Politicians’ and Judges’ Superannuation; Australia’s Demographic Challenges; Taxation; Superannuation Changes; Mark Latham – Interview with Alan Jones, 2GB

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February 25, 2004
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March 3, 2004

Politicians’ and Judges’ Superannuation; Australia’s Demographic Challenges; Taxation; Superannuation Changes; Mark Latham – Interview with Alan Jones, 2GB



Interview with Alan Jones


Thursday, 26 February 2004
7.15 am


SUBJECTS: Politicians’ and Judges’ Superannuation; Australia’s

Demographic Challenges; Taxation; Superannuation Changes; Mark Latham


Treasurer Costello is right here with me in the studio, good morning.


Good morning, Allan


How does it feel to be the $193,000 man managing a 180 billion economy and

knowing that after the next election you are going to be paid even less?


Well, I just do my best. We work on good economic policy, we don’t do

this for money, if we were doing things for money we would be in another occupation.


But Mark Latham talks about a community standard. Forget that you’re

the Treasurer, ok your not in politics. What would be a community standard for

someone managing an economy of a $180 billion.


Well, one of the, Singapore is one of the countries that has grappled with

this and they got people from the private sector and benchmarked against the

private sector. That’s not what happens in Australia. In Australia we

have had a tradition that in the public sector the salaries are not as great

as they are in the private sector and that is the way it works out.


But when Ben Chifley introduced superannuation it was to compensate for that



…sure, in fact I think that it was in the aftermath of Joe Lyons’ death

they had to turn around and look after his widow and I think that was the origin

of many of these sorts of things and a scheme was put in place. Whatever the

reason it is going to be ended.


Judges, are we going to be able to guarantee the quality on the High Court

and the Federal Court if we start cutting judges superannuation by 60%?


I am very, very opposed to what Mr Latham is proposing for federal judges.

He is proposing to cut their pensions. At the same time the states will have

their judges on pensions. You will not be able to get good lawyers on the federal

courts, which are the most important courts in the land and you will probably

not be able to get good lawyers to become judges. And at the end of the day

you get the judiciary you pay for.


Why didn’t you blokes stand toe to toe to him in the public place and

argue that position?


On judges, well I do. I will. I am. Can I say one of the things that has been

good about Australia over the years is we have never had a corrupted judiciary.

You know you might have disagreed with decisions they have given. I don’t

think that we have ever had a case where a judge has been on the take. It happens

in a lot of countries you know…


It does


…and if you don’t make sure that your judges are properly paid

there could be a temptation but even apart from that temptation if you want

good lawyers to become judges and we do, we want the best lawyers to become

the judges then you have got to make sure you pay them properly.


So the community standard applies when it suits and on other occasions it doesn’t

apply. You talked yesterday about Australia’s demographic challenges.

In a nutshell what are you saying?


We are saying that the proportion of the public that is aged over 65 is growing.

The proportion of the public that is between 15 and 65 is not. What this means

is that at the moment you have got 5 people of workforce age for every person

over 65 and 40 years time it is going to be 2 .


…(inaudible) these projections say here that by 2042, 5 million people,

that’s 20% of the population will be over 55?


That’s right and you are going to have 2 workers in the workforce to

support each person who is retired, today you have got 5 workers in the workforce…


…so basically you suggest today we can solve that problem with all these

people in retirement. We can raise taxes…


Yes, that’s not palatable no one wants to do that…


…no one, you can cut spending…


…and the dimensions of your problem would require you to abolish all

health spending…


…yes that’s right, a budget total to the health budget




Right, or you could have higher budget deficits


You could say we will send the debt to future generations, $40 billion per

annum, or you can grow your economy faster and a big part of that is trying

to encourage those older people to stay in the workforce, because if they can

stay in the workforce they will be in the workforce…


Growing the economy.


…growing the economy.


Now these are actuarial studies, basically to put that and to say it slowly

your saying that if we don’t do anything to fund the shortfall would require,

well these are the actuarial studies not Peter Costello, would require income

taxes to rise by 40%?




…would require a budget deficit of something like $40 million, $40 billion.


$40 thousand million.


$40 billion.




So you can’t, those are out.


Those are out.


