TRANSCRIPT
THE HON PETER COSTELLO MP

Treasurer

Interview with Paul Murray

6PR

Monday, 17 May 2004

8.30 am

SUBJECTS: Iraq; Budget; Tax Cuts; Ageing Population; Defence and Security

spending; Superannuation; Petrol Prices

MURRAY:

Good morning Treasurer.

TREASURER:

Great to be with you Paul.

MURRAY:

Very good to be with you. All of the talk so far has been football, so I suppose

we had better get onto politics.

TREASURER:

We have done the important news, so now we move on.

MURRAY:

Do you think it is possible that this coming federal election may be the first

time in recent memory, that foreign affairs, and I mean the war in Iraq and

the war on terror, that they will dominate domestic issues like our own economy

in the minds of the voters?

TREASURER:

I think foreign affairs and defence will be one of the two really big issues

in the election campaign and that is, as you said, pretty unusual. That is because

we have still got troops in Iraq assisting with reconstruction over there, and

one of the big issues in the election campaign is whether we should bring them

home…

MURRAY:

Yes.

TREASURER:

…or whether we should stay and re-build Iraq. We think we should stay

and re-build Iraq, that will be a very big issue. The other issue in the election

campaign will be economic management, which is a general issue, and that is

because it is so important for people for the mortgages and their jobs.

MURRAY:

I will talk to you about the bringing them home thing, Defence Secretary Rumsfeld

last week said that the Coalition of the willing may not win in Iraq, may not

win the peace in Iraq, the first time that he had been so forthright about the

chances of success there. Did that change your thinking?

TREASURER:

No, I don’t think so, I think the important thing is to re-build Iraq.

If everybody were to go home, if the Americans and the British and the Australians

were to now go home, who could tell what the outcome would be in Iraq, most

probably civil war, killing on a dimension that we haven’t seen since

the days of Saddam, and no real alternative government with the capacity to

maintain law and order. So I think the international community will have to

stay, and they will have to stay to re-build a new Iraq, otherwise you would

just be abandoning many millions of innocent people to their fate.

MURRAY:

The London Times newspaper was reporting today that both the American and

British Governments are talking about plans to get out of Iraq as soon as possible,

are you aware of those discussions?

TREASURER:

I can’t comment directly on that newspaper, but obviously the international

community wants to do the job and once the job is done, then they will be looking

at withdrawing. But nobody is going to withdraw until the job is done, and the

job that has got to be done is this – you have got to get a government in place,

it has got to have the capacity to maintain law and order, it has got to have

an army that reports to the civilian government and you have got to have a government

which can command public support, until that is done, there is not going to

be the capacity for an exit from Iraq.

MURRAY:

Peter, yesterday on Sunday Sunrise, Mark Latham the Opposition Leader said

this, he said, “after the prison torture atrocities, they obviously weakened

the capacity of the occupying powers to be liberators to be democratisers.”

Do you agree with that?

TREASURER:

Well, let me say, I am as horrified by the scenes that we have seen, the treatment

of prisoners, as anybody else and I think all of us would have revulsion at

the scenes that we saw and the people that perpetuated them should be brought

to trial, court martialled and imprisoned, and that is what is going to happen.

But having said that, the scenes that you saw also paled into insignificance

compared to the carnage that Saddam Hussein wreaked. You are talking about hundreds

of thousands murdered, not incarcerated, murdered, you are talking about chemical

weapons which were rained down on the Kurds. The killing and the level of violence

in that society under Saddam Hussein was something that we haven’t seen

since almost the days of the Second World War. Now that doesn’t excuse

the mistreatment of prisoners, let me be entirely clear about that, and the

people that do that ought to be routed out and punished. But please let’s

not abandon innocent Iraqis to murder a mass murder of the dimension that they

have seen in the past as a consequence of those bad troops.

MURRAY:

Mr Latham is basically saying we have lost the moral imperative there now,

the coalition of the willing, he is saying that we should now move towards handing

over to a United Nations force, he said this, “the best contribution that

the occupying powers, US, Britain and Australia can make is a financial one,

to provide aid.”

