MITCHELL:
Mr Howard, good morning.
PRIME MINISTER:
Good morning.
MITCHELL:
We';ll talk about superannuation in a moment, there';s a lot of detail to go through there. But terrorism first, the CIA Director is predicting more terrorism this year, thinks it is inevitable – do you agree?
PRIME MINISTER:
Sadly, yes. I hope it doesn';t come here but there will be further terrorist attacks somewhere in the world this year. I suppose, people might say given the past couple of years that';s a fairly easy call to make. There has been progress made but we';re going to have to live with this issue for a lot of years into the future. I know people are developing a bit of weariness with the subject and wonder why we have to keep talking about it – I wish I didn';t have to, but it would not be responsible to pretend that the threat has gone away. I can only hope that it doesn';t come to Australia and we';ll do all we can to prevent it coming to Australia.
MITCHELL:
I think people are becoming a little blas‚ about it.
PRIME MINISTER:
Well that is a danger, that is inevitable, it';s human, it';s natural. We can';t do anything about that. We all tend after a while to say, oh it can';t happen or it can';t happen here again or it';s only going to happen once and that was a one off and what';s the Government going on about? That all happens. Now, I understand that. All I can say is that whenever in the past we';ve done that about something and we';ve discovered to our grief later on that it was a mistaken optimism we';ve felt rather reproachful towards ourselves. Now I hope that it doesn';t come and we are safer than most and we';re doing our best, but sadly I';d have to agree with George Tenet.
MITCHELL:
Do you believe there';s any increased risk in Australia this year?
PRIME MINISTER:
I don';t think there';s an increased risk, no I don';t. It';s been there and bear in mind that Australia was according to what Bin Laden said, Australia was a target before the 11th of September, a potential target.
MITCHELL:
You said in your speech yesterday that you thought business had to play a greater role?
PRIME MINISTER:
Yes.
MITCHELL:
What do you mean?
PRIME MINISTER:
… making sure that its, not only its infrastructure, but also staff and its operations are as ready as you can be for the unlikely event of a terrorist attack and we';re going to have a ministerial forum that will bring together CEOs and other business leaders to talk to senior Ministers about that. It';s really just a question of people understanding that everybody';s in this and you can minimise damage and perhaps even prevent things occurring if you';re more alert to it. It';s all part of an adjustment process to the new and different world in which we live. And once again, I don';t want to alarm people. I don';t think something';s around the corner, but everybody should be prepared that';s really what we';re talking about.
MITCHELL:
Were you referring about security or about preparations….?
PRIME MINISTER:
All of those things, all of them.
MITCHELL:
The airfare warfare – a good thing for Australia?
PRIME MINISTER:
Oh definitely. I';m all for competition. We don';t want a situation in the Australian airlines where one has the monopoly and I';m delighted that Virgin came along and I';m delighted that Virgin is providing Qantas with competition and I';m delighted that Qantas is now retaliating. And what';s Virgin';s done, they';ve matched them and doubled them.
MITCHELL:
Well, that';s right. You can';t get through to (inaudible). Is the Government going to have any involvement in redeveloping Avalon Airport?
PRIME MINISTER:
Well we haven';t been involved in that. We weren';t, to my knowledge, the Government wasn';t approached about it. It was a private enterprise decision and good luck to them. And as to any involvement in infrastructure, well that will be dealt with in the normal way according to what sought and what the priorities are. But we haven';t been to my knowledge involved in that particular decision.
MITCHELL:
There hasn';t been a good history of cut-price airlines?
PRIME MINISTER:
No there hasn';t been.
MITCHELL:
Will this be different?
PRIME MINISTER:
I hope so. Virgin is stronger than the other rivals that have emerged. Virgin is the best team, by way of competition for Qantas, that we';ve seen since the demise of Ansett, indeed the later years of Ansett where obviously the company was in a lot of trouble. But I think from a consumers point of view you need a couple otherwise you lapse into a monopoly and we all know when you have a monopoly the prices don';t stay down, do they?
MITCHELL:
Do you think we should put politicians travelling on cut-price airfares?
PRIME MINISTER:
Well, they are entitled to do that if they wish. Should we do it compulsorily? Look, I';m not advocating that.
