hang on, hang on. 700 extra new houses in the Northern Territory and 2500 refurbished houses – nothing, nothing.
TREASURER:
Alan, I'm quite happy to spend a good 30 minutes if you like running through our record, the things we've done and contesting that long list that you've gone through. But I suspect we don't have enough time to do that this morning.
JONES:
I'd just like you to tell me; what is the highest point of achievement of the Rudd Government. You said pensions, what's another?
TREASURER:
We stopped this country going into recession. We dealt effectively with the global recession and the global financial crisis, and if we hadn't done what we did Australia would be in recession right now.
JONES:
Well, that's not quite true.
TREASURER:
Yes it is, it is very true.
JONES:
You can't prove that point.
TREASURER:
I certainly can.
JONES:
You see, there are many economists who would say that …
TREASURER:
There are not many Alan. There are not many.
JONES:
You haven't heard what I'm going to say. Many economists who would say that the evidence of net benefits from stimulus packages around the world over the past 80 years, plenty of evidence that they don't achieve a lot, and yet there are really significant consequences of ill directed, knee jerk reactions of spending and we're facing them now. You've got big levels of debt; interest rates are going to go up again today - 4 times. This is what out there in 'Struggle Street' they're worried about. How do we pay for all this?
TREASURER:
Well, can I say to all of those people out there in 'Struggle Street' that your Government acted at a time of national threat. And we put in place one of the most effective stimulus packages in the developed world, and the consequence of that is that we have an unemployment rate now with a five in front of it when most other developed countries have an unemployment rate of seven, or eight or 10 per cent. And that has a devastating impact on communities, and on families and on our long-term economic health. Our stimulus package has kept tens of thousands of tradies and others employed. That pipeline of activity is absolutely crucial to business confidence, and is the foundation of the health of the Australian economy today compared to just about every other advanced economy in the world.
JONES:
With respect to you, you can't prove what would have happened if you hadn't sent out the $900 cheques. What we do know now though is that the $900 cheque is going to have to be paid for over and over again because these are very significant debts now that the Government has run up.
TREASURER:
And Alan, if we hadn't put that in place we would be facing a much bigger problem in terms of revenue. We had $170 billion dollars wiped off Government revenues through the global recession.
JONES:
Well, you knocked off the surplus too.
TREASURER:
$170 billion knocked off our revenues over forward estimates Alan, and that is much, much bigger than any surplus…
JONES:
It didn't take you too long to wipe out the Costello surplus. You see, I'm worried about the advice you get right, because you go to Treasury. Now this is what - on May 13 last year - this is what your guru Henry said; “Employment is expected to contract through to mid 2010 leading to a substantial rise in the unemployment rate which is forecast to peak at 8 per cent in 2010 and 2011”. He's only about 2 ½ per cent out in all of that.
TREASURER:
Well, Alan you can run through those sorts of statistics.
JONES:
No, well he has.
TREASURER:
But Alan, you know what happened. You know what happened at the end of that year. We had the collapse of Lehmann Brothers. The global economy fell off a cliff. Unemployment around the world lift up, confidence was shot, that's what happened after the collapse of Lehmann Brothers.
JONES:
I want to talk Australia here. Our banks…
TREASURER:
Well we were affected by that Alan.
JONES:
No, no, no. Our banks were not at risk. We had great stability in the banking and you…
TREASURER:
But our trade was Alan, and our stock markets were.
JONES:
It was affected by all of this. But I'm simply saying that was all known at May 13 last year. It was all known in May 13, 2009 that was known.
TREASURER:
2008
JONES:
No, no, no 2009, and he said it will peak at 8 per cent. Now let me come to another thing. The same bloke therefore…
TREASURER:
Well, it's a great thing it's not peaking at 8 per cent.
JONES:
Yeah but he's wrong.
TREASURER:
And that's testament to the stimulus that we have put into the system.
JONES:
Yeah he was wrong. Now let me come to you because you're relying on this bloke and you've given him a tax review to write. Now he's written the tax review, now you won't release the tax review.
TREASURER:
I am going to release the tax review Alan, you know that, and I'd be happy to talk to you about the tax review when it's released.
JONES:
(Inaudible) that commitment.
TREASURER:
And there will be plenty of time to talk about it.
JONES:
But business is screaming for it to be released because there's so much uncertainty because, the same fellow Henry said quote – this is only last month – “In order to finance the Government provided goods and services demanded by the community revenue needs will go strongly in the longer-term. It would be prudent to plan on the basis that the tax system will over time have to generate revenues to meet substantially larger fiscal costs”. Treasurer that means your Treasury head is saying increased taxes.
TREASURER:
No it doesn't. It doesn't mean that at all. He's pointing to the fact that we've got an ageing population, that the challenges that are highlighted in the Intergenerational Report and a solution to that Alan, is to grow the economy…
JONES:
(Inaudible) Does Henry recommend in this review, increased taxation?
