Q&A Session

National Press Club

Wednesday, 1 March 2006

1 pm

SUBJECTS:

PBS, Victorian Liberal Party, Women, Multiculturalism, Tax, Essendon, Foreign debt, Trade Practices Act

QUESTION:

Malcolm Farr from The Daily Telegraph , Treasurer. One of the things that you have been wrestling with for a large chunk of these ten years has been the Pharmaceutical Benefit Scheme. I don’t know if you have wre stled it to the ground yet, but what do you see might be happening with the PBS, particularly given Cabinet’s consideration of it on Monday?

TREASURER:

Why don’t you just ask this question, Would you please tell me what Cabinet decided at it’s last meeting?’  Look, when we brought down the Intergenerational Report we showed that there was no area of Government expenditure which would increase faster than health.  Not just because of the ageing of the population but because of technological advance.  We’re getting new treatments all the time.  And within the health budget there is no area that would increase faster than pharmaceuticals.  Again, because of scientific advance.  Now we put in place a number of changes already.  We increased the co-payment.  We’ve announced changes in relation to the number of scripts before you activate the safety net.  From memory the rate of growth of pharmaceuticals which we thought a year ago was at 8.6 per cent per annum is now growing at about 6.8 per cent, something like that.  That’s an improvement.  But 6.8 per cent on an economy which is growing at 3 per cent is still a real cumulative increase year after year, and in my view, not fully sustainable.  And so I think we have to look again, particularly at this area of off-patent pharmaceuticals.  We have to see if we are getting the best price for off-patent pharmaceuticals and whether we can release to the community therapeutic pharmaceuticals which have the same effect and the same safety at a cheaper price.  Cheaper to the consumer, cheaper to the tax payer.  And although I’m not in a position to tell you what the Cabinet decided on Monday, we will be looking at those issues over and again because it’s something that we’re going to be wrestling with I think for 20 or 30 years.

CHAIRPERSON:

Thank you.  The next question is from Michael Brissenden.

QUESTION:

Michael Brissenden from ABC Television.  Treasurer, I am sure it hasn’t escaped your attention, well we know it hasn’t escaped your attention that the Victorian Labor Party is having a few preselection problems at the moment, but I also understand that the Victorian Liberal preselections have been opened this week.  Petro Georgiou is one seat that we understand could be, he could have some threat to him.  Will there be any others do you think that might open up?  And what is your position, will you be supporting Petro Georgiou and what do you think about having someone like that who has copped quite a lot of criticism from your colleagues for his small l’ liberal views in the Party?

TREASURER:

The way in which the preselections are done in Victoria is they open preselections for sitting Members, then marginals and then shall we say less marginals.  We don’t give anything away in Victoria.  And the preselections for sitting Members are now open.  Will sitting Members be challenged?  It’s quite possible.  I wouldn’t know.  I hope I’m not.  But there’s a funny thing about the Liberal Party, it actually has real branches with real people in them and they do actually meet and they do vote.  And it’s, you know, I would recommend it to the Labor Party actually, developing a real branch network.  It’s quite a useful thing.  You can’t stop that.  My view is that as the Deputy Leader of the Liberal Party and the senior Victorian, I should support all of my colleagues.  That’s my view and I will.  And I just make this point, I don’t see why any leader of any political party can’t do the same thing.  It’s not too hard to say, you know, and it’s not too hard to do.  And if you weren’t afraid of factional warlords it would be the easiest and most standard thing in your life which would happen.  And, you know all this nonsense they’re talking about in Victoria about renewal what one group of faded trade union officials replaced by a new group of faded trade union officials.  That’s what is going on down there.  Nobody is walking in off the street who has been enormously successful in another walk of life.  And all this goes back to the warlords controlling various unionships of allegiance and if you think that’s the way to get new blood in the Party, well I think you’re mistaken.

CHAIRPERSON:

A question from Lincoln Wright.

QUESTION:

Lincoln Wright, The Sunday Herald Sun. I was curious Treasurer about your comments that you wanted Australia to be the most female friendly country in the world. Is it not the case now that we are not female friendly and do you think that there is room for improvement, and if so in what areas.