MITCHELL:
Okay, superannuation. A revamp announced by the Treasurer yesterday – is this the barbecue stopper or there more to come?
PRIME MINISTER:
Well, I think superannuation is one of those things where you can never say there will be no more changes. But this is very much a long-term framework change. The most important changes I think are the proposition that you can access part of your superannuation once you reach the vesting age of 55 and keep on working, that is a very dramatic long term change.
MITCHELL:
Well, how will that work specifically? I';m 55 and I want to access some and work part time – how much can I access?
PRIME MINISTER:
We';re going to discuss the amount that you can access with the superannuation industry. The changes come into operation in the middle of next year and after we talk to the industry we';ll indicate how much of your pension, you won';t be able to access the lump sum, how much of your pension you';ll be access and it';ll probably be on some kind of pro rata basis, but I';m not going to commit myself to a figure because we have decided that we';d like to talk to the industry about it. But this is a really big breakthrough. The other big breakthrough is breaking the nexus between participation in the workforce and our capacity to contribute to superannuation. That will mean a lot of people who aren';t employees now, a lot of women who haven';t been in the workforce for a long time – they';ll be able to contribute. A lot of single people will be able to do so. It';s one of these things that there isn';t going to be an immediate effect, but over time it will bring about a very significant cultural change. And as you know, politicians are often criticised for not looking to the longer term and planning for the future, and just worrying about next week. This is very much about the next three or four decades.
MITCHELL:
So the cultural change is that people work longer?
PRIME MINISTER:
Yes and I think that';s a good thing.
MITCHELL:
Let';s go back to the issue of 55 and access the income for a 55 – if I was to do that, I work part time and access some of my super as an annuity, am I then totally opting out of the option of taking a lump sum or at a later stage can I get the lump sum?
PRIME MINISTER:
Again, to the extent that whatever you do hasn';t depleted that lump sum you can still take it but the idea at the moment is that all you can access is the portion of the pension from part of your super.
MITCHELL:
And if I jump back in, can I opt in and out? While I have a couple of years part time and using my super – can I just say, right I';m going back to full time work now?
PRIME MINISTER:
Well, in theory there';s probably no reason why you can';t do that. But that is one of the things we';re going to talk to the industry about.
MITCHELL:
One of the issues that come to my mind is that and I think a lot of people find this attractive – you reach 55, okay, wind it back to a couple of days a week, pick up some super. They could erode then their super by the time they get to 65 or 70? (inaudible) will they be able to?
PRIME MINISTER:
Well, yes, if you';re entitled to it. If you met the assets and incomes test – yes. But one of the interesting observations to make is, I heard on the radio this morning Alan Greenspan in America, Chairman of the Fed proposing a reduction in the pension in the United States as a way of dealing with the ageing of the population and one of the reasons he advanced was that America has a huge budget deficit. I hope to make the point that because we don';t have a big budget deficit because our fiscal position is very strong, we don';t have to contemplate radical solutions such as that. I mean, there won';t be any of that there. In fact, we have improved the generosity of the pension by linking its indexation to male average weekly earnings and not to the CPI which is the exact opposite of what Alan Greenspan was proposing. He was proposing that the indexation factor in America be less generous, we have made the indexation factor in Australia more generous because we';re in a stronger fiscal position.
MITCHELL:
The idea to keep people working is a good one, but I keep hearing from older people over the age 45 out of work, can';t get a job for years and years and they';re on the scrap heap at 45. So how do you address that?
PRIME MINISTER:
Well, that is true in some cases. It';s less true now because unemployment is lower than what it was a few years ago. But cultural change that I hope these reforms will contribute will play a part in bringing about that change.
MITCHELL:
So it will create more jobs?
PRIME MINISTER:
Change attitudes by employers.
MITCHELL:
Oh, I see. Towards…
PRIME MINISTER:
Yes. I think there is a very big shift going on now and I talk to a lot of employers in major banks and in major organisations who are now actively pursuing - I know that two of the banks are actively pursing policies of not only retaining, but improving mature age workers. Now, that is a lead that I hope other firms follow. But this is very much an optional thing, Neil. We';re not saying to people you have to stay in the workforce. We';re giving people incentives to do so. My experience is that a lot of people well into their sixties are making very useful contributions in all sorts of areas and they just want to keep on working, and when they stop working their life and their psychology and everything changes for the worst.
