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Address to Queensland press forum lunch, Carlton Crest Hotel, King George Square, Brisbane [and] Question and answers.



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ADDRESS BY

THE HON PETER COSTELLO MP TREASURER

TO

QUEENSLAND PRESS FORUM LUNCH Carlton Crest Hotel, King George Square, Brisbane

Friday, 12 September 2003

Thank you for the opportunity to speak to you today.

It is now almost 18 months since I released the inaugural Intergenerational Report with the 2002-03 Budget. Today I would like to take a step back from the day to day business of politics and short-term policy work and return to the theme of demographic change discussed in that report and some of the policy challenges and choices it presents.

The Intergenerational Report is an important requirement of the Charter of Budget Honesty Act. The Australian government was a world leader in promoting fiscal transparency and accountability when it introduced the Charter in 1998. Since then other governments around the world have introduced similar legislation and the IMF has welcomed the Charter of Budget Honesty as setting 'a high standard for fiscal transparency and accountability'.

Under the Charter, the Government is required to release an Intergenerational Report every five years. The 2002-03 Intergenerational Report was the first report of its kind, and the first time any attempt had been made to look across the generations and identify the challenges which lie ahead for our society and our governments. It asked some tough questions: What challenges might our children and their children have to confront in forty years time? What shape will Australia's finances be in in 2042 based on current policies? And what should we do now to prepare for the generations ahead? It also showed that Australia's strong Budget position, put in place over the past seven years by the coalition Government, means we are better placed than most other advanced societies to cope with these changes.

The Intergenerational Report spells out the consequences of current trends. It is designed to provide long-term warning of any problems and, because a new report must be published every five years, benchmark our progress to meeting those problems.

The fact that this government had the courage and foresight to publish projections out for forty years enables us as a society to start to think about the sort of policy challenges and choices that we will need to consider for future generations.

And make no mistake - the report raises issues that all of us will need to consider. We are not facing a crisis - not yet - but some difficult choices will need to be made sooner or later if we are to maintain, and indeed continue to improve, living standards and wellbeing for all in our society. And the sooner we make the right choices, the better placed we will be to overcome these problems.

Australia's population is expected to age significantly over the next forty years. The number of Australians aged 65 and over is expected to increase rapidly, from around 2.5 million in 2002 to 6.2 million in 2042. At the same time, growth in the potential labour force (that is, people of workforce

age) is expected to fall from around 1.2 per cent per annum over the last decade to zero in forty years' time. As a result, the aged to working-age population ratio (that is, the proportion of people aged over 65 to people of traditional labour force age, 15 to 64) is expected to increase from around 19 per cent in 2002 to almost 41 per cent in 2042. Let me put it another way. In 2002 there were more than five people of working age to support every person aged over 65. By 2042, there will only be 2.5.

An increasing aged population implies higher government expenditures. More than half of Commonwealth government spending is directed to health and aged care, social safety net payments to individuals, and to education. Over the next forty years Commonwealth expenditure on aged care and pensions will rise by around 2.7 per cent of GDP, slightly offset by a fall in education expenditure of around 0.2 per cent of GDP. But increasing health costs will represent the major component of the projected increase in expenditures, rising from 4 per cent of GDP in 2001-02 to over 8 per cent of GDP in 2041-42.

While health costs increase as people get older, technological change and advances in medicine will have an even greater impact on the budget. More sophisticated treatments and diagnostic techniques have enhanced the quality of life for people, particularly the elderly, but are expensive and add to cost pressures. We should acknowledge that greater emphasis on preventative health technology might reduce some longer term cost pressures, through its potential to enable people to lead healthier lives during their working years. This might enhance labour force participation and productivity.

But where these two significant developments intersect - the ageing of the population and the medical advances to treat an increasing number of illnesses, is where the cost pressures are rising fastest. The IGR identified the Pharmaceutical Benefits Scheme (PBS) as the most significant area of future spending pressure in the Commonwealth Budget.

Today the PBS subsidises around 80 per cent of all prescription medicines available at pharmacies and accounts for more than 158 million prescriptions each year. That's more than 7.5 prescriptions for each Australian every year.