Well, now what about the bloke who writes to the paper today and says Mr Costello,

people don’t want to work longer, if 47 years of work at 5 days a week

is not good enough for a new economy I suggest that the economy is not working

for us. Instead of forcing people to work until age 74 I suggest that you reverse

the gradual shift in the tax burden to middle Australia and start taking a larger

slice from those who can afford it most and it says will you be working past

the age of 65?


I hope so, will you Alan?


But what do you say to that?


I have no plans whatsoever to retire at 65 and everybody I know who, particularly

those who have taken early retirement at 55 says after a while I am bored stupid.

My health is declining, I don’t have enough to do…




I was just talking to a bloke as I was coming down here today, he unfortunately

was compulsory retired and it’s the same old story, you have got to fill

in 12 hours a day, 7 days a week. You have got to do something, and they have

got their health and one of the things with early retirement, you lose of lot

of interest, connection in the workforce you don’t have your workmates

and you lose a lot of skills.


Yeah good, might there be another strategy though, because I mean you are in

an election year. Do you have to be a bit bolder, perhaps and say listen the

tax system the system we use to gather revenue, where everything that moves

is taxed, may be the thing that urgently needs overhaul.


I think that we have got to work at keeping our tax rates as low as possible,

yes I do. And my principle is this, Alan. After you have paid for defence, obviously,

law and order, health, aged pension, pharmaceuticals, if you can balance your

budget and reduce your taxes you should, yes.


You appointed, an election promise was to appoint a new Inspector-General for

Taxation, this bloke David Vos, and the only reason he was talking about the

problems he would have to address, but he quoted the Productivity Commission’s

Chairman, Gary Banks saying that tax legislation would reach 830 billion pages

by the end of the century at its current growth rate and require 3 million years

to read it. It sounds funny yes it does but I mean when you think that now your

on the top tax bracket if your at 1.3 times average weekly earnings. When Arthur

Fadden was doing your job in 1954 you didn’t get the highest tax bracket

until 17.7 times average weekly earnings. That’s why people have not got

any money in retirement isn’t it?


Well I have supported lifting that threshold. So that at the moment you go

on the top tax bracket at $62,500 per annum. I have supported lifting that,

yes I have. In fact I moved a bill in the Parliament to do that in the year

2000. The Labor Party defeated.


…..and they said what?


They said it was giving favours to the rich….


….Mark Latham has said he is going to equalise, or consider equalising

the personal, the highest personal tax rate at 48 and bring it back to the

lowest, the highest company rate of 30%.


Mark Latham doesn’t know what he is talking about.


How much would that cost?


Well, $10 billion per annum.


Every year.


Every year. And then he said, I will double Capital Gains Tax to pay for it,

and then he said well, maybe we will look at increasing business taxes, but

at the end of the day, he doesn’t know what he is talking about on tax.


Yesterday, you said therefore, if you can’t immediately change the way

tax is collected, you would want people like the elderly, the disabled, and

others to continue to work. Yet I think the ACTU do make, Sharon Burrow makes

a very valid point. She says there are 155 000 people of those people out there

that now can’t get a job. How do you change the culture of the employer.

I see a fellow write in today from South Curl Curl, Peter O’Connelly says,

I like Peter Costello’s idea for extending working lives, by granting

easier access to super funds, but we now need some help from the State Government.

How about some payroll tax exemption for the over sixty-fives, or even the over

forty-fives, to encourage employers to retain or employ older workers. It may

even be revenue neutral due to the larger income tax pool for distribution to

the states.


That is something that ought to be considered by the State governments, yes,

yes it ought to be considered. Can I say, I agree with the point that employers

need to be, need to change their attitudes.

And I am not talking about small business, I am talking mostly about big business.

You think of the banks that went through all of their branch managers and compulsorily

retired them in their forties and their fifties, and now some of these banks

are saying, we did the wrong thing, we don’t want to close branches, we

need more people to come back and help us with our management systems and all

that kind of thing. And I think the attitude of employers does have to change,

when somebody is forty or fifty, it is not the time to out them on the scrap

heap. They have skills, they are valued employees, mostly what we know is as

they get older, their level of sickness, sick leave, declines if anything, generally



More reliable.


…workers in their forties and fifties aren’t partying out at nightclubs

the night before, which is not to say that all young people are. But they are

very reliable, they tend to be disciplined, dependable and they have skills.

