Subjects: Competition policy; tax reform; budget measures; superannuation
E&OE................................
CORDEAUX:
Let us go to the Prime Minister of Australia John Howard. Sir, How are you?
PRIME MINISTER:
Good morning Jeremy. I'm very well indeed.
CORDEAUX:
Sorry about the switching or whatever they managed to muck up there.
PRIME MINISTER:
That's okay. I'm on the line now.
CORDEAUX:
Okay. Now the front page story in our Advertiser this morning says that Foreign Affairs Minister Alexander Downer's being urged by senior colleagues to run for the deputy leadership under Peter Costello after you leave politics. What're your plans?
PRIME MINISTER:
My plans are to stay around for quite a while. [inaudible] next election.
CORDEAUX:
And after that?
PRIME MINISTER:
Well I've said that when I reach my 64th birthday which will be in a couple of years time I'll just think about my future. I haven't taken it any further than that and I thought it was the honest open thing to do to say that. I think I said that almost a year ago. But at the moment the last thing I'm thinking about is retiring. I'm really very enthusiastic. I'm very keen to win the next election. I believe that after having had a difficult few months the Government's position has improved although we are still behind. We still have a lot of ground to make up. But the public is beginning to realise that the Labor Party offers no alternative. The Labor Party has been put on the spot by the honesty of Senator Conroy. They're talking about rolling back the GST but they're not being specific. Once they become specific they've got to explain where the money's coming from and the money can only really come from cutting necessary spending that we have committed ourselves to, or by increasing income tax or other taxes in order to pay for the removal of the GST from certain items.
CORDEAUX:
Yeah. Well just coming back to the Alexander Downer story. Have you heard anything about that?
PRIME MINISTER:
No no. I just saw it in the paper this morning. But you get those kind of stories. People do a bit of crystal ball gazing about the future. Alexander of course is a very fine colleague of mine. He's been a terrific Foreign Minister. He really has been an outstanding Foreign Minister and he's doing a fantastic job. But then the question of future leadership arrangements for the party is something that the Party Room will turn its attention to when the need arises.
CORDEAUX:
Sure. But is it the kind of thing you would anoint, would he get your backing?
PRIME MINISTER:
No. I don't anoint. I don't have any power to anoint anybody. I never get into that silly business. If at some time in the future I decide to leave politics, well the Party Room will choose a successor and it will also if that successor happens to be somebody who's now the deputy leader, namely Peter Costello, then obviously they'll have to choose somebody else to take Peter's place. But that is all well into the future and it is not for me to say who should have what position. That is a matter for the Liberal Party room at the time. But as far as now is concerned and the next period is concerned the election, and beyond the election, we have a set and very cooperative leadership team. We also have a lot of very capable Cabinet Ministers. Alexander is one of them and many others who are doing a first class job.
CORDEAUX:
Well no doubt we'll get a chance to talk in the lead up to the election but I guess the campaign could be said to be up and running now. I read a transcript of an interview you did yesterday where you said I'm very committed to winning the next election, I want to do more things. I don't expect you to tell me everything but give me a snapshot of what more things actually means.
PRIME MINISTER:
Well I think more things is first and foremost hanging onto the economic reforms that we've achieved. We still haven't received the full benefit of industrial relations reform. We still haven't received the full benefits of taxation reform. There'll be more benefits coming on the 1st of July this year when company tax falls to 30 cents in the dollar and the financial institutions duty is abolished. And there's a lot of bedding down to be done in relation to the changes that we have already affected. But we will be outlining in the lead up to the next election some further plans for the next term. They'll be build around core but more principles such as providing people with more incentives, more choice, and building a greater spirit of self reliance in the Australian community whilst looking after people who are disadvantaged. We'll be having some more to say about those things as we get closer to the event. But politics is always about a government securing the nation's future. If you look back over the last five years in just about every field we've taken big steps to secure the country's future. We've secured it economically, we've secured the social infrastructure, we've secured the defences and the foreign relations of the country, and we're tackling important issues like the environment. I mean I want to do a lot more in the environment in the next term. This is particularly important to South Australia who's tackling the problem of salinity and water quality. That is probably the biggest single environmental challenge that this country has. We've committed $700 million for openers in relation to a salinity program in cooperation with the states. I'm very happy to say that John Olsen's Government in South Australia is cooperating very readily with that program. So there's a lot to be done on the environmental front and I see that as one of the big things that a Liberal Government will tackle in its third term.