The IGR showed that in future years, PBS expenditure as a proportion of GDP could grow by more than four times, from 0.6 per cent of GDP in 2001-02 to 3.4 per cent in 2041-42. Indeed, over the past four years, the cost of the PBS has increased by 60 per cent to over $4.5 billion per year.

It is vitally important that we make certain that the PBS is sustainable, because the reality is that the real cost of a number of commonly used medicines puts them out of reach of many Australians.

For example, medicines to treat diabetes can cost up to $200 per script, and for heart disease up to $115 per script. Under the PBS, if you're a general patient, you pay up to $23.10 for an item received under the PBS, whilst concessional patients (pensioners and those who hold concession cards) pay only $3.70 per script. Concessional patients have a safety net threshold of $192.40 (equating to around 52 scripts each year) while general patients have a safety net threshold of $708.40 each year (30 scripts per year at the maximum payment). Once the safety net threshold is reached each year, general patients pay only $3.70 per script whilst concessional patients then receive their scripts free of charge. The difference between the actual cost of a medicine or treatment and the amount paid by patients is met, of course, by the taxpayer.

In 2002-03, 28 new medicines or significant extensions to listings were subsidised by the PBS. And since 1 July this year a further six new medicines or significant extensions to listings have been included on the PBS, including Enbrel, a very expensive arthritic drug which alone will cost around $100 million per annum. The total cost of the three most significant listings since 1 July is around $138 million per year. Without a PBS listing, Enbrel would cost patients around $25,000 per year. As Enbrel requires around 13 scripts a year, with PBS listing it costs concessional patients about $48.10 a year.

With this in mind the Government has been actively implementing initiatives aimed at ensuring the sustainability of the PBS into the future, including attempting to pass legislation to change the co-payment rate by a small amount to restore the balance between government and patient contributions to

the PBS. This has been blocked in the Senate twice. Today I again call on the Opposition and minor parties to put aside opportunism and consider the longer term national interest.

If the Senate passed the co-payments legislation for the PBS, this would involve a rise to $4.60 per script for concessional patients and to $28.60 per script for general patients. This measure is estimated to save around $250 million per year in the context of a scheme that currently costs $5.1 billion per year.

When you put together all of the expenditure factors - health, aged care, pensions and education, the IGR projects a fiscal gap of around 5 per cent of GDP by 2041-42. This is a budget deficit of 5 per cent of GDP assuming no debt costs from previous deficits. To put this into perspective, the 2003-04 Budget forecast is for a surplus of $2.2 billion. A budget deficit of 5 per cent of GDP would mean that for 2003-04 the deficit would be around $40 billion.

These sobering numbers make it clear that society needs to make some clear choices about how we wish to address the demographic issue. In broad terms, there are a number of options available:

The first is to cut future government expenditure by around 5 per cent of GDP. There is no doubt that we will need to be very careful about government spending priorities in the future. However, it is difficult to imagine that all of the response can be met in this way, given that it is the ageing of the population that is driving much of the expenditure and that this is not reversible.

The second approach is to increase taxes by 5 per cent of GDP. This is not an option. To give you some idea of the magnitude of taxes that would raise an extra 5 per cent of GDP - it would require a GST of over 22.5 per cent. Alternatively, if all the marginal tax rates were increased proportionally, the marginal tax rate for those earning between 21,601 to 52,000 (currently the 30 per cent bracket) would be 42.5. This means that those on average weekly earnings would have a marginal rate of 42.5 per cent. The top marginal tax rate would be 66 per cent.

A third option is to run deficits and hence increase debt. This is not a sustainable or responsible solution, as it merely passes the problem on to our children's children at an ever-increasing rate, and would eventually force them into ever more extreme measures.

One of the responses that would alleviate this problem would be an increase in long term growth. This would generate extra income to meet the demands of an ageing population.

Growth in GDP is driven by growth in population, productivity and labour force participation. In my view, the best opportunities for increasing Australia's growth are to increase labour force participation and productivity.

