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Friday Forum -

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Friday forum

Reporter: Maxine McKew

MAXINE McKEW: Well, now to tonight's Friday Forum, in a week which has seen federal politics back
at the top of the news agenda. Creating most heat for the Howard Government has been Tony Abbott's
plans to cut Medicare funding for fertility treatments, exposing deep divisions within the Cabinet.
And while that issue has captured the headlines, the broader debates within the Coalition over tax
policy and, for Labor, its general direction under Kim Beazley have taken a bit of a back seat.
Well, two backbenchers with considerable interest in those issues are the member for Wentworth,
Malcolm Turnbull, and Lindsay Tanner, the member for the seat of Melbourne. With the Federal Budget
due in just over 10 days, it's worth noting that both are on the House of Representatives Economics
Committee. So, gentlemen, welcome to you both. Nice to have you back again.

BOTH: Good evening, Maxine.

MAXINE McKEW: Now, Lindsay Tanner, we'll start with you. Questions around your future have been
surfacing in the press again today. Have you had discussions with Kim Beazley about returning to
Labor's front bench?

LINDSAY TANNER, MEMBER FOR MELBOURNE: No, I haven't, Maxine. We've had nine years of failure. We
haven't had four losses in a row for the Labor Party since the 1960s, so I'm keen to ensure that we
actually get serious about doing the things that are necessary to win, and I don't think we've done
enough of them over the past nine years. We've been too reactive, we've failed to build the degree
of inspiration, the vision that's necessary to win. We both have to inspire and to reassure, and we
haven't done enough of either of them. So now is the crucial time when the foundations are laid for
the inspirational vision that will help get us over the line. We're losing control of the Senate,
which means that we are losing political relevance. We won't be as much in the frame in the
day-to-day stories because we can't stop things in the Senate. I think it's crucial that we focus
on building our policy vision.

MAXINE McKEW: Well, do you want to, and are you seeking to come back to the front bench in order to
push that particular view?

LINDSAY TANNER: Maxine, there's no vacancy. I'm not campaigning. Obviously I'll address any future
opportunity at the time if and when it arises. What I'm passionate about is making sure that Labor
gets out of this long-term hole that we've been in of being reactive and not setting the agenda, of
not being on the front foot. The only really major theme that we have been on the front foot with
over the last nine years, the only big idea in Australian public debate that we've been identified
with, really, has been Knowledge Nation. It was the right thing; we just didn't do it well enough.
We need to have big ideas out there, we need to be setting the agenda, we need to be the ones that
are generating the debate. That hasn't been happening, and that's not a recent thing; that's a
phenomenon that's been going for quite some time. I want to turn that round.

MAXINE McKEW: Well, are you saying, then, that Kim Beazley has got the emphasis wrong? Because he's
been very clear - and he repeated this at the Press Club recently - that the job of the opposition
is to put pressure on the Government.

LINDSAY TANNER: No, I don't think that's mutually exclusive with the idea of building new policy
ideas. Obviously that's part of the job of the opposition - I don't have any disagreement with Kim
about that - but it's not the only role that opposition has to play. Of course, Kim was the person
who was the inspiration and the key to the Knowledge Nation idea, so the one instance where we
really have pushed the boat out there, it was Kim involved. I voted for him in two leadership
ballots, so I've got obviously no problems with Kim being the person leading us into this, but I
think we've got an issue that's way beyond the question of who's the leader or how the leader
approaches. It's a collective issue. We have been far too defensive, far too reactive, far too much
allowing John Howard to set the political agenda. We've got to break out of that, and we've got to
do it now, not wait till the third year of the cycle or third year of the parliament. We've got to
do it now and set the debates in the public arena.

MAXINE McKEW: Malcolm Turnbull, I'm sure you've got a bit of gratuitous advice for Labor before we
move on to other issues.

LINDSAY TANNER: It'll be taken in good spirit, I can assure you.

MALCOLM TURNBULL, MEMBER FOR WENTWORTH: I think Lindsay has very fairly and eloquently sort of
recapitulated John Howard's criticisms of the Labor Party, which is that they're, at the moment, a
party without policies and without ideas and, as Lindsay says, without an agenda. And that, of
course, answers the question - why would anyone vote for them? And nobody would, unless you wanted
a government without ideas or without an agenda. And so Lindsay's criticisms of Labor are very well
made, but they underline the problem they have, that they've, for nine years, had only one idea. I
don't think it was as great an idea as Lindsay does, but if you've only had one idea in nine years,
what is the chance that you're going to come up...