CORDEAUX:
I know it was the Labor Party who introduced competition policy. But if it becomes obvious that competition policy is not really serving this country well would you look at it?
PRIME MINISTER:
Well we do now, we do now. Let me give you a couple of examples. We made it perfectly plain that we were not going to disturb, not withstanding any esoteric competition principles, we were not going to disturb the longstanding arrangement whereby newsagents in Australia were guaranteed the capacity to deliver papers on your front lawn. I mean that's a great Australian habit in many parts of the country and it was under threat, in theory at least and probably in practice, by some elements of competition policy. We just put our hand up and said no. We've done the same thing in relation to pharmacies, in respect of their capacity to operate and provide a very valued customer service. And we have a very practical view about competition. Generally speaking competition is very good. One of the reasons interest rates are much lower now for housing loans is that we have more competition. One of the reasons why telephone charges are lower than they would otherwise have been is that we have more competition not withstanding some of the challenges in relation to telcos at the present time. So I think you've just got to adopt a very pragmatic approach. Where competition policy works and delivers benefits then I'm all for it. Where it doesn't I'm not in favour of it.
CORDEAUX:
On the subject of telcos we did have after deregulation 15, we've now got five. They'll be probably be knocking on your door or the ACCC asking for the power of Telstra to be somehow changed so that they get a better and fairer go. Would you look at that, would you be keen to do that?
PRIME MINISTER:
Well there are certain responsibilities under the law for the ACCC in relation to this and we have that power as a matter of executive decision making. But I think you've got to accept that in any kind of market economy there are going to be shake-outs that occur from time to time. I naturally hope that the small people don't get hurt as a result of One.Tel and I hope that the staff is properly looked after. I read the papers like everybody else and clearly there is a lot of explaining to be done not least to the principal shareholders of the company. But there has been a great deal of exuberance in this whole high tech area and some of it was bound to be based on fairly insubstantial activity. It was inevitable, I suppose, that there would be some fall out of this kind and what we have to do is to make certain that the vulnerable are protected but also to accept that if people make investments in a market environment, well, they have to stand or fall on their own individual judgements. And no government or no ACCC or no anybody else can really protect people against the consequences of their own investments. That's what a free market system is about. I mean, people have got to have a capacity to make these decisions and then if you make an investment and it's hugely successfully nobody begrudges you your profit, and that's what the system's about. On the other hand, if you make an informed decision and you haven't been the victim of fraud or anything, well, you have to live with the consequences of that investment decision.
CORDEAUX:
The Prime Minister's my special guest and we'll put some calls to him if you'd like to ring 8305 1323.
Looking at this Newspoll this morning about the GST where the questions were, 'are you for or against the GST?', 'has the GST made you better or worse off?' In the lead-up to introducing the GST in that last election you spelt out very, very clearly the benefits, you know, making Australia more competitive, taking tax off our exports, the fact that there'll be fewer people paying income tax in the future, therefore, it was more sensible to tax consumption instead of energy and effort. Do you think you have to go back and do some remedial work because the message is now being either confused or forgotten?
PRIME MINISTER:
Well, I think it's always necessary to remind people of the longer-term reasons why we had tax reform. One of the problems with a poll like the one in The Australian this morning is that the bald question is asked, are you for or against the GST, do you think the GST is good or bad, without people being reminded that as well as the GST there were $12 billion of personal tax cuts, there's a cut in company tax, there's a cut in capital gains tax, there's the abolition of the wholesale sales tax, there are special family benefits, there's cheaper excise on diesel and in some cases no excise at all. In a way to get a proper reading from the public, particularly after the new system's been up and running for almost a year, you really have to ask an omnibus question. It's not fair, in a way, just to say, are you for or against the GST because on its own, nobody's in favour of a GST on its own.
CORDEAUX:
Yeah.