Population growth is a good thing but it is not the answer to this problem. Australia's current fertility rate has been below replacement level of 2.1 for the past 20 years or so. It is currently 1.73 and falling. Fertility rates are low in all the advanced industrial countries. This is a consequence of education and higher living standards. Even if there were a government policy that could produce an immediate increase in fertility rates, for the first 20 years it would decrease the ratio of workers to total population (the worker ratio) and increase pressure on the growth rate.

Similarly, for immigration to make a difference there would need to be an eight-fold increase in our migration program by 2042. Moreover, since those migrants would themselves age along with the rest of the population, an ever-increasing rate of working age immigrants would be required.

There may be more scope for improvement with regard to productivity. The IGR projections assume productivity growth of 1.75 per cent a year - the same as over the past 30 years. If we can do better than that - and we did in the latter part of the 90s and the early part of this decade - this will generate extra growth in incomes.

There is a considerable body of research emphasising that policy reforms on a wide front are more likely to yield significant dividends in terms of increased productivity than are reforms focussed on just one set of markets. Continued microeconomic reform and efforts to improve workplace flexibility to deliver

productivity improvements will assume particular importance in the context of slower growth in the workforce. The task is never ending.

The third determinant of GDP growth is participation.

Amongst OECD countries, Australia's total participation rate ranked 13th in 2001, suggesting there is significant potential to improve participation both in the short and medium term. I believe that there are a number of policy areas where there is potential to improve existing participation rates, including: skills and education; health; welfare reform; workplace relations; and retirement incomes policies.

By addressing these, we can remove constraints or disincentives that lead people not to participate in the workforce. It is not about forcing people to work. Rather, it is about ensuring that free choices made by individuals are not influenced by aspects of policy that currently bias their choices against participation or make it difficult to participate.

Australia's income support system is very extensive. The flat rate of benefits coupled with means testing through the income and assets tests places us in a better position to finance the system than in many other countries, with their earnings-related benefits. However, we need to ensure that elements of the system, such as income test structures (including their interaction with the income tax system), the eligibility criteria for payments, and activity tests attached to payments for those of workforce age (such as requirements to look for work) provide an adequate safety net while encouraging self-provision and labour force participation.

For this reason, the Government remains committed to changes to eligibility rules for disability support pension (or DSP) announced in the 2002-03 Budget. When we have one in nine males aged 50 to 64 receiving DSP, I think it is fair and reasonable to look at measures to address eligibility for those with some capacity for work. For some, at least, DSP has become a de facto early retirement pension.

With an ageing population, it is important that retirement income policies do not encourage reduced participation in the labour force.

One area that I think we will need to consider is preservation age. At the moment, benefits must be preserved until age 55 - 10 years before pension age. The preservation age can act as a signal to people of an appropriate retirement age. A person's retirement income is also affected by when they start to draw down on their superannuation. For these reasons the Government is gradually increasing the preservation age to age 60 by 2024. Unfortunately, most of the baby boomers will have retired well before 2024.

This is an important point - and one that should not be overlooked in the current debate. Some people argue that we don't need to take steps now to address the ageing of the population. After all, 2042 is a long way off. That is true. But the retirement income system operates over a forty year timeframe. To get change that is effective in 30 or 40 years time requires action now.

We need to take action, starting now, so we can maintain a prosperous economy and a cohesive society that does not leave an enormous burden on future generations. We cannot expect that these problems will fix themselves.

The Government would like to start now and has put forward a number of legislative reforms. But the Opposition in the Senate has frustrated them.

The necessary legislation to implement the Government's 2002-03 DSP reforms was rejected by the Senate, but the Government remains committed to targeting funding to people with disabilities who have the highest support needs.

Legislation to ensure the sustainability of the PBS into the future, including a change to the co-payment rate by a small amount to restore the balance between government and patient contributions to the PBS, has been blocked in the Senate twice.

The Government has introduced some 22 workplace relations bills into the Parliament between February 2002 and September 2003. Over this period the Senate has either proposed unreasonable amendments or simply refused to pass bills. The Senate has held up reforms that would have resulted in more jobs for Australians.

