Doorstop Interview

Senate Courtyard

Parliament House, Canberra

Wednesday, 21 March 2007

3.30 pm

SUBJECTS: Labor’s plan to raid Future Fund, Australian dollar, Liberal Party preselections, broadband

TREASURER:

It is hard to think of a more irresponsible policy than a policy to raid the savings of future generations and yet that is what Labor is proposing to do.  To raid future generations, to spend the money now on its election programs, and to take Australia back into debt.  Just when we freed the Commonwealth Government from debt, just when we’ve started financing for the first time Commonwealth Government liabilities, just when we are on the verge of freeing future generations from the debts of previous generations, Kevin Rudd has come out to say he will steal money from the Future Fund:- from the future of all Australians.  This is a turning point.  This is the most irresponsible policy that Mr Rudd could have announced, and that not even Beazley, not even Latham would have engaged in.  This is a turning point for economic responsibility.  Whilst Labor wants to steal money from the Future Fund, Labor cannot be trusted with money.  This is an exceptionally important principle here.  It is a principle as to whether we are going to prepare Australia for the future, free future generations from debt, fund future liabilities, or whether we are going to steal from the future in order to pork-barrel today.  Now, Wayne Swan is on the record tens of times demanding that the Future Fund be a ‘locked box’ that can not be plundered for political schemes and yet Kevin Rudd is doing just that. 

JOURNALIST:

You can’t be serious that this will push the country into debt?

TREASURER:

Of course it will.  We have a superannuation liability at the moment of $101 billion, to which we are building a Future Fund to try and meet.  And from which Labor has now taken money.  We’ve got $101 billion of unfunded liabilities.  Our plan is to set aside money plus the earnings on that money to grow to $101 billion or by 2020, $140 billion to meet that liability.  Now every dollar you take out is not just capital but it is earnings and so as you start to raid that Future Fund, that Future Fund will never meet this liability.

JOURNALIST:

Mr Costello, wouldn’t most people in the community say that spending roughly $3 billion from the Future Fund to build a national broadband scheme is money well spent when compared with the purpose you’ve set it aside for which is (inaudible) future liabilities of public service superannuation?

TREASURER:

But the liabilities will still have to be paid.  After you’ve spent the money, the liability will still have to be paid and where will you get the money for that liability?

JOURNALIST:

$101 billion …

TREASURER:

No, no, let me tell you, let me tell you, if it is so important to spend the money in relation to this, why doesn’t he raise the funds to do so?  Why doesn’t he raise the funds out of taxes or why doesn’t he raise the funds by taking it from some other area or if he can’t do that, why doesn’t he push the budget into deficit?

JOURNALIST:

You could say why don’t you do that to fund superannuation?

TREASURER:

Superannuation has never been funded, Laurie.  If you have…

JOURNALIST:

But it could be.

TREASURER:

Well if you have a plan, if you have a plan to get $101 billion which is what we currently owe, and $140 billion by 2020 which is more than the total income tax collected by this country, we better hear about it.  And if Mr Rudd had announced today that he had some other way to meet these liabilities, he would have told us.  But you see, he has no way of meeting these liabilities.  The first thing that has been done in a generation to meet them, the establishment of the Future Fund – is now being raided.  Now let me tell you…

JOURNALIST:

Mr Costello, why is robbing future generations grand larceny to invest money in a broadband company when it is not robbing future generations in grand larceny to invest in Woolworths or an insurance company or mining company?

TREASURER:

Well if I was robbing the Future Fund to invest in Woolworths you could call me guilty of grand larceny.

JOURNALIST:

Well, what’s the difference?

TREASURER:

Well, I don’t rob the Future Fund to invest in Woolworths.

JOURNALIST:

Someone will use the Future Fund money to invest in Woolworths or similar companies, why can’t it be used in a broadband…

TREASURER:

No, I am sorry, somebody will use the Future Fund to pay superannuation liabilities of public servants whose superannuation has never been funded.

