11 March 2015
Transcript - #2015051, 2015

Interview with Linda Mottram, 702 ABC

LINDA MOTTRAM:

Treasurers for a few years now have been releasing Intergenerational Reports on the odd occasion – every five years or so, looking forward 40 years. Now, as Stephanie says on the text, ‘I wonder how accurate we would have been in 1975 if we’d looked forward to 2015?’ It’s a very good question isn’t it Joe Hockey? Good morning.

TREASURER:

It’s a great question. How are you?

LINDA MOTTRAM:

I’m very well, how are you?

TREASURER:

Good.

LINDA MOTTRAM:

Nice to see you, thank you for coming back. We had a date actually didn’t we?

TREASURER:

We did…

LINDA MOTTRAM:

Because last time you were here we just got onto housing, I think?

TREASURER:

And we ran out of time.

LINDA MOTTRAM:

And we ran out of time.

TREASURER:

But it’s very good of you to have me back. And I kept my word, I said I would come back. So, here I am…

LINDA MOTTRAM:

Well done you. [inaudible]

TREASURER:

Thank you.

LINDA MOTTRAM:

Let’s start with that and we’ll get to the Intergenerational Report, but just on housing, you’ve talked about this idea – you say it should be talked about, it’s not going to be policy necessarily –  dipping into superannuation if you’re a youngster trying to buy a first home. And the main criticism seems to be: look, that’s all well and good but if everybody dips in, it’s just going to drive up the price; the problem is on the other side of the equation. Isn’t that right?

TREASURER:

I am most concerned about the accessibility to housing for first home buyers. Back in the mid-80s, the cost of a home to the average household income was around 2.7 to 2.8, now it’s about 4.1. So, it’s getting harder – it is getting harder for people to be able to buy their first home. Now, you’d say, well, naturally enough we should increase the stock. In the last year alone across Australia, the amount of housing stock increased 13 per cent on the previous year. In New South Wales actually, to their great credit, they actually released a lot more opportunity for people to buy homes and that stock increased by 20 per cent in the last 12 months. So…

LINDA MOTTRAM:

It’s still not keeping up, is it?

TREASURER:

It’s not keeping up and you know, when I speak with young – particularly young people and also their parents and grandparents about how it’s going trying to get into a home that you can own, they’re very frustrated. Now, of course, one way to do it is to have even more stock – that’s also important, but it is just difficult for people to be able to get a deposit if it’s a five per cent or 10 per cent deposit; that’s a lot more cash you need to have upfront; now, together with much higher stamp duty than perhaps our parents had many years ago.

LINDA MOTTRAM:

But dipping into super isn’t going to make any difference in terms of affordability is it? It is just going to drive up prices?

TREASURER:

Well, obviously not everyone would be able to do it because all the demand for housing is certainly not first home buyers. And, of course, one of the other challenges a lot of young people have now that previous generations did not have was that if they went to university, they’ve also got university fees in terms of loans – university loans, which were first introduced by a previous Labor Government. So, those – that’s a hard point to start to get into your first home. Now, the reason why I raised it in the context of the over-arching Intergenerational Report is because we are living longer, something that should be celebrated. And because we are living longer, we’ll be drifting in and out of the workforce on numerous occasions with many careers. Now, the question will be, you know, the stereotype is that we’re young, we study and go to school – maybe do a trade or go to university, then we work during a set number of years and then we retire – retire usually around 65. Well, if life expectancy is going to the mid-90s or the late 90s, it’s quite obvious that you can’t have a life that is going to be as fixed as what I’ve just said. So, it’s going to change and therefore, super may well act as a shock absorber for various periods during people’s lives because that is their savings that arguably they should be able to access.

LINDA MOTTRAM:

Sure, but doesn’t it – does it really change the fundamental purpose of super in any way? I mean, it might act, I can’t get my teeth in, might act as a shock-absorber at various times, but don’t you still want it to be there principally for that reason, not for a range of other reasons, as Peter Costello….

TREASURER:

Sure, and it’s true but what this Intergenerational Report clearly identifies is that today, four out of five people over the age of 65 are eligible for the age pension and will claim the age pension. In 40 years’ time, the ratio is exactly the same – four out of five – even though there’s been massive taxation concessions for superannuation, even though people are increasing their superannuation, the number of people who will still be accessing the age pension will be the same in 40 years as it is now and you’ll have an ageing population. So, now, the composition of that – to be fair to composition, is instead of getting a full pension – there’ll be fewer people getting the full pension, more people getting a part pension, but the challenge is it all needs to be funded, including the taxation concessions for superannuation.

LINDA MOTTRAM:

Okay, how do you respond to the criticisms of the assumptions in the Intergenerational Report? And I’m not going to pretend to be an economist – I am not, but certainly Lenore Taylor ran through them this morning for us and said the assumptions on pensions, on hospital costs, which it assumes the Federal Government won’t pick up anymore of those over time, the assumptions on taxation and bracket creep – I think these are issues that Peter Costello also went to last night; how do you answer that?

