Superannuation Changes; Australia’s Demographic Challenges; Taxation; Mark Latham; Wentworth Pre-selection – Interview with Sally Loane, ABC 702

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Superannuation Changes; Australia’s Demographic Challenges; Taxation; Mark Latham; Wentworth Pre-selection – Interview with Sally Loane, ABC 702



Interview with Sally Loane
ABC, 702

Thursday, 26 February 2004

9.05 am


SUBJECTS: Superannuation Changes; Australia’s Demographic Challenges;

Taxation; Mark Latham; Wentworth Pre-Selection.


The Federal Treasurer, Peter Costello, joins me. Mr Costello good morning

and welcome.


Good morning Sally. Great to be with you.


Yeah. Good to have your company this morning. A lot of people want to talk

about this. There’s a great deal of interest. Obviously things were too

inflexible. You had to introduce some flexibility and a bit of incentive. Some

people have said though, you haven’t gone far enough, you haven’t

given any tax incentives.


Well, you can always be accused of not doing enough. And people can always

say, you know, you have run a mile, why don’t you run two? Of course,

I accept that. But I think the big issue here and this is the issue I want to

focus people’s minds on, is, that the nature of our society is changing.

We have a lower birth-rate and we are living longer. And in forty years time

one in four Australians is going to be over 65. Today there are five people

in the workforce to support each person over 55, in forty years time there are

going to be two and a half. So they are going to have the carry the burden not

only of their own services but of supporting this ageing population. And it

is going to change the nature of our society. Now the changes are in the can.

They are in the can because our birth rates changed thirty years ago. They are

in the can because medical technology changed. And this is a looming problem

which I say we have got to start addressing now, not with panic measures, but

with sensible policy so that we can adjust to this change over ten, twenty,

thirty and forty years. And that is the conversation that I want to have with

people about how we are going to face up to this issue.


You have got to change the culture in a lot of work places too where people

are still seen if they are forty five or over they are over the hill.


Absolutely. Yeah…take the banking industry. The banks started closing

down their branches and were putting off bank managers in their 40s, some of

whom have never worked again. And you can’t retire in your 40s, you can’t

retire in your 50s. My message is, if you retire at 55, you are going to have

trouble supporting your retirement because life expectancy is now 82. It is

going to rise to 85. If you retire at 55 that is 30 years in retirement. For

some people, if they have done higher education, they only get into the workforce

at 25, if they are going to work for 30 years and then retire for 30 years,

how are they going to manage? So, we have to change the attitude of employers,

we have to change the attitude of people themselves and we have to face up to

this problem. Now, it is not an insurmountable problem, it is a problem which

every developed country is going through, all of the so-called “rich countries”

of the world, and we are probably as well placed as many. But the earlier we

start on this issue the better we will adjust to it.


Do you think there are many people though, do you know many people in your

circle of friends if you like, who want to retire at 55 or even 65? Don’t

you think people’s attitudes to work have really, really have changed?


I think they are changing. The superannuation preservation age is 55. And I

think a lot of people, perhaps not so much today, maybe five years ago said,

well I am 55 I will take my superannuation and I will retire. And it is funny

as I talk around these issues so many people come forward and say, yes, I retired

at 55, I got totally bored, I have come back into the workforce. Now, they may

not want to come back into the workforce and work 40 hours a week on the same

duties that they were doing before. They may want to come back and work two

days a week. Or they may want to work for a couple of months and then take a

caravan up the coast for a couple of months. So I think the nature of work for

these people will change. It will be a lot more part time work.


And they will be able to access their super?


And what we are saying is…




…we will change the law so that they can supplement their income with

their super if that will encourage them back into the work force. Now that will

be good for them because they will get a bit more income but also it will be

good for society and the economy as a whole because we will be utilising all

the skills of the older workers.


I know 55 year olds that are starting on their second families. I mean they

have got no prospect of retiring. It will be 20 years before…


Well, they are doing something for society. They are boosting the fertility



That’s another question isn’t it? Have you thought about some

policies to do that?