TREASURER:

I think we are female friendly, but we have got to keep re-examining all these things and if there are areas where we can do better we should do better. That is my view. Half of the population which, we are now finding, is the more intelligent half of the population if you look at university entrants and university training. Now, with highly developed skills because you have got a tradition of education and entering the workforce, still with the difficulty of balancing family and work men also have that difficulty but it is worse for women, I think, and we ought to be looking at making this the most female friendly place on earth. And I think we would be in the front row of countries, I would think in relation to that. But, if there are areas where we can improve these things I would want to see that and that is going to involve work family balance, it is going to involve childcare, that is going to involve respect for abilities and I think there are areas that we can actually improve things.

QUESTION:

Sexist (inaudible)?

TREASURER:

You know, Australia is not a perfect place. Nobody can say Australia is a perfect place but, you know, are we bad by international standards? No. We are actually quite good by international standards and you know, I think we can be quite proud that we have had a good tradition of female equality in this country. But, I just think it can be better.

CHAIRPERSON:

Mark Kenny.

QUESTION:

Mark Kenny, Radio National, Treasurer. You quoted Hans Teitmeyer, the legendary German central banker I think you said he was saying policy needs to be anchored to something. Am I right in concluding that that is essentially your problem with multiculturalism, that it is essentially relativist, it does not stem from a particularly anchored or agreed set of Australian values?

TREASURER:

Well, when Hans Teitmeyer was lecturing the Interim Committee of the IMF on the need to anchor policy I did not immediately think of multiculturalism. It was more a speech on fixed exchange rates, inflation targeting and balanced budgets. So, let me put Hans to one side and come to your question.

My point is this, we want Australia to be open and tolerant with a robust respect for diversity. But I believe that in order to do that you have to have some ground rules, you have got to have a framework within which people can exercise that diversity and expect and receive tolerance from others. Now what is that framework going to look like? Well the first thing you are going to need, if you want to have tolerance of all religious faiths, you are going to have to have a secular state. An obvious point but a right one. You are not going to be able to tolerate different religions in a theocratic state. You need a secular state which does not favour between religions. You need a robust acceptance of the rule of law that governs everybody regardless of their faith or their culture or their language. You need a respect for the rights and liberties of others because I will never be able to practise my religion and my culture if there is somebody that does not respect me. And if I want that person to respect me I have got to respect that person. And we can only do this under an agreed set of facts of rights and liberties. And then where is this rule of law going to come from? Well, in a democratic society it has got to come from the people and so what I am arguing very, very strongly is for a framework within which we can have a robust diversity and tolerance. But, if our tolerance moves to such an extent that we say it is actually optional whether you have a secular state, or it is optional whether your laws come from a democratic legislature, or it is optional to recognise the rights and liberties of even people you do not agree with then that will compromise all of us. So, I am actually for robust tolerance and diversity but my point is we have got to have agreement on the values. And there are some values that are so important to that that they are not optional values. And we have got every right to ask people to subscribe to those values. If we want to have freedom of speech in this country, you have got every right to say to people you are not allowed to bash up somebody because you disagree with their views. Every right to say that because if we do not say that we are not going to have freedom of speech and that is why I am putting forward here I think we have got to be quite unambiguous about those values. I think we have got every right to say them and I can assure you I intend to keep on saying that.

CHAIRPERSON:

Dennis Shanahan.

QUESTION:

Dennis Shanahan of The Australian, Mr Costello. On the weekend you said that the public and the people actually want tax cuts not tax reform. Today you have said welfare reform is essential and one of the targets for the coming years and simplification of the tax system also one of those targets. Surely you can’t achieve both of those targets merely by returning bracket creep as tax cuts in each budget, what more has to be done?

