Transcriot

of 

THE HON PETER COSTELLO MP 

FEDERAL MEMBER FOR HIGGINS

Interview with Chris Smith

2GB Afternoon Show

Wednesday, 13 May 2009

12.20 pm

E & OE

SUBJECTS:  Budget

CHRIS SMITH:

Mr Costello good afternoon.

MR COSTELLO:

Good afternoon Chris.

CHRIS SMITH:

Second Budget in recent times where you haven’t delivered.  What’s it like to sit back and watch?

MR COSTELLO:

I think the thing that breaks your heart is to see how quickly the situation has deteriorated, that within the space of what 18 months, the Government has re-borrowed all of the debt that we paid off.  The Budget has plunged from a surplus of $20 billion to a deficit of $58 billion.

CHRIS SMITH:

But hang on this is your fault he says.  You should have left him with a bigger surplus. 

MR COSTELLO:

Yes he was saying that on Monday.  He said I should have left him with more money so he could spend it.  Well I left him with $20 billion and he spent his way through that.  He is well into deficit.  I am glad I didn’t leave him any more because it would have been wasted.

CHRIS SMITH:

Treasury figures – let’s get to the nuts and bolts here – predict a return to 4 per cent plus growth in just a couple of years coming out of the recession like somewhat of a freight train.  Paul Kelly writes today that this has to be the result of a miracle and there are plenty of commentators saying they are being way too optimistic.  Are they dreaming?

MR COSTELLO:

Well this is a heroic assumption.  The reason why they say the economy is going to grow so strongly in the future is that the Budget is now in deep deficit.  People should understand that it is in deep deficit and all those cheques that are being sent out to people at the moment that’s all borrowed money.  The Government is borrowing now to honour those cheques and when the Government is asked well how are you going to get the Budget back into balance, they say “oh we can do it in six years”.  They can only do it in six years time if they have extremely strong continuous growth.  And that’s why they need to have that assumption in the Budget so that they can make the claim that in six years’ time they will get the position back.  Now can I say this Chris, Mr Rudd says a deficit for six years is a temporary deficit and many of the listeners will think well gee six years is a pretty long time to be a temporary deficit.  Could I suggest that some of them go round and see their landlords and ask for the landlord to let them off rent for a temporary period?  And if the landlord says well I will let you off for a temporary period ask for six years.   See if the landlord thinks that is a temporary let off.

CHRIS SMITH:

When will we see a surplus again do you think?

MR COSTELLO:

Well see this is whole point.  Mr Rudd says there will be a surplus in six years.  Well of course there’s an election next year 2010, there’s another election in 2013, there’s another election in 2016.  Three elections away I think he can quite confidently say he won’t be around so I don’t think you will be asking him about a balanced Budget.  And I think the bottom line of all of that is that this Labor Government will never deliver a surplus Budget.  I think the awful truth of last night is this Labor Government will never deliver a surplus Budget.  They will never balance the Budget.  And when you think about the accumulated debt it gets even worse.  Because if it is going to take us six years to balance the Budget we are still going to have a huge debt hanging over our heads even when it’s balanced.  It will probably take 10 or 20 years to pay that off.  So kids that are being born today will be inheriting that debt and it will be their debt when they are adults and when they are in the work force.

CHRIS SMITH:

Okay let’s just look at pensions and of course the figures that you cannot deny which is the booming population of older Australians – they have raised the pension age to 67.  Now you suggested this when you were in Government.  Is this the right thing to do then?

MR COSTELLO:

Look it is to be raised in 2023 so let’s not get too carried away.  It’s, what is it, 14 years away.  I did say and I agree that as we live longer and as we get healthier we have got to expect people to remain in the work force longer.  And I was the person that first said that so obviously I agree with that and measures that encourage people to stay in the work force longer are to be welcomed.  I think in 2023 sixty seven will look like a reasonable age for your retirement.  But even today there are people who don’t retire until they’re 70 or more.  So I think it’s good to encourage older people to be active and I would encourage them to stay in the work force, to choose to do so, and of course that was the point of our superannuation reforms.

CHRIS SMITH:

Well this is what I was about to get to.  If you are trying to encourage the paying off of debt, if you are trying to encourage the support of more older Australians why have they ripped to bits some of the carrots that you dangled in front of us in terms of superannuation?

MR COSTELLO:

Well see that’s the point isn’t it.  One if you want them to stay in the work force longer you should give them incentive to do so.  Two if you want to keep people off the pension you should give them incentive to put money into superannuation.

CHRIS SMITH:

Yes.

MR COSTELLO:

So that’s a no-brainer.

CHRIS SMITH:

Yes.

MR COSTELLO:

Make superannuation attractive so people set aside their own money.  If they set aside their own money and they can live off their own sayings then they won’t need the pension.

CHRIS SMITH:

So why are they doing this?  Are they that thick?  We have had discussions on the open line over the past two days and people are not happy with the fact that this has been dismantled because the rules keep changing and we can’t plan for our own future.

MR COSTELLO:

Exactly right.  Exactly right.  When I announced that there was going to be no tax on superannuation after 60 and I encouraged people to put money into superannuation it was designed to be a change for 30 and 40 years.  Along comes Mr Swan, he needed some money, so he starts changing the rules and trying to get some money back off you.  But you see long term are they really going to save money by making superannuation less attractive?  If you make it less attractive less people will retire on superannuation they will be on the pension anyway.  You see it does actually pay the Government to encourage people into superannuation.  That’s the point here.  It is not as if it has completely lost money.  Every person you encourage to save for their own retirement is one less person on the pension.

