TRANSCRIPT
THE HON PETER COSTELLO MP
Treasurer

Interview with Kerry O’Brien

7.30 Report

Wednesday, 25 February 2004

7.30pm

SUBJECTS: Demographic change, Immigration, Superannuation, Fertility

O’BRIEN:

Peter Costello, as you define the problem, 25 per cent of the population is

going to be over 65 by 2040, the workforce is shrinking, so your solution, in

a nutshell, persuade or coerce more single mothers back into the workforce,

people on (inaudible), people on disability pensions to work, and more older

people to stay in work, is that the essence?

TREASURER:

Well, the problem is this, that the number of people of workforce age will

not be increasing, with medical advances and scientific advances, we’ll

all be living longer. So, instead of having five people in the workforce to

support each person above 65, we will have 2 , those people have to pay their

own taxes for their own services, and they will have to take a share of funding

that larger proportion that is at retirement age. Now, in this paper, what I

put out, is I say, we can address that demographic problem in four ways –

you could increase tax, that is not very, that is not something that is going

to excite the public, you could restrict expenditures, you could run deficit

budgets and blow the problem out to future generations, or you can try and run

your economy faster and stronger – and that is what I think we have to

aim at, a stronger economic performance. Now, where are we going to get this

from? Well, one of the areas that we can get it from is by engaging more Australians

in the workforce, and we go through in our paper, we look at some of those parts

of the Australian population that aren’t engaged in the workforce, and

we asked the question, what can we do to give better incentives for them to

be engaged?

O’BRIEN:

And that is more single mothers, more people on disability pensions, and older

people staying in work.

TREASURER:

Well, let me come to each of these in turn, I think it is important. Let’s

go to the older people. Yes, I think it would be good for Australia if we can

encourage older people to stay in the workforce, yes I do. At the moment you

have got to preserve your superannuation to 55, but if somebody is going to

retire at 55, with life expectancy going out to 80, that is 25 years of retirement,

it is going to be very hard for them to support themselves. So, yes we ought

to try and encourage mature age workers to stay in the workforce. I laid down

a few ideas as to how we can do that, and the most important I think, is to

allow people to access part of their superannuation whilst staying in the workforce.

They might only want to work part-time, say two days a week, they may not want

to have the full duties they did in their forties or their fifties, but if you

can encourage them to stay, work part-time, take some superannuation, you will

encourage them to be in the workforce, that would be good for them, and it would

be good for the economy.

O’BRIEN:

But we had a similar problem, not exactly the same, but a similar problem after

World War II, we solved it by importing a workforce, we paid migrants to come

to Australia, and it solved the problem, it worked. I don’t see the word

immigration anywhere in your speech today, why not?

TREASURER:

No, no. We do have a section in this paper, and I have released a big discussion

paper on (inaudible)…

O’BRIEN:

But there is no emphasis from you about it…?

TREASURER:

Let me tell you why. Immigrants, if they were young, would make a contribution,

but in order to overcome the demographic problem, you would have to have an

ever expanding program of young immigrants, you couldn’t have family reunion,

you couldn’t let them bring their parents, and…

O’BRIEN:

But can’t you fashion a policy for the time, as you are now…

TREASURER:

…and, and it doesn’t make that big a difference. As you know I

am in favour of making sure that we import skills and people that can grown

our economy, don’t get me wrong, but it is not going to solve the demographic

problem.

O’BRIEN:

…by having more of them?

TREASURER:

But if I can tell you what actually, what actually made the difference in the

forties and the fifties in Australia is not so much immigration, it was fertility

rates which were much higher. The best way to grow a population is by natural

increase…

O’BRIEN:

That was a medium term, outcome, that wasn’t an immediate outcome as

your immigration situation was.

TREASURER:

…and what’s changed is that back in the seventies fertility rates

fell, for whatever reason, I have got my own ideas, let’s not go there,

but along with every advanced developed economy of the world, fertility rates

fell, and as a consequence we have that baby boomer generation, the generation

that was built on fertility rates of 3 and 4, moving through the system.