TREASURER:

Well Dennis, we just don’t just return bracket creep in tax cuts, you know, if I go to that diagram there and I made this point before if we’d have taken the $50,000 threshold at which the 47 cent rate cuts in and indexed that in 1996, today it will be $64,000. In fact on 1 July it is going to be $125,000. So, you know, this is not just a question of returning bracket creep and as you can see rates like the 20, 34 and 43 cent rates are cut. Now, I feel that the tax debate in the minds of some newspapers has gone off on a funny tangent and you know, I keep reading people aren’t interested in tax cuts, they are interested in tax reform, now the point I make is this. Nobody is interested in a tax reform which is going to put their tax up nobody. I have never met somebody yet who said, I want tax reform so I pay more. People want tax reform which will cut their tax and the important thing I think is to work to reduce taxes. And I am not going to get involved in these long arguments about what is tax reform and what are tax cuts. I think the public knows what they want, they want taxes to be as low as they can consistent with decent services. Decent health services, decent hospital services, roads where traffic moves that is a big thing they are demanding at the moment consistent with low interest rates. And you know, I hear some people say, oh well, you know, you don’t need to balance your budgets anymore or you don’t need to add to national savings, we are not going to give away our fiscal policy, that is anchored policy since 1996. We are not going to give away our fiscal policy but consistent with that fiscal policy, consistent with good services we are going to ensure that the tax burden is as low as it can be and we are going to internationally benchmark that against you see we don’t benchmark against Mali and Peru and Bangladesh anymore or even Slovakia as I noticed was recommended in some newspapers we tend to benchmark against the developed economies because we are a developed economy and being a developed economy means that your level of social services will be higher because people expect and they are entitled to a certain standard of health and education and roads and pharmaceuticals. So, we will internationally benchmark, we will find areas where we are doing okay, we will find areas where we are behind the pace and we will start working in those areas first.

CHAIRPERSON:

The next question is from Andrew Fraser.

QUESTION:

Andrew Fraser, Treasurer, The Canberra Times. I was wanting to ask about perhaps the most important organisation over which you have responsibility that being of course the Essendon Football Club. The club has recently implemented a new leadership structure in which they have replaced a proven, popular, premiership winning captain with a relatively untried full forward. However, the ex-captain remains in the run-on side casting something of a shadow over the new leader. I am wondering if you think this leadership structure could transfer to the world of government and particularly in what position Captain Costello would play ex-Captain Howard?

TREASURER:

Well, I don’t think I would play John Howard in the ruckI don’t think I would play myself as a rover so, you know, we have got certain limitations there. And I don’t think that I agree that the new captain is untried. I think the new captain is very well tried and has been a leading goal kicking over a long period of time. I am talking about Matthew Lloyd here.

CHAIRPERSON:

There is a question from Michael Harvey.

QUESTION:

Michael Harvey from the Herald Sun, Treasurer. I am interested in the comments

TREASURER:

Normally you would ask that kind of question.

QUESTION:

I was going to ask about your proposal for the world football league but another time maybe. I’m interested in the remarks about multiculturalism and you talked today about the framework for robust tolerance and diversity. Last week you talked about people who want to practice Sharia law in Australia should go elsewhere to do that, and should be stripped of their citizenship and that is fine. What about, though, the detail of this you talked about a lot of principles but would this mean families would have to be spilt. What if there is a father who is expelled in that circumstance, what if his daughter is an Australian citizen? What do you say about the detail, are you prepared to countenance that sort of scenario.

TREASURER:

I actually went into a quite a lot of detail and in a flurry of media transcripts was asked all of these questions and essentially what I put forward is if you are already a citizen of one country and you want to come to Australia but can’t accept its values then keep the citizenship of that country, that Australia has a pledge that in order to become a citizen of Australia you have to take that pledge and in my view should mean it. If you are not a citizen of another country, if you were born here, you have no other citizenship then obviously there is nowhere else for you to go. You are an Australian citizen, you are one of us and you have the rights here’s the rub and the obligations of an Australian citizen, the rights and the obligations and to those people as I said in my speech we must appeal, explain our values and appeal to them to embrace them, loyalty to the country, respect for the rule of law, support for democratic institutions, respect for the rights and liberties of others. We must call on leadership of goodwill that they respect to help us. But I don’t think we can ignore the problem that is my point. I think we have to engage, we have to engage leadership, and we have to explain our values.