TREASURER:
I'm not going into the recommendations of the review Alan. When we put it out there with the Government's initial response I'll be more than happy to talk about it.
JONES:
Let me just ask you one thing though. As Treasurer you go for advice to Treasury, and your principal adviser is meant to be the head of Treasury. How the hell do you go to the head of Treasury to get advice as to what you should do about a tax review which has been written by the bloke who is supposed to be giving you advice?
TREASURER:
Well, it hasn't been written by Dr Henry. Could I make that point. It is an independent tax review…
JONES:
The Henry Review.
TREASURER:
There are other independent members of that review. The Government has not had any fundamental role in writing the review. It is the product of that committee's deliberations, and that will be there for all to see when we release the review with our initial response. It is an independent tax review, and that will be plain and clear for all to see.
JONES:
Treasurer, let me take you to this. Look, Terry McCrann is one of Australia's leading economic commentators. He writes today “Kevin Rudd is damned, and damned utterly by his own Intergenerational Report. It loudly proclaims we have a Prime Minister who hasn't got a clue”.
TREASURER:
Well that's rubbish, isn't it? I mean I've read the article. You should save my time.
JONES:
No, no, no. He talks about the report's comprehensive inanity. Now the point he makes - which everyone out there listening understands - that if we are going to get productivity and economic growth, the great thing that's given us a unique position in the world is cheap energy. Cheap energy has come from fossil fuel, or as he says, one dirty word called coal and at the same time as you're talking on the Intergenerational Report, and arguing that we're going to have to do something - increase productivity to pay for the problems of health and welfare that lie ahead - you've got the same Prime Minister continuing on the same line with the Carbon Pollution Reduction Scheme which in fact imposes significant taxes, but worse than that, eliminates our unique advantage that we have in relation to cheap energy.
TREASURER:
Well Alan, he's arguing what many argue which is that we should just sweep the problem with climate change under the carpet and do nothing to prepare for the future. We're going to make ourselves, and need to make ourselves more energy efficient. The same argument that Terry McCrann is making today and others are making, would have been made by people like Terry and others back when we introduced compulsory superannuation which has turned out to be such a boom for this country. Such a support for us, particularly during the global financial crisis. Some decisions are difficult, we have to take them in the long-term and we take them knowing that we are confronting a huge future challenge. And if we act early then there are great benefits, particularly productivity improvements, particularly investment in renewable energy that flow from that, and Australia will reap the benefits for generations.
JONES:
Do you understand that you would have put in front of you any number of reports which suggest to you that at no point in the future will any access to renewable energy replace the existing energy reserves that deride from fossil fuels.
TREASURER:
Well, fossil fuels will continue to play a very big role in the economy as it goes through into the years ahead and into the decades ahead. The Government knows that. It's all part of our plan, but we also have to invest in renewable energy as well. One of the reasons Alan, that we are investing in carbon capture and storage is precisely because we know that coal will continue to play a critical role in the global economy for a long time to come.
JONES:
But your legislation that is going to be - is this the stuff going to be reintroduced, this Carbon Pollution Reduction Scheme stuff - going to go into the Parliament this week?
TREASURER:
Yes.
JONES:
You're sticking with this? So, the IPCC, the Intergovernmental Panel on Climate Change is still your Bible is it?
TREASURER:
Alan, all of the scientific advice from the CSIRO, the IPCC and so on, tells us that what we need is to put a price on carbon. In other countries, 30 odd other countries around the world, are putting a price on carbon through an Emissions Trading System.
JONES:
You think Mr Obama will be putting a price on carbon?
TREASURER:
Well, there are plans in the United States to do precisely that, and there are schemes operating elsewhere around the world.
JONES:
Do you think that will get through the Government in the United States of America?
TREASURER:
Well, that's entirely a matter for the United States of America.
JONES:
It's got as much chance as you becoming Premier of Western Australia, and that's got no hope at all.
TREASURER:
Well, thankyou.
JONES:
Let's come back to the economy and the ageing population. There's real concern out there that you are, and will be attacking superannuation. You've already reduced the amount that people can pay…
TREASURER:
No we're not going to attack superannuation, and we haven't attacked superannuation.
JONES:
You have.
TREASURER:
No we haven't.
JONES:
You've reduced the amount that people can pay in if they are under 50 into superannuation and get a tax break, and you've reduced the amount that they can pay in over 50. You've reduced those amounts. So Government policy is actually destroying the incentive for people to save in retirement and old age, but you're telling us we won't be able to afford …
TREASURER:
No Alan, I don't accept any of those things for a moment. We value superannuation. We will do everything we possibly can to support superannuation and to ensure that senior Australians have adequacy when they retire. That is a fundamental point.
