Interview with John Laws

2UE

Wednesday, 9 May 2007

9.10 am

SUBJECTS: Budget 2007-2008

LAWS:

Treasurer, good morning.

TREASURER:

Good morning, John.  Great to be with you.

LAWS:

Good to be with you.  Are you a happy Treasurer this morning?

TREASURER:

Well I think the Budget that we brought down last night is a very, very powerful statement of investment for the future and it will lift the capacity of the Australian economy.  It will allow us to lock in the benefits and gains that we have made over recent years, and so I am very optimistic about the future of Australia.  I think we can rise to challenges and I think this Budget will be a big part of that.

LAWS:

Tell me, what will Mr Rudd aim at?

TREASURER:

Well, he’ll aim at getting good headlines, I suppose. 

LAWS:

But what particular part?

TREASURER:

Look, I could not fathom it, John, I could not fathom it.  I am the wrong person to ask.

LAWS:

I would have thought you were the right person to ask.  You wrote it.

TREASURER:

Well, you are asking me to read his mind and I could not fathom it.

LAWS:

It will be very difficult I think politically for Labor to target anything.  That’s why I asked the question.  I think, you know, they are going to find it very difficult to do that.

TREASURER:

Yes, look, they will oppose things.  That is the nature of their business.  But I think when you look at it and you say, look, we have now got to a situation where we’ve paid off Government debt, we’ve got no interest payments, we’ve got two million additional Australians in work and we’ve got an investment for the future which will build our economy stronger and this investment will lift the capacity of the Australian economy.  Then I think it is an important statement for Australia and its future.  And, look, there will be people who will criticise here or there, but I think overwhelmingly, people are saying this is right for our future and our country.

LAWS:

And then there is Malcolm Farr, I am sure you regard him highly as a writer, says in the paper this morning that your Budget paper should have had the footnote on it, ‘Written and authorised by P. Costello for purpose of doing over Kevin Rudd’.  That is exactly what it is for.

TREASURER:

I have always believed that if you focus on getting the economy right so people can keep jobs, and business is profitable and people can keep their home, that that is what people expect you to do and you owe it to them.  And if you get the economy right, well, the politics looks after itself.

LAWS:

The Budget, obviously, is not without its critics as you would expect, but there were more than a handful of economists saying with the economy going along at such break-neck speed, in other words, with the economy being in such good shape, it was a bit dangerous to start throwing so much money around.  Interest rates under pressure probably some time in the next year or so, I would think.  Would you agree?

TREASURER:

No, I don’t think so because when you look at the Budget, the Budget will be in surplus for the 10th time and that means that we are able to afford our new spending measures and we’re able to cut tax.  We are able to invest in the future but our Budget is still in surplus and whilst the Commonwealth Government is maintaining a surplus, that is being responsible, because we are adding to savings.  We’re not borrowing, we won’t borrow a dollar.  The Government will not borrow a dollar in the next year and that is consistent with keeping pressures to a minimum.

LAWS:

You know that one of my pet subjects when it comes to Budgets and money are the elderly people.  What are you doing to help the aged?  And what are you doing to help the self-funded retirees?  How do they benefit?

TREASURER:

Well, I said earlier that we’ve increased the number of Australians in work by 2 million. 

LAWS:

It’s a lot of people.

TREASURER:

Think about 2 million, think of a grand final crowd of 100,000 and think of 20 of them, all lined up.  That is the number of additional people that have got into work.

LAWS:

I means as good as that may be, and it is very good, obviously, but that’s why (inaudible) though isn’t it?

TREASURER:

That’s right.  This is the object of good economic management.  You get people off unemployment benefits and into the workforce.  First of all you save all of those payments for unemployment benefits.  Secondly, they go into the workforce, they pay tax.  You get a saving on the expenditure side and you get a benefit on the revenue side and the consequence of that, of course, is that you are in a stronger position and I think that’s why it is responsible to cut tax.  You’ve got more people paying tax, more people paying less tax can raise the same amount of money.  That’s what the object of good economic management is.  If you had more people paying the same amount, you would be raising more.  So we’ve actually cut tax.  That will help more people come into the workforce.  We’ve got to try and grow bigger again and you get these benefits from it.

LAWS:

Okay, back to the oldies.  What is going to happen there?