TREASURER:

Well, Mr Latham was always against the moral imperative, he was against the

moral imperative, let’s remember this, while Saddam Hussein was still

running the place. He was against the allies removing Saddam Hussein, let’s

remember that, so you know, let’s not say that he has had some big change

of heart. I always thought there was a moral imperative, the Government thought

there was a moral imperative when that mass murderer was running loose. Now,

in the course of liberating Iraqis yes, some troops have behaved badly and they

have done things that should never have been done in treating prisoners, and

for that, they ought to be tried and punished. And that is what western powers

do, they try and they punish people. What would Saddam have done in a situation

like this, well he probably would have buried them and murdered their parents

and their children and cut out tongues and unleashed weapons of mass destruction.

This idea that there is some kind of moral equivalence, I think is what Mr Latham

is trying to do, and Saddam Hussein was no worse than George Bush, this is the

argument that is now going around. Let me tell you, there is the world of difference

between a democratic power which tries and punishes people that do the wrong

thing and a mass murderer, and any attempt to try and say that they are morally

equivalent really is ridiculous and it just clouds the judgement about what

has got to be done in this world and what has got to be done in Iraq.

MURRAY:

Is there a time when the United Nations has to be brought back into the action

here?

TREASURER:

Sure, the UN will be a very important part of it. Let’s not forget this

point either Paul, the UN was in Iraq and the UN left because terrorists bombed

their headquarters and killed their people. Let’s not forget that. The

UN was the subject to a bombing and murder campaign, that is why the UN had

to leave, and that will tell you something about the people that are running

the bombing and terrorism in Iraq. The fact that they were bombing the UN, you

know, this is terrorism incorporated that is going on in Iraq, not just against

Americans and British but against the UN for heavens sake.

MURRAY:

Treasurer Peter Costello is here to take your calls, 9221 1233 is the number

if you want to speak to him, let’s get right to the lines now, Margaret

in Kewdale is first up, G’day Margaret.

CALLER:

Good morning Paul, good morning Mr Costello.

TREASURER:

Good morning Margaret.

CALLER:

I have a problem with you because we voted liberal all of our lives. I am

57 and my husband is 60, he has worked shift work all of his life and (inaudible)

sort of decent money he has to hope he gets a Saturday or a Sunday once every

eight or nine weeks, he is on the lower scale of about twenty-one to fifty something

thousand, and we get absolutely nothing and I think it is terribly unfair. Those

who are over $80,000 can afford to go out for a meal and to the pictures and

stuff, I can’t remember the last time my husband and I could do that.

TREASURER:

Well Margaret that is one of the reasons why we have been working at improving

the tax scale for quite some time, and in 2000 we cut the rate on income earners

of $38,000 from 43 cents down to 30 cents. That was what we did in the year

2000. In the year 2003 we indexed all of the thresholds again and in this budget

we have also delivered relief to those people who are between $60,000 and $80,000.

But the way to look at it this, this has been in three instalments and for people

that were in that $38,000 bracket back in 2000, the big tax cuts came in 2000

and this is really returning to make it balanced in an overall package.

MURRAY:

Thanks for that Margaret. In the Australian today Labor’s tax spokesman,

Mr Cox is talking about passing your package, your tax package, through the

Senate. He says this, that he said, the tax cuts need to be passed before June

30 so employers knew how much to deduct. However Mr Cox said that still left

the second round of tax cuts in 2005 and 2006 and the Family Tax Benefits that

could be looked at and he is quoted as saying, “it is possible to look

at the structure of the family tax benefits and the tax changes, it’s

not like all that money is quarantined”.

TREASURER:

Now this is a very, very important point. There is a lot of people who won’t

know who Mr Cox is. Mr Cox is the Assistant Treasurer for the Labor party and

he is not a well known figure but he does a lot of their background work. Now

what he has said in the papers today, and I appeal to people to read it very

carefully, he says that Labor intends to pass the tax cuts and the family assistance

but if they get elected they may well take it back.

MURRAY:

The second part of it…

TREASURER:

…that is…

MURRAY:

…what they can…

TREASURER:

This is a very, very interesting point. This is a new Labor tactic. They want

to get the kudos of passing tax cuts and family assistance but he has let the

cat out of the bag because he says, and if we get elected we may well take it

back from you again. Now there’s a lot of people who are going to say,

oh well that is Mr Cox, I mean who is Mr Cox? Mr Cox is the man, as that article

says, who is in charge of doing the sums for Labor and he has let the cat out

of the bag…

MURRAY:

…so that’s what, its not like all that money is quarantined, that’s

what it actually means?