To make our companies more internationally competitive, the Government is also reforming international taxation. As Australian companies grow to world size we have to help them access opportunities in world markets, and provide job opportunities for Australian workers. Unfortunately the Labor Party has indicated its opposition to these reforms.

In the 2003-04 Budget, the Government announced far-reaching reforms to Australia's higher education system. The reforms are to free up universities and allow them to build on their strengths so that they provide the quality courses that our students want and our nation needs. But the Labor Party has stated that they will seek to block these measures in the Senate.

So we must now ask ourselves: how can we reform the Senate so as to reduce the capacity of obstructionist behaviour that threatens to derail our long-term opportunities?

I do not think our constitutional arrangements are set in stone, that we can never improve them.

I would favour a system where measures which had been twice rejected by the Senate in one Parliament, could be passed by a joint sitting after an election.

Under this system, the Prime Minister of the day would be able to ask the Governor General to convene a joint sitting after an election to vote on legislation blocked twice by the Senate in the previous Parliament.

The issues in contention would have been debated openly in the Parliament beforehand and during the campaign. The mandate would be clear, and resolution of the conflict possible.

Under the current policy of the Labor Party our House of Review is failing us. A House of Review is designed to protect the long term interest against short term and irresponsible decision making. Under modern Labor tactics it is frustrating the long-term interest in the interests of short term and irresponsible, opportunist politics.

The Senators who are now restricting Australia's long-term possibilities are hardly known to the public. Who knows the names of the Senators who are blocking these reforms? They have enormous power but have little accountability to the public.

Here is the opportunity for a Labor Leader:- to end the policy of obstructionism in the long-term national interest.

And the Senate itself should be reformed to prevent short-term thinking and obstuctionism from restricting Australia's opportunities

© Commonwealth of Australia 2000

TRANSCRIPT OF THE HON PETER COSTELLO MP Treasurer

Question & Answers

Friday, 12 September 2003 1.25 pm

SUBJECTS: Succession, Double Dissolution, Senate Obstructionism, Middle East, Terrorism, First Home Owners Scheme, Ansett Levy, Senate Reform

MC:

Have you had any more discussions with the Prime Minister since his public announcement that he is staying on in the job regarding you moving into the job, and if you are not Prime Minister within four years or so, will you quit?

TREASURER:

Thanks for the welcome. Obviously the Prime Minister and I have discussed the issue of succession and I have already had as much to say about that as I intend to say about that. There is no new news on that front. The second part of your question is an interesting one. Football coaches always say, we will take it one week at a time, and I think that is good advice, because if you start playing the next game before you finish this one, you can sometimes get yourself into trouble. I tend to take it one year at a time, bravely one election at a time, and I won't make any prognostications. Other than that, I am fully focused on the job and intend to do the best job that I possibly can. Thank you very much.

MC:

Spencer Jolly from Channel 9.

JOURNALIST:

Treasurer, given your frustration at the Senate blocking the reforms which you have outlined here today, and with Labor struggling to make a mark, and the economy bubbling along, the Government is well placed for a double dissolution election before the year is out?

TREASURER:

Is that a question or an observation, Spencer?

JOURNALIST:

Yes or No.

TREASURER:

There are a couple of things that never change about Queensland, the weather is always good and Spencer Jolly is always here, and his questions are always very tricky. Look, I think when I talk about these long-term reforms, that they are, this is the way I put them, they are not necessarily in the interests

of the government of the day. I am putting these forward in the national interest for 2042. That is what I am doing. And I think a reasonable Opposition would say to itself, well gee, we may be in government at some time between now and 2042, and if we are, wouldn't it be nice to be able to take advantage of these reforms? These are reforms that are not going to swing the monetary cycle necessarily tomorrow, but we all know they have got to be done, this is the funny thing. Co-payments, PBS, this was started by the Labor Party, and we warmly endorsed it and it ought to be continued in a by partisan way. Disability support pension, the Labor Party have claimed that that has got to be done, I just think they got themselves into a mind set of opposition for oppositionisms sake, and what I am saying, is that is not what the Senate was there for and I call on them to change the mindset. That would free the blockages, but if the mindset won't change, let's look at the institution itself, because I don't think it was set up with this kind of thing in mind by the founding fathers. So, Spencer, in answer to your question, we would like to get these bills through, yes, of course we would like to get them through, your're asking me as to the tactics as to how we might get them through, and I am not telegraphing anything today, I am just arguing for what I consider to be a very strong case.