TREASURER:

Well, so having got more people into work we thought that it would be right to share some of the economic benefits with older Australians and we announced in the Budget that for pensioners and older Australians, there will be a bonus of $500 each person who is a pensioner.  So if you are pensioner couple, it is $500 each.  A bonus of $500 to be paid before the 30th of June.  And in order to be fair to self-funded retirees, this will also be available to self-funded retirees for people who are on the Commonwealth Seniors Health Card. 

LAWS:

Okay, so they get exactly the same treatment as those people who are on the pension?

TREASURER:

Yes.

LAWS:

About time.

TREASURER:

Yes. 

LAWS:

The hard-headed economists still seem to be a bit worried that you are going to throw more money around leading in to the election.  Will you need to toss more around?

TREASURER:

Look, I think the important thing is we keep the Budget in surplus.  That we make sure that surplus is a decent surplus.  It is about 1 per cent of the economy, that’s a decent surplus and that’s the kind of bottom line that I think is responsible in the current circumstances. 

LAWS:

I think you might have missed the question.  Are you going to be throwing any more money around prior to the election?

TREASURER:

I didn’t miss the question. 

LAWS:

Just didn’t answer it.

TREASURER:

That was my answer.

LAWS:

It wasn’t a good one.

TREASURER:

No, no, the answer was what we’ve done now is decent and responsible and we want to ensure that we keep a decent responsible Budget bottom line.

LAWS:

And that will exclude you spending any more money prior to the election?

TREASURER:

Well, John, I am focussing on what we’ve done in this Budget and what we have done is reasonable and I want to make sure that in future years the bottom line is as strong as it is now.

LAWS:

Okay, in order to do that you might have to spend some more money before the election.

TREASURER:

I don’t know that you are properly interpreting my answer.

LAWS:

I don’t know that you are properly interpreting my question.

TREASURER:

We are two old stagers John.  We are used to each other in these interviews.

LAWS:

How much money have you mentally budgeted for what your boss might promise to win the election?

TREASURER:

Look, I think it is important that we keep a strong bottom line and, of course, that means that all policies have to be responsible.

LAWS:

And some money may need to be spent in order to keep the responsibility?

TREASURER:

No, the responsibility is the most important thing.

LAWS:

Okay.  You know I’ve got all of this on tape.

TREASURER:

I do, as I said, you come at people from a disarming angle, John.

LAWS:

Well, it’s taken a lot of practice.  Let’s have a look at the details.  When will people actually see something different in their pay packets?

TREASURER:

The tax cuts take effect from 1 July, so it would be the first pay period after 1 July.  For most people, that is fortnightly, so it would be about the middle of July.

LAWS:

Okay, for lower incomes, what from the new financial year?

TREASURER:

The Low Income Tax Offset applies throughout the year and that is done upon assessment.  The tax cut is factored into the amount the employer takes out of your pay packet and you should feel that within the fortnight after 1 July.

LAWS:

Okay, but for the higher income earners, it won’t happen until later?

TREASURER:

Well, higher income earners get the same tax cut of course.

LAWS:

But not at the same time?

TREASURER:

No, no, well, you see when you cut the level of tax between $25,000 and $30, 000 everybody gets it.  We all pay, even if you are well over $30,000, you all pay a lesser rate on your income between $25,000 and $30,000.  So everybody will get a tax cut.  The fact is there is a second instalment in addition to that which starts on 1 July of next year and that will give an additional instalment to middle and higher middle income earners. 

LAWS:

The conservationists seem more disappointed than most of the interest groups, I’ve got to say.  Are solar panels the only initiative in relation to emissions and climate change?

TREASURER:

Well, I think that it is a pretty good initiative.  When you think about it, if the Government is going to offer you a rebate of $8,000.  That is a lot of money, $8,000.

LAWS:

It is.

TREASURER:

People on average wages in this country are between $40,000 and $50,000, a rebate of $8,000 is, what, about a fifth, nearly a fifth of their annual income.  That’s pretty significant.  That’s the equivalent of, if I am getting my maths right, of two months salary.

LAWS:

Tell me, this…

TREASURER:

It is $8,000.  Now we think the cost of one of these standard solar panels is about $14,000, so if you get a rebate of $8,000, that’s more than half the price, which is pretty decent.