CHAIRPERSON:

Mark Riley.

QUESTION:

Mark Riley from the Seven Network, Treasurer, in your speech you nominated the near elimination of Commonwealth debt as one of the hallmarks of the last 10 years, but surely the real explosion in private debt, personal and household debt is also a hallmark of those years, what can and will you do to attend to that problem.

TREASURER:

Well the first point that I would make is the debt and you are talking of foreign debt, here I assume, foreign debt is now almost entirely, I think 96 percent held by the private sector. It is not Government borrowing that has led to foreign debt; in fact it is Government saving which has actually led to that foreign debt being lower than it otherwise would have been. This is the point I keep making about fiscal policy, you heard what our target was. Commonwealth Government will not detract from national saving. I’d go further, we actually add to national saving. Why? If we were not actually adding national savings, foreign debt would be higher, because the Government would now be in the market of drawing down. At the moment it is the private sector, principally banks that are borrowing overseas and on-lending to their customers. Now that is not necessarily a bad thing depending on what it used for. If a bank goes overseas, borrows money, lends it to RTZ, RTZ puts in another rail track up in the Pilbara which increases its capacity it is a good thing. If a bank borrows overseas, funds say a toll road constructor who builds a toll road which relieves congestion – and that is the point, which relieves congestion – that can be a good thing. These are not bad things; the critical thing is that what the money is actually used for. It would be much worse if it were a Government going overseas borrowing money to pay recurrent revenue, that is of a totally different character.

Our view is in a competitive market where the borrowing is between private borrowers, consenting adults, then it can be used for good outcomes in a way which boosts the economy. So the point I am trying to make to you is it’s not just the level, it is the character of foreign debt which is quite important here and the character of foreign debt today is much better than it was. Now I keep on putting this caveat does that mean that I am unconcerned about Australia’s current account? No. Would I like to see it narrow? Yes, but do I feel it is the same kind of problem, of the same dimension as it was back in the late eighties, early nineties when the Government was adding to those borrowings? No. But do I feel we can relax on our fiscal policy and let the Government get into the dissaving business? No. This is a very important point here, you have to keep the Government in the saving business. It is another way of saying we need to run budget surpluses.

CHAIRPERSON:

Laura Tingle.

QUESTION:

Laura Tingle from The Financial Review, Treasurer. You’ve put a lot of emphasis on competition policy in a rather ambitious agenda you have set out for the next ten years or so. I just wonder what ever findings the Cole Commission makes in the coming months, can we see what has happened with the Wheat Board and the fact the Government didn’t know or officials couldn’t act to address the problem that have emerged do we see that as a sign of failure of monopoly regulation? What is your general view of success of monopoly regulation under your Government? And also given your emphasis on competition do you think it is sufficient to just leave as a stand-off the position of Senator Joyce on competition policy when it is blocking the remainder of the Dawson reforms being legislated?

TREASURER:

I think where you have got a monopoly you do have to be more careful with your regulatory arrangements, because monopolies do not have the pressures of a competitive market. So you need to be more careful in the interest of consumers and also of course where you have competitors they can actually keep a watch on each other. There is somebody who actually does have an interest on keeping a watch on the other players in the market so you do get a bit more discipline in a situation where you have competition. In relation to the Dawson reforms, they are good reforms, they are a balanced package, they have been put up to the Senate, the Senate has not passed them. Our view is that they will be a good addition if they are passed in their entirety but they would be lop-sided if they are not passed in their entirety. So there is no point in putting it back into the Senate unless there is a change of view in the Senate. Would the Trade Practices Act be improved if it went through? Yes. Would it have led to huge change in relation to merger policy? No. I have always made that point, I think the critics overstated the degree to which it would change things, it would improve but it would not be a major difference. So can the current situation continue, yes it can, and it will continue so long as the Senate is opposed to it. If any Senators are thinking of reconsidering, or any of the lobby groups that argued against those changes are thinking of reconsidering, let me know.