TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

Interview with Mark Colvin

ABC PM
Pre-record
Tuesday, 14 May 2002
5.45 pm

SUBJECTS: Budget deficit; defence; border protection; disability pensions; medicines; Inter-generational Report

COLVIN:

Treasurer, surplus has been your `watch-word’ since you’ve been Treasurer. Is it an embarrassment to find yourself with a $1.2 billion deficit?

TREASURER:

Well, we are forecasting, of course, a $2.1 billion surplus in the budget year. In relation to 2001-2002 we expect that we will record a small deficit of about $1.2 billion. Principally that relates to commitments in the war against terror, and also weakness coming out of the world economy.

COLVIN:

You say that it is a small deficit but in November you were forecasting$500 million surplus in November after September the 11^th, obviously. So where has it come from so suddenly?

TREASURER:

Well, additional commitments in relation to the war against terror which we have entered into after November. And also through the course of 2002 weaker cash tax receipts, particularly…

COLVIN:

Why, could you explain that?

TREASURER:

…well, particularly in the companies area. Companies were weaker in the early part of 2002. One of the reasons for that could have been the international down-turn, I think that was probably a big part of it. But also, obviously we had corporate collapses, some of which were influenced by September the 11^th, like Ansett and HIH and One-Tel, and some of those other companies. So, there were weaker collections in the course of 2002.

COLVIN:

But Australia is still experiencing good growth. Surely we shouldn’t be experiencing a deficit, cash deficit at the same time?

TREASURER:

Well, that is why Australia does not run large deficits, like the United States, the United Kingdom, or the European Union, or the OECD. That is why a loan amongst the advanced, industrial countries will be in surplus in 2002-2003, because we do have a stronger economy. But the idea that somehow Australia is immune from world events, that the rest of the world can go into recession and it won’t affect Australia, believe me it does. We are lucky, well, not lucky, we, through a combination I think of good reform and good management, avoided the United States recession, and the German recession, Singapore’s recession, Taiwan’s recession, Japan’s recession. We grew but we were affected. It would be much better if the world hadn’t been in a global slow-down.

COLVIN:

If you failed to forecast this deficit though, why should people believe absolutely your forecast of a $2.2 billion surplus for next year?

TREASURER:

Well, I do not think that the world will have the same global slow-down as it did in 2001-02. I think the US economy will recover. We are not anticipating a new front in relation to security measures that have not already been dealt with. These are decisions that you have got to take in the light of particular events. This time last year I did not forecast September the 11^th, I am very honest about that. I do not think I was the only person that did not forecast it. And my forecasting another event – well we are taking preventative measures so that we can respond to another event. I hope there is not one. But we have got to make sure that we are ready.

COLVIN:

How can you make sure that you are ready, though? You can pump all the money that you like into defence but Al Qaida seems to have an ability to strike just where people don’t expect it?

TREASURER:

Well, we have got to make sure that we take preventative measures. We have protective security officers on Australian flights. We have tightened bomb detection at airports, we have raised permanent regiment which can deal with nuclear, biological and explosive incidents. We have set up a new tactical assault group on the east coast of Australia which can deal with hostage situations. We have stock piled antidotes to biological outbreaks. Now, we are going to try and tighten our borders further and we have got measures. Now, can you make an absolutely fool-proof system? Well, it is very hard in an open society. But I think the public would expect us to do what is reasonable and to spend the money that is required. And I think with the $1.3 billion of additional spending in this Budget, we have done that.

COLVIN:

The last boat landing, you said in your own Budget speech, was December the 10^th 2001. Now, eight months on some people are going to say, well, the system is working well now, why do we need to spend all this extra money?

TREASURER:

Well, I think the system is working because we decided to spend extra money. And if we were to walk away now we would go back to where we were in August of 2001. It has been a combination of measures. It has been a combination of additional surveillance, navy patrols, excising the Christmas Island and Cocos Islands from the migration zone. It has been a combination of assisting with the UNHCR, of beefing up our intelligence agencies, of working with countries to try and stop unauthorised boat arrivals before they get into the northern waters.