LINDSAY TANNER: One major theme that dominated public debate, Malcolm. Slightly different from what
I said.

MALCOLM TURNBULL: Well, OK, one major theme in nine years. It's a big challenge to come up with an
agenda for government in the next year or so.

MAXINE McKEW: Malcolm, John Howard has a thumping victory under his belt. He's about to get control
of the Senate. The one big idea that's been floated this week from the government is that IVF
treatments should be limited and capped. In fact, the Health Minister, Tony Abbott, is saying they
now fall into the category of non-essential procedures. Do you agree with him?

MALCOLM TURNBULL: Well, I think they are essential if you want to have a child, if you're
infertile.

MAXINE McKEW: Good point! (Laughs) Do you think the Health Minister appreciates that?

MALCOLM TURNBULL: Well, I'm sure he does. I'm sure he's been misquoted, but I just say this...

MAXINE McKEW: No, he hasn't. I assure you, he hasn't.

MALCOLM TURNBULL: Alright, well, children are essential. And if you are infertile, an IVF treatment
or other fertility treatments are essential, so...

MAXINE McKEW: Well, it sounds as if you're agreeing, then, with Helen Coonan, the Communications
Minister. She apparently has made the point to the Prime Minister in a letter that infertility is a
treatable health condition.

MALCOLM TURNBULL: Well, that's plainly correct. It is treatable and it is treated all the time and,
I might say, treated much more generously under the Howard Government than it was under Labor.
Under Labor, not only, of course, did you not have the safety net - I mean, Labor is against the
safety net, which of course makes all the treatments cheaper...

MAXINE McKEW: Well, the safety net...

LINDSAY TANNER: You don't need the safety net. With the major increases in doctors' funding that we
were going to provide, the safety net is unnecessary, and your electorate gets a lot of money out
of the safety net, Malcolm. It's the sort of people in your electorate who take all the loot out of
the Medicare Safety Net, and people in low-income electorates that don't get anything.

MALCOLM TURNBULL: Well, you see, Lindsay's now demonstrating the major theme that he's going to
develop, which, interestingly enough, is very reminiscent of his nemesis, Mark Latham, which is the
politics of envy.

LINDSAY TANNER: I wasn't aware that he was my nemesis. (Laughs)

MALCOLM TURNBULL: Now, that got Mark nowhere, Lindsay, and it will get you nowhere either. Let me
just make this observation. Under Labor, the Medicare limit was six cycles over your lifetime. And
Michael Wooldridge changed that.

MAXINE McKEW: That was 1996. Malcolm, you of you all people know all the multiple factors that are
out there meaning that women - why women are delaying pregnancies and having babies later and
therefore in need of, if you like, these kind of reproductive technologies.

MALCOLM TURNBULL: Sure - well, we recognise that. The Liberal Party - the coalition in government
recognise that and has made much more generous provision.

MAXINE McKEW: OK. Are you in favour of keeping that generous provision?

MALCOLM TURNBULL: I'm in favour of us funding procedures, fertility procedures, which have a real
prospect of success.

MAXINE McKEW: That's a matter for doctors and their patients?

MALCOLM TURNBULL: It's a medical question, plainly.

MAXINE McKEW: Exactly, it's a medical question.

MALCOLM TURNBULL: And it will vary from individual to individual.

MAXINE McKEW: Lindsay Tanner, what's your view on this? Is there a case for rationing subsidies?

LINDSAY TANNER: What Malcolm's ultimately saying is that the government's going to be half as good
as what Labor was 10 years ago, therefore, what's everybody complaining about? Well, the key thing
he's missing, of course, is that IVF emerged...

MALCOLM TURNBULL: No, I'm not. Lindsay, Lindsay...

LINDSAY TANNER: That's effectively what you're saying, Malcolm. You're talking about three
treatments as opposed to six.