O’BRIEN:

But the fertility rates of the developing world aren’t stopping, and

in this context World Bank President, Jim Wolfensohn said on this program recently

that the population amongst Asian countries, our Asian neighbours is going to

increase by 2 billion in the next 25 years, not the next 40, the next 25, and

he says that Australia is going to have to develop immigration strategies to

deal with that from our perspective. Now, doesn’t that issue go hand in

hand with the problems you are trying to address today?

TREASURER:

Sure, but it depends what Asian countries you are talking about here, Kerry.

China is…

O’BRIEN:

All of them.

TREASURER:

…well, hang on…

O’BRIEN:

Just about.

TREASURER:

…no…

O’BRIEN:

A possible exception of…

TREASURER:

…China has a one-child policy. China is going to be facing up to a massive

ageing of the population. Japan is looking at…

O’BRIEN:

…is shrinking…

TREASURER:

…negative population growth.

O’BRIEN:

…Indonesia, Thailand and so on.

TREASURER:

…what you find is, and you find this all around the world, fertility

rates are high in developing countries…

O’BRIEN:

But isn’t that, isn’t that (inaudible) for us in our region? Two

billion in our region.

TREASURER:

…yes, and fertility rates are low in developed countries, like Japan,

like New Zealand, like Britain, like France, like Germany, like Australia. This

is a phenomena around the world, and the ageing of the population is going to

take place in every society, we know that. The die has been set Kerry, the die

was set…

O’BRIEN:

(inaudible) 25 years another 2 billion people in our region…

TREASURER:

…two billion people in developing countries, this is the point that Jim

Wolfensohn made, 2 billion people in developing countries, and he says that

the rich world is going to have to come to terms with the poor world, I couldn’t

agree more.

O’BRIEN:

…including with an immigration…

TREASURER:

But let me say, in this country, like in every developed country in the world,

we are going to have an ageing demographic. Some of them have got worse problems

than we have, but the point I keep coming back to is this is a date with destiny,

this cannot be changed. We can’t fool ourselves and say there is some

magical elixir that will stop the ageing of the population, it was set in stone

30 years ago, it is going to work out over the next 40 years. The only choice

we have is this, do we start coming to grips with it early, in which case the

adjustment will be less, or do we leave it so that the adjustment will be more

drastic, and my message is, let’s start early.

O’BRIEN:

And Simon Crean’s message today is, where is your population policy beyond

work until you drop?

TREASURER:

Well, Mr Crean, I think, was his usual whining negative self and I think there

are other Labor Members that came out and said that it was a very good policy,

so take your pick.

O’BRIEN:

It didn’t go far enough.

TREASURER:

Look, here we are, we have laid down something that is in Australia’s

national interests, a forty year snap shot of where our country is going to

go, and we have said, let’s start doing something about it. Now there

aren’t many governments in the world that are doing this. Again, we are

leading the pack, this is long-term, and this is visionary, and if Labor really

wants to get in on this issue, it should start supporting us.

O’BRIEN:

Well, they are saying you don’t go far enough, they will support what

you are doing but they…

TREASURER:

Hang on Kerry, they don’t, they are not supporting the changes we need

in the workplace to make work more flexible, they are not supporting the changes

we need in relation to welfare reform…

O’BRIEN:

…they are supporting you on superannuation, as they say, as far as it

goes.

TREASURER:

…all of the measures, which we have to come to grips with now, are being

blocked in the Senate, we need to clear that Senate roadblock, and let’s

in a spirit of national purpose, get on with meeting this problem.

O’BRIEN:

You also want to, speaking of the workplace, you want to further deregulate

the workplace to accommodate more part-time work. Is that code for saying, you

want to reduce working conditions and protections for Australian workers to

make it more appealing for employers to hire older workers, that at the moment

they don’t find appealing?

TREASURER:

It is a recognition that, at the moment you can get you superannuation at preservation

age of 55, and you can go on the aged pension at 65, and there are some people

that drop out of work because they want to access their superannuation. A lot

of these people wouldn’t want to continue to work, they don’t want

to work 40 hours a week, they may not want to work with all of the physical

demands that they previously had, but they might be able to work 2 days a week

or 3 days a week, they might be able to train younger people, they might be

able to supervise them, share their skills, these are the people we don’t

want to (inaudible). We need to send a message back out there that mature aged

workers are welcome. But they are going to need more flexibility and we want

to make our industrial relations system a flexible…

O’BRIEN:

When you say more flexible, you mean, breaking down existing conditions, don’t

you?