TREASURER:

That is what it means. What he is saying and he is, it is over a headline,

it says well how is Labor going to get money to try and fund its promises. How

is Labor going to try and get money to fund its promises? Mr Cox says they’re

going to take back your tax cuts and your family assistance if you get elected,

that is how they’re going to do it.

MURRAY:

9221 1233 if you want to talk Peter Costello today. Jane South Perth, hi there.

CALLER:

Yeah, hi Mr Costello.

TREASURER:

Hello Jane.

CALLER:

I just wanted to talk about the Baby Bonus and your encouraging couples to

have three children possibly, and I have been considering that because, you

know, a while ago they were saying that men just weren’t interested in

being Fathers and if I was a male I don’t think I would be considering

parenthood because there is such a high risk of relationship breakdown in Australia

TREASURER:

…sure…

CALLER:

…and the mother tends to, you know, to get most of the time with the

children and um (inaudible) would be one that would have a lot of heartache

and a lot of problems in getting a fair deal as far as when separation happens

and it would be bad enough to be separating from 1.7 children but from three

it gets worse and worse doesn’t it…

TREASURER:

That is a fair point. Can I just say Jane, look some people can’t have

children and some people will never marry and some people will have large families

and I am not laying down the law as to how many children people should have.

I just made this point…

MURRAY:

You would just settle for lots, wouldn’t you?

TREASURER:

…well I just made this point. We are an ageing society. The number of

people of working age in Australia over the next twenty years will hardly change

and the number of people above 65 is going to double. So what that tells us

is we are going to have the same number of people in the work force trying to

support double the number of people in retirement over the next forty years

and that is going to be a very big cost on those people that are still in the

workforce. Now the reason that changed, and it is not just our country it is

every developed country, the reason that change is occurring is that our birth

rates are not replacing our population. They have fallen below replacement level

and I just made the point that if we could get them back up above replacement

level we would deal with some of those problems. Now I am not saying to people

have three kids or four kids or 12 kids but I am just saying you must aware

that if we don’t replace our population we are going to have this ageing,

we are going to have this ageing problem. But I do agree with Jane. I think

that one of the reasons why people are not having as many children is family

breakdown, absolutely.

MURRAY:

Money is only one part of a family’s problems.

TREASURER:

Look I think relationships is a much bigger problem. People get married later,

they put off having children as a consequence of that, they find later in life

it is not as easy to have children as it is earlier in life. You run into marriage

breakdown. I think it would be a very sad thing if you had a marriage breakdown

and Dad was isolated from the kids. There is all sorts of problems, so I am

not saying you financially fix this. But I am saying as a country if we can

replace our population in 20 and 30 and 40 years time we will be a stronger

country.

MURRAY:

Jack in (inaudible). G’day Jack.

CALLER:

G’day Paul, g’day Mr Costello how are you?

TREASURER:

Not too bad thanks.

CALLER:

Welcome to Perth.

TREASURER:

Thank you.

CALLER:

Peter as a coalition voter, about four or five years ago or probably less I

took Alexander Downer to task on this same radio program with Paul’s predecessor

for the fact that spending on defence and security was less than 3.5 per cent

of GDP and I really regret that it took September 11 to give us a wake up call

to the fact that we weren’t spending enough on defence and security. I

hope that we never get into another lull where we believe that no matter what

we will be ok and the rest of the world will ignore us. Or we can ignore it

and that we do spend that which is required on defence and security.

TREASURER:

Well I think you are right Jack. We have really increased spending on defence

and security over the last four budgets. Really we started in the year 2000

when we laid down our Defence White Paper and we announced a new build up of

hardware. Which will include airborne early warning aircraft, AWACS. We have

announced we are going to buy a joint strike fighter, once it is developed.

We have made announcements in relation to Sea-Air warfare and we really have

upped our defence acquisition program. And then came September 11 and in the

aftermath of that we decided that we needed to put much more into anti-terrorist

activity, we raised new regiments which could give us tactical response to deal

with chemical, biological war fare and we have got a good response now on both

the west coast and the east coast if we should ever have to deal with a terrorism

incident.

And then in this budget our focus has really gone on things like shipping

containers, airport security. This is going to be the new area where we have

got to start taking defensive measures we think. For example the shipping containers

going around the world who knows what is in those shipping containers and there

is now got to be new security and identification measures in relation to all

of those things. So that is really the third stage. But you are quite right,

Australia has got to look after its own defence. If you can not defend your

country your are not going to have much of a life and that is why we have been

upping it since really the year 2000.