JOURNALIST:

Is the Future Fund money not to be invested?

TREASURER:

The Future Fund is to be paid to superannuants whose money has …

JOURNALIST:

Is it ..

TREASURER:

No, no, no I am sorry, Laurie.  It cannot be paid to anybody except for people who have a superannuation entitlement.

JOURNALIST:

But will it not be invested?

TREASURER:

It will be invested…

JOURNALIST:

But why can’t it be invested in broadband?

TREASURER:

Because, Laurie, when it is invested in broadband, you won’t have the money to pay the superannuation liability unless you sell the broadband at some other point.

JOURNALIST:

There will profits, there will be an income stream…

TREASURER:

No, no I am sorry, there is a very important point.  You have got to understand this point.  The Future Fund has a capital sum and all earnings reinvested in it.  It can not be paid out until 2020 in respect of superannuation liability.  It can not be taken out in 2007, it can not be taken out in 2008, it can not be taken out in 2009, it can not be taken out in 2010, it can not be touched until 2020.  Now, in order to get your hands on that money and the liability in 2020 is going to be $140 billion.  In order.. no sorry Laurie…

JOURNALIST:

But the investment in the first place.  If you can invest it in Coles, why can’t you invest it in a broadband company?

TREASURER:

I am sorry, Laurie, let’s take an individual’s superannuation.  An individual’s superannuation which is going to be paid to them when they are 60, hang on Laurie, let me finish, let me finish.  It is going to be paid to them when they are 60 might be invested in all sorts of things, but it can’t be touched until they are 60 when it is paid to them.  Future Fund might be invested in interest but it can’t be touched until it is paid to the person who owns it.  It is not the Government’s money.  It is not my money, it is not your money.  It is the superannuants’ money.  And just as Mr Rudd could not take the money off your superannuation or yours or anybody elses, Mr Rudd is not entitled to take the money of public service superannuation which will have to be paid by the Commonwealth.

JOURNALIST:

Aren’t you beating this up a bit, Mr Costello?

TREASURER:

I am most certainly am not.  Let me tell you there is only several billion.  Right, once he has raided $2 billion out of this, why not raid another $2 billion next year?  Why not raid another $5 billion…

JOURNALIST:

(inaudible).

TREASURER:

Yes, but Michelle to raid this he has to amend the legislation.

JOURNALIST:

We didn’t hear you criticising the Prime Minister for spending $10 billion on water a couple of months ago.  I mean, what’s the difference?

TREASURER:

Steve, you know, can I just answer the question.  If the Prime Minister had raided the Future Fund, I would have said precisely the same thing.  All right.  Let me make this point, to get money out of this fund, you have to amend the legislation and you’ll have to either get consent of the guardians or if the guardians don’t consent, you would have to sack them and replace them.

JOURNALIST:

But you need to amend the legislation?

TREASURER:

Now, hang on….  No, Laurie, let me tell you.

JOURNALIST:

You put your own provision in there.

TREASURER:

Let me tell you.  To get money out of the Future Fund before 2020 you will have to amend the legislation and once you amend the legislation to say that you can take money out of the Future Fund, you can take money out of the Future Fund for all purposes and that is the reality.  The legislation of the Future Fund says it can not have any money taken out of it until 2020 when it meets the superannuation liabilities.

JOURNALIST:

But you could (inaudible) as you wish?

TREASURER:

The only way you can get money out of the Future Fund is if you legislate to take that away and help yourself to the funds.  Now once there is no lock on the Future Fund – this is the point I am making – anybody can take that money for any purpose they like.  Once you start the principle of allowing the Government to raid somebody’s superannuation fund, once you establish that principle, you can raid it for any purpose you like.  You can raid today for broadband, raid tomorrow for welfare, raid the next day for something else.

JOURNALIST:

But does the section Mr Tanner read out not exist then?

