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Prime Minister discusses education; R&D funding; and petrol prices.



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30 January 2001

TRANSCRIPT OF THE PRIME MINISTER THE HON JOHN HOWARD MP RADIO INTERVIEW WITH ALAN JONES, 2UE

Subjects: education; R&D funding; fuel prices

E&OE……………………………………………………………………………………

JONES:

Prime Minister good morning.

PRIME MINISTER:

Good morning Alan.

JONES:

Prime Minister that is central to this whole thing isn’t it? You’ve at least got this issue on the front page which you’d have to concede is where it belongs surely.

PRIME MINISTER:

Well it’s a very important issue. We’ve done more than get it on the front page. We have actually detailed after 18 months work a very comprehensive plan that will be implemented over five years. The aim of the plan is to harness the capacity of Australians in generating ideas and convert those ideas into incomes and jobs in Australia. Now education is a central element of that. So is converting ideas into jobs and incomes. This country has had a very proud record in inventions and new ideas. We haven’t always been so good at converting those ideas into commercially saleable products therefore capable of generating incomes and jobs. And this integrated approach that we have adopted makes that a lot more likely. That’s why we’ve put a lot of emphasis on not only research grants but also on ways of helping universities and business get together so that the good ideas are then turned into something that can be sold and get a return not only for the people who generated the ideas but also for people in Australia, and not overseas, who’ve been involved in the whole process.

JONES:

Well let’s just take all of those points and shove them together if we might because you announced Federation Fellowships yesterday to stem the brain drain and they will offer $225,000 a year which is more than double the existing amount and that will be for five years. The only catch I suppose is there’s 25 and I wanted to say to you that when you’re talking about the idea that hanging on to them and not letting them drain overseas, if a top maths or science student got a PHD after six or seven years work and was lucky enough to get a university lectureship, they’d start on no more than $45,000. If they made it to the full

professorship they’d be lucky to get $100,000. In the United States the same person would be on $225,000. That’s where the brain drain is occurring isn’t it?

PRIME MINISTER:

Well that’s partly where it’s occurring.

JONES:

How do you rectify that?

PRIME MINISTER:

Well one way of rectifying it is for the universities themselves which we don’t control, we only fund them, to adopt a far more deregulated approach to how they remunerate their staff.

JONES:

But in relation to that funding the federal government, not your government, all governments, yours and your predecessor’s government’s contribution to university budgets has been cut from 3.1% of GDP to 2.2% of total federal spending. So there has been a massive slashing of money there hasn’t there?

PRIME MINISTER:

Yes but the universities, I’ve got two comments on that, the universities have found new ways from the private sector of funding themselves and there is a lower government contribution but there is now a higher private contribution.

JONES:

Is that a problem for the integrity….?

PRIME MINISTER:

I think you need a balance. I think the idea that the government could pick up the entire tab for universities is unsustainable and you do need a contribution from the students who can afford it, and many of them can, and you also need a contribution from the private sector. You also need some full fee paying students from both Australia and overseas.

JONES:

Which we’ve got.

PRIME MINISTER:

Which we’ve got. Mr Beazley incidentally would cut out the full fee paying students from Australia. He would have them from overseas but not from Australia. But can I go back to the other point that what I’m suggesting is that with the pool of money they have available from both public and private sources universities have it within their capacity to alter the salary structures so that they do remunerate their people more. I mean it’s just a question of in the end that the universities have got to do something about deregulating their salary structures and we in fact have offered the universities more money if they restructure their industrial relations arrangements. Some of the universities are taking that up, others are not.

JONES:

But see if you had a problem which it seems we’ve got and you’ve conceded this and I think we’d all concede it, in really establishing a bias in favour of science and pure maths and technology in terms of study. Why wouldn’t you allow those people to go to university for nothing? I mean the reason we can’t get good science teachers and maths teachers in the class room is that we can’t get good science and maths graduates. And many callers to the open line said earlier this morning this scheme that you’re talking about has got to start at primary school. I mean when you’ve got people getting a TER, with a TER score of 52 getting into teaching it’s axiomatic that you’re not going to have strong teachers in the front of the class room.

PRIME MINISTER:

Yeah but Alan that will change as more people want to go into teaching. The TER score for teaching will probably be much higher next year because more people will want to go into it.

JONES:

But are we paying them enough given that that’s the current….?

PRIME MINISTER:

I think some teachers are grossly underpaid and I believe that some teachers deserve to be paid a great deal more. It’s like anybody else. You need to have a more merit based approach to the way we remunerate people. But this is essentially an age old industrial relations debate. Unions believe in remunerating everybody essentially the same. That is increasingly unsustainable in the sort of economic environment in which we now live. But I mean I’m not trying to walk away from answering…..

JONES:

No, no.

PRIME MINISTER:

In the end the federal government does not employ any teachers. The teachers of this country are employed by state governments and by the independent school sector. We fund both of them.

JONES:

But still to give it a real kick along and to really confirm that you’re wanting to change the culture in favour of education, science teaching, new technologies, you’d have to concede that somewhere along the line we’ve got to say to those people who swallow your bait - well listen we’ll reward you as well.