MALCOLM TURNBULL: No, no, no, Lindsay, the thought that has been floated in the press - and I don't
know whether it's government policy or not; I've just read about it in the press - the thought
that's been expressed is that there would be a limit of three cycles per annum up until the age of
42, and then three thereafter.

MAXINE McKEW: In total, for women over 42. So you're discriminating in terms of age.

MALCOLM TURNBULL: OK, let's not - I just want to get the facts straight about Labor. Labor's limit
was six cycles over your entire life.

MAXINE McKEW: Well, as I say, it's a long...

MALCOLM TURNBULL: So your colleagues when they were in government, Lindsay, had a very, very stingy
and niggardly approach to fertility.

MAXINE McKEW: Sorry, let Lindsay have a reply here, please.

LINDSAY TANNER: Which leads to the point that I was halfway through making, which was that IVF
first emerged well into Labor's term in government, and obviously has changed considerably over
that time. The number of women seeking to access it has obviously increased substantially. You're
dealing with two things that are very difficult to compare. Ultimately, the bizarre thing about
this whole exercise, Maxine, is that you've got a Government led by people like Peter Costello,
who's been in the papers holding babies saying, "Have one for the husband, one for the wife and one
for the nation", putting out all this stuff about fertility and how important it is that we have
more babies, and yet, across the whole gamut of medical procedures - of which there are many, some
of which are more urgent, more desperately needed than others - they've decided to pick on IVF, the
one thing that goes directly against that whole message about we need higher levels of fertility.
Malcolm Turnbull, amongst others, has pointed to this problem. It just doesn't connect with their
overall position.

MAXINE McKEW: Malcolm, that is a point. There are a lot of mixed messages here, aren't there?

MALCOLM TURNBULL: You've asked me what I think. As I've said to you, I think that these procedures
should be funded - and, of course, no procedure should be endured unless it has a realistic
prospect of success...

MAXINE McKEW: A 40-year-old woman in your electorate at Bondi Junction comes up to you tomorrow
morning and says, "Look, Tony Abbott doesn't want us to have abortions, but he's going to make it
harder for us to get pregnant. Can you explain that to me, Mr Turnbull?" What will you say?

MALCOLM TURNBULL: Well, I think that's a comment that people will make, and it's a fair comment,
and the question - that's not to say that I'd agree with it. I don't think Tony Abbott is trying to
make it harder for people to have children, but, you know, where I'm coming from is a very simple
basis of principle, which is that fertility treatment is important. It is an essential procedure if
you want to have children, and having children is the most important right that any of us have, and
there is nothing more important that any of us can do than to have children, because we all have an
interest in each other's children.

MAXINE McKEW: What's the bet this idea will be dropped before the budget?

MALCOLM TURNBULL: Well, I'm not a bookmaker - I'm not a bookmaker, so I'll leave that to you and Mr
Tanner.

MAXINE McKEW: Alright. Lindsay?

LINDSAY TANNER: I've become "Mr Tanner" now? You obviously got a bit upset, Malcolm.

MALCOLM TURNBULL: I've always treated bookmakers with respect, Lindsay. (Laughs)

LINDSAY TANNER: (Laughs) I do have SP bookies in my family background, so we can have a chat about
that later.

MAXINE McKEW: Let's move on to a big question, and that's the question of tax and how much we pay.
You both probably noticed the Centre for Independent Studies has declared today is Tax Freedom Day
- that's the first day of the year, apparently, when you start working for yourself and not working
for the Treasurer. The point they make, I think, is taxation now absorbs 32 per cent of GDP.
Malcolm, if we don't change this equation, your view is that we're going to lose talented workers,
aren't we?

MALCOLM TURNBULL: Oh, there's no question that if your taxation system is uncompetitive, you lose a
lot of talented people, and, you know, there are a million Australians living overseas at the
moment. Most of them are people of managerial or professional ability.

MAXINE McKEW: Our best brains.

MALCOLM TURNBULL: Well, they're among our best brains. We don't want to be in the situation where
everyone has to stay in Australia and can't leave, but the...

MAXINE McKEW: But we want a good flow back and forth, don't we?