MC:

Paul Osborne from AAP.

JOURNALIST:

Over here. Treasurer you are heading to the Middle East next week, what sort of gesture do you think is needed to bring peace about in the Middle East, from both the Palestinians and the Israelis? I was talking to the Bishop of Canberra a couple of weeks ago, and he was suggesting that maybe the Israeli President needs to spend a week in the house of the Palestinian President or something like that as a symbolic gesture. What do you think really needs to be done there?

TREASURER:

Well, the first thing is that the terrorism has to stop. If you, imagine you were living in a society where a bomb goes off at bus stops or cafes, not because the people in the cafe or at the bus stop had taken any part in military activity, they are just civilians that happened to be there. Imagine you were living in a society like that, it would be so hard to remain focused and positive and run your country. It is almost impossible to develop trust where there is terrorism. Terrorism has to stop, and all people of goodwill should be asked to prevail on those that are organising this and stop it, and the security services of the Palestinian authority should be directed towards this task. And I think once the terrorism stops then sure, you can enter into negotiations, I don't know how they would be conducted, they might be conducted under the auspices of the so called Quartet, certainly the Americans will have a very big hand in it. But, you have got to move through the terrorism in order to get there, and I think all people of goodwill should be urging those in the Middle East to do everything they can, everything they absolutely can to end terrorism, because I can't see any other outcome other than that continued acts of terrorism in response will take the situation into a downward spiral. So, that would be my outlook on the issue, obviously I will be talking to people while I am over there, and engaging in discussion with them on some of these issues.

MC:

Louise Willis from ABC Radio.

JOURNALIST:

Treasurer, in light of your trip to the Middle East next week, and your strong interest in the situation there, can I ask for your views on the decision overnight by the Israeli Security Cabinet, in principle, to expel Yasser Arafat, and what such a move would mean for the peace process, help or hinder, also, it is unusual I guess, for the Treasurer to be speaking out on foreign affairs issues and making this trip overseas, as well as your Prime Ministerial ambitions, do you have foreign affairs ambitions as well?

TREASURER:

Gee, I am going to be a busy guy, aren't I? Well, I am en-route next week to the IMF meeting in Dubai, which is an important meeting which, the annual meeting of the International Monetary Fund, which I attend every year, and I am taking the opportunity to visit the Middle East where I haven't been for quite some time, notwithstanding the fact that I have received numbers of invitations to do so. I hope that it will be possible to meet with people on both sides, although obviously it is a difficult situation there at the moment, I was going to meet the Prime Minister of the Palestinian authority, Abu Mazen, but you saw the developments this week, and a new Prime Minister has been named, but not yet confirmed, Abu Ala. We would hope that the Prime Minister could be given enough authority to enter into meaningful discussions in relation to progressing the peace agenda. And we would hope that Yasser Arafat would allow his new designate sufficient authority to do that. I think that would be the most positive thing that could happen on the Palestinian side at the moment, and that the Prime Minister, together with other interested authorities are able to clamp down on some of the militants and some of the terrorism in the way that I have just spoken about earlier. And it is our hope that the opportunities which seem to have opened up could none the less continue. This is a very difficult situation, it is a problem that has been with us for a long time, but from the Australian Government point of view, we would urge that kind of direction.

MC:

Chris O'Brien from ABC Radio.

JOURNALIST:

Treasurer, the Federal Opposition and the Victorian Government today have both expressed anger at reports in the Melbourne press that 73 people who have got the first home owners grant went onto buy houses worth $1 million, and the question is, is it fair for millionaires to have access to that grant? Should it be means tested?

