TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

Interview with Steve Price

2UE

Wednesday, 1 May 2002
7:10 am

 

SUBJECTS: M1 protests; Medical insurance; Baby Bonus; Mitsubishi; Japanese

Prime Minister; Free Trade agreement; Essendon

PRICE:

Good morning Treasurer.

TREASURER:

Good morning Steve, how are you?

PRICE:

I’m okay. Those M1 protests that will break out across the world today. I

just don’t understand exactly what the M1 protest stands for anymore?

TREASURER:

Well, it seems to be a core of people who are opposed to free enterprise,

the economic system. They then attract onto them other people that seem to be

in support of asylum seekers and at the end of the day it all gets wrapped up,

and, don’t they call themselves after May the 1st?

PRICE:

Yes, look, it’s a loose collective, it seems to me, they sit around and try

and work out exactly what they are going to protest about. You wonder why, you

know, trying to storm the headquarters of Australian Correctional Management.

All they’re doing is running the detention centres on behalf of the Government,

I’m not sure what that’s going to achieve?

TREASURER:

Well that’s right, and May the 1st was of course, May Day, it was the international

day for the communist movement to demonstrate, so that is no doubt why they

have chosen it. And you get a few people who are radical activists, what they

try and do is they try and bring in others, and radicalise them through these

sorts of protests. The proper way to solve these issues is by debate in our

society and through elections and I do not think those protesters are going

to make one iota of difference.

PRICE:

Is that what you used to think when you were at Monash?

TREASURER:

Absolutely. It won’t make one iota of difference.

PRICE:

Exactly. Can we start with this problem with medical insurance. I mean I don’t

think it’s too harsh a term to call it a crisis, although the Government, yesterday,

was trying to stop people from panicking. Who do you blame?

TREASURER:

There are a number of factors involved here, Steve. The first, is, that as

a society we have become more litigious and that means that the pay-outs for

medical negligence cases have become more frequent, they have become greater.

Secondly, and we do not yet know the full facts, but hopefully when the insurance

company goes to the court, it will explain its financial position. There are

other insurance companies in this area that have managed to keep themselves

in much better condition, and obviously there have been some management decisions

that have brought this about. And, so, you have got a combination of those two

things. Added to it was the fall-out from September 11th, because that meant

that worldwide re-insurance went up. And when you …

PRICE:

I think people don’t understand that. PMS, which is a doctor run scheme, they

would have had to have insurance themselves, wouldn’t they, to cover for things

like the Calandre-Simpson pay-out of $13 million. So what you are saying, once

September 11 happened, the premiums for them to cover themselves got more expensive?

TREASURER:

What happens with insurance companies, is that they take in premiums, they

then generally speaking, invest the money, they try and make money off the premiums

before it is required for a pay-out, and then with some other part of the money

they will go and buy an insurance contract themselves with some, generally international

insurer. And that will be an insurance product which will say if we have a big

claim, or an unexpected claim, this other insurer, and it is called a re-insurer,

will pay them out. Now these re-insurers operate worldwide and they operate

in different classes. Once you get a big claim, wherever it happens in the world

– in this case it was September the 11th – there are big claims on those re-insurers

worldwide, so they all put up their premiums back to other insurers. Secondly,

of course, if you had money invested, premium money invested in stock markets,

because stock markets fell, the actual earnings inside funds can be affected.

That could also have happened in relation to UMP, and hopefully when they go

to the court and seek a provisional liquidator they will give an explanation

as to what actually happened in relation to all of these events. But I would

say in this order, the fact that we get more claims and they are larger, the

management and investment strategy and also the events of September the 11th,

a re-insurance crisis worldwide, would have all contributed, you have now got

this situation. The most important thing to be done now, Steve, is what is to

be done to fix it?

PRICE:

So how do you fell then when you have New South Wales Health Minister, Craig

Knowles, saying it’s all your fault?

TREASURER:

Well…

PRICE:

As in your Government?

TREASURER:

Well, if he said that, he obviously does not understand the issues. But if

Mr Knowles, and this is a New South Wales, principally a New South Wales problem…

PRICE:

Here and Queensland.

TREASURER:

…and in Queensland. If Mr Knowles has some constructive suggestions,

he should make them. Have you heard him make them?

PRICE:

No. He said that it is up to the Federal Government now to cover this problem

because if you don’t we’re going to have people here who are not going to be

able to undertake lifesaving operations in the next 48 hours. I mean he was

talking about the specific problems of yesterday and again today where we have

up to fifty GP’s with their clinics closed.

