December Quarter National Accounts; OECD Report; drought; bulk billing; leadership

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December Quarter National Accounts; OECD Report; drought; bulk billing; leadership



Interview with Kerry O’Brien

7.30 Report

Wednesday, 5 March 2003


SUBJECTS: December Quarter National Accounts; OECD Report; drought; bulk

billing; leadership


Peter Costello, on the economy, the OECD says we are one of the better economies

in the world, but at the same time we are systematically slowing down and we’ve

got a record current account deficit and record foreign debt. How do you explain

the contradictions?


Well, Kerry, the OECD has said that Australia is one of the stronger growing

economies of the world and is resilient. And, I think the figures today showed

what it meant by resilient. We are in the worst drought probably in a century,

and yet the Australian economy continues to grow, not as much as it has been,

but it continues to grow by 3 per cent. The last time we had drought of this

dimension it was inevitably accompanied by recession and wide spread unemployment.

And yet we have come through his drought, still in it, and hopefully it will

end, with an economy which is still growing and growing faster than most of

the rest of the world which proves that there is resilience.

And, as I said today there are really two stories. There is the farm economy,

which has been through a severe recession and has been hit savagely, and then

there is the remainder of the Australian economy which continues to out-perform

the world and grows strong, led by business investment. And when you put the

two together the Australian economy, thankfully, continues to grow.


Labor says that for the first time ever, Australian households are spending

more than they earn. They point to a collapse in savings. Does that concern



Well, again, what the National Accounts show, and the statistician made the

point, is, that there wasn’t a positive savings ratio because the household

income includes agricultural farming, non-incorporated businesses. And those

agricultural businesses are not getting in any income. They are spending more

than they are receiving. They are not saving. And as a consequence of that you

have a negative savings ratio. Now, that is a consequence of drought, and obviously…


But that hasn’t happened in past droughts has it? I mean we had the drought

that led to the last recession but the savings ratio did not dip into the negative

then did it? So it’s more than that isn’t it?


Well, no farmer is saving at the moment. Farmers are spending on stock and

feed, and they are not getting income, so when you add that in, and the statistician

made that point in the National Accounts today, when you add that in, that is

what produces this particular outcome.


So, you are not worried about savings?


Well, Kerry, I am never one to say to people, don’t save. I think saving is

important, we have some compulsory schemes and we have some voluntary schemes,

so I will never say that. But what I can say to you, is that that outcome is

a feature of the drought and hopefully the drought will pass. And when it does

when the agricultural sector gets back into income it will take that one-off

out of those figures.


How do you, Peter Costello, evaluate the personal cost to farmers themselves.

We’ve got the big picture figures, how do you evaluate it at the farmer level?


It is awful. It is the heartbreak of seeing no crop in the ground. It is the

heartbreak of disposing of stock, of seeing stock die in the field. You know

the whole of New South Wales is now drought declared, and every farmer is now

eligible, subject to an income and assets test, to drought assistance in the

whole of the State. You see it in other ways. The National Accounts today said

that we lost 20,000 jobs in the agricultural sector…


60,000 in the last two quarters.


…and added to that 40,000 in the quarter before. Now, as it turns out, the

number of jobs in Australia, overall, is still increasing. That’s because the

non-farm economy is growing so strongly that it can make up for those 60,000

jobs, and more so. But in the agricultural sector that is very severe.


Do you know, for instance, what farm incomes have fallen by?


Well, farm incomes are essentially zero in most of Australia at the moment.

Farmers are drawing down on savings. They are not making any money. And what

people have got to understand, of course, it is not just the living expenses,

because the Government has now stepped in with assistance – farmers are eligible

to apply for Newstart, what used to be called the dole, they can get the dole,

and that puts…


(inaudible) it seems though…


…food on their table.


There seems to be a lot of frustration about how the system is working and

the National Farmers Federation are pleading with you for substantially more

funding support for farmers in the May Budget, both to help them survive right

now, and as you say many of them are struggling to put food on the table, and

then to get back on their feet when the drought is over…




…are you going to be able to give them more money?


Well, I was going to go into it. There are two elements, there is income support

and every farmer in New South wales is now eligible for what we call Newstart,

or the dole, and that gives them the equivalent payment of an unemployed person,

and that is for food on the table.