MURRAY:

Thanks Jack. Humphrey good morning.

CALLER:

Good morning Mr Costello.

TREASURER:

Good morning.

CALLER:

Mr Costello better economists than me claim there is a huge black hole in your

budget and that is the $90 billion dollars in unfunded super liabilities. Now

if we are going to have less tax payers in the future how the hell are we going

to pay for that and is it mentioned in the budget.

TREASURER:

Yes the Commonwealth Government, long before my time, decided that it would

run its superannuation, defined benefits superannuation, whereby the Commonwealth

pays out the liabilities as they fall due. And that means that in relation to

past people who have qualified we pay out of recurrent revenue their superannuation

entitlements. Now what that means is that there is a big accrued liability there

which will have to be paid over 20, 30, 40 years as those public servants continue

to draw down on their defined benefits schemes.

So what have we done about this? Well the first thing we have done about it

is we have closed the schemes to new entrants so that the liability does not

grow. The second thing we did in this budget was we paid out some of the liabilities

for Telecom people and Australia Post people and the third thing we have done

is we have greatly reduced the government debt so that government won’t

be holding large debts in 20 and 30, 40 years time as those liabilities mature.

MURRAY:

Peter the budget was predicated I think on an inflation projection of 2 per

cent wasn’t it. We have seen now oil prices going through the roof and

the Prime Minister is conceding over the weekend that this could add to inflation.

Does this mean that the underpinnings of your budget are now questioned?

TREASURER:

No, it does not but let me say that the oil price is increasing petrol at the

bowser quite dramatically. You have seen that. It has gone above a dollar and

it won’t come back down under a dollar unless the world oil price comes

down and I can not see the world oil price coming down until such time as the

problems in the Middle East are resolved to some certainty.

MURRAY:

Well is 2 per cent still a figure that we can use then?

TREASURER:

The inflation forecasts are accurate. They were done at a time where the oil

price was very high and of course when we are looking at an effective inflation

in the economy generally we tend to look through one-off volatilities in particular

products. The budget forecast has taken into account oil prices but the main

effect it is going to have is it is going to have an effect at the petrol bowser

and that is going to mean that until the situation in the Middle East is resolved

people unfortunately are going to be paying more for their petrol.

MURRAY:

I got an email from Arnold. It is in detail but Arnold calls into question

the CPI figure. He says ‘we hear all the (inaudible) politicians from

the government talking about a low inflation rate and they talk about the cost

of living he says but his cost of living has skyrocketed in recent years and

its not reflected in the CPI figures and he basically said to me ‘you

know how has this inflation rate calculated cause it doesn’t reflect what

I see when I go out to buy food for my family’.

TREASURER:

Well the inflation rate it not done by me it is done by the Australian Bureau

of Statistics which is an independent agency and what they have is they have

a basket of goods. Meat, fish, vegetables…

MURRAY:

But doesn’t it effect the reality of Australian families?

TREASURER:

…yes electricity, gas, water, health, cars, petrol and just at snapshots

in time. They say what was it last quarter, what is it this quarter? And they

measure they change, it is not done by me. You will find that in this basket

of goods somethings go up and somethings go down. In my experience you tend

to notice the things that have gone up. You rarely remember the things that

have gone down. See like petrol, we are talking about petrol now. Which is above

a dollar a litre. It was above a dollar a litre in back 2000 but in between

it has gone down an incredible amount. So you do tend to remember the prices

that have gone up rather then come down. But that, that statistic which is produced

is not done by me that it is the Australian Bureau of Statistics.

MURRAY:

Peter how has the budget gone down with the 30 seconds we have left?

TREASURER:

I think it has got a warm reception. I think people realise that you can not

do everything in a budget but you have got to keep Australia strong and my message,

my biggest message is this. The world does not owe us a living. Australia is

on its own. We have got to run our own economy. Bigger countries than us have

got themselves into a lot of economic trouble over the recent years.

The fact that we are still growing, we have got more people in work than ever

before indicates that strong management has paid results and it is strong management

that is going to continue to deliver results in the future and that is my message.

We have got to continue to work at it, it is not an accident and it is not a

fluke. It is management that is going to keep Australia where I hope it will

stay as one of the stronger performing economies of the world.

MURRAY:

Half an hour goes in the blink of an eye. Thanks for your time today.

TREASURER:

Great to be with you Paul.