Subjects: Federal Budget 2002
E&OE...........
O'BRIEN:
And the Prime Minister joins me now from our Parliament House studio. John Howard, you're not going to get the cuts to the Pharmaceutical Benefits or the changes in the disability pension through the Senate, are you? Where does that leave your Budget?
PRIME MINISTER:
Well I don't accept that. The Labor Party and the Democrats have made noises but Kerry…
O'BRIEN:
They've made more than noises.
PRIME MINISTER:
Well Kerry the Australian people have to understand what is at stake here. You have a Pharmaceutical Benefits Scheme that is growing, on average, over the last 10 years at 14 per cent a year. It has almost quadrupled over the last 10 years. Take the anti-nicotine drug Zyban. The actual cost to the taxpayer of that every time it's prescribed is $238. Under our new proposals the maximum that anybody would contribute would be $28.60. So there is still a massive taxpayer subsidy. I mean, an important subsidy and one that I support, but I cite that example to give you some idea, and the public some idea of the dimension of the costs that are involved with this scheme. And what we are trying to do, along with some other measures, is to introduce a level of cost control. Now the Labor Party can play politics, score easy pickings. And these are the sort of things where an Opposition can play fast and loose with longer-term responsibility, but in the end you can't go around saying to the public, we are responsible economic managers, as Mr Crean says, yet every time they're faced with a test of their economic credentials, they run away and they play popular politics. I hope they don't block it. I'm not prepared to accept at this stage that they ultimately will. They've often feinted and pretended in the past, but if they do block it then they will be saying to the Australian public nothing has changed, the Labor Party of the last six years is still the same old opportunistic mob that the public has thrice rejected during the last six years.
O'BRIEN:
But you have contributed to the blow-out in the Pharmaceutical Benefits Scheme yourself, have you not, with that pre-election promise to bring another 200,000 Australians who were too wealthy to qualify for a pension into a much reduced rate on their prescriptions? Now surely that was a direct contribution by you to the blow-out in the PBS?
PRIME MINISTER:
I don't accept that. What you are…
O'BRIEN:
Why?
PRIME MINISTER:
Well let me explain why. What that question effectively implies is that people who might on other grounds be entitled to the seniors health card, and I believe those self-funded retirees were entitled to it...
O'BRIEN:
In the shadow of an election year.
PRIME MINISTER:
Well hang on, let me finish. They are meant to carry the burden of containing the cost of the Pharmaceutical Benefits Scheme while people on, dare I say it, your salary and mine...
O'BRIEN:
And a lot of smaller salaries, and a lot of smaller salaries, as well.
PRIME MINISTER:
Hang on, hang on, hang on… are relieved of the obligation of paying a little more for the individual prescriptions. What we did for the self-funded retirees last year was justice because many of those people had been squeezed, many of those people had suffered the negative side of low interest rates. Low interest rates are great if you're a home buyer or a small businessman, but they're not so good if you're living on the interest on the investment of your retirement savings. And we owed those people, many of whom had contributed to Australia through the difficult years of war time. We owed to those people a fairer go. And I just don't accept that it was a fair crack of the whip to say, well you can carry the greater burden, so we can avoid spreading it amongst all taxpayers.
O'BRIEN:
But it has added to the blow-out. Senator Stott Despoja suggests...
PRIME MINISTER:
No, no, no, I'm sorry. That's - no, what has added to the blow-out...
O'BRIEN:
It's extra cost.
PRIME MINISTER:
No, is use, is over-use. And the problem with the Pharmaceutical Benefits Scheme is that the basic cost to the taxpayer, as I demonstrated with the Zyban example, is enormous. And there is a tendency for overuse of drugs in preference to a lifestyle change. And one of the elements of the package announced last night is not a price one, but rather some new procedures in relation to prescription and the attitude being taken by doctors.
O'BRIEN:
Senator Stott Despoja suggests that you make up some of the difference by targeting the health care rebate to exclude high-income earners rather than, as she puts it, slug the poor. What's wrong with that?
PRIME MINISTER:
Well the high-income earners that she's speaking of, as I read her letter, are people who earn over $60,000 a year. Now that is a good income, but it's not the income in Australia of today of a wealthy person. If you take away their incentive to have private health insurance, more people will be thrown back on to the public hospital system. We'll have further pressure for expenditure of dollars into public hospitals, and you won't save any money in the long run in relation to that. That is poor public policy. I think it's bad economics and it misunderstands the nature of middle Australia. Many people in Australia now do not regard $60,000 as being the income of a wealthy person.
O'BRIEN:
But that same $60,000, that same person on the $60,000, if they have two or three children, as you would well know, they're going to be slugged, they're going to feel the pinch. They're going to feel the pinch of this extra $620 per script, which is a 27 per cent increase, not the slightly more expensive that you talk about - a 27 per cent increase.
PRIME MINISTER:
Kerry, you've made my argument. What you're really saying is that a bloke on $60,000 a year with two or three children is not well off. Of course he's not. And that's why what the Democrats are putting forward is out of touch with the reality of a lot of people in middle Australia.
O';BRIEN:
But you can't say he's well off on one regard, but not well off on the other.
PRIME MINISTER:
I'm not the person who's arguing to introduce some kind of income test for the private health insurance rebate. I'm not in favour of that. It's Natasha Stott Despoja who is arguing for that. Not John Howard.
O'BRIEN:
You've produced this Intergenerational Report, which tells us we're going to have a crisis in 40 years. Isn't that exactly why Labor introduced compulsory superannuation a decade ago to save for the future, which you opposed?
PRIME MINISTER:
Well in the lead-up to the 1996 election we indicated that we would keep the superannuation surcharge.