TREASURER:

The section that Mr Tanner read out Laurie and I would invite you to go and have a look at it – is the section that says that the Government can give a direction that Telstra shares can be held in escrow for a period of time as we did, that they could be held for two years so that they don’t swamp the market and when they are sold after two years the funds go into the Future Fund.  It does not authorise the taking of any money out of the Future Fund.  So Mr Tanner is wrong.  The answer is yes, Mr Tanner is completely wrong.

JOURNALIST:

Treasurer why is there no… why does it pay to pay public service superannuation out of the proceeds from Coles or Woolies shares, out of the revenue stream but not okay to pay it out of the revenue stream from a broadband company?

TREASURER:

Let me tell you, once the money is spent on broadband it is not in the Fund.

JOURNALIST:

If invested and it gets put to revenue stream back into the fund which can be used just like the revenue…

TREASURER:

No the capital has been taken out, first of all the capital has been taken out.

JOURNALIST:

But the capital could be invested in something…

TREASURER:

And secondly of course once you have taken the capital out the earnings are not locked into the Fund.  That is the point.

JOURNALIST:

(inaudible) is taken out, what is the difference?

TREASURER:

Laurie as I have told you the Future Fund has been established.  It cannot be touched until 2020 or until…

JOURNALIST:

But it can be.  Money has got to be invested…

TREASURER:

No I am sorry…

JOURNALIST:

(inaudible) invested in BHP and it could be invested in broadband.

TREASURER:

I am sorry Laurie you are completely wrong.  Under the Future Fund legislation the money has been locked up until 2020.  The only person, the only person…

JOURNALIST:

… (inaudible) out earning any interest.

TREASURER:

Sorry Laurie, let me ask you the question.  What does section 8(1) of the schedule mean?  Well come on, you know.

JOURNALIST:

No just clear up this point – what is the difference between investing in a broadband fund and investing in Woolworths?

TREASURER:

All right let me answer your question.

JOURNALIST:

You keep going on to the future, what is to be done with the money once it has been paid to superannuants?

TREASURER:

You ask your question and I will give you the answer.

JOURNALIST:

Good.

TREASURER:

Okay what is the question?

JOURNALIST:

The question is what is the difference between the fund investing in Woolworths or investing in a broadband company?

TREASURER:

Here is the answer to your question.  The Future Fund is a superannuation fund which is protected by guardians. The money cannot be spent out of the Future Fund except when it reaches $140 billion or 2020 whichever is the earliest when it can be spent for one purpose, ie paying liabilities to superannuants.  In order to take money out of that fund to spend it today on broadband or anything else you will need to pass an Act of Parliament appropriating money out of the superannuation fund.  Once you appropriate the money out of the superannuation fund not only will the Future Fund have less capital but it will not have earnings on that capital.  The appropriation that Mr Tanner and Mr Rudd have announced is $2.7 billion but once the legislation is changed and you can take $2.7 billion out, you will be able to take more out in the future.  We established this as a ‘locked box’.  I will circulate to you Mr Wayne Swan’s demands that it be locked even further so that it couldn’t be spent in this generation.  This is a proposal to spend in this generation on an election policy of the Labor Party.

JOURNALIST:

(inaudible) invested on the share market before 2020?

TREASURER:

It can be invested but it is owned by the Future Fund and it cannot be paid out.  It cannot be paid out to anybody to construct broadband, it cannot be paid out to fund an election policy.  It must be held by the trustees of the Future Fund on trust until such time as it gets to $140 billion or 2020, whichever is the earlier.

JOURNALIST:

Are you saying that the $2.7 billion in shares of Telstra that Labor is talking about, if that is pulled out then the Future Fund won’t meet its 2020 target?

TREASURER:

If the $2.7 billion is pulled out the Future Fund will not meet its target of funding superannuation by 2020, of growing to $140 billion because the capital will not be in the fund nor will there be any earnings on that capital. And the more you pull out of it the more it will fall short.

