Budget – Interview with John Laws, 2UE

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Budget – Interview with John Laws, 2UE




Radio 2UE – Interview with John Laws

Wednesday, 15 May 2002





Okay, our Treasurer, Peter Costello has delivered his seventh Budget and he

is on the line from our Canberra studios. Good morning Peter.


Good morning John, good to be with you.


Good to talk to you. Where did you sleep last night?


In Canberra, for not very long.


That’s what somebody said to me before, where the hell does he sleep, I mean,

does he ever get to bed? You did, but late?


Well I have just got a flat in Canberra and we got out of Parliament House

sometime after midnight and we were back a bit before six this morning, so it

wasn’t very long.


No. Will this be your second last Budget?


Well John, this is the Budget that I am focussing on at the moment, I am not

focussing on any others I can assure you of that. I believe that this is a Budget

which is appropriate for the times and I am fully focussed on explaining it

to the Australian people.


And you are not about to tell me whether you think it might be your second

last or not?


I’m not about to think about any Budget other than the one that is before us



Last year’s Budget cash surplus for the current financial year was $1.5 billion,

you know all this and they are all predictable questions. You have missed the

mark by $2.7 billion producing a deficit of $1.2 billion, will heads roll within

Treasury because there must have been some miscalculations somewhere along the



No, we revised down through the year, principally in response to events which

we didn’t see in last year’s Budget, which was the World Trade Centre. The terrorist

attack on the World Trade Centre and Australia’s subsequent engagement in the

war against terror in Afghanistan, and at the time we decided to make that commitment

we said it would cost additional money and you have seen that in this year’s



Yes, but you have said since September 11 that you could keep the surplus.


We came back to the Parliament early this year and we sought additional money.

We have got land, sea and air operations going.


Oh I understand there is a lot going on, but you did say that you could keep

the surplus.


No, what we said earlier this year is we actually needed additional money.

We came back into the Parliament to seek it. But John, let me put this in context,

in a year when the American economy went into recession, there was a global

slowdown and defence commitments increased. I think it was actually very timely

for the Australian economy to have some help. It kept us out of recession and

in fact we turned out to be the strongest growing economy of the developed nations

of the world.


I think we still are, aren’t we?


And we are forecasting in 2002-03, that is in this Budget for the coming year,

that we will be. That is better growth than America or Britain or France or

Germany or Japan or any of the comparable advanced economies of the world. This

has been a good run for the Australian economy but it has been a difficult time

with the global slowdown.


Have you paid too heavy a price for some of the pre-election sweeteners at

the end of last year? There were a few there.


I don’t think so. As you know last year the big measures which we announced

were tax cuts for self-funded retirees and …


Yeah. Not quite enough there though.


Well, they were pretty substantial. You asked me did we pay too much, and your

answer is it was not quite enough, so I guess we didn’t pay too much, but I

think it was about right.


Well, I don’t think it was quite enough, because you, I mean we did do something

in the area of cards being given to self-funded retirees, that only half happened.

You can blame the States I think for it not happening.


Yes, we extended the Commonwealth Seniors Health Card for self-funded retirees

so that a lot of people who previously had not got it would get one. And then,

in addition to that we said, well now that you have got the health card, which

gives you access to concessional pharmaceutical presciptions, we will go to

the States and we will ask them to recognise that card to give the same kind

of pensioner benefits that they give to pensioners.


Yes, but they have not done that, have they?


Well one of the States, South Australia, had agreed with us while the Liberal

Government was in. But when the Labor Government got elected in South Australia

it turned its face against that and looks like the other Labor State Governments

are following suit.


So you can legitimately blame the States.


Well the States give, we gave the concessions on Commonwealth matters, we,

Telecom, we gave to the Senior Health Cardholders the same benefits (inaudible)

telephone line rentals that pensioners have. But the State concessions, things

like buses, trains, the State would have to recognise them to give them the

pensioner concessions and when we went to the States and asked them to do it,

the Labor States in any event wouldn’t assist.


Okay, now as the economy is ripping along, as it is, it is probably the best,

it is probably in better shape than any other Western economy at the moment,

isn’t it?


Oh well, we are growing stronger than America and Britain and Japan and France

and Germany, so we are growing stronger than any of the major industrial countries

of the world.


Okay, well that being the case. Why do the sick and elderly get forced to pay

more for what they would regard as essentials?


Well, let’s come to the Pharmaceutical Benefits Scheme, John. A pensioner or

someone who has got one of those health care cards that I was talking about

before, will get a prescription for $4.60. Now that is not the cost of the pill,

one of the things I announced last night, just to give you an example was a

new pill that we are putting on the scheme which costs …


$230 a pill or something…


Well the new one we put on last night is one called Glivec, right, Glivec costs



A pack?




Yes, I heard, I paid great attention to what you said, believe me, last night.