TREASURER:

Well, the Federal Government has put a solution on the table, which is to

give an indemnity to doctors, guaranteed to them, that any of their treatments

or procedures from now until the 30th of June will be covered by a Government

guarantee.

PRICE:

Do you think you’ll have to legislate? I mean there was a feeling yesterday

the doctors didn’t trust the word of the Prime Minister…

TREASURER:

Well, if necessary we will. I think you can trust the undertaking of the Government,

but let’s not argue about that…

PRICE:

I guess the doctors are saying, if, you know, what happens if I get a claim

against me 4 years down the track when the Howard Government might no longer

be in office and a government of Simon Crean might say, well, bad luck.

TREASURER:

Well, if they are worried about Labor reneging on this undertaking, let’s

put it in legislation. You know, let’s not have an argument about this. As far

as the Government is concerned it is an ironclad guarantee and if it makes the

doctors more secure, let’s put it in legislation, there is no point in having

an argument about that. And then we will work with the insurers between now

and the 30th of June to get other players in. There are other medical defence

organisations in Australia, as you know, which are solvent.

PRICE:

Can I just clear up what happens to claims prior to an incident, that might

have happened prior to April 25 when the Government gave that undertaking?

TREASURER:

Well, that would be covered under the policy that the doctor had. Now the…

PRICE:

But if UMP goes under?

TREASURER:

Well, UMP is going to go to the court, maybe today, I hope it is today, and

appoint a provisional liquidator. The good thing about that is once you get

a provisional liquidator in, he can have a look, he or she can have a look at

the financial situation, actually give a report…

PRICE:

So that indicates to me that you have got some confidence they may be able

to trade their way out of trouble?

TREASURER:

Well, well, I really want a provisional liquidator to give an explanation

as to what the financial position is. Now, the financial position may be such

that they can pay-out previous claims, and if so there is no problem.

PRICE:

If they can’t?

TREASURER:

If the position is not, then we will have to have a look at it. But nobody

is in a position to say until you get that actual financial report. I am told,

by the way, that UMP has substantial assets, it has got investments in, well,

it has got investments. We do not know what they are currently worth, but a

provisional liquidator would go in and put a value on those investments, try

and put a value on the claims which are outstanding, try and work out whether

they can all be paid, or if not, what percentage in the dollar can be paid over

a long period of time, and give a report. And I think, actually, it is something

that should be done sooner rather than later, to get that provisional liquidator

in and get a report.

PRICE:

So you’re making it clear that the Government’s guarantee exists between April

25 and the end of June?

TREASURER:

I am making it clear that the Government guarantee extends to anybody who

is operating yesterday and today, and tomorrow. You can go out there and practice

your specialty or practice medicine…

PRICE:

But not back beyond that?

TREASURER:

Well, beyond that, prior to the giving of the guarantee, the risk was held

my UMP, and what I am saying is we will turn our attention to that once we have

got a report from the provisional liquidator. But that has passed anyway, you

know, we are not in a time machine, that has all passed. What has happened has

happened. What we are concentrating on, is getting the doctors out there today

and tomorrow and that is what the guarantee is there for.

PRICE:

Twenty past seven, just a couple of other questions, I know you are rushed

for time. The Baby Bonus promised during the Federal campaign, speculation today

that that might be under review, might be scrapped. Will it be?

TREASURER:

No.

PRICE:

You will keep it?

TREASURER:

Yes.

PRICE:

As promised?

TREASURER:

As promised.

PRICE:

$2500 a year for 5 years after the birth of your first child?

TREASURER:

That is right, up to $2500.

PRICE:

Yes.

TREASURER:

It, depending on what your pre-tax position was. If you were in the workforce

and you went out of the workforce, then you could start claiming back tax paid

up to $2500 over 5 years. And there is a minimum of $500. This was very central

to the election campaign. I have introduced legislation to give effect, and

I will be reconfirming that on Budget night in two weeks time.

PRICE:

Mitsubishi, considerable amount of Government money has been given to Mitsubishi,

a Japanese owned company, no money given to Ansett. It would appear that if

UMP went under, there would be no money given to them. Why is Mitsubishi’s case

any different?

TREASURER:

Well, let me say, money will be given in relation to the clients of UMP. The

guarantee that we have given…

PRICE:

(inaudible)

TREASURER:

Well, Steve, if a doctor operates today and he is sued in 5, or 10, or 15

years, the taxpayers will be guaranteeing the pay-out. It is not money to UMP,

as such, but it is money to the clients of UMP, who UMP would otherwise would

have had to guarantee. So, so…

PRICE:

So why Mitsubishi and not Ansett?

