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Treasurer discusses demographic challenges; economy; Commonwealth Grants Commission; unemployment; and Job Network.



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THE HON PETER COSTELLO MP Treasurer

Interview with Jon Faine ABC, 774

Thursday, 4 March 2004 8.30am

SUBJECTS: Australia’s Demographic Challenges; Economy; Commonwealth Grants Commission; Unemployment; Job Network

FAINE:

Today, the Federal Treasurer, and the Liberal Member of Parliament for the seat of Higgins is in our Parliament House studios, Mr Costello good morning.

TREASURER:

Good morning Jon, good to be with you.

FAINE:

The superannuation reforms that you announced last week have met with a mostly positive but not universally applauding commentariat. A couple of things from me before we get to our listeners calls, 9414 1774 and 1800 033 800. First of all, the Government says this will all depend on getting employers to change their attitudes and you may have to change discrimination laws. How do you change attitudes?

TREASURER:

Well I think that there was a tendency through the 80’s and into the 90’s of many of big businesses in particular deciding to restructure and throw a lot of people in their 40’s and 50’s out of work. And I am thinking perhaps particularly of the banks. As the banks were restructuring I came across in my electorate many bank branch managers in their 40’s or 50’s who had been more or less thrown out of their jobs. And I think as you look back on that period, and many of the banks have come to this conclusion themselves, that these were very valuable employees who had a good store of knowledge, they were able to make a good contribution. Some of the banks are now actively recruiting mature aged workers and we are attempting to sell to employers the benefit of maturer, more mature workers. They are reliable, they don’t tend to have as much sick leave, they have knowledge and they make good employees. And we are preaching that message and we will be engaging in discussions with employers to try and tell them of those benefits.

FAINE:

Are you going to change the laws about discrimination and compulsory retirement if it still exists in some industries?

TREASURER:

We changed the law at the federal level outlawing age discrimination in the Commonwealth Public Service and we are recommending that other Governments in their own areas follow suit. But I think it is important really to keep spreading the message that you are not on the scrap heap at 50. Now you raised the question of compulsory retiring age. I don’t think there should be a compulsory retiring age. Some people have thought that it is 55 because that is when you can get your superannuation. My message is 55 is too early. Some people say well it must be 65 because that is when you go on the aged pension. And I am saying, even if you are 65 and you may not want to continue working full time you should look at the possibility maybe of down-scaling and one of the initiatives we announced to keep people in the work force to 65 was to allow them if they wanted to go part time to draw down on their superannuation at the same time. These are lost years for Australia. We compare badly for keeping people in the work force between 55 and 65. We compare very badly with other developed countries.

FAINE:

The general response we got on talk back on this radio station Treasurer was people saying well if you give us a tax benefit we will look at it. But otherwise if it is going to cost us we won’t do it. That seems a very simple equation to me and irresistible logic. You have got to make it worth peoples while.

TREASURER:

I don’t think it will cost anybody. In fact the message I have is, the longer you stay in the work force not only the higher your income will be, but the less you will draw down on your superannuation savings. So there will be more left when you do fully retire. It is financial good sense. That is the point I am making.

FAINE:

But people were saying for instance if you give me a tax concession, if I am in my post 60 working years I want to be taxed at a lower rate because I am doing you a favour. I am still earning and paying tax when otherwise I could be drawing on a pension.

TREASURER:

Well my first message is people are doing themselves a favour. This is my message, it makes financial good sense for people. We do, we have introduced actually a reduction in tax for people over 65. And it is called the Senior Australians Tax Offset and if you are over 65 then you are eligible for a lower tax rate and for some people over 65 you don’t start paying tax until your income goes above $20,000. So there is a big tax incentive there after 65 and before 65 my message is you are on the same income tax rates as everybody else. But it actually makes good sense for individuals if they are up to it, some people may, their health may not be good enough to continue working after 55…

FAINE:

Indeed.

TREASURER:

…if you are up to it to continue working. Now the point I make at the end of all this Jon is life expectancy is increasing and it is now around 80. If you are going to retire at 55 you may have 25 years to live and that is a very long time, you know, unless you have got huge financial backing, and it is much better to try and stay in the workforce until you are 65, that means 10 more years of part time work and 10 less years of drawing down on your superannuation savings.

