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PBS, Disability Support Pension, tariffs, leadership, Liberal and National Party merger, bracket creep – Interview with Leon Byner, 5AA


Interview with Leon Byner


Thursday, 23 May 2002

11.05 am



SUBJECTS: PBS, Disability Support Pension, tariffs, leadership, Liberal

and National Party merger, bracket creep


Let’s welcome the Federal Treasurer, Peter Costello. Good morning.


Good morning, Leon.


Good to see you.


Great to be here.


You’re in the paper playing golf. Was that just a publicity shot or do you

actually know what an iron is?


I know what an iron is. I do not know how to use it, though. I was in Merimbula

yesterday, and doing a function at a golf course, and the press said to me,

“Come out and hit off the first tee.” Well, it was a pretty ugly shot,

I can assure you. If you saw, if you saw the picture, you would know it was

a pretty ugly shot.


All right. I want to ask you about the controversial changes to the Federal

Budget which you delivered very recently. There’s been a lot of public reaction

to the Public Benefits Scheme with regards to subsidised medicines. Now both

Simon Crean and Natasha Stott Despoja say you will not get these changes through.

What will that do to your increases for a dollar for pensioner and a few dollars

for each person to paying around $28.50 or $28.60?


Sure. Well, can I just very briefly say what the changes are. For pensioners,

the current co-payment is $3.60, and it is going up by a dollar. And for pensioners,

after you have 52 scripts in a year, they are free. So, it is an additional

dollar. For other people, the maximum that you can pay is going up to $28.60.

But, there is a lot of people saying, “Oh well, that means they are all

going up.” No, they are not all going up. Many of the common medications

are sold for less than $28.60. For example, Ventolin is sold for about $17.00.

$17.00. It will stay at $17.00. The only thing that goes up is the maximum contribution

if you are taking a treatment which has a cost of $100.00 or $200.00, or some

of them have thousands of dollars.




The maximum that you can be asked to be paid, to pay, if you are not a pensioner,

is $28.60. If you are a pensioner, it is $4.60. So what we are trying to do

is, we are trying to have a system where we can afford to bring new drugs, which

are effective but very expensive, onto the Scheme by financing the whole Scheme.


All right. Now, but you, despite your rationale this morning, which people

understand, you’re going, you’ve got a problem in the Senate where you won’t,

you probably, if Natasha and Simon are true to form, you won’t get them through.

What will you then do?


Well, my first argument will be that they should be responsible. And I am not

going to let them off the hook. I mean, you know, here you are, you had an election,

what – late last year? The Government’s first Budget. The Labor Party did not

win the election. Natasha had a very bad election outcome. And now the Labor

Party and the Democrats want to block the Government’s legislation in its first

Budget. And the point I will be making to them is this: That if we do not get

the Pharmaceutical Benefits Scheme on a sustainable basis, you will not be able

to bring new, expensive treatments onto the Scheme. That is what we are looking

at. We are trying to make this Scheme sustainable, so that you can bring new

treatments onto the Scheme. If the Labor Party and the Democrats will not co-operate

in making it sustainable, if they are going to force this Scheme basically to

be financially stretched, which looks like it is their tactic, the consequence

of that is, you will not have a sustainable system, bringing new medications

onto the system at a reasonable cost in the future.


Now, I spoke to you briefly just before we went on air about the fact that

there are 240,000 people now approximately, but that’s a pretty good figure,

who suffer from Hepatitis C, which once you’ve got, you’re stuck with it. Now,

the virus treatment for this as you go through life is very, very expensive.

And Dr Greg Pyke from the Southern Cross Bioethics Institute made the point

yesterday that the harm minimisationists around the community who have been

giving out syringes, not in exchange but just handing them out to people, lest

they get AIDS, have produced another monster which is really going to affect

a lot more people. How are you going to handle that in terms of the cost?


Well, this is the point about the Pharmaceutical Benefits Scheme. Some of these

medicines, in fact, are bought by the Government, have to be bought from the

people that make them, for thousands of dollars. Right. There is one we put

onto the Scheme last week which cost $6,745.00 a prescription.


What’s that?