MITCHELL:
We have a caller that';s very relevant to that point. Michael, go ahead.
CALLER:
Mr Prime Minister. Many years ago they changed the Work Care legislation that once you turned 55 and you wanted to keep working you had to pay your own Work Care cover, so that the other unemployed young people could get a job. Now, you want to go back the other way – are you going to re-change the Work Cover legislation?
PRIME MINISTER:
Well, I don';t think I control that particular piece of legislation, I think it';s state. But you raise an interesting point and I think it';s a valid point. We have in a fairly short period of time seen a turnaround in attitude. I can remember in the late 70s the vogue was to get the older blokes out of the road as quickly as possible and make way for younger people. That was true and I think there was an attitude that said the earlier you can retire the better. I can remember the debate sometimes we had around the Cabinet table about 60 versus 55 as a vesting or potential retirement age and I can remember people saying, soon everybody will be retired at the age of 55. That has turned around in the space of a generation and you are right to say in some respects to where we were before.
MITCHELL:
Have you thought though whether the States can be addressed to address that Work Cover legislation – Why do people…working over 65 they';ve got to pay their own?
PRIME MINISTER:
Yeah, well I';ll take that on board. I want to think through before I make any call on the states to do that.
MITCHELL:
Have you looked at… did you look at reducing the tax weight on superannuation? I saw it reported today that (inaudible) most heavily taxed superannuation system in the world.
PRIME MINISTER:
In this group of reforms, no, because this was very much… these reforms are very much about framework changes. The question of whether you reduce tax on super is something that has to be looked at, along with all the other things. I mean people want lower income tax and want more spending on health, more spending on education, more spending on defence, more spending on roads, and lower tax on super. Now in the end we can';t do all of these things, and…
MITCHELL:
Is it still on the agenda, the…
PRIME MINISTER:
(inaudible) anything of that kind is always on the agenda. We have of course in recent times brought about some reduction, with the help of minor parties in the Senate, in the super surcharge. That is on the way down. We had a great struggle to get it through the Senate. The Labor Party was very resistant to it, but we got the support of the independents in order to get it through.
MITCHELL:
Would it also be possible to look at the tax rates on people over the age of 65, so if you';re in the workforce at age 70 and you';re earning $40,000, maybe you can get a tax benefit, maybe the tax rate could come down?
PRIME MINISTER:
You could look at that. I';m not certain I favour moving away from the principle that equal work should attract equal remuneration and also bear an equal amount of tax. I';m not certain about that. We already have a very generous concessional tax rate for self-funded retirees, that is people who have left the workforce. I think that would be a harder thing to do.
MITCHELL:
We';ll take a break and come back with more questions, more calls for the Prime Minister.
(break)
MITCHELL:
It';s 11 to 9. The Prime Minister is with me. PM, it just came to mind during the break there, if – and this again might be state legislation – but at the moment it';s illegal to advertise for employees of a particular age, under equal opportunity legislation. That needs to be looked at as well, so you can say well look I want older employees, I want somebody…
PRIME MINISTER:
Well if it stood in the way of helping older workers, yes. I think we can go too far with this sort of very rigid obsession with discrimination because there was (inaudible)… those laws were designed to prevent discrimination because, but if in fact we actually as a society want to encourage older people to stay and the law is standing in the way, well the law should be altered.
MITCHELL:
Hello John. Go ahead John.
CALLER:
Hello Prime Minister and Neil. How are you?
MITCHELL:
Okay.
CALLER:
Look, I';m an ex-serviceman. I joined the Army when I was 17, got out at the age of 38. I';m on a service pension, not a disability pension, but on a pension. I';m in the workforce now working, and that pension now gets taxed as an income, which makes it very hard for me to go for other jobs that I might want to go for because all of a sudden I';m getting taxed as two incomes. Are you looking at that in your service sort of area, when you look at…
PRIME MINISTER:
Well I understand your point. I don';t want to pretend that it';s something that';s going to be changed tomorrow. I mean it';s the sort of thing you might in an ideal world want to alter, but the principle that the person has got a job and are also getting a pension, the idea that that pension should be taxed along with the income, a lot of people would argue is not unreasonable.