FAINE:

All right we will get to callers and we have plenty of them in just a moment. A few quick things from me on other topics. Peter Costello first of all, Mitsubishi at the Geneva Motor Show, the Global Head of Daimler Chrysler has dropped a bit of a clanger, a hint that Mitsubishi operations around the world are being reviewed and this has apparently raised the spectre yet again of closure of the Mitsubishi plant in

South Australia which would be a blow to the Australian car industry. Have you got a comment to make about that?

TREASURER:

Well, no one would like to see Mitsubishi to close. And I would urge Mitsubishi to do whatever it can to keep its operations in Australia. I would make this point that motor car sales in Australia are higher than ever in Australian history. Consumer sentiment is strong, interest rates are low and people are buying cars.

FAINE:

They are not buying Mitsubishis though.

TREASURER:

Well at the end of the day people are going to buy cars that give them good value. And that is why it is up to motor car companies of course to ensure that they have got good value going. But I would say to Mitsubishi that this is a strong economy with a good business environment and they ought to consider that very carefully.

FAINE:

All right. Meanwhile there has been another outburst from various Premiers heading in your direction. And in Victoria John Brumby has led the charge in particular against Queensland getting what he says is an unfair proportion of the GST carve-up. You have defended the position by saying well I am not personally in charge nor is the Prime Minister in charge of the State Grants Commission. It is done by an independent body. But surely the point stands, this is a very antiquated mechanism for divvying up huge amounts of money. Isn’t it time to look afresh at the formula used and the mechanism used to carve-up money between the States?

TREASURER:

Jon, can I just go back a step and explain how this is done because you know I think all of the facts ought to be on the table and I sometimes think that in their rush to make political points some of the State Ministers get a bit loose with the facts. The GST raises about $34 billion, will raise about $34 billion in 2004-05. Every last dollar of GST is received by State Governments. It goes to the State Governments, all of whom happen to be Labor State Governments. Now, every Labor State Government wants a larger share of the $34 billion than its other compatriot Governments, State Governments. And so, when these arrangements were entered into it was agreed unanimously between all of the States that this independent Commission would arbitrate the amounts between the States.

FAINE:

Yep.

TREASURER:

This Commission was not a new creation.

FAINE:

No.

TREASURER:

It was set up in 1933.

FAINE:

Yep.

TREASURER:

And that Commission sits down and says well you eight States and Territories, you are collectively entitled to $34 billion, we will sit down and we will arbitrate the amounts between you. And it is an independent Commission. I don’t set the amounts. What I do is I forward the cheques.

FAINE:

Now that is not being questioned. But Mr Brumby is saying, the mechanism by which they do their job needs to be overhauled because it is taking the wrong things into account and coming up with the wrong answers.

TREASURER:

Well Mr Brumby will be getting, let’s just put it on the record, over 7,000 millions of dollars in GST revenue.

FAINE:

And he points out that Victorians pay more in GST than they get back. And we are being dudded by more than a billion a year.

TREASURER:

Well he, by the way, doesn’t know what Victorians pay in GST. I know…

FAINE:

He quoted a figure yesterday of somewhere around 80 cents in the dollar.

TREASURER:

Well, what, he knows what comes through Victorian tills does he? No. Mr Brumby will be getting 7,000 millions of dollars. Now he says he should be getting more. Bob Carr says he should be getting more. Peter Beattie says he should be getting more.

FAINE:

No Mr Beattie in fact says I am very happy with the system which makes us all the more concerned in Victoria.

TREASURER:

Yes, Premier Gallop, Labor Premier Gallop says he should be getting more. Every State Minister says they should be getting more and so they have agreed to a process by which this Commission formed in 1933 would arbitrate between themselves. And I just want to put this on the record Jon…

FAINE:

Yes.

TREASURER:

…this is not an argument between the Federal Government and the State Labor Governments. This is an argument between the State Labor Governments. All of whom, and I can understand it, want a larger share of GST. But between them they are getting 100 per cent. And the argument is between them as to which proportions.

FAINE:

Understood. You have still not really dealt with my question. Do you think there is any need to review the mechanism and the formulas used as they bicker amongst each other or do you think it is working just fine?

TREASURER:

If the States want to change the formula I wouldn’t stand in their way. Of course I wouldn’t. The States have set the formulas.