JOURNALIST:

So is the entire Fund dependent on reaching the 2020 target on $2.7 billion worth of Telstra shares?

TREASURER:

No the Fund has much more than $2.7 billion in it.  The Fund has a very large corpus in it, which if the corpus is held and all of the earnings are held will reach $140 billion, the superannuation liability by 2020, or if it reaches it earlier it can be used to pay liabilities prior to 2020.  But the more you take out of it not only do you lose the capital but you lose the earnings, the further it will fall short.  Now the liability won’t go away, the liability will have to be made up at the point it falls short by the taxes of that future generation.  That is why you are stealing the taxes of a future generation for today’s liability.

JOURNALIST:

Treasurer are you concerned by the strength of the Australian dollar and what do you think is pushing the currency up so high at the moment?

TREASURER:

Well the fact that the dollar is high does make it harder for Australia’s exporters, I acknowledge that.  It is doubly difficult if you are an agricultural producer because you are also dealing with drought conditions but as you know we have a floating exchange rate, it moves in relation to trade flows, the global economy and interest rates.  And there are a lot of factors that go into putting the exchange rate to where it is but the reality is the Government’s policy is to allow that to trade in an open market.

JOURNALIST:

Treasurer, financial markets are factoring in a rate hike about Budget time in part due to the strong economy.  Are they over-reading things in (inaudible)?

TREASURER:

Well I won’t be commenting on future movements in interest rates.

JOURNALIST:

That would make things difficult for the Government wouldn’t it – a rise in interest rates?

TREASURER:

Sorry?

JOURNALIST:

Treasurer what is your attitude to the pre-selection of Ken Aldred for the seat of Holt and should the State Executive take steps to (inaudible)?

TREASURER:

Well there is no doubt that when the Liberal Party puts forward a candidate we want to put forward the best possible candidate.  A candidate has to be endorsed by the Administrative Committee of the Liberal Party.  The Liberal Party will not endorse anybody who has a controversial record in relation to slurs or allegations and I am sure that when the Liberal Party deals with this matter it will deal with it taking all of those matters into account.

JOURNALIST:

Are some people still campaigning within the Party for him to be endorsed?

TREASURER:

People who want to endorse him will get their chance to vote that way, this is a democratic party, but nobody is a candidate until such time as they have been endorsed.  When the issue of the endorsement comes up, the Administrative Committee will look at a person’s record and whether or not they would be a good candidate in the seat and whether or not they will aid the national effort of the Liberal Party.  And it is after taking those matters into account that they will vote accordingly.

JOURNALIST:

Treasurer is the idea of a broadband network…

TREASURER:

Well, no look, it is a question of a vote and I think that the people that make the vote will have to take into account his full record.

JOURNALIST:

Is that idea of a national broadband network – is that a good one?

TREASURER:

Oh well the broadband network is something that Telstra is proposing to fund, Optus is proposing to fund – there is already a substantial network out there.  Let me tell you there is no basis whatsoever to raid the Future Fund in relation to a broadband network.  And even if you didn’t think Telstra could do it or the G-9 could do it, if you thought it was so important you would do it by reprioritising other expenditure, or if you thought it was really important by imposing a tax.

JOURNALIST:

Do you think it is important?

TREASURER:

Or alternatively try by driving your Budget into deficit but to raid the savings of future generations is absolutely irresponsible.

JOURNALIST:

Is it worthwhile in your view?

TREASURER:

Well as I said to you we have a substantial network.  There are proposals from Telstra to invest, to extend the network.  There are proposals from Optus and the G-9 to extend the network and I would have thought to myself that those companies wouldn’t be talking about doing it if they didn’t think they could get an adequate return.  Now if you want the Government to do it, the Government can do it by taking expenditure from some other area, it can do it by increasing taxes or it could do it by driving the Budget into deficit.  But it can’t do it, it shouldn’t be doing it, it would be economically irresponsible to do it by stealing from future generations.  Thank you.