PRIME MINISTER:

Yeah I think you should do that but that is something I believe the employers of teachers have to deal with, and I agree with you. But can I go back to your point about offering people free places. I don’t believe in offering people free places in one particular discipline no matter how attractive it may seem on the surface. We tried free university places under the Whitlam period and it didn’t work. I believe that it’s unrealistic for people who can afford to make a contribution towards their education not to do so. They get a great reward long term, most of them do out of it, and I think the system we now have in this country where people do make a contribution to their education is the best system you can have. You see if you say to teachers we’re going to train you for nothing because there’s a shortage now, in a few years time if a shortage develops in another area people will say well you train us for nothing. I think the HECS system is fair. If you can’t afford to pay your fees up front you pay them when you start to earn and your income goes above a certain…..

JONES:

Well can we just talk about that fee paying because one in six students now comes from offshore. These are overseas full paying students, they pump about $3.5 billion into the Australian economy each year. Are you concerned at all the debate that’s raged in the last month about the likelihood that university standards might be being diluted to pass those students, in otherwise compromising intellectual integrity merely to maintain the revenue stream? In other words what can we do to on the one hand retain the full fee paying foreign students but at the same time maintain the integrity of the system?

PRIME MINISTER:

If that were happening I would be very concerned. I don’t know whether it’s happening or not. There have been some generalised allegations made and I have said those allegations have got

to be fully investigated by the universities. There’s no clear evidence that that has happened. I’d be very concerned, very concerned indeed. Everybody would be if that were occurring. But we are a long way short of a situation where it’s been established that that has definitely happened.

JONES:

But there would be a temptation for university authorities to lower for example English language entry standards to maintain the swelling tide of fee-paying students.

PRIME MINISTER:

Well Alan there are temptations all the time in life. But I have sufficient faith in the integrity of people who run universities in this country to believe that in the overwhelming majority of cases if not in all cases those temptations would be resisted. But if people have evidence that this is happening let them present that evidence to the university governing bodies, let them present that evidence to any forum they wish and it ought to be investigated. It would be very serious and we would want it properly investigated and rooted out. But the basis of education in this country at a tertiary level has historically been one of the academic independence of the universities themselves. I mean they pride themselves, quite properly because it’s in the long classical tradition of education that universities are autonomous and they’re not, in terms of their academic administration, they’re not interfered with by government. So that of course gives them a freedom but it also gives them the responsibility that if allegations of this kind are made they have to investigate them and they have to satisfy us and they have to satisfy the community that it’s not occurring. Now there’s just been some generalised allegations and in fairness to the universities we shouldn’t assume that those allegations are correct. I’d like to see a lot more evidence before I started to believe that those allegations have real substance.

JONES:

You announced yesterday, thank you Prime Minister for that answer, you announced yesterday the government would provide a tax concession of 125% on all R&D spending by companies. You would be aware would you not that a couple of years ago the Productivity Commission suggested that may not be the smartest way to go about encouraging R&D, that it might be such that taxpayers’ money was being wasted on subsidising spending that would have taken place anyway and that countries overseas like Canada and the United States and France and so on provide the tax concession to spending over and above a company’s normal spending level? Can you see the difference between those competing approaches?

PRIME MINISTER:

Yes I can and I think we’ve struck the right compromise. We have kept the 125% concessional rate for the generality of R&D spending and we have resisted requests to increase the general rate to 150%.

JONES:

But you’ve stuck it up to 175% for additional investment.

PRIME MINISTER:

For demonstrated increased research and development effort over and above what would have in any event occurred and which under the guidelines might attract 125%. I mean there are arguments on both sides of this.

JONES:

So in other words you get 125% for all…for existing R&D spending, but additional spending will incur 175% tax deduction. Is that right?

PRIME MINISTER:

That’s the new scheme. We think that is a fair compromise. We think it is better for the taxpayer than increasing the general rate to say 150%.

JONES:

Right. But you said earlier you wanted to promote - A) - the generation of ideas and then the exercise of those ideas in developing either technology or plant or jobs. But there is a tax office ruling pending is there not which aims to deny R&D deductions for plant that was used successfully in commercial operations. Are you aware of what the status of that tax ruling is?

PRIME MINISTER:

They’ve circulated a draft ruling.

JONES:

You’d be opposed to that I hope.

PRIME MINISTER:

Well I prefer not to get into the details of any views that we might, you know that we might have at this stage because it’s a draft ruling and the matter’s going to be further looked at by the Government. But I am aware of what that draft ruling is, I am also aware that industry has made a lot of representations to the Tax Office and it is my understanding that the Tax Office is not about to issue a final ruling that it’s still considering the matter.

JONES:

Right, just on R&D Prime Minister, I mean they are large tax concessions - 150%, 125%, 175% - it is true is it not that the companies likely to contribute most to a nation’s research and development are the bigger companies and in this country many of those companies are multinational companies. How can we be sure that the Australian taxpayers’ money that is being used as an incentive for research and development with foreign-owned companies isn’t improving the research and development of the parent company somewhere around the world other than Australia?