FAINE:

So if enough of the States want it changed it can be changed as far as you are concerned?

TREASURER:

Absolutely. I didn’t set the formula. The States have set the formula. They have agreed on the formula. If the States agree on changing the formula then the Commonwealth Grants Commission will apply it. But again Jon, the States cannot agree on changing the formula because they all want a larger proportion.

FAINE:

Okay.

TREASURER:

So what you have got here is you have got a bickering going on between eight States, Labor State Governments and Territory Governments. And can I just point out I do find it wryly amusing on the way through, what are they bickering for? More GST! I thought the Labor Party was against the GST.

FAINE:

Yes but once you have got it you may as well try and make the most of it we all know that. Peter Costello, let’s get to callers. There’s plenty of them. Marcus in St Kilda first up, and good morning Marcus.

CALLER:

Good morning Treasurer.

TREASURER:

Good morning Marcus.

CALLER:

The Commonwealth Statistician Report (inaudible) of the labour force shows that we have a real unemployment figure of 2 million chasing around 100,000 jobs. And not only that your Government pays the dole to 1½ million people. So why are you trying to get more people into the workforce when there clearly are no jobs? And statisticians believe that that won’t change until 2020.

TREASURER:

I think our Government pays unemployment benefit or the dole to around 600,000.

CALLER:

No it doesn’t. It’s because you have got five different unemployment…

TREASURER:

No, I am sorry. We have got a thing which is called NewStart which is unemployment benefits and

unemployment benefits are paid to around 600,000 people and unemployment as measured by the Commonwealth Statistician at the moment is about 5.7 per cent. That is the measure in Australia which…

FAINE:

That’s a percentile but Marcus lets not argue about the statistics…

TREASURER:

Let me go on…

FAINE:

(inaudible)

TREASURER:

Let me go on…

FAINE:

The issue is there are more people unemployed than jobs so why ask for more people to go looking for jobs?

TREASURER:

Well, let’s go to the issue. I think we ought to encourage more people to get into the workforce.

FAINE:

But there are no jobs…

TREASURER:

Yes I do.

FAINE:

…is Marcus’ point.

TREASURER:

Well no. Well hang on. Unemployment now is at twenty year lows. If you were to speak to many employers, many employers say that there are labour shortages. I think in Melbourne the unemployment rate in Melbourne is a lot lower than 5.6 per cent. It used to be thought that full employment was 5 per cent Jon. So we are getting, and in Melbourne it would be actually lower than 5 per cent, it would be higher in regional areas. So we are getting pretty close to full employment and the second part of what I have done in this demographic study, and this is the really important part, is we believe that the number of people of workforce age in Australia is not going to grow. The economy will grow but the number of people of workforce age will not grow and that I think means that we could actually in twenty, or thirty, or forty years be looking at labour shortages.

FAINE:

So you don’t think that the older workforce will be taking jobs off younger applicants?

TREASURER:

No, I don’t, I don’t, and I think that is one of the reasons why the older workforce got a raw deal in the 1990s, a lot of people said, well get them out because they are taking younger people’s jobs, I don’t think

that is true.

FAINE:

On 774 ABC Melbourne and ABC Victoria statewide, Jon Faine with you with Peter Costello the Federal Treasurer, Clive from Delahey, good morning Clive.

CALLER:

Good morning.

FAINE:

Go ahead.

TREASURER:

Good morning.

CALLER:

I’m a 48 year old, and I have been out of work for over two years, I have got many years business and IT experience, now I want to work, but I can’t get work.

TREASURER:

Well, this is the situation that we have really got to help and work to address, we are putting in place some Labor market programs through the Job Network to help more mature workers…

CALLER:

I have looked on the internet and there in nothing specific for me.

FAINE:

And in particular it would be difficult in the bush wouldn’t it Clive?

CALLER:

Well, Delahey is not in the bush, I am in the outer suburbs of Melbourne near Keilor.

TREASURER:

…and 48 for me, I don’t believe is even a mature age worker these days, I think it is somebody in the prime of their middle age. And I agree with you, we have got to work to keep our economy strong to create more jobs and we have got to have a program of encouraging employers to take people on in the forties, I absolutely agree with you, this is what I am talking about, this is my message to employers today…

FAINE:

But with IT jobs Treasurer, being outsourced to India, there is massive unemployment in the IT industry and that is not about to change, is it?