TREASURER:

No I don’t, I mean somebody being able to work in an assistant role,

maybe not with the full duties they had, but assisting somebody else in those

duties two days a week, or three days a week, maybe 20 hours a week, maybe 10

hours one week and 20 the next, the flexibility…

O’BRIEN:

The Treasury paper on flexible work options that you have released asks, “how

can we encourage mature aged workers to take a broader view, as to the type

of work they could undertake?” Do you have an example in mind?

TREASURER:

Well, what I have just been saying. Maybe, instead of being the full-time hands

on executive that you have been in your fifties, you might become an assistant

to somebody who takes that role…

O’BRIEN:

But what about a worker further down the line, and the evidence that the ACTU

cites of people who are often discriminated against in the workforce, the 30

per cent of unemployed, who are unemployed now, 45 year olds and 60 per cent

of unemployed 55 year olds, who can’t get work simply because employers

consider them to be too old. How do you change the employers mind…

TREASURER:

We have got to re-educate employers, we do, and this is a big problem. There

is a view amongst many employers that if you are 45 or you are 50, you are past

your best. That is not right, that’s our message, that is not right, these

people have skills and you can utilise them. Now, in the Commonwealth Public

Service, we have outlawed age discrimination, what we want to now do, is we

now want to re-educate employers, but the employers have got to know that they

will have the freedom to enter into flexible arrangements and the key here is

flexibility. Kerry, nothing could be more retrograde in Australia, if we started

re-regulating industrial relations, or making it harder for part-time work.

That will kill the opportunity to keep mature aged workers in the workforce.

O’BRIEN:

Superannuation, where in all of this are your new incentives for people to

save more before they reach retirement age. At the moment for instance, you

tax super on middle incomes when it goes into their funds, you tax it again

when it comes out. Where is the incentive in that?

TREASURER:

We have announced a few incentives today to allow people to make contributions,

to stay in the workforce and draw down on super, we are allowing them to have

the opportunity of making a co-contribution, by giving tax breaks for people

who make co-contributions, and our message is this, that people should think

about their retirement, they should plan for it, that if the aged pension is

not going to be sufficient for them, a co-contribution and a tax incentive will

be part of their financial plan.

O’BRIEN:

So in overall terms, the thrust of what you are saying seems to be a perfect

argument for Mr Howard staying on beyond 65 as Prime Minister, or do you have

a part-time job in mind?

TREASURER:

Well, look…

O’BRIEN:

Or retraining perhaps?

TREASURER:

…let me put it you Kerry, there is always going to be a job here for

somebody at the 7.30 Report who is over 55 too.

O’BRIEN:

And for Prime Ministers over 65.

TREASURER:

Prime Ministers and Treasurers, whilst they have great contributions to make,

we will encourage them to make it.

O’BRIEN:

And he has a great contribution to continue to make.

TREASURER:

Well all do. We are all making great contributions.

O’BRIEN:

So, while we are on superannuation, how did you feel about the way you were

hung out to dry defending the Parliamentary Super Scheme, only to have to Prime

Minister pull the rug from under you?

TREASURER:

Well, my point is, and it always has been, that people that have senior responsibilities

in public life I think, by public service and by private sector standards, these

can be justified, that’s my view.

O’BRIEN:

But what I am talking about is you were out there, you were out there…

TREASURER:

That was the view I put, that is the view I hold…

O’BRIEN:

…and did the Prime Minister ring you up when you were out there saying,

I am supporting the existing policy, hey Pete, you better take it easy there,

I might be doing a back-flip?

TREASURER:

…and I don’t think that there are people, I haven’t heard

anybody say that that is not right, and I will come on because I think this

is another important point, I was saying the same in relation to judges, the

idea that you can take judge’s pensions away and still have a qualified

judiciary in this country is nuts, we want to get the best people onto our bench

and I think by private sector standards, their package is reasonable.

O’BRIEN:

Well, we still don’t know how you felt when you were hung out to dry,

but we will leave it there. Peter Costello, thank for talking with us.

TREASURER:

It’s always a pleasure to be with you Kerry.