TREASURER:

Well, Ansett, remember we guaranteed the tickets in Ansett for quite some

time, it was not possible to rescue that company and we should not have put

taxpayers, good taxpayers money after bad.

PRICE:

But I keep repeating the question, why Mitsubishi?

TREASURER:

Why Mitsubishi? The arrangement in relation to Mitsubishi is $35 million,

I think, in 2004 to assist them to bring their world R&D headquarters to

Adelaide, and it is conditional on that. It is an assistance to bring a new

investment. If they do not bring the new investment they will not get the money.

It is certainly not a case of giving a failing company, taxpayers money.

PRICE:

If you were an Ansett worker, would you be happy with that answer? You have

got an Ansett company that had a workforce of some 16,000, much larger than

the Mitsubishi company, Mitsubishi is Japanese, headquartered in Tokyo, quite

able to trade itself, you would have thought. Ansett was a company that was

badly run from New Zealand but was fundamentally an Australian company employing

a huge number of Australians.

TREASURER:

But Ansett was a company which had become insolvent, you could not save Ansett.

Can I say to the Ansett employees…

PRICE:

Well, you would have to say Mitsubishi is insolvent in Adelaide?

TREASURER:

Well, I don’t think that is right Steve, Mitsubishi actually made a profit

in the last year. But leaving all that aside, what I would say to the Ansett

employee, is that the Government actually did put in a scheme for their entitlements.

This is being paid for by the $10 levy on tickets. It was not as if the Government

did not help the employees. The Government has put in place a scheme, and I

cannot quite remember the amount, but from memory it is designed to raise hundreds

of millions to pay their entitlements, don’t forget that. Now, I do not think

it was the right thing to do to put taxpayers money to try and keep the company

going because the company was insolvent, but the Government did put in place

a system to help the employees.

PRICE:

The Japanese Prime Minister is in Canberra today. How important is it that

we have a free trade agreement with them?

TREASURER:

Very important. I think, Japan is our biggest trading partner…

PRICE:

But today’s meeting is one of the most important, probably, you have had since

you have been in office?

TREASURER:

It is a very important meeting today. It is, the Prime Minister of Japan,

this is the second largest economy in the world, this is Australia’s largest

trading partner. If we could achieve free trade of all of our goods, this would

be a fantastic thing for the Australian economy. We are one of the few countries

in the world that runs a trade surplus with Japan. That is, we sell it more

than it sells to us. For Japan, most other countries, it is the other way round.

They are selling more to other countries than the other countries are selling

to them. But we are running a trade surplus with Japan and, if we could have

free trade on all goods, both ways, we would be very big winners. Our farmers

would be winners, our mining industry would be winners, our sophisticated service

exports would be winners, and this would an enormous breakthrough. Now, a free

trade agreement will not be finalised today, these things have to be negotiated

over a long period of time. But if we can have, in principle, discussions about

this and map out a way forward in relation to free trade with Japan, this will

be a very important day for Australia.

PRICE:

Just finally, the mums and dads invested in Telstra saw the share price go

under $5 this week, I think it has lost something like 24 per cent over the

past year. Do you still intend to sell off the rest of Telstra and what would

that mean to those people who have invested or held onto their Telstra shares?

TREASURER:

Well, the first thing we have said, is, Telstra is under performance indicators

to improve its services, particularly in rural and regional Australia, and that

is what Telstra has to do. But long-term you have got to make up your mind with

Telstra. It is either going to be a private company or it is going to be a nationalised

company. Long-term you cannot leave it with a 50.1 per cent Government ownership.

And that is why I think it is necessary to fix up the rural and regional services

so that you can settle the status of Telstra once and for all. Now that requires

legislation in the Senate and we have seen that even the Labor Party is now

coming to the view that you cannot leave Telstra in this half-way house. So,

I would say to them that it is incumbent on them to actually try and help to

clarify the status and get Telstra on a proper footing.

PRICE:

Appreciate your time. Essendon are gone are they?

TREASURER:

Not gone, just, sort of, staggering, momentarily on the canvas and about to

get up.

PRICE:

Very poor on Anzac Day?

TREASURER:

It was a wet day. They can only play under cover these days.

PRICE:

Obviously. Thanks for your time.

TREASURER:

Thanks Steve.