CHRIS SMITH:

Exactly.

MR COSTELLO:

It will save the taxpayer.

CHRIS SMITH:

Three quick things.  Paid paternity leave – should they have left this alone given the economic circumstances?

MR COSTELLO:

Look it is something they say will apply in 2011, that is after the next election so obviously this will be something that will be kicked around and can be greatly change.

CHRIS SMITH:

Let’s just look at welfare for families.  I mean of course this was part of John Howard’s legacy, your legacy, was it wrong to feed the boom in the Howard years with middle class welfare?

MR COSTELLO:

I hate this phrase that assumes that if you actually give incentives to people to look after themselves it is somehow welfare.  Let’s look at the private health insurance rebate.

CHRIS SMITH:

Yes.

MR COSTELLO:

Private health insurance was collapsing.  Healthy people were staying out of it. And you need healthy people can get into it so that their premiums can be used to subsidise the people who are not so healthy right?  So we said to people if you want to take out private health insurance particularly if you are a healthy person we want to encourage you.  We will give you a rebate of 30 per cent of the premium.  Is that welfare is it?  You are putting your own money up, the Government is giving you an incentive to put your own money up, and again every person who puts their own money up and goes into private health insurance is one less person who is queuing in the public hospital system – one less person.  Now let’s suppose people start leaving private health insurance.  You know what they are going to do?  Go back in to the public hospital system.

CHRIS SMITH:

And the hospital system if it’s not crushed already will soon be.

MR COSTELLO:

Will soon be crushed and then the Government will say oh we need more health funding.  Why?  Well we need more health funding because people are giving up private health insurance and they are clogging up the public hospitals.  Now I think if the Government gives you an incentive to put up some of your own money, and that is what it did, to take your own costs off the public health system and to save taxpayers I don’t call that welfare. 

CHRIS SMITH:

I don’t either.  You are not going to get an argument.  But what about things like baby bonuses, an increase in the baby bonus, the family tax rebates, the childcare rebates that is welfare.

MR COSTELLO:

Well you see that is where Mr Rudd, sometimes he calls it welfare and sometimes he doesn’t.  Apparently it is not welfare if it’s his parental leave scheme that’s not welfare.  If you introduce that, that’s not welfare.  It is only welfare if it was introduced apparently by the Coalition Government and that’s the rationale for cutting it back.  Okay well he is cutting back benefits for families.  I understand that.  We understand that he is against cutting back benefits for families but be honest enough to say I am cutting back benefits for families don’t say I am cutting back middle class welfare.  You are cutting back benefits for families.  They ought to know it.  These people do not regard themselves as welfare recipients because they pay tax, they work hard, they save, they look after their kids.

CHRIS SMITH:

And it was about time we got something.  But anyway that is another issue.  Infrastructure – why has New South Wales been wiped completely off the list?  I have got to look to be going elsewhere.  Is it any good in Victoria?

MR COSTELLO:

Oh no it is no better down there.

CHRIS SMITH:

Is there anywhere to go?

MR COSTELLO:

Where would I recommend you go at this point?  Oh Western Australia that might pick up a bit.

CHRIS SMITH:

I thought that was the only State.  What would you have done if you were handing down this Budget last night?  What would you have done?

MR COSTELLO:

I think the biggest error they made and let’s bear this in mind that we have had the biggest increase in Government spending since the days of Gough Whitlam.  Rudd with Whitlam as the two book ends of the great spenders.  What I think they should have done is they should have been much more careful before pumping all those cheques out.  So it’s a funny thing Chris there will be some people that will be receiving their $900 cheques this week and next week right.  And as they’re receiving their cheques that’s all borrowed money, bear that in mind.  The cheque that you are receiving is borrowed money right.  The Government has borrowed the money and sent the cheque out.  And in the years to come it is going to say now here’s a tax bill so we can pay the borrowing back and I think that was the great mistake.  They have pumped these cheques out, it has got us deeply into debt, it didn’t prevent the recession from occurring anyway and of course the debt is still coming.  These guys remind me very much of those advertisements that you see on television which says buy now no interest repayments until 2012. Have you seen those ads?

CHRIS SMITH:

Yes.

MR COSTELLO:

No interest repayments until 2012.  People think oh cool I can have a free TV or a free computer.  And you can until 2012 but in 2012 not only will you pay the price but you will pay the interest on all of those payments you have missed.  And that is what’s coming.  The bill is coming.

CHRIS SMITH:

And the debt collector. 

MR COSTELLO:

And hopefully they think it will be after the next election.

CHRIS SMITH:

I reckon, one last one, with all this economic turmoil, the electorate needs a leader with a pretty good economic track record.  Can you think of anyone suitable?

MR COSTELLO:

Well it’s not Kevin Rudd.

CHRIS SMITH:

Is it Peter Costello?

MR COSTELLO:

I’ll tell you this – it is not Kevin Rudd and he ought to be held accountable for this Budget.

CHRIS SMITH:

Thank you for your time this afternoon.

MR COSTELLO:

Thanks Chris.