PRIME MINISTER:
They're in favour of tax reform as a package and as a package I believe it was the thing Australia needed. I know it's had its criticisms over the past few months and there has been, I believe, an undue preoccupation with some of the more negative aspects of tax reform without enough focus on the benefits of tax reform. And I do remind your listeners that one of the main reasons we brought about tax reform was a belief that with an ageing population, which Australia, in common with a lot of western countries, has, unless we made a move towards shifting some of the tax burden away from income tax towards consumption then we would, in the years ahead, have faced much higher levels of income tax than we now face or we now have. You have to accept the reality that with an ageing population, by definition, you have increasingly fewer people in the workforce, therefore, the burden carried by income tax will increase proportionately. But one way of stopping that happening is to shift the burden, some of it, to consumption. Now, that was unashamedly one of the long-term reasons why we introduced a new tax system and that has been an argument I've employed now for probably 10 or 15 years in talking about the structure of our tax system and it's an argument I re-employed this morning to remind people of what some of the fundamental reasons were. And what worries me about rollback is that those who.I mean, rollback is really about taking the GST off certain items. That's what it is. I mean, rollback is one of those sort of mushie words - put aside the mush and just tell us what it is. It's a proposal to take the GST off certain items. Well, if you take the GST off certain items you've got to find a replacement for the revenue you've lost. Now, you either do that by cutting spending or by increasing other taxes, or by going into the red. Now, if you're not going to go into the red, which Mr Beazley says he won't, well, what spending will be cut or what other taxes will be increased?
Now, that's the big tax debate over the next few months. I mean, we have done the tax reform. We have taken the political risk. I mean, I knew it was going to be unpopular, I knew that, but what's the point of being in government unless you're prepared to do things that might be unpopular in the short-term but have a long-term benefit for the nation. And I believe that tax reform will have a long-term benefit for the nation but there have been short-term political costs, I accept that, I've always known that. But what Mr Beazley and Mr Crean have got to tell us over the next few months is, if you're going to rollback the GST, what are you going to take the GST off and how are you going to pay for it?
CORDEAUX:
Prime Minister, I promised a couple of listeners that I'd get, when I was talking to you next I'd put these questions to you. After the budget came out we had a lot of people on disability pensions who felt they shouldn't have missed out on the $300 grant, that it should have been given to absolutely everybody. And the other question was, with this $20,000 threshold - someone rang up and he said, well, it sounds awfully good but the problem is, if you earn $21,000 the threshold reverts to $6000.
PRIME MINISTER:
No, no, no, it doesn't revert fully to $6000 until you get to $37,000, in the case of a single person, or $58,000 in the case of a couple.
CORDEAUX:
Oh, well that's fair.
PRIME MINISTER:
Otherwise you would have the situation where somebody on, say, a person over age pension age who had $200,000 .at an income of $100,000 a year would have a tax free threshold of 20,000, whereas somebody at the age of 45 with 10 children, so to speak, would have a threshold of, well, if one of his kids was under 5 he'd have a threshold of about $13,000. But the increase in the threshold is delivered by way of an increased rebate and that rebate, once you get over 20,000, starts to reduce so that by the time you've reached $37,000 you're in the same position as any other person. But as far as I'm concerned I think they're telling fibs. And it's 58,000 in relation to - I think it's 58 or 57, 58,000 in relation to a couple.
CORDEAUX:
I think that's fair enough. In the wake of the HIH collapse - and I'd be the last person in the world to promote nationalising anything - but do you have any worry about superannuation, that we've got $500 billion, people heading towards retirement depending upon that money being there and, by and large, we don't know really, do we, how these companies are being managed, whether or not we might face some huge collapse in a major superannuation company?
PRIME MINISTER:
Well, I'm not.
CORDEAUX:
I mean, how safe is super?
PRIME MINISTER:
Well, I guess pretty safe. Nothing anybody has invested can be totally and absolutely guaranteed but I don't have any reason, on the information available to me, to suspect the strength and the stability and the safety of people's superannuation.
CORDEAUX:
But there's nothing you'd like to put in place to make that.
PRIME MINISTER:
Well, no, I was just going to go on to say having said that, after the collapse of HIH one of the things I am doing is running the ruler again over all of the supervisory arrangements we have and I am not a person who believes that any supervisory prudential system is ever perfect and there can always be room for improvement. And HIH has been a warning to everybody. I don't want to pre-judge what the outcome of the inquiries will be but certainly I would say to people who have invested some superannuation, generally speaking, you should have no reason for concern but the Government understands that these things can always be made better and we will be examining, again, in the name of being ultra cautious and ultra careful with people's savings, we'll be examining again whether improvements can't be made.