It is, Glivec it is called. It treats cancer. $6,745.00. Now, what the Government

is saying is, for pensioners, pensioners can have access to that for $4.60 and

the taxpayer subsidy will be $6,740.40. Now, now these things do not actually

cost $4.60. It costs $6,745. The taxpayer puts in a subsidy of $6,740.40. So,

when you put it in that context and you say that the pensioner’s contribution

is a maximum of $4.60, you can see how cheap and opportunist the Labor Party

is being, you know, in trying to stop these measures. And why are we putting

these measures in place? We are putting them in place because all the time there

are new treatments, they are effective and they are very expensive. And if you

do not have a sustainable financial way or running the Scheme, the Scheme will

break under its own financial weight.


The entire car industry, Treasurer, and all State governments, are united in

their push for a freeze in tariffs of 10 per cent past 2005, especially given

that most of our Asian neighbours have import tariffs on cars ranging from 20

to 300 per cent. Does the Federal Government agree with the push to freeze tariffs

until 2010?


Our policy is to bring the tariff down in 2005 to 10 per cent, and we are currently

looking at the assistance that we will be giving to the motor car industry in

the post 2005 era. And let me put this in context. I think this Government has

done quite a lot for the car industry. We cut the tax on cars, which was 22

per cent Wholesale Sales Tax, to 10 per cent, the GST. We have given a great

deal of assistance to Mitsubishi Motors, which Mitsubishi has indicated will

allow it to continue here in, here in Adelaide. So, it is our policy to bring

the tariff down in 2005, and we are looking at assistance thereafter.


Okay. What about the countries we trade with, many who do not share the same,

if you like, verocity of bringing tariffs down that we have? Many of our trading

partners do not give us, I mean, for example, we have a problem where in some

Asian communities there are tariffs three, four, five times what we have. Is

that fair?


Well, it depends what countries you are talking about. But, yes, there are

countries, the United States is one, for example, which is, at the moment, well,

was putting tariffs on steel – and we were able to negotiate a lot of those

tariffs away – and is now unfairly subsidising agricultural production. Now

that affects our exporters. So, we are going to be very, very active in opposing

the US moves to subsidise agricultural production. We are going to try and get

them to change their policy in relation to that. But, if you were to say, “Oh

well, the answer is that we will put tariffs on all of their goods,” that

would not actually help us. We are trying to get into their markets. It is in

our interests to bring tariffs down, not to put them up.


So, so you think that we should play the good Samaritan?


No, I think it is in our interests to have our exporters able to compete overseas.

And part of that is getting other countries’ tariffs down, and we have a consistent

position in relation to this. But, you know, you take the Australian car industry.

Mitsubishi Motors has announced that, with Government assistance, it is going

to stay here in Adelaide and have a new model. But we are actually a car exporter

now. We should not be thinking about banning imports, we should be thinking

about how we actually get exports. We are a big car exporter to the Middle East.


I don’t think it’s a question of banning imports. It’s about fair trade as

opposed to free trade. That’s really been the catch cry. Surely you understand



Oh I do and we, around the world, champion fair trade and the fairest trade

is the kind of trade which gets our trading partners to reduce their tariffs

so our exporters can get in, and correspondingly we operate a lower tariff regime

here in Australia.


Okay. I want to go through a couple of very important issues just quickly because

I know your time is precious and I thank you for coming in this morning. There

are a couple of things. First of all, we have got about 600,000 people on disability

pensions. From 1990 upwards there was a huge growth of the number of people

on disability pensions and a lot of it was done for opportunism, to get people

off one list of unemployment figures onto another. So are we, are we now saying

that by reducing the number of hours from 30 to 15 we want to put some of those

people back from the list they were, they are now on back to the one they were

on before we made the change?


Well, look, the Government got criticised for that very point. People have

said, oh look, you are disguising unemployment by putting people on disability

pensions. So we said alright, well we will tighten up the rules on disability

pensions. What’s the first thing that happens? The Labor Party, which had demanded,

which had demanded that we address this policy, says oh, now it is going to

oppose our measures. Talk about cheap jack opportunists.


So, what will you do if they do?


Well, look, the point on disability pension is this, a lot of people think,

oh well disability pension, they must be talking about people in wheelchairs.

The largest category of people on disability pension are people who have muscular

skeletal problems…




…simply bad backs.


Yes. Is that the RSI of the new millennium?


Well, that is the largest single category on disability support pension, people

with bad backs. And in the past if you were incapable of working 30 hours you

went on the disability pension, you stayed on it for the rest of your life until

you went onto the aged pension. There was never any attempt to give rehabilitation

or training, maybe get people back into part time work. What we are saying,

is, if you can get people back into part time work, if they can work 15 hours,

maybe in a desk job, they have got a bad back but they can work in a desk job,

you should give them rehabilitation training to get them back. That’s what we’re

trying to do.


