Interview with Nick McCallum

3AW

Wednesday, 15 November 2006
8.35 am

SUBJECTS: G-20, aid, industrial relations, income splitting, self-funded retirees, Victorian election

MCCALLUM:

Mr Treasurer, thanks indeed for your time.

TREASURER:

Thanks Nick and it is great to be with you.

MCCALLUM:

The, one of the most important meetings, we are told, in Melbourne’s history will take place this weekend, the G-20. From a layman’s point of view, why is it so important, what difference will it make to the people of Australia, this meeting?

TREASURER:

Well it is probably the most important meeting of economic decision makers in the world. It brings together the Central Bankers and Finance Ministers of the 19 most significant economies of the world, the most developed economies and developing economies. And it discusses the global economy and global economic prospects and tries to get coordination in relation to policy. And it is the most important economic forum that Melbourne has ever hosted, ever will host. And it is a great I think that it is here in Melbourne, it puts Melbourne at the centre of international finance for the world for this weekend.

MCCALLUM:

Can we expect anything concrete to come out of it though? I mean you have described a talk-fest and I understand that, but can we expect anything concrete?

TREASURER:

Oh sure, there will be a lot of discussion about global economic policy. One of the big issues at the moment is inflation. Inflation is leading to rising interest rates around the world and there will be discussion as to what the likely movements are, what needs to be done in relation to those issues and how various countries will be responding. And that discussion, and the policy issues involved, comes back very directly to the hip pockets of Australians because global inflation and global interest rates affect all of us, it affects us on our mortgage ultimately.

MCCALLUM:

And petrol prices too.

TREASURER:

Another issue which will be a big focus of discussion is the current pressure that we have got on all energy – oil, gas, coal. A lot of it is coming from the fact that China is now a huge importer and it is soaking up global demand and global supply is not enough to meet that demand. That is why we have seen the oil price go up and that is why you saw petrol prices go up. And we will be looking at some initiatives for energy security, which if they work will encourage new investment, increase supply, bring down prices and as we all know if world oil prices are lower then Australians get the benefit at the petrol bowser.

MCCALLUM:

A lot of demonstrators, it is estimated 10,000 on Saturday, are you expecting it to be as ferocious as the ones at the World Economic Forum?

TREASURER:

Well I call on the demonstrators not to engage in violence and I call on the demonstrators not to try and disrupt the meeting. Demonstrators can make their point and they can make it anywhere in the city of Melbourne.

MCCALLUM:

And do they have a legitimate point, though, I mean their emphasis is making poverty history?

TREASURER:

Well there are all sorts of different demonstrators. We have demonstrators coming out of the woodwork on every issue. I mean there are some demonstrators who want a communist society. Do they have a legitimate point? Well I don’t think they have, I don’t think the Australian public thinks they have.

MCCALLUM:

But the legitimate protest is to make poverty history.

TREASURER:

There will be some, there are some socialists, there are some anarchists, there are some people that want to disrupt world trade, there are some aid activists who want to make their point about aid. Now as I said earlier, it’s perfectly legitimate to make your point on any of these issues but the important thing is that they are non-violent and that they don’t try and disrupt the meeting. And can I make this point, from the point of view of Melbourne, here we are, we are at the centre of world finance, we have got Central Bankers and Finance Ministers coming in from all over the globe, this is a great thing for Melbourne. What do you want the international footage to be of? People trying to disrupt world leaders or a warm friendly welcoming city that makes a great place for people to visit.

MCCALLUM:

But some of the protesters have a point and your own brother today, Tim, is launching a report which indicates in terms of the other G-20 countries Australia is a bit of a miser when it comes to aid.

TREASURER:

Well that is not right…

MCCALLUM:

Have you told him?

TREASURER:

Well I invited him and the Make Poverty History people to a summit with me last week to discuss this and we had a very good discussion. He didn’t come but he sent his offsider and we had a very good discussion about these things. You know, Australia is generous. Australia is currently giving in aid, $3 thousand million. Let me say that again because it rolls off the tongue very easily, $3 thousand million which is an 81 per cent increase in aid since 2000. Now, there would be very few other countries in the world that have lifted their aid by 81 per cent. And I think the Australian public is quite prepared to give aid, it is their taxes after all, as long as they know that it is being used well and wisely. And I think over recent years not all aid has been used well and wisely so we have got to make sure that we use the $3 thousand million well and wisely before we ask the Australian public, as we are going to ask them, to increase it to $4 thousand million.

MCCALLUM:

Is the report right when it says of the G-20 nations, Australia actually donates less per head of population than any of the G-20 nations?

TREASURER:

That is completely false. Absolutely false.