Secondly, as I was going to go on to say, their business expenses don’t stop,

you see, this is the business expense of hand feeding, or the business expense

of keeping the stock, or the business expense, hopefully, of cultivating the

land, or whatever. Now, this is where you can get additional business support,

that’s where the difficulty has been.


(Inaudible), the Farmers Federation are saying it is not enough…


No, I think what they are saying…


…I’m asking, are you going to find more money in the Budget?


I think what they’re saying, they’re saying it’s taking far too long to get



They also want it in different forms and they want more money.


…and we are looking at this because a lot of this being administered by the

State agriculture departments and we also want to know why it’s taking so long

to get out, and I can assure the farmers of this, the Commonwealth is going

to be breathing down those departments to make sure that that money does get

out, but I can tell them this…


I wonder who is going to breath down your neck.


…well the money that’s paid out through Centrelink, that’s paid out for the

dole, for income support is being received and being accessed immediately.


OK, can we move onto Medicare and bulk billing which you have had a lot to

say about in the last few days, in particular that Medicare was never designed

for doctors to bulk bill every patient, it was never designed to be universal,

that’s bulk billing. Who exactly should be entitled to the benefits of bulk



Well, we have never had 100 per cent coverage of the Australian public with

bulk billing.


No, no, that’s acknowledged. But who should be entitled to it?


Well, so you want to make sure that bulk billing is available to as many people

as possible, and certainly available to low income earners such as pensioners

and the like. Now, this question came up today, somebody said, well are you

objecting to 100 per cent bulk billing, and I said no, of course not. If the

doctors are prepared to serve everybody in Australia for 85 per cent of the

scheduled fee, fantastic…


But you know yourself, that the reason the bulk billing, the reason that fewer

doctors are bulk billing, is because they say they can’t afford it, they’re

going out the door backwards in terms of their own business. So, we know that

you are never going to get 100 per cent, in fact it’s declined from a peak of

80 per cent for GPs to 70 per cent with every sign that it is going to go lower.

So what should be the level of bulk billing, and who should get it?


…and so that’s if as you say that doctors are never going to extend it, never

have extended it to 100 per cent of the public then you would want to make sure

that it goes to the most needy and …


So who decides that?


…well they are the people who are on pensions or low income earners, and

the Government is looking at measures to actually encourage bulk billing wider

coverage to the low income earner.


But who is going to decide that? Your saying, you’ve said categorically no

means testing for bulk billing, are you going to leave it to the doctor to decide

who is worthy of, or needy enough to get bulk billed?


Well, Doctors do decide that to some extent because the evidence is that they

do actually have higher bulk billing rates for pensioners and low income earners,

but we think that there are other things that can be done to encourage that

and we are looking at that at the moment.


But are you saying that patients should go in and show their health card, their

pension card, their dole card, is that what should happen?


A lot of them do. In fact you will find that in a lot of surgeries they do

show their pension cards and that’s why the rate of bulk billing among pensioners

is much higher than it is amongst the general population.


So you’re not going to means test but you want doctors to means test?


No we are not going to means test. What I am saying is that many doctors extend

bulk billing to pensioners at the moment, whereas they don’t extend it to higher

income earners and we want to encourage them to continue and to widen the extent

of bulk billing amongst lower income earners and people who are pensioners.


Very quickly before we go, once again the old leadership question that keeps

coming up, and it’s coming up tonight because the Prime Minister put it back

on the map today, when he said in the Parliament that basically he will be around

for the next 18 months in the Parliament. That takes him to the next term, I

imagine that you would welcome the news that he will be around to lead you into

the next election.


I think what he said in the Parliament today, and I would thoroughly endorse

this, is the longer the Labor Party talks about interest rates the longer we

will engage them on the issue…


No, no he said that basically he will be happy to sit in the Parliament for

the next 18 months and hear it and deal with it.


He said he would be happy to sit there and remind the Labor Party of it’s record

on interest rates for a very long time, as will I Kerry.


For 18 months, to the next election?


I’d be happy to do it for 18 years.


Peter Costello, Thank you.


Thank you.