CORDEAUX:
Can we take a caller Prime Minister?
PRIME MINISTER:
Sure, I'm happy.
CORDEAUX:
Henry.
CALLER:
Oh, good morning, Prime Minister.
PRIME MINISTER:
Good morning, Henry.
CALLER:
Jeremy has touched on my question but I'll still ask it. Prime Minister, given the record of private enterprise disasters, beginning with our own State Bank, the apparent failure of the privatisation of utilities such as electricity, the recent HIH disaster plus schemes where people, particularly the elderly, lose their lifetime savings in huge scams, would you agree that private enterprise has a lot to answer for and, perhaps, public control in many things is more appropriate having regard that the aim is not merely to make a huge profit for individuals?
PRIME MINISTER:
Well, Henry, good question. Could I just correct you on one thing. The State Bank in South Australia was not a private enterprise disaster, it was a public enterprise disaster.
CALLER:
No, Prime Minister.
PRIME MINISTER:
No, I'm sorry, the take out of the State Bank is.
CORDEAUX:
Only guaranteed by, Prime Minister.
PRIME MINISTER:
Well yes but that's the point. I mean the reason why the taxpayers of South Australia have been landed with a great burden is that the former government of South Australia thought it could engage in a bit of private enterprise which is not really the business of governments. On the question of the private sector's performance generally, yes there have been some failures. There are some people in private enterprise who behave improperly. There are some people in private enterprise who give bad advice. And there are some people in private enterprise who are greedy and deserve to be punished by the law. That's not the case with the great majority of them. As far as people, elderly people being defrauded and let down, there have been some examples of that. I have to say that in some cases of course people have taken greater risks in the hope of getting a greater return. One of things that anybody has to make a judgement of in a pre-market system is that yes if you take a risk you get a better return if everything comes off but you run the danger that you might lose your money. One of the comments that's been made to me about HIH is that quite a number of people refused to take out policies with that company because the premiums seemed to them to be unsustainably low. I mean I know company directors, I was talking to the chairman of a company only a couple of weeks ago who said that he had instructed all of his companies not to insure with that company because he thought the premiums couldn't be believed. So the point I'm making is that in any free-enterprise market system there has to be a room, there has to be some room for individual judgement. It's called personal risk taking. You can't have a risk-free free enterprise system. I mean, okay you could say to somebody well look you can invest in this, it's as safe as anything can be but your interest rate is much lower and your return is much lower, that is the price you pay for having a risk free investment. But then somebody says, no well look I am prepared to take a bit of a risk, I'll have a go, I'll exercise a judgement and I'll put my money in something else and I'll get a better return. Now that's fine but you have to accept that if you do that there is a slightly greater risk that you might hit a snag one day and get a lesser return. Now that is the way the system operates.
I don't, can I say to you with the greatest of respect, the idea of the government being a better judge of risk than people in the market, I mean that has just not been proved by history. The disasters of governments getting involved in business activities in South Australia, in Victoria, in Western Australia, I mean we've had classic examples in the last twenty years - the State Bank in South Australia had the disasters of the Cain Government, in Victoria you had the disasters of Western Australia Inc with the Burke Government. That was all about the government thinking it was more capable of playing the market than private entrepreneurs. I don't believe in that, I think governments are inadequate to that kind of trust. I think what our role to do is to have tough, but fair rules of the road as far as activity is concerned and if you have that then you create the best system. But I can't ever guarantee that you won't have private enterprise failures. No prime minister can do that. They occurred under all previous prime ministers and they will occur under all future prime ministers.
CORDEAUX:
The Prime Minister's my special guest. I am holding the news over by the way. Prime Minister can you give us another few minutes?
PRIME MINISTER:
Yes.
CALLER:
Oh yes, hello Jeremy. Good morning Mr Howard.
PRIME MINISTER:
Good morning.
CALLER:
I have a question, first I'd like to paint you a picture and then perhaps you can answer it please. I am not talking about a general disability, picture say a person with a neurological disorder, the spouse is the full time carer, now that couple has been hit with a double whammy, not only don't they receive the $300 because under the age pension, they also disadvantaged with the very long waiting list for funded equipment and such a basic item as a lifting frame. Now that couple to me is unjustly discriminated against. Can you answer why in those circumstances a disability pensioner is not given the $300.
