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Tuesday, 30 November 2004
Page: 27

Senator BRANDIS (2:05 PM) —My question is directed to the Minister for Finance and Administration, Senator Minchin. Is the minister aware of long-term fiscal challenges facing Australia as a result of demographic change? Will the minister outline what strategies are in place to deal with these challenges and what further strategies might be adopted? Is the minister aware of any alternative policies?

Senator MINCHIN (Minister for Finance and Administration) —I thank Senator Brandis for that very pertinent question—much more pertinent than those coming from the opposition. On 9 October the Australian people decided that we were the superior economic managers of this country compared to the Labor Party, and they did that largely on the basis of our focus on the long-term national interest. It was as a result of the long-term approach that we take that a couple of years ago we commissioned the Intergenerational Report, which focused on the challenges facing this country over the next 40 years by the ageing of the population. Then in June this year, the Treasurer asked the Productivity Commission to report on the impacts on the economy of this process of ageing. The commission released its very important draft report last week which reported extensively on the likely impact of ageing on the economy and on government budgets, both state and federal.

It projected that the impact of ageing on government budgets would be quite significant. It projected that by 2044, state and federal governments would experience a fiscal gap equivalent to seven per cent of gross domestic product every single year, which is the equivalent of $56 billion in today's dollars every year. The cumulative value of that gap, if you add it up over the next 40 years, would amount to $2.2 trillion, if there were to be no policy change from today in response to this challenge of ageing. The commission also makes the point that the great bulk of the burden of ageing will fall on the Commonwealth, because we have greater responsibility for the greatest growth area for spending—that is, health—while the states have responsibility for areas like education, which will actually become cheaper relatively.

The point here is that those figures are based on there being no comprehensive policy response. Clearly there has to be a very comprehensive policy response. That is why we need to improve work force participation by reducing taxes for older workers; encourage people to move from welfare to work; boost productivity by reforming workplace relations; sell Telstra; and invest in transport infrastructure. And we have got to control things like expenditure on the Pharmaceutical Benefits Scheme. Those are the sorts of responses that we have got to make if we are to meet this extraordinary challenge, particularly for the federal government.

One of the most incomprehensible responses to this very significant Productivity Commission report came from the Leader of the Opposition, who had the audacity to say that it was a vindication of one of the most irresponsible policies the opposition took to the last election—that of the so-called Medicare Gold. In fact, Medicare Gold was a policy that purported to remove any discipline in relation to health care for people over 75. There were going to be no price signals and no account for clinical need. My department, the department of finance, estimated that it would cost $5.8 billion by 2007-08 and grow by 10 per cent a year. So it would massively exacerbate that fiscal gap. Indeed, that point was made very well by Mr Lindsay Tanner, one of the many members of the `shadow' shadow cabinet that we now have opposite. In one of his first interviews just last week he said:

I think, for example, the idea that Simon Crean put forward of a future fund and dealing with the looming problem of the ageing population—the pressure on the federal budget was contradicted by Medicare Gold, which would add a very substantial burden to future federal budgets.

Mr Tanner recognised the massive problems involved in Medicare Gold—how totally inconsistent it was with any comprehensive approach to dealing with this problem of ageing—and for his honesty he appears to have been banished to the backbench. So you are left with this talentless lot over here. All the talent has gone to the backbench, to the `shadow' shadow cabinet. We want to see a responsible opposition which is going to join us in dealing with these problems of ageing. (Time expired)