Okay, what will you do if you get opposed though, in the Senate, what would

you do?


Well, if this is defeated in the Senate, what will happen is it will be more

or less an open invitation for more and more people to go on the disability

support pension, and the taxpayer will pick up the tab, that is what will happen.


When do you think you might be Prime Minister?


I don’t really think about that Leon.


It never strikes your mind, you never think about it, never give it a thought?


No, too busy being Treasurer. It is a lot of work being Treasurer.


I’m sure it is. So, you have never thought at all about when you might be Prime



No, I don’t think about it, no. We are in the middle of a Budget. I am out

explaining the Budget and that is the thing that is on my mind.


Do you agree that the Liberals and the Nationals should merge?


Look, different people in the Party have different views on this and I think

it is something that should be discussed, I do. I think it should be discussed

within the forums of the Party. Now, you would have seen overnight that Senator

Minchin was going to say something to the National Farmers Federation, which

is I am sure why you asked me this question


Yeah, sure.


And the point that is being made there is he was representing the Prime Minister

and it was not the Prime Minister’s views, so, I think Nick acknowledged that

and withdrew those comments.


But, do you think if there was a merger it would drag the Nationals to the

right? Do they, do they need to be of that particular part of the political

spectrum do you think? What do you think?


I don’t think the Nationals regard themselves as a, as a left-wing operation

which needs to be dragged to the right. It is the first time I have heard that

proposition actually.




I think the National Party would regard itself as pretty much on the conservative

side of the spectrum and not in need of a right-wing blood transfusion.


Okay, let’s talk to Lorraine. Lorraine, you are talking with Treasurer, Mr



Hello Mr Costello.


Hello Lorraine.


Nice to speak to you.


Thank you.


Two questions I’d like to put to you and it concerns the transferring of costs

of State Government liabilities onto the Federal Government. The first one is

that I am actually on Workcover. Now I have been told I will never work again,

I am pretty well had it. My medication costs around about two to three hundred

dollars a month. Once I hit the $800 I then get a health care, or get the concessions,

but because the medications are work related my insurance company is being subsidised

by the Federal Government under the PBS scheme. Secondly…


That is cost shifting.


… that is cost shifting. Secondly, under the new Workcover Scheme, after

2 years I will be virtually thrown off the system. I will be eligible then for

a disability pension. That is cost shifting again.




Why are the taxpayers of Australia paying for my employer’s negligence?


Well, look, I am very pleased you rang, you rang in with examples like that.

The point that is being made here is that somebody who is on Workcover under

a State scheme is effectively being pushed onto the Commonwealth schemes through

the Pharmaceutical Benefits and Disability Support Pension so that the Workcover

Scheme is making a saving and the Commonwealth taxpayer is, is picking up the

cost of (inaudible), it is a very good example.


What might you do about intervening in a matter like this?


Well, look, it is something I will ask our officials to have a look at and

come back to the South Australian State Government about. I am sure the South

Australian State Government would be horrified to realise they were reducing

their own costs at the expense of the Commonwealth taxpayer.


One quick question, and I thank you very much for coming in. Is there a time

in your Treasurership that you will index tax brackets so that we don’t get

this bracket creep where, if things keep going the way they’re going, within

a couple of years your average wage and salary earner will be on nearly the

highest marginal rate of tax?


Well what we did, Leon, back in July of 2000, is, we raised all the thresholds

and effectively dealt with that problem. But it is something you have always

got to keep an eye on. But, if you go back to July of 2000 when we reformed

the system, we raised all of the thresholds and cut most of the rates and the

effect of that is that the so-called bracket creep was more than compensated

for with the income tax reductions.


Although the Taxpayers’ Association sent out a document which I saw recently

that said that 50 per cent of those cuts have now gone because of bracket creep?


Ah, well, I would have to look very carefully at the figures. But I can tell

you at the time that we cut income taxes by $12 billion, the effect of those

income tax cuts was far greater than any bracket creep during the time of our



Mr Treasurer, thanks for coming in.


Thank you very much for having me Leon.


And your message to the people of South Australia is what?


Keep supporting the Crows, and if you don’t support the Crows, support the

Port Power.


Treasurer Peter Costello on 5AA.