LAWS:

It is very decent but there are a lot of people in Australia who live in home units as either owners or tenants.  Is there going to be some sort of incentive for landlords to put solar panels on the roofs?

TREASURER:

Well, we’d like to give the rebate to people directly.  There is another program, you have rebates for schools and community organisations, which will be able to get an even bigger rebate, $12,000 I think.

LAWS:

But what about landlords?  (inaudible)

TREASURER:

Well, I think whoever is the owner, if it is affixed to the actual premises, would be able to claim the rebate, whoever incurs the cost.

LAWS:

Okay, we’ve had some calls from listeners, specific questions.  Hopefully you’ll be able to answer them.  Does the pensioner bonus apply to people on disability pensions?

TREASURER:

It applies to people of aged pension age, that is people who have qualified for the age pension.  For those who are on the disability support pension, we have other initiatives including the bonus for carers which will be of significance and benefit for people who care for them.  That is long over due, it is long over due and carers I think are people who do great work and will get a bonus of $1,000 for those on the carer payment and $600 for the carers allowance.

LAWS:

Okay, but no specific increase in disability pensions?

TREASURER:

Well, there will be an increase because the disability support pension is indexed to wages and it is indexed twice a year, so yes it will go up, but the bonus that I was talking about before was a bonus to people of aged pension.

LAWS:

Okay, the Conservation Foundation says a whole lot more needs to be done.  Will you do more?

TREASURER:

Well I think this is a great investment.  The Murray Darling Basin is going to fix irrigation, to save water.  We’ve got forest initiatives which will encourage retaining of forests which soak up carbon dioxide.  We have got the solar panels initiative.  Now, people say will you do more.  Well, my answer to that is, you are working on these issues over long periods of time.  These are great initiatives.  These are practical initiatives for today.  Will more be done in the future?  Well you are always working on these things, but gee, before we forget about what we did last night, let’s just make sure that we get these measures into place and we get some effect from them.

LAWS:

Okay, I notice, what have you got left, about $10 billion or something?

TREASURER:

The Budget surplus that we are forecasting for next year, you know, it is about $10 billion, it is about 1 per cent of the economy.

LAWS:

So you’ve got plenty of money left there.

TREASURER:

No, see that’s the point I was making earlier.  You don’t want to spend all of that.  You’ve got to have a Budget surplus to keep the economy strong. 

LAWS:

Sure, but does it have to be that big?

TREASURER:

Well, you’ll have arguments from people as to what the Budget surplus should be, but I think 1 per cent of the economy, which is what it is, is a pretty reasonable figure.

LAWS:

And it also means of course that there is plenty of money there especially come the end of this month when the climate change report is released, you might want to spend a bit more.

TREASURER:

Well, the report is going to look particularly at emissions trading, a trading scheme which might sound pretty complicated but that in itself is not an expenditure, it might be associated expenditure. You have to look at but that really is a scheme to look at how you trade emissions.

LAWS:

As you would know, as I am sure as Tony Abbot would have told you, I’ve been very hot on the State/Federal tiff, that’s what it amounts to, about dentistry to come to end.  Have you got enough dentists to solve the problem?

TREASURER:

Well we are going to increase the number of dentists and I announced the establishment of the new dental school in regional New South Wales to train new dentists last night.  And also a provision to give city students an opportunity to go and work in rural areas.  So, actually I think we’ll make a bit of an impact with the training of new theatres as I announced it last night.  We want to get more dentists particularly in rural areas and the Charles Sturt university will get a dental school and this is something that Kerry Bartlett, our Member for Macquarie has been pushing very strongly and I was pleased that we were able to do that last night.

LAWS:

Tell me, do the States need to come to your dental party to make it work properly. 

TREASURER:

Well, you see, we train dentists but State Governments own and run dental hospitals.  So they will have a responsibility for running those dental hospitals and the public looks to them for the efficient management of those dental hospitals.  The Commonwealth Government runs the Medicare system and I announced last night that people whose health is affected by dental trouble can be treated under the Medicare system if they are referred by a GP.  That is Commonwealth Government responsibility.  We are not taking over State dental hospitals.  The States have been running them forever and they should continue to do so.

LAWS:

Well, the principle has changed hasn’t it?