And what we are saying is that the pensioner concession for that, which is

$6745 means that they will pay $4.60.


Yes, I heard all of that too. But, it is still going to cost them more for

medication that they are currently receiving.


It will cost a $1 more. It was $3.60 and it will cost $4.60. But the point

I am trying to make is, that is not the actual cost of the drug. What they are

asked to pay is an extra $1. But the drug could cost $6000.


I know, I know. And of course out of this, the drug houses are doing pretty

well, aren’t they?


Well, again we try and screw the drug houses down as much as we can to get

the best price and the drug houses say that they get much better prices in countries

other than Australia. But the second thing I will say for pensioners is it is

$4.60 per script, but after you have had 52 in a year, it is free. So you only

have to pay $4.60 for the 52 scripts and after that it is free, so it is true

that it will be an extra dollar per script, but that is nothing like the cost

and if you want to keep bringing these new medicines on, and I am only listing

this one because we announced last night we are bringing this new one on, you

have got to have a way of sustaining the cost of this system.


Well, all of that taxpayer subsidy, that you refer to, that is going straight

into the pockets of the cashed-up drug companies, isn’t it?


Well it is. Well, sorry, let me put it in context. The drug company makes this

thing and it comes along and it says we will sell it to you. Normally it starts

off with the price that it is selling it in America. We try and screw them down

as much as possible, take this one, we screw them down to $6745, then the tax

payer steps up to the plate and pays about $6740 of that and we ask the pensioner

for $4.60.


Yes, so in other words the taxpayers are supporting the drug companies and

the people who require the drugs.


Well the taxpayers are paying for the cost. When you say supporting the drug

companies, the drug companies would say that that is the cost of actually making

the thing and if you don’t want to buy it from us, well it just won’t be available

to anybody. We are in this situation, we could say to the drug companies well

we don’t want to pay your price. And they say that is fine, but nobody in Australia

would then get access to that drug.




And then people come to us and they rightly say well hang on, why can’t I get

this drug. (Inaudible) because you are negotiating prices all the time.


Could I ask you to listen to this. I must say that I haven’t heard it in total,

I just heard it in the background as I was getting ready to come down and talk

to you. It was a call to my friend and colleague Steve Price and it sounded

like a very distressing call, as I say I haven’t heard it totally, but I think

both you and I should listen to it, if you could just spare a minute here.


I take three lots of painkillers, I’ve got (inaudible) ulcers, I’ve got lupus,

I’ve got osteoporosis and all these medications is trying to keep me out of

pain and keep me going. But I don’t know where we are going to go, I have been

trying to keep me head above water, you know the chemist lets me tick it up

until I get me pension and then it’s all gone.


And she later said that there were occasions when she tossed up as to whether

she would have painkillers or food. We can’t have that sort of society can we



No, absolutely not John.


So what are we to do about that?


Well, as I said earlier, somebody who is on substantive medication, and the

system is that after they have had 52 scripts they get them free. So I would

say that a person who is taking medication at that particular rate would be

eligible for the free pharmaceuticals which is, under that safety net situation,

after the 52 scripts.


But she has got to get the first 52. She still has to pay more for the first



Well, if you are taking several a week, it wouldn’t take you long to rack that



I agree with that. You wouldn’t think so, but she has still got to come up

with the extra $52 and obviously she is going to have difficulty doing that.


Well, look a person like that and obviously I don’t know the situation, but

a person like that most probably would be on a pension of some kind or another

where there have been rises in the pension rate over the last year, they have

been indexed to wages, there is a pharmaceutical allowance available, there

is a rent allowance available if she is renting and if somebody is in a difficult

situation like that, there would be numbers of income support arrangements available

to her.


Okay, how does she find out about that, because it doesn’t, you see, she is

still struggling to pay. You heard her say that the chemist lets her run a tab

until the next pension cheque comes in, so she has got real problems. Now it

may well be mismanagement, I don’t know, I don’t know the whole story.


Well, look maybe you know, it is a situation where somebody has got to sit

down and try and help her.


Well, will somebody do that?


Well, we have a Centrelink which is designed to do all of that. You know, we

could refer her to some of the counsellors that we have available at Centrelink.

This is a Government service which is designed to help people like that.


Yeah, you see people are going to be concerned and distressed, you know they

always want to be concerned and distressed after a Budget, occupational hazard,

you bring down a Budget, they get concerned.


Oh, and you know, there are people who want to blow things up, but the point

I make is this, that you are talking about prescriptions which cost, which cost



Yes, I understand that.


…sometimes, thousands of dollars, the taxpayers pay the hundreds and the

thousands, the total co-contribution is $4.60 and after 52 scripts it is free.


Yes, but you have still got to get the 52 scripts.


Sure, (inaudible), but that is the situation at the moment John, that hasn’t



No, but you have got to….