PRIME MINISTER:
Well Jenny the circumstances you describe are difficult and I sympathise with them very much. The design of that $300 benefit was that it would go to people of aged pension age and above. There are a lot of groups who aren't of that age who don't get it. The view was taken that as a particular category, there was a case for giving people on the pension and over the $300, subject to.. the much better off wouldn't get it. But pensioners and part-pensioners and a very small number of self-funded retirees who are of aged pension age and not in the tax or social security system. Now it is true that it doesn't go to disability pensioners. It doesn't go to people who receive the unemployment benefit. It doesn't go to quite a number of people who receive government benefits who are below aged pension age. There's been no decision taken by the Government to just exclude people on the disability pension. We are not paying it to people on unemployment benefits or other benefits paid to people who are not of aged pension age. So I want to assure you that we haven't set out to just exclude people on the disability pension.
CORDEAUX:
One more call Prime Minister?
PRIME MINISTER:
Yes.
CORDEAUX:
Hi Edward.
CALLER:
Good morning Prime Minister.
PRIME MINISTER:
Good morning.
CALLER:
Just a very quick question. How safe is your superannuation?
PRIME MINISTER:
Well I guess my superannuation is reasonably safe. I think as safe as anything can be but then other superannuations are pretty safe as well. You ask me how safe, with the implication being that mine is safer than anybody else's. Is that the point you're making?
CALLER:
Yes, well look after the people like you look after yourselves, simple as that.
PRIME MINISTER:
Well can you . you can't really point though to the failure of superannuation. I mean most Australians - the record of equal stability and security and reliability of superannuation in this country has been very good. Very, very good indeed. I mean I was asked a question earlier how safe did I think it was and I thought very safe but I said you can always make it even safer and that's true of anything. But the general performance and reliability and delivery of superannuation in this country has been excellent, excellent indeed.
CORDEAUX:
Prime Minister, I think probably what Edward was getting at though, may be in a sarcastic way, and it comes up on this programme very often that there is one superannuation rule for the general public and there is another more generous arrangement for politicians and we should either have yours or you should have ours. But we shouldn't have two systems. Do you have a feeling on that?
PRIME MINISTER:
Well you've asked me before and it's a fair question, there are some aspects of our super scheme which is more generous than others, also some that aren't. I mean we make an 11% contribution after tax during the years that we contribute. I don't know of others where the contribution is as high. So there's another side to it. If you look at the overall remuneration of Members of Parliament, particularly those who hold very senior positions, and I'll leave myself out of it, the remuneration of senior ministers even when you take into account the superannuation package is way below what is given to people in private enterprise, arguably in many cases discharging less responsibility. Now I am not saying that they deserve, ministers deserve a payrise, I am not saying that, I am just trying to put these things into context. Now if you compare our income with average weekly earnings, it's a high income, I acknowledge that, as is the income of many people, your income, the income of people in business and so forth. And it's always easier to draw a comparison and say, oh yeah look how much money he earns, I only earn this. Look I can't argue with that, that's true, but you have to, you have to sort of look at the responsibilities that are involved and the accountability and so forth. And look I think there are some aspects of our super scheme that are open to criticism but I also think that there is, you know you have to look at the aggregate remuneration, you have to look at the salary, you have to look at the responsibilities, particularly for senior people, not so much Members of Parliament, I think they're quite well paid. I think at a ministerial level, I don't think ministers are remunerated anywhere near a level commensurate with what people in private enterprise earn, but I'm not saying they ought to get anything higher because when you go into politics you don't go into it for the money, I certainly didn't.
CORDEAUX:
Yes.
PRIME MINISTER:
But, look can I just say to the gentlemen that yes there are some aspects of our super scheme that are a little better than others, but there are other aspects where that's not true because the level of contributions required is much higher. In many cases people have super now without any contribution out of their own salaries.
CORDEAUX:
Prime Minister great to talk to you and I thank you for all of that time and I am sorry about the line mix up in the beginning.
PRIME MINISTER:
No problem.
CORDEAUX:
All the best to you sir.
PRIME MINISTER:
Thank you.
[Ends]