Well, it is an interesting thing. And I have been very interested, fascinated

by some of the work that has been done in this area. It seems to be a phenomena

right around the world that in the developed countries, the rich countries of

the world, Europe, Japan, North America, Australia, the fertility rates have

fallen. It is not an Australian thing, it is happening in France and Germany

and Italy and Japan and America and Canada and New Zealand and Britain and of

course where fertility rates are high is in the developing world. Now, we have

got a lot of ideas as to why that might be the case but that seems to be a given.

As a society gets more affluent…


And more educated.


…and more educated, I think education is a big part of it too, then the

number of births per family tends to get lower.


I can see a lot of questions coming through on the board already. We have

got a full board already Treasurer, so if you would like to put your headphones

on. A lot of them are going to ask you about tax, tax on savings.

Can I ask you firstly though, before we get to calls, the whole issue about

still taxing super, surely you have looked at that? Surely that would be a terrific

incentive to people if you reduced tax on super?


Yes, we have been working on that. We have been working on reducing the super

surcharge. We had a policy at the last election and unfortunately the Senate

defeated it but we got some measures through. And we are also working on encouraging

co-contributions which I think will be another avenue here. But, at the moment,

we are not putting forward a tax policy. What I want to put forward is something

much bigger than a tax policy. I want to put forward an issue which is going

to change the nature of our society. As I said yesterday, demographic change

is slow, but demography is destiny. When it arrives it changes the nature of

your society. And it is not just in the retirement area that we have got to

think about this but we have got to think about it in all sorts of other areas

as well because it will affect our health system, our pharmaceutical system,

our aged care system, our economic system, our industrial relations system and

just about every other area of policy.


You said you are not releasing any tax policy yet, well is that something that

we can look forward to in, later on in the year around the Budget?


Well, we are coming up to a Budget…


Something recrafted?


…and in a Budget we will be looking at all areas of expenses and revenues.


Some tax changes there?


Well, I am not ruling things in or out but we are coming up to a Budget and

my attitude is, and I have laid down this principle before, if a Government

can pay for defence and security and health care and pharmaceuticals and aged

pensions and balance its Budget, then our philosophy is you should try and reduce



Mmm, because a lot of Australians, I mean The Australian newspapers tax series

has just pointed out very starkly to anybody who was still in doubt that we

still are very highly taxed. Our high, certainly our top marginal tax income

rate is higher, it kicks in at a lower income level than a lot of other developing


A lot of people are just crying out for some sort of tax reform, particularly

post GST.


Well, two points, one point I agree with and one I don’t. I do agree

that our top marginal tax rate cuts in at a low threshold. It cuts in at $62,500

and I tried to lift it to $75,000 and the Opposition defeated that. So I do

agree with that point. On international comparisons of the developed countries,

Australia tends towards the lower taxed overall of the developed countries.

Our tax burden is less than it is in Europe for example Canada, some of these

other countries. Now they take a lot more weight on their indirect tax system

than we do in Australia. We take more weight on our direct, our income tax system.

Some of those other countries have GSTs or VATs at 17 or 18 per cent, as you

know, so they take more weight on their indirect. And most of those countries

have death duties. Australia doesn’t have any death duties. The United

States has death duties. So we tend to take more of the weight on our direct

tax system but overall it is, we are probably in the lower third of the OECD.


It is seventeen past nine. I am with the Federal Treasurer, Peter Costello.

Let’s take a couple of calls. I know a lot of callers want to ask you

about taxation rates, particularly on savings. Alan good morning.


Good morning Sally. Good morning Treasurer.


Good morning Alan.


I retired from the workforce in July last year after working for 52 years and

paid a lot of my own superannuation and my company paid part of it. One of the

things I want to ask you is why doesn’t the Government give a tax break

on savings on interest earned?




That is an incentive we could all do with.


Sure. The way the income tax system works is that it taxes income and income

includes interest. One of the ways in which superannuation is encouraged of

course is if you put money into superannuation the interest that is earned in

a super fund is taxed at a 15 per cent rate which is a much lower rate than

the income tax rate. That is one of the areas where superannuation is more concesssional

than general income. But…


But you still have to some money set aside that you look at, try and save,

and put a little bit away for things on the side and I think that an incentive

as a retiree that you should look at. Because after all we have already paid

tax on it and now we’re retired and now we are being taxed again on it.