MCCALLUM:

So that report is wrong?

TREASURER:

Absolutely. If that is what it says, and I haven’t seen it…

MCCALLUM:

Well that is what is being reported this morning.

TREASURER:

…it is absolutely false because there are G-20 nations that don’t give anything. There are G-20 nations that actually receive aid. They don’t give it.

MCCALLUM:

And this is in terms of the gross national income.

TREASURER:

Absolutely, there are G-20 nations that not only give nothing but actually receive aid. Australia is not an aid receiver, Australia is an aid giver. There are G-20 countries that are subject to aid programmes that we are giving money to. So to say that we are the lowest and I can’t believe the report would make that error…

MCCALLUM:

Well you would have seen it in the papers today.

TREASURER:

I saw a paper report that and I thought to myself you know, this report couldn’t possibly say that because it is absolutely false.

MCCALLUM:

Okay, well the report is being released by your brother this morning so we will try and get that confirmed. The other element is debt relief. Now once again, according to this report if, and they used the example of Indonesia, if Australia excused the debt – $1.1 billion – that would then translate into 20 thousand kids’ lives saved. Is that way too simplistic or that a way that the western countries can help countries like Indonesia?

TREASURER:

Well Australia has forgiven all debt that is owed to it by heavily indebted countries. We are a world leader. And not only have we forgiven all debt, but we have just recently paid to the World Bank ten years pre-payment to make up the debts that it has forgiven. Now, we are so far out in front on debt relief, there would be very few counties that have done nearly as much as Australia.

MCCALLUM:

So are you then pressuring the other countries of the G-20 to do similar?

TREASURER:

I hope the other countries follow Australia’s lead because we are right out there in front. Now, let’s come to Indonesia, you will recall that a lot of Australia’s new aid to Indonesia came out of the Tsunami including new loans that we made for construction to the Indonesian Government. That was only about two years ago. It would be a very funny thing to enter into these loan agreements which Indonesia can and does want, and then to turn around and say two years later that you would cancel them. So Indonesia is not one of those heavily indebted countries. But the heavily indebted countries that Australia lent money to, and this was all done before I became Treasurer, we have forgiven all of that debt. And we have paid ten years of advance. Australia has been a world leader on debt forgiveness.

MCCALLUM:

Okay then, 9690 0693, if you want to speak to the Treasurer. Coming up after the break we will also ask you about the Victorian election and how you think that is going. Coming up after the break, 9690 0693, 3AW.

[Ad break]

MCCALLUM:

And before we get the callers to ask Mr Costello some questions, just a couple of quick ones from me. The IR decision in the High court yesterday, does that spell the end of the States? Are they now nothing more than powerless councils?

TREASURER:

No, look that is taking this decision far too far. What the High Court said is that the Commonwealth can make laws with respect to corporations and that has always been in the Constitution and we, the Commonwealth Parliament, made laws relating to industrial relations for corporations. The High Court found that that was within our power. Now to say that because of that decision somehow this destroys federalism as we know it is not right. It is a limited power, it is in relation to corporations. I think the High Court got it right, I think that this will mean we will have a better system of national industrial relations legislation and it will enable the Commonwealth Parliament to use its power for a national economy.

MCCALLUM:

Do you have plans or can you see down the track that you would envisage using it again to get control over education and health, say for instance?

TREASURER:

Well I don’t think you really could because education is not delivered by corporations. You know, you have got power to legislate in respect to corporations. Now, the Victorian Education Department for example is not a corporation. So I don’t see that this would enable a takeover of education or health, they are traditional State areas. But the Commonwealth does have power in relation to corporations and to set a system of industrial relations that corporations can apply on a national basis and I think is actually good for the national economy. And we are one nation, we are one economy, we don’t have a separate Victorian economy and a New South Wales economy. The Commonwealth Government is responsible for the tax of corporations, the superannuation of corporations, we are responsible in relation to monetary policy and I think it makes sense that the Commonwealth Parliament also take responsibility for industrial relations.

MCCALLUM:

Okay, I will ask you about the Victorian election in a second, but we have got some callers here. Isaac, you want to speak to Mr Costello.

ISAAC:

Good morning Mr Costello…

TREASURER:

Good morning.

MCCALLUM:

…I just want to ask you about income splitting. I remember you a few years ago talking about maybe introducing it to Australia where a spouse stays at home to look after the kids.

TREASURER:

Yes, what we have done in relation to that is we have introduced a system called Family Tax Benefits and the Family Tax Benefit does give a tax cut to a family that has a mother staying home. You either take a tax cut or if you are not paying that much tax you actually get a tax refund, a payment, from the Federal Government. And the consequence of all of that for families that have a stay-at-home mother or indeed a stay-at-home father if that happens to be the case, is they are actually doing better than full income splitting up to around about $70,000.