TREASURER:

Well…

CALLER:

I am prepared to pack supermarket shelves even, you know.

FAINE:

Anything.

TREASURER:

Sure, yes. Well, I’ll get in touch, if you are prepared to do anything I am sure that we could get you in contact with Job Network provider who would have jobs that are going.

CALLER:

I have already done that.

FAINE:

And indeed you have got…

TREASURER:

If you want to…

FAINE:

…network provider, haven’t you Peter Costello, because it is as recent reports have shown, it is not doing a particularly good job?

TREASURER:

Well, I will just say, if the gentleman leaves his name and his number off air, we will get a Job Network provider onto him today.

FAINE:

Yes, but the overall issue, we’ll do that for Clive, the overall issue is there are many Clives in many places.

TREASURER:

Sure, and Jon, that is why we have got to work at keeping our economy strong. You won’t get jobs in a weak economy, one of the reasons why unemployment has fallen is there has been good creation, we don’t yet have work for everybody in our society, but we ought to work at getting it, absolutely we have got to work at getting it.

CALLER:

It hasn’t fallen, unemployment hasn’t fallen, for me.

TREASURER:

Well, it hasn’t for you, but there are 1.3 million more Australians in work today than there were eight years ago, and if you are prepared to do anything…

CALLER:

I am already a Job Network member…

TREASURER:

…including labouring jobs, and I don’t know if you are interested, but there are chronic shortages in some of the horticultural areas. We will get a job network provider to try and help you, very happy to do that.

FAINE:

Alright Clive, I will put you back to the producers and we will get you in touch with Mr Costello’s staff, although the point remains that it is more than just Clive’s problem. Jacinta in (inaudible), good morning Jacinta.

CALLER:

Good morning Jon, good morning Peter.

TREASURER:

Good morning Jacinta.

CALLER:

My question is, I am in my early forties, have been retrenched and redundant and found it very difficult, have also worked in the recruiting industry, how are we going to have employers change their minds on older members of the community? I don’t consider myself older, but when you are looking at people who have just finished university, we don’t have a degree, not a high percentage of us have a degree, and that is generally is a main criteria these days. So, how are we going to go about changing that thought process?

TREASURER:

Well, I am not leading aside the question of retraining, obviously that is part of the mix, but I don’t think you need a degree to get good and satisfying jobs…

CALLER:

I would agree with you there.

TREASURER:

…and I think this is a big part of the educational process if I may say so.

CALLER:

If I could just interrupt for just a minute, I do agree the fact that you don’t necessarily have to have one, but that depends on the person themselves, on their determination as to whether they are going to have the situation beat them or not, but generally speaking, you need to have a degree, if you don’t have a degree, I have had resumes go across my desk, and when they are sorting through them, they want people, if they have got to differentiate between the two, the person who has the degree gets the job and the other one doesn’t.

TREASURER:

Yes well, look, I don’t want to put down degrees because degrees generally help people, but there are a lot of occupations where degrees are not required, some of which we have shortages, and I don’t think we want to overlook TAFE training in this area. I think TAFE gives people skills and it gives them different abilities, but I will come to your point Jacinta which is this. One of the reasons why I am talking about this issue now, is to educate employers. Absolutely, that is where I started off, and there will be employers who will be listening to this, and I would say to them, people in their forties, by the way are not old, nor are people in their fifties, nor are people in their sixties in my view, particularly given the fact that we are all going to live until we are eighty most probably…

CALLER:

At least.

TREASURER:

…and I think to those employers, I think you get a different set of skills with somebody who is of greater years, you get reliability and you get experience and I think they have got to think very carefully about their mix of work.

FAINE:

Peter Costello, one of the reasons you can’t say everybody should get a degree is because the cost of getting a degree has gone through the roof under your government, under John Howard’s Government, hasn’t it?

TREASURER:

No, it is because there are many worthwhile jobs that don’t required degrees, but…

FAINE:

(inaudible) people with degrees, I mean you are stuck between a rock and a hard place here, aren’t you?