Sure, well these are all areas that I think Governments have got to work at

keeping taxes as low as possible and to do that we have got to keep expenditures

as low as possible. And I think it behoves us all to do as well as we can in

these areas. And I can assure you we will be.


Margaret good morning.


Oh, good morning Sally, good morning Treasurer.


Good morning Margaret.


My comment is that I think in some ways the forty years is short-sighted and

it is not taking into account our poor adult children who would like to live

in certain suburbs but already those suburbs their houses are close to a million

dollars. Now these people will be trying to pay a mortgage and they may not

be able to retire but I don’t know that they are going to bother about

trying to fund other peoples retirement.


Well, that is…


A lot of young people have quite a strong resentment about the fact that now

housing, simple housing, is really quite unaffordable.


Well, I think this is a good point. The younger people are not only going to

have to pay for themselves but they will be called upon to pay for an ageing

society. And as I said earlier, whereas we have got five people in the workforce

to support those over 65 today, that will decline to 2 and simple arithmetic

says if you have got half the number of taxpayers supporting the retirees, that

could be double the cost for them unless we start making some kind of provision

for this now. And that is why we have to contain costs as far as possible and

encourage people to make self-provision, stay in the workforce longer, make

a part time contribution in their 60s whereas they might have previously retired.

This is a big part of the ageing of the population.

It is not just the ageing of the population either. The other big factor that

is changing our society is technological improvement. That we are now getting

access to drugs which can cure conditions which previously were incurable. And

the public wants access to these drugs and these treatments and you can get

if you are a pensioner, access to pharmaceuticals at the concessional price

of $3.70. Sometimes these treatments cost $3,000. And there is more of them

coming on to the market all the time. And you have got to have a way of sustaining



So, in every workplace out there, all the young people should be encouraging

the oldies to stay?




If they hear of somebody retiring, they say, no, we need you.


We need you in the workforce.


(inaudible) to push them all out of the workforce.


We need you in the workforce. Stay here. You don’t have to work full

time but do two days a week and you can have a top up with your superannuation

and that will make life easier for me as well. That is the way you have got

to think about this.


We have got a couple of questions Treasurer about people in, particularly in

trades and manual jobs, John, you want to know about this don’t you?


Yeah, g’day Peter.


Yes, how are you?


Oh, I am fine. I was listening to the discussion yesterday and today and it

struck me because I come from an agricultural background, if you are going to

have a blanket rule of keeping people on instead of letting them go at 57, if

I am a shearer, you know, I kick off at 17, at 57 I will tell you what, I am

starting to look forward to a bit of retirement.


You want to rest your back I suppose do you?


Well that’s right. Yeah, yeah, yeah.


Well, that’s fair enough. And understand that, in manual jobs, physical,

where physical exertion is required like it obviously is in shearing it is going

to be much harder. But I think what we have then got to think about is maybe

different opportunities. I don’t know in the shearing shed if there are

other jobs that could be done or there might be other jobs done where you could

be on a tractor or something like that. I understand the point about physical

exertion and you can’t keep doing that into your late 50s and your early

60s but we have got to think about other opportunities.


I know a shearer who opened a coffee shop in his local town. He didn’t

like the standing up though, the long hours, I don’t mean to be flippant

but what a lot of people are doing, and what we find here with our audience

is that a lot of people maybe leave one job and go into another job, start their

own businesses, things like that.


Well part time work, maybe drive a hire car, something like that, a lot of

people do. A caretaker down at the local school, you know, looking after the

property and that kind of thing. It is lighter duties, you come across a lot

of people that are doing that. And I think you will see more of it actually

in our society. I have noticed this in countries which have a bigger ageing

population than us, it is quite common to see much older people in the workforce.


Still doing lots of different things.








Good morning.


I am trying to find out how we are going to keep these, this part time employment

going when employers don’t want it?