PRIME MINISTER:

Well you can’t be absolutely certain of that. But on the other hand we often get the benefit because multinationals operate in this country, of research and development which has occurred in another country and which has attracted the help of the taxpayers of that country through the concessional R&D arrangements those countries operate. So in a global economy that thing can cut both ways. The other comment I’d make Alan is that not all of the bright ideas come from big companies, a lot of the bright ideas come from very small companies and one of the things we also announced yesterday was a cash-out arrangement for . . .

JONES:

Small business, yes.

PRIME MINISTER:

For small enterprises who are not yet paying tax but are expending money on research and development and that particular announcement will be warmly welcomed by hundreds of very small enterprises who have got some good ideas.

JONES:

There’s a magnificent Australian technology showcase here in New South Wales which I know the Federal Government contributes to. Just on that $905 million that go to postgraduate students over the next five years to encourage them to complete their postgraduate courses and talk that it will help 240,000 students or potential postgraduate students and you said yesterday repayment on a loan would be deferred until the student completed his or her second degree and started earning income. How much income have you decided would trigger the repayment process?

PRIME MINISTER:

Alan it’s essentially going to be the same as the HECs arrangement, first degrees at universities and you have to be earning over . . .

JONES:

$22,000.

PRIME MINISTER:

$22,000 odd, I mean there’s a sliding scale and it will essentially be the same. You start to pay when you get to a certain level and as your income rises then you pay a bit more. It’s a pretty fair arrangement and it’s deferred, there’s no interest on it although it is, the obligation is indexed for inflation. It’s a very good system and it’s one that I now hear very few complaints about except from the brigade who still believe that everything should be completely free.

JONES:

Can I ask you a couple of questions about this wretched Business Activity Statement which is due on Sunday, February 4? Does that mean for business that they’ll have to have it in by Friday since Sunday isn’t a business day, or is it the next business day, Monday? When is the due date?

PRIME MINISTER:

Well, it’s administered by the Tax Office, not the Government. My understanding is that they’re not going to sort of put the meat cleaver down if you don’t have it in exactly on the same day. But I mean they really should have time . . .

JONES:

I think the meat cleaver’s a good image Prime Minister.

PRIME MINISTER:

Beg your pardon?

JONES:

The meat cleaver is a good image. I mean the table of contents of this wretched thing is more than five pages and the instruction booklet, 148 pages . . .

PRIME MINISTER:

It is and I’ve said a number of times and I’m very happy to repeat it on your programme that we are closely looking at how people are handling the compliance of this and yesterday over lunch, before I made my speech I had the opportunity of talking to the heads of a number of business organisations to get their views on how their members large and small were coping with it and the views were very mixed. I mean many of them, a number of them said to me, “oh look it was, the first one was difficult, people have now got more used to it and we don’t want you to change it all because they’ll have to relearn how to do it”. Others said, “well there are still some ongoing problems”. I am very interested in this issue and I am not going to allow a situation where there are ongoing areas of legitimate complaint, particularly by small business, but we have to get the next statement in and the Government in consultation with the Tax Office and others will be looking very closely about whether there are areas where you can further simplify it but without of course robbing yourself of the capacity of getting the information you’re entitled to have under the new system. But . . . .

JONES:

It was always going . . .

PRIME MINISTER:

There was always going to be, there were always going to be some challenges in adapting to the new system. I made that clear back in July of last year and you can’t go over to a huge new system like this without there being some challenges, but gee the inflationary impact of the

GST’s been less than we predicted and overall it has gone remarkably smoothly.

JONES:

Well can I ask you that final question on that before we go to the news because February 1, today’s the 30th, February 1 if we’re to believe everything a tank of petrol will go up by, because the excise goes up and then there’s a GST on the excise. You’ve been under significant pressure to waive that component, that is the GST component of the excise. Are you going to stick to your guns and see that this just moves into place and petrol as from February 1 will go up by the excise plus the GST?

PRIME MINISTER:

Alan the answer is that we looked at that before Christmas and you’re looking here at an increase of around 1.5 cents/litre. We looked at that before Christmas and we decided that it was better, a better investment in the future of Australia and better for Australian motorists if we put $1.6 billion into additional road funding.

JONES:

But it is a tax on a tax.

PRIME MINISTER:

Alan, you know I understand that if you could do both you would be very popular. But we had to make a choice, $1.6 billion into road funding or allow this, or waive this excise increase.

JONES:

So you’ll wear the electoral fallout?

PRIME MINISTER:

Well Alan you wear the electorate fallout no matter what you do.

JONES:

To preserve the Budget surplus?

PRIME MINISTER:

Well no, it’s not as simple as that. Well we certainly, having decided to spend $1.6 billion on roads to then go ahead and spend roughly the equivalent of that, or perhaps a little bit more on waiving this excise increase, to do that, well to do both would be financially irresponsible….

JONES:

We’ve got to go to the news. We’ll talk again.

PRIME MINISTER:

…that’s a better long-term investment.

JONES:

Thank you for your time.

PRIME MINISTER:

Thank you.

[Ends]

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