What has changed is that the concessional rate is a dollar, one dollar.


Yes, but it seems to be having an effect on people, whether it is panic or

not, I don’t know.


Well, I think John, if I may say so, there is a lot of ill-informed commentary

which has somehow given these people the view that they are not going to get

scripts any more. The change is one dollar.


Yeah, and in order to avoid ill-informed commentary I am speaking to you (inaudible).


Well that is right, and that is why I keep on saying. There is a lot of people

who will be listening and saying oh, you know, or what is going on. And I just

want to say it again, the change is one dollar.




And so, so, you know, that is the message, people should not hear, you know,

that I am going to be thrown off medicines or they are not going to be available.

The change for the pensioner is one dollar.


Okay. I must say I have not heard a lot of alarmist stuff, but I haven’t heard

a lot. But, you are going to be criticised because of that foreign currency

swap, about $4 billion. That can’t have helped the bottom line? I mean, are

you prepared for criticism that the sick and the disabled and the elderly are

paying the price for the folly of a few screen jockeys within Treasury?


Well, obviously they are not.


Why? Why aren’t they?


Because, John, again that was disinformation.


Well how much money was lost?


Well John, what people did is people said if you had punted the Australian

dollar and sold billions of dollars at the bottom and bought billions of dollars

at the, sold billions of dollars at the top and bought billions of dollars at

the bottom you could have made money. We were not punting it. We have a 10 year

portfolio, some of which is denominated in foreign currency and is realisable

in 2006 and 2007. It was never to be bought and sold in the course of a year

and that figure is essentially a fiction.


So no money was lost?


None of the money, that was a valuation of current stock, we were not actually

buying or selling it. It does not appear on the bottom line, it does not come

off the bottom line. I must say, as one of these complicated areas where again

a lot of people engaged in quite considerable disinformation.


Okay, so it’s not factual that the Australia taxpayers lost $4.8 billion?


It most certainly is not.


So when Bob McMullan made his rather cute comment about you being asleep at

the roulette wheel, incorrect is it?


Oh, just one of those smart alickey things that you hear from the Labor Party.

But I’ll tell you, you will hear a lot of smart alickey lines from the Labor

Party. What you will never hear is a policy, John, long time since we have heard

a policy from the Labor Party.


I agree with that.


The last one we heard about was Rollback, do you recall that?


I recalled rollback and I knew how good Rollback would be and so did you.


And after 5 years of Rollback what did Mr McMullan say last week, oh well,

we never actually believed in that anyway.


Yeah, anyway we don’t want to sit here and (inaudible) the Labor Party…


No, no…


…it’s not necessary is it.


…no, no, I don’t think it is necessary.


Labor’s opposed changes to the PBS however, could you face problems getting

that through the Senate?


Look, if the Labor Party wants to try and disrupt the Budget in the Senate

they have the capacity to do so, yes they do. And they will not be doing anything

for Australia but this has been a bit of a pattern, as you know, they try and

do a cheap opportunist stunt. It is that same as Rollback. Remember they tried

to stop tax reform and then 5 years after the event they said, oh well, really,

actually, it had been quite a good thing for the Australian economy. They will

probably try and disrupt, hoping that we get it through because if they ever

get into office they would want to take credit for all of the changes we have



You can’t help yourself, can you?


Well, well, what is, but John, what is the point…




…of the Labor Party trying to block the Budget in the Senate, what is the

point of that?


I don’t see a lot of point in it but I must say I don’t see a lot of point

bagging the Labor Party because it would appear to be that you are well in front.


Well I am trying to encourage them to be responsible. Now, I think, you know,

could I just say to them, I think Mr Crean, he has tried to cheat opportunism

for 5 years, it has not got anywhere. I would recommend to him that he try and

join the Government in the national interest because I think it might help him

a bit more.


Okay, can I say this to you? People will say, Simon Crean will be one of them,

but it is quite a predictable and understandable statement, if the economy is

booming as it is, (inaudible) we have talked about that two or three times this

morning, why would you even hit pensioners at all?


Well, we are not hitting pensioners. Let me make it clear that pensions are

rising and they are rising faster than the cost of living index. They have been



(inaudible) the ones that are going to (inaudible)…


…to wages. Now, in relation to pharmaceutical benefits at the moment, whatever

the cost of the pharmaceutical benefit, you will be paying $4.60 until you have

had fifty-two scripts and thereafter they are free. Why are we doing it? We

are doing it because the pharmaceutical benefits scheme costs are increasing

exponentially, not just increasing year by year but increasing exponentially,

and unless you get this scheme onto a sustainable basis you will be unable to

bring new drugs onto the scheme. Now, people always want the latest drugs and

they are entitled to get the latest drugs. And they want the latest medical

science, but the taxpayer will not be able to afford to bring those scripts

onto the scheme unless we have made it sustainable. I do not want to be in a

situation where the Government says, well no more new treatments will come onto

the scheme because people will say, well, hang on, this could be a life changing

treatment for me and if you are going to bring them on at $2000 or $3000 or

$4000, what we are saying is to make it more sustainable people will have to

pay a dollar, an extra dollar.