JONES:
But you've reduced the amounts for which under-50's can contribute into their superannuation fund, and you've reduced the amounts that over-50's can contribute into their superannuation fund.
TREASURER:
We did make some changes in the last Budget to obscene levels of subsidy which went to a very few number of people, which are denying other people adequacy in retirement income. But these are matters which are before the Government, and will come before the Government through the independent tax inquiry and the Cooper Review. We will respond to those, but let me make this point. Our objective is to strengthen superannuation and to make sure people do have adequacy in their retirement, so they can have the choice as to whether they work or they don't.
JONES:
So you can say hand on heart to me, that in a Budget about to be brought down in about three or four months time…
TREASURER:
I can't speculate about the Budget Alan. I have no intention of speculating about the Budget
JONES:
No, no, no, but hang on, I'm asking about superannuation – that you won't be taxing superannuation or changing the tax arrangements in relation to super. To give certainty to people out there who …
TREASURER:
What I can say Alan, is that the superannuation arrangements are the subject of review by the Independent Tax Committee and a separate review by Mr Cooper. They all come before the Government and we will respond to those reviews in a positive way. But we'll have to see what's in them all but our underlying objective Alan, is to reinforce the importance of private saving, and reward people who work hard so they can enjoy a retirement with an adequate income.
JONES:
So how do you say to people out there in 'Struggle Street' listening to you, with the level of debt that the Government has gone into…
TREASURER:
The Government has the lowest debt of any advanced economy in the world Alan.
JONES:
I'm not worried about other economies in the world. I'm worried about us here. Kevin Rudd might be Prime Minister of the world, you're Treasurer of Australia. He might want to be Prime Minister of the world…
TREASURER:
And I'm proud of what Australians have achieved over this global recession.
JONES:
Good. Ok. But you've got $136 billion of Government borrowings, and the debt drivers - $136 billion - and the debt drivers like health and welfare spending will continue to increase, as you said in this report…
TREASURER:
That's right.
JONES:
And ageing Australia demands more medical care. So, two things, do you cut back on social security, or are you going to increase taxes to pay off this debt?
TREASURER:
The first thing we need to do is to make sure we invest in the drivers of productivity so we can grow our economy faster and have the revenue that comes with that to support an ageing population, and also Alan, we need to have Budget discipline. The previous Government spent like drunken sailors at the height of the mining boom, locked in permanent spending in a whole host of programs and it falls to us to exercise Budget discipline as we go forward, and that's why the Intergenerational Report is so important.
JONES:
Treasurer, people are ringing me this morning and saying the one question. Will you ask the Treasurer why they needed 114 people to go to Copenhagen, and what was the cost of that when the same Prime Minister is talking about Budget discipline? What was the cost of 114 people going to Copenhagen?
TREASURER:
Alan, I can tell you the cost to our economy of climate change and decisions taken in places like that is very high, and that's why those sorts of events are important. Now that turned out not to produce the result that everyone would have desired, but it doesn't lessen the need to deal with dangerous climate change because it will be a huge economic and environmental cost to this country over a long period of time.
JONES:
So the Himalayan glaciers are going to melt, and the Amazon River is going to disappear. Do you believe all that crap, do you?
TREASURER:
Alan, I believe the scientific evidence that dangerous climate change is a threat to the economy and a threat to our society. And because there's a few people around the place who may have mucked up a small element of one report doesn't lessen that one bit. And because there are a whole lot of other crack-pots around who deny the danger of climate change doesn't lessen our responsibility to deal with this as a fundamental economic and environmental problem for Australia.
JONES:
There were a lot of crack-pots at Copenhagen though weren't there? Because it came as was an absolute failure. We invested energy, time, money, talk about nothing but and came home with nothing.
TREASURER:
Can I just say one thing about what we've done internationally. We've been very involved with the G20 and that has brought great benefits to this country, and been part and parcel of why we've gone through a global recession as well as we have and produced the best outcomes of any advanced economy - major advanced economy - in the world. So sometimes there are swings and roundabouts with international involvement, and we can't necessarily predict what other countries will do in international forums, but it doesn't mean to say we shouldn't be there.
JONES:
But interest on your Commonwealth debt - final question - is going to go, by your own figures, $3.5 billion a year to $8.3 billion. You've got to find that dough somewhere.
TREASURER:
That's right, and that's why we put in place our medium-term fiscal strategy which is clear and set out in the Intergenerational Report yesterday, and why we're determined to bring the Budget back to surplus. Because what we managed to do over the past couple of years is avoid massive unemployment in this country and the closure of tens of thousands of businesses because we borrowed responsibly to support our economy, and that gave us the best outcome of any major advanced economy in the world.
JONES:
Treasurer, good to talk to you, thank you for your time.
TREASURER:
Good to be with you.