TREASURER:

…hang on, no Jon, hang on, employers (inaudible) people to (inaudible), let me tell you. It is very hard to get a roof tiler in Australia at the moment. It is pretty expensive to get a plumber at the moment, and these are skilled occupations which don’t require degrees but where I think we probably have shortages. Now, in some areas, yes, people need degrees, but this idea that everybody in society has got to have a degree, maybe it is the reason why we have got skills shortages in Australia. We are still, by the way, bringing in a lot of people from overseas with skills because we have skills shortages, we have skills shortages.

CALLER:

But Peter, if I could just ask something here. If you are in your forties and fifties you don’t want to be running around doing rooves. My husband is a sub-contract carpenter, he is in his fifties, he is a young fifty year old, his body physically can’t keep up with the demands of doing a physical job like that…

FAINE:

So what are his alternatives Jacinta?

CALLER:

Well he doesn’t have many alternatives, and that is the reason why I will probably actually become the sole breadwinner because physically, yes you are right, you don’t need a degree to go into a trade, you need training and you gain your experience through the years. We lose our older tradespeople because their bodies can’t keep up with it, not because of their mind. But if you are building houses or if you are running on rooves or digging ditches, you can’t really physically do that much past your fifties, not because you don’t want to, but because your body won’t allow you. So, I am not so sure of that is a really valid argument Peter, that…

TREASURER:

No, I was putting it like this, Jon was saying you can’t get a job if you don’t have a degree, and I was saying lots of people can get jobs if they don’t have a degree, and you know, I would recommend to lots of young people that are coming through school to think about getting a trade or TAFE training, that’s the proposition I was putting there. I agree with the other part of your argument by the way, that as people get older obviously they don’t want to do physical and manual work to the same degree, and we have got to have options for those people. A lot of people in the building trade as you said, move into sub-contracting, that is one of the things that they do. Now, the only point I am putting here is, we have got to

think about this proposition, if everybody is going to retire at fifty…

FAINE:

Yes.

TREASURER:

…in our society, I don’t know who is going to pay for all the retirees of Australia. Let me give you one figure Jon…

FAINE:

I do want to get another call in.

TREASURER:

…yes sure, at the moment there are five people of working age for every person above 65.

FAINE:

Yes.

TREASURER:

And in 30 and 40 years time, there are going to be two…

FAINE:

Yes, and it is going to get very, very difficult. Alright, let’s move on.

TREASURER:

…now, those two are not only going to have to support themselves and their education needs and their health needs, but they are going to have to support people in retirement and as we get healthier we ought to think about extending our working lives…

FAINE:

Let’s try and get one more caller in.

TREASURER:

…fifties and sixties.

FAINE:

Let’s get another caller in before the news, and Howard from Heidleberg, that will be you.

CALLER:

Mr Costello, I am wondering why you didn’t opt for the part of encouraging early savings towards retirement, because I am aged 66, and I am quite sure that we made, we retirees make a big contribution both to the community and sometimes essentially in family life, which we couldn’t do if we were earning money, and I am just wondering why you as Treasurer, didn’t opt for increasing savings towards personal retirement funding?

TREASURER:

Well, we actually have introduced some initiatives to encourage savings, one of which is a government co-contribution for low and middle income earners. If you are prepared to put $1000 into superannuation the Government will match it, a co-contribution. Now for people who are still in the workforce and are

thinking about building this (inaudible) lives, I would recommend it, I think it might be a pretty good deal.

FAINE:

Alright, Peter Costello The Age newspaper and The Sydney Morning Herald ran an opinion poll that showed that if there was an election last weekend in Australia, you would be probably becoming the Leader of the Opposition rather than continuing to be the Prime Minister in waiting. Do you rule out a challenge to John Howard before the next election?

TREASURER:

Jon let me tell you, I am working to win the next election, at the moment I am working to do another budget and keep Australia’s economy strong…

FAINE:

Well if you want to win the next election, rolling John Howard may the best way of doing it.

TREASURER:

…well, nice try Jon, but I am very focused on what I am doing at the moment.

FAINE:

Do you rule out a challenge before the next election?

TREASURER:

Jon, you know, I don’t go into these sorts of discussions, ruling things, ruling out. I’ll tell you what I will rule in, I am ruling in doing the next budget, working to keep Australia strong and I will be trying to keep good government going in Australia.

FAINE:

Thank you for your time this morning, I am grateful to you and thank you to our callers.

© Commonwealth of Australia 2000