Now, as they are coming up to fifty-five, there has been a tendency in our society,

to say you can get your super at 55, go and retire, and…


They may live until they are 85…


…maybe living for another 30 years. No, superannuation is not going to

keep you going for another 30 years at a decent standard of living. So, what

I am saying is, as you are coming through 55, maybe you don’t want to

work 40 hours a week, maybe you don’t want to get up early every morning

and have all of the difficulties of your strenuous jobs. But you might want

to work 3 days a week. You might want to hand over your job to somebody else

and be there as an assistant or a supervisor, or a guide, give them some guidance

as you are coming up. Or maybe at 65 you want to say to somebody, look you know,

I will come in each week as long as you give me 2 weeks off to go fishing and

3 weeks off to do this, and I will work for you part-time. And I am saying that

one of the things that could encourage people to do that, is if we let them

get some of their super, it could supplement their part-time income and remain

in the workforce…


Do they choose how much?


…yes, they would be able to go and…


They would choose how much of their super they can take.


an income stream and…


Because at the moment, you can’t access super unless you finish work.


…that’s right. We say to people, if you want your super, go out

of the workforce, and so some people do go out of the workforce. The big change

that we are announcing now, is if you want to stay in the workforce, maybe working

part-time, we will let you, choose a product that suits you, with an income

stream to supplement part-time work. Now, that is good for you because you are

going to have two sources of income, it is good for the economy because we are

going to have people working longer with their skills, with an ageing demographic,

and it is going to help us cope with this problem of the ageing of the population.


OK, so that is up to 65. I mean you did have a rule, there is a rule now that

you must have worked at least 10 hours a week if you are under 65 to be able

to put money into superannuation, that’s out.




That’s out.


We will move annual test because…




…again, some of these people, they don’t want to say ten hours

a week…




…they might say, look I will come in and work 40 hours one week, and

then go fishing for another two weeks, so if you move it to an annual, some

kind of annual test, you are giving them a lot more flexibility.


Sixty-five to seventy-four, you have got to work at least 10 hours in each

week, now you are going to change that aren’t you, for an annual test…


…and you don’t quite know what the annual test…


Well, we are going to discuss that with the industry and we are going to say,

what will give maximum flexibility here?


So, when you are talking about flexibility, the key there, coming back to your

point before is the employer, isn’t it?




Perhaps he needs some incentive.


Well, I am not against giving the employers more incentive, but I will say

this, I think there are some employers that need to re-consider their attitudes.


Let me just ask one very simple question in all of this, because everything

you have said in the last 24 hours, has been about how we can better provide

for retirement, and we need extra savings. If savings are important, I know

this is a difficult one for you, but why do we tax them? Why have we got this

15 per cent on your super when you go in, 15 per cent when you come out, 15

per cent on the earnings in the middle. If I save 10 grand and get 5 per cent

interest on it, I am going to pay tax on it, well there is a bit of a limit

there I know, but why do we tax savings if they are this important?


Well, the superannuation contributions tax was introduced in 1988. It wasn’t

introduced by me, it was introduced by Paul Keating and the Labor government.

It has been a feature of the system ever since. I should say that the 15 per

cent contributions rate is still less than the income tax rate. Better to put

you money into super where it is taxed at 15 per cent, than to take it at 48

. But that was introduced in 1988 and it has become part of the system.


And 9 per cent, 9 per cent is not enough, to provide for retirement, is it?

Yet you can’t ask the employers to put more, how when people are struggling,

Ross here, to make ends meat on every tax that is paid and whatever, how do

you encourage people to put a bit more away for superannuation?


We have got a policy now called co-contribution, which is if you want to make

a contribution out of your own money, an additional one to the 9 per cent employer,

you can get tax breaks to do it.

So, what we are saying to people, is if you want to make an additional contribution,

we also have a policy of allowing husbands to make contributions on behalf of

wives. Because there is another part of all this you have got to remember, wives

don’t go into the workforce for 40 year periods, and so many of them don’t

have any superannuation at all. So, we are trying to encourage a co-contribution

with some tax incentives.


Mark Latham, is he getting traction in the electorate and why?


I think the media are pretty interested in him, giving him a good run at the



And will that continue?


I think Mark Latham’s problem is he is weak on policy Alan. He is one

of these guys you know, that goes to the internet and downloads an idea, and

that is his idea for the day. But you know by the next day he has got another

idea off the internet, and you can’t have a government by Google.


Treasurer, good morning and thank you for your time.


Great to be with you Alan.