MITCHELL:
Thank you John. Prime Minister, when the GST was introduced, you said the tax system was fixed. Do you stand by that?
PRIME MINISTER:
Did I say it was fixed, or did I say it was a lot better? I would have said millions of things when it was introduced.
MITCHELL:
I think the idea of the GST was to the fix the tax…
PRIME MINISTER:
Well I think the GST certainly fixed the major flaws in the tax system. In the literal sense, is the tax system ever completely fixed? No, it';s not. Would I like to do more? Yes, I would. Would we have done more at the time with the GST? Yes, we would have. We';d have had a higher threshold for the top marginal tax rate – we';d have had $75,000 instead of the 60 that was imposed on us by the Senate. I think the GST has been a huge success.
MITCHELL:
But we';ve still lost $3.8 billion in bracket creep.
PRIME MINISTER:
Yes.
MITCHELL:
$3.8 billion (inaudible)
PRIME MINISTER:
Well the only way you I suppose eliminate bracket creep altogether, if you regard bracket creep as the sole criterion of whether or not an income tax system has been fixed, the only way you eliminate that is to have a flat rate of tax.
MITCHELL:
Or index the tax rate.
PRIME MINISTER:
Or index the tax rate.
MITCHELL:
Would you do either of those?
PRIME MINISTER:
Well I';ve looked at flat tax and that won';t work because it will penalise low-income people. We';re not going to commit ourselves to indexation. Our principle is that as far as possible, when we have the capacity to do so, we give tax relief.
MITCHELL:
But it doesn';t last.
PRIME MINISTER:
Well, no by definition…
MITCHELL:
(inaudible) they';ve lost it. It';s all gone.
PRIME MINISTER:
Well it';s not all gone. Of course people as they go into higher income brackets, they will pay more tax. That';s true. But of course the gap between that middle rate – the 20 cent and the 30 cent rate – the gap is enormous now. You go from what $22,000 of income to $52,000 or you go (inaudible) higher bracket.
MITCHELL:
Where is the benefit most people get from the pain of the GST? Where is the benefit…
PRIME MINISTER:
Well they are paying lower income…
MITCHELL:
(inaudible)
PRIME MINISTER:
But hang on. Yes, but if we hadn';t have brought that whole new system in, they wouldn';t have got the $11 - $12 billion of personal tax cuts. (inaudible) you';ve got to compare what the situation now is with what it would have been if we';d have left the system unchanged. And if we';d have left the system unchanged, people would have been paying infinitely more tax.
MITCHELL:
Did you see the reports this week that a woman went back to work part-time (inaudible) earning a real income. For every $1 she earned, she lost $1.08.
PRIME MINISTER:
Yes.
MITCHELL:
And that';s ridiculous.
PRIME MINISTER:
Neil, the only way you can avoid that is to increase the permissible limits under which you can keep your family tax benefit while you go back to work or not have the family tax benefit in the first place. I mean, that kind of thing';s a function of an income-based family benefit system. We could get rid of that by paying the family tax benefit to everybody no matter how much money they were earning and then you wouldn';t have these effective marginal tax rates. All you can ever do with those things is to adjust them and to make them a bit more generous as part of ongoing changes to the system. You can never completely abolish that unless you believe that you don';t have any income testing of family tax benefit.
MITCHELL:
Is tax indexation still on the agenda?
PRIME MINISTER:
I think it';s fair to say that in the next budget we';ll be looking at a whole range of tax options, but I want to be realistic and be honest and say that we can';t meet every expectation. I said earlier people want more money spent on health and want more money spent on education and want more money spent on roads. We need to spend more money on defence and intelligence and people want superannuation tax cut, they want income tax cut. I understand all of that and we will be trying very much to get the balance right. Could I just say on behalf of the Government that as far as the fundamentals are concerned, we';ve got the balance very right. I mean, our economy is performing better now than at any time since World War II.