TREASURER:

Well, look, when this was put in place, this was put in place as a response to the introduction of GST on housing. The argument being, at that time, that if GST came on housing, everybody would be paying tax on housing and therefore should have a first home owners grant to cash it back. Now, I can assure you of this, the GST, if someone were buying a new home on $1 million, would be very, very substantially more than $7,000. It would be 1/11 of $1 million, if someone can work that out for me now, I will tell you what the figure is. Somewhere between $90,000 and $100,000, I would think. So, if they were buying a new house on finished real estate and that were the value of the building, because there is no GST on land, but if that were the value of the building, of course they would be paying very much more than that, very much more than the grant that they were getting. The other thing of course is, once you introduce a means test, whilst they are good in theory, they can have a lot of difficulty in practice, means test the property or means test the income? It is conceivable, for example, you could get very wealthy people buying cheaper houses. So should you means test the income, or should you means test the property? That is another point that hasn't been entered into. So we thought that the simplest way of doing it was just to say, if you had had a house before you wouldn't qualify, and if you hadn't you would get it. I think, whilst I obviously understand the political point that is being made, I think keeping it simple and keeping the transactional costs down, it has probably given the taxpayer a good deal. Complicating it, and introducing new layers of administration would make it a more expensive scheme to run. And that is why it was introduced in the way that it is, and that is why it is operating in the way that it is.

MC:

Denis Atkins from the Courier Mail.

JOURNALIST:

Treasurer, late last year in response to the, well, late last year you gave a speech to the Australian Asia

Society and in that you talked about the need for countries like Australia, in response to terrorism like the Bali bombing, the need to engage more with Asia. Last week you were in Phuket and you met with APEC Finance Ministers. Can you tell us what they were saying to you about the West's response to terrorism in Southeast Asia and do you think Australia can do more and, if so, what is it?

TREASURER:

Well, I thought it was very supportive, Denis. I met with Indonesian counterparts. The Indonesians were very appreciative of the work that we did helping with the investigation in Bali and also the Marriott hotel in Jakarta. I met with all of my ASEAN counterparts, who all expressed a horror of terror. And some of the countries in ASEAN are more acquainted with that than we are. The Philippines, for example, has been fighting a terrorist organisation probably for thirty or forty years. Singapore has been very active in relation to this. Thailand cooperated in the arrest of Hambali quite shortly before we arrived in Phuket. So, so I think there is a lot of goodwill and there is a lot of support amongst the ASEAN countries. At the meeting, we discussed measures to strengthen against money laundering and the financing of terrorism. It is another area where Australia has a very sophisticated system and we are able to help some of our neighbours in relation to that. And we discussed other general matters that could be done.

But let me return to the theme of what I said at that Asia Society. Terrorism in Bali was an awful thing. It was one of the, probably the greatest, civilian tragedy that our country has suffered. What should our response be? Not to pull apart from Asia, but to draw closer. If you thought that by pulling apart from Asia we could protect ourselves from terrorism, Bali said we could not. Bali proved that Asia's security was our security. Some people, like, you know, sometimes when you, when you are listening to the radio, it is almost as if people think Bali is an Australian territory. Bali is Indonesia. Bali is Indonesia. And what did we learn with the Bali bombing? That security in Indonesia is security for Australians. And we cannot say that terrorism is a problem for Indonesia and it is none of our business and draw apart. We have to draw closer and assist, in Indonesia, the fight against terrorism because, it is not just their country and their countrymen at stake, but ours, too. Go back to the World Trade Centre. Australians were killed by terrorists in the World Trade Centre. This is why this is a global effort. Your citizens are going to be all around the world. They might be working in a World Trade Centre, they might be working in Bali, they might be holidaying in Phuket. And if terrorism strikes, they do not say, oh, any Australians in there? Let's pull back. This is why it is a global effort. Every country in the world that wants to protect its citizens is going to have to join this fight against terrorism. And the point that I made at that speech, was, we will have to draw closer. We will have to assist more. It will be in forensics, cooperation in law enforcement, intelligence, assistance in relation to financial transactions and tracing the flow of funds by terrorists. All of those areas. We are doing it to help our neighbours, but we are also doing it for our own citizens and our own country.

And, of course, the other thing, is, that the more people you can track down overseas in Southeast Asia, the less people you will have to track down here. This is important for our region and our world, and the Australian Government will be at the forefront of it, I can assure you of that.