O'BRIEN:
But you opposed it, you opposed it at the time that Labor introduced it.
PRIME MINISTER:
I think it is correct that the Opposition did at the time. We were concerned about the impacts of it on a lot of small businesses.
O'BRIEN:
But that was a saving for the future exactly as you're now warning us we should be doing.
PRIME MINISTER:
I think the changes that were made to superannuation in relation to that as well as, importantly, the changes contained in the Budget last night, they have all contributed to the fact that Australia's position in relation to the ageing of our population is nowhere near as bad as that of other countries. The good news out of the Intergenerational Report is that we're not as hard off, or doing it as hard as others. The bad news is it's still going to be difficult. One of the other reasons why it's not as difficult in Australia is that from the end of World War II, successive governments more tightly targeted the old-age pension and many other benefits and we didn't have the unlimited welfare approach that was adopted in countries like New Zealand and in many of the countries of western Europe.
O'BRIEN:
Do you see any irony in the fact that at the very time you are warning of the need to start saving prudently now for a crisis in 40 years, you've produced a Budget deficit?
PRIME MINISTER:
No because the orders of magnitude don't make any real difference to the fact that we have run essentially Budget surpluses in the whole time we've been in Government. The possible cash deficit for this financial year is $1.2 billion. The Labor Party ran up $80 billion in five Budgets before we came to office. We have paid off $63 billion of Government debt in the last six years. So it is but a temporary blip, a nick, an aberration along a pathway to a situation where our national debt-to-GDP ratio is the most impressive in the industrialised world.
O'BRIEN:
But of course in paying off that debt you sold off something like $50 billion in Government assets.
PRIME MINISTER:
Yes that is correct. We sold them to the men and women of Australia, who are now shareholders and I gather, I think...
O'BRIEN:
The Government in the process has lost assets.
PRIME MINISTER:
Yes but the people are the Government in the end.
O'BRIEN:
Isn't one of the reasons you're in deficit with a very thin fiscal surplus next financial year that you spent quote, like a drunken sailor unquote, to buy your re-election, as Sydney Morning Herald economist Ross Gittins put it this morning?
PRIME MINISTER:
Well we did spend a bit of money last year, but every one of the things we spent the money on was justified. The money spent on the home savings grant. That was an absolute godsend to the housing industry in Australia. It was also a godsend to new home buyers. We spent more money on rural roads. We spent more money on defence. We spent more money on salinity. All of those things were needed. Every last dollar we spent I would defend and on top of that, and very importantly, that extra expenditure provided a fiscal stimulus to the Australian economy at the very time when it ran the risk of going into or near to a recession as a result of the adverse influences from overseas. So I am proud of what the Government did last year economically. I think it helped keep the economy on an even keel and I think all of the things we spent the money on were completely justified. I mean is the Labor Party saying we shouldn't have spent money on rural roads? Are they going to…
O'BRIEN:
I think the Labor Party is saying that at least a part of your motivation was winning an election.
PRIME MINISTER:
Well Kerry there's not been a political leader alive who is honest that doesn't acknowledge that from time to time you take political considerations into account. If there happens to be...
O'BRIEN:
So it's not all virtuous?
PRIME MINISTER:
No but if it happens to be a gentle conjunction between, you know, political good and national good, well so be it. And let's be honest about it.
O'BRIEN:
I know you're probably getting sick of the leadership questions, but I would like to come at it from a slightly different angle. Obviously you have to retire at some point. Is there an ideal time in the three-year cycle of a government to effect an orderly transition to a new leader?
PRIME MINISTER:
Kerry I've stated my position on this and I literally don't have anything to add.
O'BRIEN:
Well you see I'm not asking you directly about when you're going. I'm saying - is there an ideal time in a government's three-year cycle for a Prime Minister to effect an orderly transition?
PRIME MINISTER:
Kerry I don't have anything to add.
PRIME MINISTER:
Do you have any regrets about flagging the issue? Because of course by doing so, you have raised the expectations of at least a possible departure, not only with the public, but also with Peter Costello and anyone else who would like to replace you. Do you have any regrets about that?
PRIME MINISTER:
I don't have anything to add.
O'BRIEN:
We're not going down, going to have a long slow countdown, virtually month by month until July next year, because you did flag this last year. That must be unsettling for your colleagues and for the Government.
PRIME MINISTER:
I still don't have anything to add.
O'BRIEN:
Well this is not now a question of, you know, me getting some tricky way to get you to suddenly admit you are or aren';t going to retire. This is addressing the dynamics that have now been created which potentially can affect the stability of your Government.
PRIME MINISTER:
Kerry, I'm not, if I may, I'm not accusing you of being tricky. But I still don't have anything to add.
O'BRIEN:
Well what I'm saying is that this is not just a question of is John Howard going or not? This is a question of a dynamic that is now in effect which has the potential to disrupt your Government. Do you acknowledge that that is a possibility?
PRIME MINISTER:
I don't have anything to add Kerry.
O'BRIEN:
I'll just try once more. Peter Costello's – no this is my last go.
PRIME MINISTER:
Can I give you some advice? Don't waste your time.
O'BRIEN:
Well let me make the point in the question - that Peter Costello's predicament, of course, is that no Government lasts forever. It must be in his mind that if he has to wait until a fifth term to get a crack at the top job, his chances of winning a sixth term become much more problematic. Do you have any sympathy for that situation?
PRIME MINISTER:
I don't have anything to add.
O'BRIEN:
John Howard, I tried. Thank you very much for talking with us.
PRIME MINISTER:
Thank you. Always nice to talk to you Kerry.
[ends]