MITCHELL:
The… I guess the point is this – you';re looking at all options in the budget, but are you looking beyond the short-term fix (inaudible) tax cuts (inaudible)? Are you looking at a genuine reform…?
PRIME MINISTER:
Well what Peter Costello announced yesterday, I mean it';s not directly in tax, it';s hardly a short-term fix. I mean, it was very much the longer term and that was the strength of that policy announcement. We';ll be looking at a whole range of options. But I just have to say again that our capacity is sadly is nowhere near as great as some people imagine because we not be going into debt, we';re not going to make the American mistake of going into deficit and I go back to what Alan Greenspan is saying, I mean to think that America is looking at the possibility of reducing the generosity of the pension indexation factor and one of the reasons for that is that they have a big budget deficit.
MITCHELL:
Is there a decision close on the future of Geoff Clark?
PRIME MINISTER:
Yes,
MITCHELL:
How close?
PRIME MINISTER:
Well, that';s a matter for the Minister, she has an independent legal discretion and I don';t want directly or indirectly to be seen to influence her.
MITCHELL:
Well, are you willing to comment on what seems to be vacuum of leadership at a time of some tension, racial tension?
PRIME MINISTER:
I don';t think ATSIC has served the aboriginal people well at all.
MITCHELL:
What about the moment, talking about racial tensions, look at Redfern.
PRIME MINISTER:
Well, Redfern is a very sad development. I think it';s very sad when any young person of that age dies in such awful circumstances. I don';t see any evidence though that he was being pursued by the police. I think the allegations that have been made against the police are unreasonable and I defend very much the position of the police in a situation like that.
MITCHELL:
Another incident (inaudible) being attacked in Walgett after the funeral. Do you accept that these are race-based riots?
PRIME MINISTER:
I think they arise from a combination of factors. I think they arise from the total breakdown in family authority within aboriginal communities. I think they sometimes arise from a policy perhaps of treating different groups in the community differently. The solution very much lies in treating everybody equally and as part of the mainstream as far as law enforcement is concerend.
MITCHELL:
Just quickly, you have a meeting on the Scoresby Freeway today (inaudible) deadlock (inaudible) for some time. What';s the meeting about?
PRIME MINISTER:
I';m just meeting people in the area whose businesses and livelihoods depend very much on it being built.
MITCHELL:
And you';re really firm, no money for Scoresby if this tolls…
PRIME MINISTER:
No, we…
MITCHELL:
(inaudible)
PRIME MINISTER:
Well, the state government shouldn';t imagine that we';re going to give way on this. They signed an agreement and we';re going to keep them to it.
MITCHELL:
(inaudible) industrial relations law in Victoria. I spoke to your Minister earlier in the week. If the federal legislation isn';t working…
PRIME MINISTER:
Well, it';s not that problem, it';s the permissive culture of the state government towards unions. Every businessman in Australia knows that the unions are getting away with, relatively speaking, blue murder in the state compared to say New South Wales or Queensland. The two states that are regarded as having the most permissive approach to industrial relations are Victoria and Western Australia. You talk to any businessman in those states and they';ll tell you, privately that is exactly what they';ll say. Now, I';m not sticking up for the New South Wales or Queensland governments, but relatively speaking the unions don';t have the free reign there that they have in Victoria and Western Australia.
MITCHELL:
Thank you very much for coming in. How are you getting on with Peter Costello?
PRIME MINISTER:
Very well.
MITCHELL:
Really, he';s a bit grumpy at that superannuation back flip.
PRIME MINISTER:
Look, we';re a great combination. Look at him yesterday.
MITCHELL:
(inaudible) he got all the attention yesterday.
PRIME MINISTER:
Well, that';s good. That';s exactly what I wanted. I mean, he was the man of the moment yesterday an that';s how we planned it and that';s how it worked out.
MITCHELL:
There';s a bit of a word around Victoria that they';d like to replace you.
PRIME MINISTER:
Well, we';ve been through all of that.
MITCHELL:
It';s not going to happen?
PRIME MINISTER:
No, I';m very committed to the next election.
MITCHELL:
Prime Minister, thank you.