COLVIN:

Isn’t it also just because people want to go back to Afghanistan now that the Taliban is gone?

TREASURER:

Well I hope that is right. If people were taking on boats to come to Australia because they were afraid of the Taliban I would say to them now that the Taliban is gone and Australia has made its contribution to that, we would welcome them beginning a new life again in Afghanistan. In fact, we have given more money to the Afghan Interim Authority. We have given more aid to try and help Afghanistan and we are actually giving financial incentives to those people to go back, and we would certainly encourage them to do so. I suspect, however, you have not ended the worldwide problem of people movement. The UN estimates that there are tens of millions of people that are looking for new countries to live in. I would be pleased if they were only Afghanis and the problem was solved for Afghanis, but I suspect that the problem is still there for many more people.

COLVIN:

But this is all very costly and somebody is going to have to pay and the way it looks in the Budget is that many people, for instance, will go off the disability pension as a result. Are they the ones who are going to have to pay for all this?

TREASURER:

Absolutely not. These measures, in relation to secure borders, commenced last year, will be continued this year, and there are no changes on disability support pension until July 2003. There are no changes, in terms of saving, until July 2004-2005, so the measures in relation to border protection will nearly have been completed before the disability support pension changes start. And to try and draw some connection would be thoroughly and irresponsibly wrong.

COLVIN:

People will also be paying more for their drugs. If you take, say, a family that has got, say, a child with asthma, needs a couple of prescriptions, Mum’s on cholesterol lowering drugs and Dad’s got blood pressure. They are going to be spending more than $100 a month now?

TREASURER:

Well, there are two classes. If you are a pensioner or a Commonwealth senior health card holder the cost at the moment is $3.60 and it goes up by a dollar.

COLVIN:

But this is an average working family?

TREASURER:

If you are not in that concessional scheme the price rise per prescription is a maximum of $6.20 so…

COLVIN:

So they’ll be paying more than $24 extra a month?

TREASURER:

Well, it depends how many scripts they have. But when they get to having paid $874 a year, then they go back onto the concessional rate, so there is a safety net if you like. It is true that you pay $6.20 for a script, but I think it is after you have paid something like thirty scripts, or $874.90 in the year, you go back onto the concessional rate so that those people that are heavy and repeated users are actually protected.

COLVIN:

Now, you have written, you have produced this Intergenerational Report looking way into the future but you have been talking throughout this interview about how difficult it is to look even a year into the future. Do the figures in your Intergenerational Report make any sense at all?

TREASURER:

Well what they show is that on current indications, in 20 years time, 30 years time, 40 years time, if you want to preserve a pharmaceutical benefits scheme that gives people access to drugs at concessional rates, you had better prepare for very, very large tax increases. And we say it is 5 per cent of GDP, which is about $80 billion a year. Now, you know, let’s say it was only 4 per cent of GDP and it was only $60 billion a year, there is no way that on current indications you would have the capacity to fund that kind of system. It does the same in relation to aged care and it tries to put some kind of dimension on the problem. Now, you make the point, you are quite right, you would be foolish to say this has costed things out for 40 years, down to the last billion, or even down to the last $10 billion, maybe even down to the last $20 billion. But what it is telling you is that you have got a multi, multi billion dollar problem out there and if you want to be in a position in 40 years time to deal with it we had better start dealing with it over the next 10 years, because if you do not deal with it by moderate steps now they are going to be drastic steps in the future.

COLVIN:

Well, finally then, you obviously won’t be here 40 years from now as Treasurer but how long will you be here as Treasurer?

TREASURER:

Well, we get through one Budget at a time…

COLVIN:

14 hours a day, 24 hours, sorry 14 hours a day, 7 days a week.

TREASURER:

…working nearly as hard as the ABC.

COLVIN:

Have you got another one in you?

TREASURER:

Look, I will do this Budget, you ask me everything about this Budget and when we come to next year, ask me about next year’s.

COLVIN:

Treasurer, thanks very much.

TREASURER:

Thanks Mark.