MC:

A couple more. Jo-Anne Youngelson from ABC TV.

JOURNALIST:

Thanks. Mr Costello, can you update us on what's happening with the Ansett ticket levy? What do you think of suggestions that the Government is double dipping? And should some of the money raised by given to the employees who are yet to receive their full entitlements?

TREASURER:

Well, the Ansett ticket levy has been suspended.

JOURNALIST:

Well, what's happening with the Federal ticket tax then?

TREASURER:

Well, it is not being collected.

JOURNALIST:

So the 350 million, $355 million loan to Ansett - is that correct? There was a $355 million (inaudible)?

TREASURER:

I cannot tell you the amounts. But what happened was that employees who had not been paid their entitlements - which was holiday leave, long service leave, from memory eight weeks of redundancy pay and other entitlements - we said we would implement a ticket levy to raise sufficient funds to cover those entitlements. We came to the view, from memory in June, that we had enough money to cover those entitlements and suspended the levy. So it is not being collected. The financial advice to us was that there was enough that had been collected at that stage. Now, in relation to the administration of Ansett, there are still competing claims by other creditors. Until you know what the other creditors have to be paid out, you cannot have a final determination. But we are not collecting it and we will meet all of those entitlements. And we also said that, if it appeared at the end of the day that we had collected more than was required for those entitlements, then the money would be directed to either the tourist industry or the aviation industry. But I want to tell you this: that the Government, the Commonwealth Government, is not, is not taking anything out of this. The money will either be received by the Ansett employees or, if there is a surplus, will be distributed to the aviation, aviation industry or to the tourist industry.

JOURNALIST:

Just to follow that up, though. When will the workers actually see their money? Is it weeks away, months away?

TREASURER:

Well, they have all been paid those entitlements, as I understand it.

JOURNALIST:

There's no outstanding (inaudible)?

TREASURER:

No. We guaranteed long service leave, holiday pay, all other entitlements and eight weeks of redundancy pay. That was the minimum entitlement. There are some employees who claim they are entitled to more than eight weeks of redundancy. Now, the Commonwealth Government did not say it would pick up more than eight weeks of redundancy. That was the minimum. Whatever the minimum entitlement was. I am pretty sure it was eight weeks. It could have been six. No, I think it was eight. But there were some people that said, well I should get forty or fifty weeks of redundancy. The Commonwealth never said it would pick up the full entitlement. It said it would pick up the safety net entitlement. And those people that want to come back into the airline for above minimum entitlements will be standing as creditors. But those minimum entitlements are the entitlements which the Commonwealth is paying out of, has paid, out of the proceeds of the levy.

MC:

Final question. Louise Willis again.

JOURNALIST:

Mr Costello, just to return you to your thoughts on Senate reform. As part of those reforms, are you in favour of fixed and/or four year terms?

TREASURER:

Well, I do not think, I do not think this necessitates a change to either fixed or four year terms. I have views on those as well which I am happy to go into. But I think, I do not think this is necessarily connected. I think we could actually do this with the current situation. Now, you know how hard it is to change the Constitution of Australia. You have got to have a referendum. It has got to be passed by a majority of voters in a majority of States. History tells us that it is very hard to get a positive outcome for a referendum. I have been on a few losing referendum sides myself. And so I think that when you do go to the public, it is best to go with a proposal which is as simple and as moderate as possible. So, this is simple and moderate. We could add, we could add some bells and whistles - four year terms and fixed terms. But my political judgement says to me, keep it as simple as possible, you will maximise the chances of having it accepted. So that is why I am not going into the deluxe model, I am just giving you the standard Commodore model on this Constitutional reform, or the standard Fairlane model or the standard Camry model. Whatever it is - the standard model, the simple model, the one without deluxe premium add-ons, the one that even I can understand. And if we keep it simple, you never know, you have always got a chance of passing these things. And I would like to see it go through because I think it would be good for Australia. That is what we are here for - what is good for long-term policy in Australia. Let us set our country up for the kind of opportunities that it really deserves. Thank you very much.

© Commonwealth of Australia 2000