I think this is the biggest problem. The attitude of employers…


Can you have a stick for employers?


…well, you know, I am sort of out there rattling the drum. And I am saying

to employers, particularly big companies, I think it is a bit different in small

companies, but big companies. Look, you do have the opportunity to keep these

people on. They have skills, they are very reliable, the one thing about an

older person in the workforce is they tend to be very reliable. We know this,

they don’t have as many sick days and have big nights out. They turn up

on time, they have that work ethic. They are very reliable. And maybe they are

not in a full time high pressure job but they can be there assisting somebody

else or taking the overload work or something like that. And I think we do have

to re-educate our employers, this idea that you are going to throw people on

the scrap heap at 40 or 50, and there was a lot of that going on in the 70s…


Sure was. Yeah and 80s.


…and 80s. That is wrong. Those days are over. I guess my message is this.

There is going to be no such thing as full time retirement. There is going to

be part time retirement and part time work. And the other thing I would say

about it as I talk around the community, so many people say to me, well I tried

full time retirement and it nearly killed me. Or wives say, he came home after

30 years and I couldn’t stand him in the house all day. You know, get

him back in the workforce.


It is twenty five past nine. I am with the Treasurer, Peter Costello, who is

on the road today selling some of these ideas and changes. I just wanted to

ask you about Mark Latham Treasurer, how is his honeymoon going? Still going



Oh it is going pretty well. I think he is getting a good run from the press

and they are giving him a good go.


Are they being soft on him?


Oh, look a new person comes along and they get interested and they give him

a go. And he has had a long go.


Too long?


But you and I know that after the honeymoon the hard business of marriage begins

and he is going to have to pick up on policy. That is where he is weak.


Would you like to be there going head-to-head with him? I know…


Well I went head-to-head with him…


…you do in Parliament.


…no I went head-to-head with him for seven months when he was Shadow

Treasurer. And the thing I learnt about him was he didn’t have an economic

policy. He is one of these people, I think he gets on the internet, he gets

an idea and he says listen to this. And then the next day he gets on the internet,

he has got another idea listen to this.


But they are listening aren’t they. A lot of people are listening.


Sure. But…


Especially the stuff about boys and…


…after a while you say, well hang on, what you said on Monday is quite

different to what you said on Wednesday and if he ever got into Government he

would have to make all this add up. And you can’t govern a nation by Google,

by a search engine.


Can I ask you, you are going to have either Malcolm Turnbull or Peter King

side by side with you? The preselection is this Saturday for that seat of Wentworth.

Are you backing any one candidate?


No, I am not engaged in it. I am not lobbying delegates or anything like that.

Peter King asked me for a reference which I was happy to provide because he

has been a valued colleague.


So he has got your reference and the Prime Minister’s reference. That

would push him over the edge wouldn’t it? In terms of preselection?


You know the funny thing about Liberal Party delegates is they are very independently

minded. They make up their own minds and not like Labor Party factions. You

can’t tell a Liberal how to vote in a ballot. You know, they exercise

that privilege quite carefully. So, as the delegates will decide it. I am not

lobbying delegates one way or the other. But Peter is a colleague and he asked

for a reference and I was happy to give it because he has been a valued colleague.


So, you would miss him if he was beaten by Malcolm Turnbull?


I think he has got a great contribution to make. I think Malcolm has got a

great contribution to make. It is a pity that there weren’t two seats



So Malcolm Turnbull shouldn’t have gone into a seat…


Well I think they have both got contributions to make.


…held by Peter King?


And I don’t think we are so overflowing with talent that we don’t

have opportunities elsewhere.


Peter Costello, just finally, the Prime Minister John Howard is 64 as we know,

retirement age, pension age next year, would you like to see the Prime Minister

going into his 70s like you are encouraging all the other workers in Australia?


Well, you know, I am encouraging people whilst they have contributions to make

to continue to do it. And that applies to you, me, everybody Sally. But in politics

as you know, the voters decide that at the end of the day. They decide whether

or not to compulsorily retire you.


Peter Costello thanks for your time.


Thanks very much.