TREASURER:

Well, look, we’ve still got a Federal system and we’ve still got a State Government and a Commonwealth Government and they have each got their areas of responsibility and if the Commonwealth Government ran everything, what would you have a State Government for?

LAWS:

Well, you’d have nobody to blame.  I mean, the States would have nobody to blame.

TREASURER:

That’s probably right. 

LAWS:

Julie Bishop must have been pretty happy.  I mean that Education Endowment Fund, $5 billion, that’s a hell of a lot of money. 

TREASURER:

And the capital will not be touched.  That’s the important thing, not to spend that money, we’re going to invest that money.

LAWS:

You said it is politically untouchable?

TREASURER:

Politically untouchable.  We don’t want Kevin Rudd to try and raid it because he is trying to raid the Future Fund, you know.  You know the Future Fund, he’s trying to raid that.  I can’t believe it and we don’t want him to try and raid this Endowment Fund so the capital has got to be untouchable.  It’s the earnings which will be distributed to universities to build first class facilities for first class institutions.  After it is invested, we’ll get a year’s earnings, we’ll distribute that next year and hopefully we will increase the capital as years go by.

LAWS:

In fairness to Kevin Rudd, you’ve got to be fair, he does say that he wants to raid that Futures Fund for broadband and he says that’s as much as an investment in the future as anything else.

TREASURER:

No, once you can raid a fund for one project, you can raid for all projects.  You know, it is like your superannuation fund.

LAWS:

I wanted to talk to you about that.

TREASURER:

If Kevin Rudd came along and said he had a good idea and he would like to take some money out of your superannuation fund for a good cause, how would you feel about that?

LAWS:

Well, you wouldn’t feel good about it, would you?

TREASURER:

No, you wouldn’t.  And here we are with this Future Fund, which is funding superannuation liabilities and Kevin Rudd said, oh, I might like to take a little bit of that money.  And, of course, once it takes it for one purpose, he’ll start taking it for all purposes.  You’ve got to make sure, superannuation is one of those things that has got to be untouchable because once you let politicians start raiding superannuation funds, it will never stop.

LAWS:

Tell me this, there didn’t seem to be a lot of detail on the road and rail spending, big figures certainly but that’s five years, $24 billion, but what about the specifics and what about, in particular, the people who listen to this program right across the country who are affected greatly by the Pacific Highway heading north from Sydney to Brisbane.  Have specific amounts been set aside for problem areas like that?

TREASURER:

Yes and we are of course contributing to construction on the Pacific Highway already and the funding that I announced last night will continue that duplication.  Mark Vaile, the Transport Minister, will announce the specific timetables and the stages in due course but I can assure people that the Commonwealth Government, the Australian Government, is continuing to fund the construction in relation to the Pacific Highway.  It is our aim to continue to do that.

LAWS:

Okay, somebody just asked me why did health lose out in the Budget?

TREASURER:

Well, I don’t think it did.  I think you will find as you go through the measures, there are some great  measures in the Budget, including after hours GP visits, aged care home visits by GPs, improving dental, which I mentioned.  There’s a lot of measures to improve our health system.

LAWS:

What about indigenous health?

TREASURER:

Including indigenous health, yes.

LAWS:

…that’s a huge problem…

TREASURER:

Big problems with drugs and alcohol abuse and petrol sniffing and we’ve got to make sure that we attend to those things, John.

LAWS:

Aboriginal people are dying years and years and years earlier than white people.

TREASURER:

Their life expectancy is much shorter than …

LAWS:

Seventeen years less than whites.

TREASURER:

Yes, it is terrible.

LAWS:

Tell me are you still looking at that rail link from Melbourne to Brisbane.  They have been talking about that since Burke and Wills.

TREASURER:

They have.

LAWS:

And they could have done with it too.

TREASURER:

They could have done with a few dams up there too, I think.  It gets looked at from time to time but that was not something I announced last night. 

LAWS:

So it is only being looked at from time to time.

TREASURER:

Well, various people look at it but it wasn’t something I announced last night.

LAWS:

Okay, I appreciate your time.  As usual after the Budget you give me your time and I am very grateful for that always.

TREASURER:

It is always good to be with you and thank you very much to you and your listeners, John.

LAWS:

Thank you very much, Peter.