No, all of that’s fine. I mean you should be congratulated, and I do and many

people do on a quite outstanding set of economic indicators, especially when

compared with other developed nations as we said. But I believe that that is

going to prompt those less well off to wonder why they are the ones that are

getting hit?


Well, John, as I said earlier the concessional rate is $4.60 which is an additional

dollar and for bringing new drugs onto the scheme at hundreds, thousands – in

the case of one we brought on last night, $6745.00, the co-payment will be $4.60.


Listen, something that I looked at this morning that bewildered me a bit and

I hadn’t really thought about it before. When you look at the overall tax structure

companies currently contribute about 17 per cent of the total revenue. But individuals,

PAYE people, they chip in over half. Now companies only contribute 17 per cent.

The average Joe, the ones that are going to get a bit hurt here and there along

the way, they chip in more than half. Last week the National Australia Bank

declared a six month profit of more than $2 billion, every major bank over a

billion, are those major corporates paying their fair share of tax if it only

amounts to 17 per cent and they are making profits like that?


Well, 17 per cent is not their tax rate, their tax rate is 30 per cent.


No, no, no, but that’s the amount they contribute.


The reason why their proportion of the tax take is smaller than individuals

proportion of the tax take is there is a lot less companies than there are individuals.

Companies pay 30 per cent of their profits, individuals depend on their tax

rate but most people are on a 30 per cent tax rate, it’s just that there are

many more individuals than there are companies.


You should also be congratulated for honouring that pledge to force companies

to make super payments quarterly. You are going to keep right onto that aren’t



I hope so. This is something that has come back, the public said they wanted

it done and we are doing it and companies will now have to set aside peoples

superannuation quarterly, rather than annually. That means that if a company

goes down rather than a person being at risk of losing twelve months of their

superannuation guaranteed payments they will only be at risk of losing three

months, a maximum of three months and that is designed to protect employees

against companies which could be insolvent or go down.


Do you think this Budget is going to help or hinder your leadership aspirations?


Well, John it has been a difficult period I think for the world economy. A

global slowdown, an American recession, September the 11th, war in

Afghanistan, and to see Australia come through that, not unscathed, but come

through that stronger than comparable nations, I think has been something that

all Australians can feel proud of and I pay tribute to our salary earners, to

our companies, to our farmers. Our farmers who have made a fabulous effort in

relation to exports in a weakening world economy. It has kept our nation much

stronger and I can report that we are, you know, amongst the lead countries

of the world on the strength of our economy. We have just got to keep this going.


Peter, you have just given me a terrific Peter Costello answer. That answer

certainly will not hinder your leadership aspirations but it wasn’t quite the

question I asked.


What was the question again?


Well your answer was so convoluted that I have forgotten.


It wasn’t convoluted. It was, you were asking me about being Treasurer and

I was trying to explain to you how I faced this Budget and how a Treasurer thinks

about things.


Okay. Well, the question was do you think this Budget will help or hinder your

leadership aspirations?


I don’t think about that John.


You should.


Well, well, I don’t because…


The rest of the country is, you should.


Well, I don’t because I am just concentrating on being Treasurer.


I see. So how long will this concentration continue?


I have got a lot of concentration.


Okay, I don’t think too many people can complain too much about the Budget

with the exception of those that are going to be affected. I mean I am now hearing

stories about asthmatics claiming that their allergy drugs have been taken off

the PBS and increasing the cost to pensioners by a lot more than a dollar. But

I am sure we will hear about all of these things as we go through the morning.

But can I ask you this, if somebody who calls me, does seem to be legitimately

in trouble, now whether it is mis-management or not because a lot of people

simply don’t know how to manage their money, I am one of them but I am not short

of it at the minute – but if people call and they are having severe difficulties,

is there some avenue open to them where they can get advice…


Oh, sure.


…and if necessary get assistance?


Yes, sure. In the first place Centrelink, because a person on a pension would

know Centrelink quite well. This is where they would go whenever they have difficulties

in relation to their pensions and that should be their first port of call. But

other than that, follow it up through the various avenues of the Government.

We would be more than happy to help.


Are you going to have some sort of Budget hotline set up for people to make



I think there probably is one, John, I just can’t give you the number. But

perhaps we will get back in touch with you and try and give you the number off



If you could do that, that would be appreciated very much.




Good to talk to you. I’ll see you soon I hope, I haven’t seen you for ages

and ages and ages.


Look forward to that John, thank you.


Okay, bye.