MALCOLM TURNBULL: But the reality is that talented Australians, particularly - for talented
Australians, particularly young Australians, it's a borderless world. Their services are in demand
everywhere, and if we have an uncompetitive, excessively onerous tax regime - the type that the
Labor Party, I might say, has always wanted us to have, and when they did have, together with the
Democrats, the numbers in the Senate, went to great pains to prevent taxes being reduced...

MAXINE McKEW: Now, come on - it was Labor in the '80s that got rid of the rorts that you actually
complain about, quite rightly.

MALCOLM TURNBULL: Well, if they got rid of them, I wouldn't be complaining about them.

MAXINE McKEW: Well, they certainly started the hard...

LINDSAY TANNER: You guys have been in government for nine years, Malcolm. How about talking about
what YOU have failed to do?

MALCOLM TURNBULL: Let me be very clear. As far as - and I think most people who think about tax
would agree with this. We should have a tax system that is simple. It's got to be de-complicated.
It's too complex. We should have a tax base that is broad and we should have tax rates that are
much lower and with much - we shouldn't have a difference between company tax and personal income
tax, or at least not a significant one, because, of course, it creates the opportunity for
arbitrage between one and the other.

MAXINE McKEW: Well, look, here's a bold idea. Lindsay Tanner, you want Labor to be bold. At the
recent Melbourne Institute conference on sustainability, the whole question of tax was on the
agenda, and the ANU economist Ross Garneau, as you know, has proposed a flat tax of 30 per cent.
That's levied from the first dollar, with the elimination of all deductions, and then a negative
income tax for low-income people. Is Labor ever likely to run with something like that?

LINDSAY TANNER: I think that proposition's worth examining. Obviously the key question you've got
to look at, Maxine, is the ultimate equity outcomes. The thing that's difficult to assess without
really serious examination is the impact of abolishing deductions - which certainly would be
progressive, because deductions ultimately favour better-off taxpayers - and the impact of getting
rid of the threshold, which also would ultimately favour lower-income taxpayers if you're
compensating them for that. Whether that would counteract the obvious negative impact on equity
that you would get from having one rate or reducing the rates - I think there's certainly a case
for simplifying, flattening and broadening the tax base, but ultimately, the measure you've got to
assess it by is: what does it produce in practice, in outcomes? What does it mean for an ordinary
worker on 35 grand a year who's struggling to feed a family, to get by? Do they go up in tax
obligations or do they go down? What does it mean for the ordinary citizen and what does it mean
for the sort of people in the public housing estates in my electorate who are battling on very low
incomes? Will it be mean they'll be better off, worse off?

MAXINE McKEW: Sure.

LINDSAY TANNER: Ultimately they're the issues you've got to assess it by. But certainly we've got
to have a look at those kind of ideas. Simplification's important, but equity's crucial as well.

MAXINE McKEW: Let me ask you: do you accept the proposition that, in fact, Malcolm put in his
speech at the Melbourne Institute, and that is, in fact, the case can be put that if, in fact, you
lower taxation, you can actually grow revenues?

LINDSAY TANNER: I don't necessarily agree with that. That is called the Laffer curve theory that
Ronald Reagan ran up giant budget deficits in the United States with, the theory being that if you
actually cut taxes, you'll create more economic activity and you'll end up getting it back through
the back door through increased taxes anyway. History suggests that that's a very dubious
proposition. It's not absolutely wrong, but you need to be very cautious about it, and you
certainly can't assume, as Reagan did and as I suspect some of George Bush's advisers have done,
that happily cutting tax will lead to this poultice of revenue that comes from more economic
activity. It's a much more complex thing.

MAXINE McKEW: On the other hand, Malcolm, you were quoting, I think, UK figures that show just
this?

MALCOLM TURNBULL: Well, when Margaret Thatcher and Ronald Reagan both, at round about the same
time, made very substantial reductions in income tax, particularly in the high rates of income tax
in their countries, not only did - and removed a lot of concessions, so they broadened the base and
lowered the rate - not only did you have an increase in tax receipts overall, but the percentage of
tax that was paid by people in the top 10 per cent of incomes actually increased as a percentage of
the whole tax take.

LINDSAY TANNER: Clearly, if you're taking with one hand and giving with the other, that's possible,
but that's a separate issue. The question of knock-on economic effects is a different matter from
what Maxine's asking you about.

