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Treasurer says ALP plan to use Future Fund to finance national broadband policy is economically irresponsible.

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Thur sday 22 March 2007

Treasurer says ALP plan to use Future Fund to finance national broadband policy is economically irresponsible


TONY EASTLEY: While Opposition leader, Kevin Rudd, enjoy s a thumping lead over the Government in the opinion polls there's one area in which the Coalition still leads Labor - public perception about who is better placed to manage the economy. 


It's the Government's trump card in a diminishing pack and yesterday it seized an opportunity to attack Labor over Kevin Rudd's plan to finance a new national broadband system. 


Labor says it will pay for it by dipping into the fund set up to cover public service superannuation liabilities. 


Federal Treasurer, Peter Costello, calls it a "smash and grab raid" on savings. 


Mr Costello is in our Canberra studio with our chief political correspondent, Chris Uhlmann. 


CHRIS ULHMANN: Peter Costello, good morning 


PETER COSTELLO: Good Morning Chris. 


CHRIS ULHMANN: What's wrong with building a national high-speed Internet system? 


PETER COSTELLO: There's nothing wrong with a national high speed Internet system and as you know both Telstra and Optus have plans to do that at the moment and the Government has set aside money to ensure that rural and regional Australia gets a fair go. 


What Labor is proposing to do is to take that money away from rural and regional Australia - that's $2 billion - and then it's planning to raid Australia's future fund in order to put money out there in into something which really is being attended to by the private sector, really which can be funded by the private sector, but worst of all, will take money away from future generations just at a time when we're facing the aging of the population and that's what's irresponsible. 


CHRIS ULHMANN: Yeah, but you agree that this idea is a good one, now it's an argument about how it's funded, how it's put together. 


PETER COSTELLO: It should never be funded by taking away the savings of future generations. 


Let me tell you, if you take the money out of the future fund now, if you spend it, you're still going to have a $140 billion of liability in 2020, except you won't have the money to pay them. 

And just at a time when the population's ageing, when we've got fewer people in the workforce, when the demands are greater, you're going to have no provision, or less provision to actually meet those liabilities.  


CHRIS ULHMANN: But we're talking about money that was locked up in Telstra shares, why didn't you just sell those shares and apply it to a national broadband system? Why isn't the community today benefiting from that money which is a public asset? 


PETER COSTELLO: Yeah, see this has always been the Labor way, sell off an asset and flog the proceeds. 


CHRIS ULHMANN: But you sell, you've sold off assets. 


PETER COSTELLO: No, no you see we haven't, you see. What we've done is the proceeds have been locked away. 


CHRIS ULHMANN: Only part of the proceeds from one part of one sale. 


PETER COSTELLO: No, no, the proceeds have been locked away, to fund future liabilities to 2020.  


What Labor wants to do is take the proceeds and spend them. 


It's what Labor did when they were in office, I warned Australia, that Labor couldn't be trusted with money, they're like a bear with a honey pot. 


They see this fund, which, has been set aside to set Australia up for future challenges, and they're breaking into it, trying to consume that honey for their own electoral purposes. 


CHRIS ULHMANN: They're talking about part of it, they're talking about the Telstra shares and your own Act allows you to make directions on those shares, your own Act in fact locks up those shares for longer than perhaps the guardians of that system would like. 


PETER COSTELLO: Well can I make this point... 


CHRIS ULHMANN: So you can make directions on those shares. 


PETER COSTELLO: No, no, no. The direction that's been made is Telstra shares will not be sold for two years and the reason for that is a whole lot of people bought Telstra instalments and they had to have some assurance that the market wouldn't be flooded, but that direction doesn't allow... 


CHRIS ULHMANN: But that's constraining... 


PETER COSTELLO: It does not allow anybody to come along and say we direct the future fund guardians to put their money here, here, here and fund my election promises, that's not what it allows and in fact here's the critical question for the Labor party - what are they going to do in order to construct the future fund guardians to pay for their election promises? 


They will have to legislate, they will have to legislate, because they're taking away some things been locked for future generations. 


CHRIS ULHMANN: Well your own legislation says the Government's intention is that these directions will be issued only in light of material changes in the investment environment faced by the fund, or in the national interest. 


The Labor party would argue that they're doing something in the national interest 




CHRIS ULHMANN: And they're making an investment in the future. 


PETER COSTELLO: No, there's provision which has been exercised to say that Telstra shares can't be sold for two years, that's because the market was concerned they'd be swamped. 


There is no provision to say what the future fund will invest in and there is no provision to direct the future fund to fund a political party's election promises. 


None whatsoever, the only way this can be done is with legislation. 


CHRIS ULHMANN: But the fund has a bucket of money, it will make investments. Why shouldn't it make some investments in the national interests and this as we agreed at the outset, is in the national interest>? Australia does need a high-speed Internet system.  


PETER COSTELLO: Because this is taking money out of the fund, it's taking money out of the fund. 


If you take capital out of the fund and you take earnings out of the fund, by the time you get to 2020, you're going to have $140 billion to pay of liability, without the money to pay it. 


You're going to be in a situation where got an age population, where you're health bill is skyrocketing, where your pharmaceutical bills are skyrocketing and you're going to have a $140 billion which we could've coped with, but we won't cope with because Kevin Rudd back in 2007 said I've got an election problem, I can't pay for my policies, I'm raiding the future to do that. 


CHRIS ULHMANN: Well you can't know what's going to happen in the market, you can't be sure what will be in the fund in 2020 exactly, can you? 


PETER COSTELLO: Well we have an actuarial report year after year. 


CHRIS ULHMANN: And it changes every year. 


PETER COSTELLO: Sure, it grows year after year, but I can tell you this Chris... 


CHRIS ULHMANN: And as the market goes backwards... 


PETER COSTELLO: No, well... 


CHRIS ULHMANN: It may well go backwards for a while. 


PETER COSTELLO: Sure if the market goes backwards it won't grow, but let me tell you this, if it's got $2.7 billion less in it, if it's going backwards, it will go backwards by a lot more. 


Chris, it stands to reason, let me tell you, if you have a bank account, you're earning interest on it, the interest rate might be higher or it might be lower, but if you take $200, 000 out of that bank account, you're going to earn less in interest and if you take $2.7 billion out of a future fund, you're going to earn less in dividends or interest. 


CHRIS ULHMANN: And if you just sit on money in the bank, you may not go anywhere and your own broadband advisory group says that a broadband access could produce benefits of $12 billion to $30 billion a year, so making a sound investment with that money could in fact reap great dividends. 


PETER COSTELLO: Both Telstra and Optus have plans to build high-speed networks. 


CHRIS ULHMANN: And they've been arguing over it for ages. 


PETER COSTELLO: And the only argument they've got is, whether they should let each other use it and the terms and conditions. 


Along comes somebody who doesn't understand economics - Kevin Rudd - and Kevin Rudd says "Here's this big honey pot, I want to get elected, let me raid this honey pot and let me put this out there as a way of getting votes." 


Well he can raid the honey pot today, but let me tell you, in 10 and 15 and 20 years time, when Australia faces its greatest economic challenge, the ageing of the population, because this bear has raided the honey pot, Australia will not be in a position to meet that great challenge. 


It is economic irresponsibility of the first order. 


CHRIS ULHMANN: Peter Costello, thank you. 


TONY EASTLEY: And the Federal Treasurer, Peter Costello speaking with our chief political correspondent, Chris Uhlmann in Canberra.