MCCALLUM:

John, you have got a question for Mr Costello.

JOHN:

Good morning Mr Costello, it is Nick, isn’t it?

MCCALLUM:

Yes.

JOHN:

Mr Costello, I am a self-funded retiree and I notice that the amount I get, earn as a couple is $80,000 a year and I, is there any reason why that isn’t indexed like other Centrelink benefits?

TREASURER:

The rule is that you are eligible for a Commonwealth Seniors Health card if your income is up to $80,000 and the health card entitles you to subsidised pharmaceuticals. Of course you can earn over that amount but if you are earning over $80,000 then of course you have got a significant income and like other members of the public you don’t get the full subsidised pharmaceuticals, you only get it subsidised to the maximum rate. We do increase that from time to time. I think before I became Treasurer the limit was around $20,000 so we have got it up to $80,000 and from time to time at Budget time we look at actually increasing that.

MCCALLUM:

Okay, Peter you have a question for the Treasurer.

PETER:

Yes, I am just wondering with these unfair stand down clauses, when I get stood down from two to three weeks which may happen in my industry, will the banks accept that as an excuse?

MCCALLUM:

In terms of paying your mortgage?

JOHN:

Yes.

TREASURER:

Knowing banks, I doubt it. But if you are an employee that is, you are asking whether the banks will let you off your mortgage for two or three weeks, I doubt that would be the case. Stand downs have always been with us and it is a very unfortunate thing. You would have heard of them quite a lot for example in the car industry, if a parts manufacturer has a strike and it doesn’t supply parts to the car assembler, then the car assembler, has always been entitled to, and over the years has quite often done a stand down because there is no work assembling if you don’t have the parts. The only thing I can say, and the only way to avoid stand downs, is to make sure that we minimise industrial disruption and that is the object here.

MCCALLUM:

We will go back to the callers in a second, but a question now about the Victorian election, you have in the past, you have been a little restrained of your praise of Ted Baillieu. Have do you think the campaign is going so far and realistically, do you think the Liberals can win?

TREASURER:

I think the Liberal campaign has been a very well executed campaign. I think it has stayed on message, I think it has been disciplined, I think the paid and the un-paid media has come together well and I have been thoroughly supportive of all of that all the way through. I think that Victoria could do better, I really do. I don’t like to see other states passing Victoria in terms of economic opportunity, I want Victoria to be the lead State in the Commonwealth and I think that on election day, which is Saturday week, voters have got a chance to take a turn for the better.

MCCALLUM:

Mr Baillieu is a pretty laid-back and nice man, does that make it hard for him to sell a message and hard for him to come back from so far behind in terms of seats.

TREASURER:

Look, nobody should kid themselves, if you are in Opposition you start behind. In a race, if the other side has got a margin of 5 or 6 per cent on you, it is like starting the 100 metres from scratch with them 5 or 6 yards in front. So you are coming from behind but it can be done you know, Mr Bracks did it in 1999…

MCCALLUM:

He came from a long way behind with your friend Mr Kennett.

TREASURER:

And so it can be done and when you go into an election you don’t go into an election to run second, you go into an election to try and win it for all of your supporters, but more importantly for the people that you want to represent.

MCCALLUM:

One final question on the Victorian election campaign, did you see Jeff Kennett and talk to Jeff Kennett on Sunday?

TREASURER:

I didn’t see him, no, because there was about 400 people that were there. But he was there, all of the former leaders were.

MCCALLUM:

Would you have liked to seen him and sort of smoothed the waters?

TREASURER:

Oh I talk to him quite regularly. Jeff does the Beyond Blue depression thing for the Federal Government and he is regularly in touch with me asking for more money.

MCCALLUM:

Well he went about it the wrong way a couple of months ago, didn’t he?

TREASURER:

I can assure you of that, I got a letter from him the other day actually asking for some more money, so we regularly hear from him and look, it is a good initiative that he does, there is no doubt about it. The first thing you learn as the Treasurer, Nick, is every cause is a good cause in someone’s eyes and every cause requires more money in their eyes and we would love to give it to every person if we could, the only problem is someone has got to pay for it and the taxpayers have to pay for it at the end of the day. So you have got to be careful with taxpayers’ money.

MCCALLUM:

Okay then, Peter Costello, Federal Treasurer, we are coming up to 9 o’clock so we had better take a break. Thanks very much indeed for your time, I appreciate it.

TREASURER:

Thanks very much Nick.