MALCOLM TURNBULL: Lindsay, with respect, I think you overlook the dynamic nature of all of this.

LINDSAY TANNER: No, but that's precisely the question Maxine's just asked you, which is about the
dynamic knock-on effects, which you haven't answered. What you've actually talked about is the
question of trade-offs for higher-income earners who might win by a lower rate but lose by having
deductions or concessions knocked out. Separate issue. Your point's quite correct on that, but you
haven't responded to the Laffer curve point.

MALCOLM TURNBULL: But the Laffer curve point is all about - what you're really criticising Reagan
for is expenditure. The reality is that revenue did increase as a consequence of lowering rates.
Now, if Reagan went off and spent...

LINDSAY TANNER: Nothing like was projected.

MAXINE McKEW: Let's not get into an arcane argument about that.

MALCOLM TURNBULL: This reminds me of Kim Beazley-talk, spending half an hour talking about Bob
Hawke's economics.

MAXINE McKEW: Malcolm, specifically, I want to ask you what I asked Lindsay. This notion of flat
tax, which, of course, used to be a joke...

MALCOLM TURNBULL: Like flat Earth.

MAXINE McKEW: Joh Bjelke-Petersen used to talk about it years ago. What did you think of what Ross
Garneau was putting up? Affordable?

MALCOLM TURNBULL: Well, Ross Garneau's proposal is not affordable in anything like the near term,
and he concedes that. It's a great thing to talk about. Let's just talk about flat tax, though.
What's interesting about flat tax is that years ago, it was a flat-Earth idea - it was a crazy
idea. You've now got a large number of countries that have introduced flat tax, and the 'Economist'
had a cover story on it the other day. Most of Eastern Europe, Russia, Poland, Ukraine, the Baltics
have all introduced flat taxes, and I think it's very - it would be very arrogant of us not to have
a very close look at tax reform experiments in other countries and see what we can learn from it.

MAXINE McKEW: That's precisely Garneau's point - that, in fact, something big needs to be done
instead of all this tinkering round the edges. And, arguably, we went through Peter Costello's tax
reform and, as you say, we have ended up with a far more complex Tax Act. The accountants are
walking away because of this complexity. They are walking away from their desks.

MALCOLM TURNBULL: I agree. I said recently that taxation was a black art.

MAXINE McKEW: You agree that Costello got it wrong, do you?

MALCOLM TURNBULL: No. Peter Costello is not infallible, but he's right almost all the time.

MAXINE McKEW: (Laughs) Very interesting!

LINDSAY TANNER: Malcolm, have some self-respect, please!

MALCOLM TURNBULL: Let me just make an observation, though, about incremental reform, because it's
an important one. I was in Jerusalem the other day and I had a meeting with Bibi Netanyahu, who's
the Finance Minister. On his desk was a very well-thumbed book by Roger Douglas, which I couldn't
help but noticing, and Douglas has been a great New Zealand economic reformer...

MAXINE McKEW: We remember him too, yes.

MALCOLM TURNBULL: And I said, "What's the main thing you've learned from Douglas?" And he said that
Douglas had taught him, or he'd learned from Douglas, that if you're going to reform your tax
system, you cannot do it incrementally; it's got to be big.

MAXINE McKEW: You go for the big bang.

MALCOLM TURNBULL: And that is what Peter Costello and John Howard did with the new tax system and
the GST and so forth.

MAXINE McKEW: Well, hang on. It's not what they did, and now you've got...

MALCOLM TURNBULL: Well, they did. That was a big reform. You're asking me whether we should have
another one. But they have performed a very big reform.

MAXINE McKEW: Let me just end on this point. You've got a re-elected Howard Government and what are
they talking about? Knocking off IVF for women, right, and that would save something like seven...

MALCOLM TURNBULL: Wait for the budget.

MAXINE McKEW: ..$7 million, and worrying about voluntary student unionism. Where's the big bang
from this re-elected government?

MALCOLM TURNBULL: Well, wait for the budget. It's going to be a very exciting night.

MAXINE McKEW: Oh, OK. Alright. Gentlemen, we will wait for the budget. Thank you for a dynamic
discussion tonight. We'll see you again. Thanks.

LINDSAY TANNER: Thanks very much, Maxine.