TREASURER:

You have to build in assumptions. I mean, the assumptions…

LINDA MOTTRAM:

But not too heroic…

TREASURER:

No, no, no, and of course, we haven’t because they’re actually very similar to the last Intergenerational Report delivered by Wayne Swan and the ones before delivered by Peter Costello. So, the overarching – the underlying assumptions about economic growth and so on are actually very similar. In terms of policy, it’s based on the policies that [inaudible] particular time and obviously that’s the impact of our policies – you can see that in the Report. But, the most robust figure – and when you’re looking 40 years out, I mean, look…

LINDA MOTTRAM:

 [Inaudible]

TREASURER:

…of course it is, but this is meant to get a conversation going in the community, that is the intention, and what is the most robust figure in the Report is the expected longevity of Australians. The fact that by the middle of this century, a little child born could expect to live to around 100. Now, people say 40 years is a long way away. You go to a childcare centre and you look at all the kids and in 40 years’ time, they’re going to be younger than I am today. So, what sort of world are we handing to those children? And that’s the question we’re asking.

LINDA MOTTRAM:

Yeah, sure. So, in that case, did you make a mistake in tying it so closely it seems to to 2014 Budget? I mean, it just seems to me that that was a political agenda on your part.

TREASURER:

No, I was intrigued with that because under the Charter of Budget Honesty we actually have to link it to government policy and it’s based on Budget projections. So, Peter Costello used it to make the point that the PBS was unsustainable – Pharmaceutical Benefits Scheme. He argued for change. Wayne Swan said, ‘don’t worry, everything will be fine about the Budget’, but, part of it is required under legislation to deal with the state of the Budget and the pressures on the Budget. That’s why it’s part of the Charter of Budget Honesty. So, when people say you shouldn’t have had any reference to government expenditure under there, well that’s clearly not the case and it’s certainly not the precedent.

LINDA MOTTRAM:

Okay, the Federal Treasurer Joe Hockey is here; Member for North Sydney, of course – lives in our midst [inaudible]

TREASURER:

I was really, I was quite shattered to hear about Stuart Wagstaff this morning. I mean, he was a friend of mine. I didn’t hear about it until this morning and I think Australians will really – he was part of a generation that was really an elegant and decent generation and he was such a wonderful man. I spoke with him quite a bit. Given I am the Member for North Sydney, he was a member of my community, I just wanted to make note of my sadness about that.

LINDA MOTTRAM:

 [Inaudible] Stuey Wagstaff, as my mum like to call him. She felt like she knew him even though we lived in Perth and we only ever saw him on the telly.

TREASURER:

Well, I remember Blankety Blank, but it wasn’t just that. He was a wonderful stage actor. On screen and off screen he was the same sort of person – charming and very elegant.

LINDA MOTTRAM:

Yes, indeed, elegant is a great word for him. Joe Hockey is here – the Federal Treasurer. Should we get back to [inaudible]

TREASURER:

Of course.

LINDA MOTTRAM:

I just want to go back to some of the assumptions and forgive me…

TREASURER:

You’re right…

LINDA MOTTRAM:

I’ll just try and get this right. One of the significant changes is your decision to cut spending on hospitals; beyond 2017-18, the Commonwealth Grants to states for hospitals are going to increase only in line with the population and the Consumer Price Index, correct?

TREASURER:

Yeah, yeah.

LINDA MOTTRAM:

But the cost of running hospitals is continuing to climb; where is that money going to come from?

TREASURER:

Now, this is a very good question. Now, we went to the last election saying we would maintain the commitment over four years, but the additional add-ons that the previous Government had were totally unfunded – just like Gonski in education, it was totally unfunded. And then the National Disability Insurance Scheme was partially funded but certainly not totally funded – all these… and defence and a range of other things. So, we kept our promise. We increased it by eight to nine per cent per annum over the next three years from now on, but, I wrote to all the states and said, ‘do you want to participate in this because this a whole of Australia Intergenerational Report’. Now, all the states for various reasons came back and said, ‘no’, and that is a bit frustrating because it would have been a much more complete picture but they do run the hospitals system. Now, I would urge the states to think about having their own Intergenerational Reports because, of course, the biggest hit to their bottom-line over the next 40 years is unquestionably going to be the massive increase in hospital services and in some home and community care services, as well.

LINDA MOTTRAM:

I read somewhere that you’d spent $380,000 on focus groups ahead of the release of the Report; why?

TREASURER:

We obviously – I think it’s important to do research. I think it’s important to ask people what they’re expecting in a report like this. I mean, these sort of reports can be – as you said – very technical; they can be droll. We want people to engage in the conversation.

LINDA MOTTRAM:

So, what did they say?

TREASURER:

Australian’s are up for the conversation. They’re not particularly enthusiastic about someone standing on a soap box in Canberra and telling them that this is their future and this is how they’re going to live. They want to be part of the conversation. They want community engagement. They want to be able to provide direct feedback. They want a say in the policy-making process. Australians know, when you go through the issues, they know – look, I think Australians instinctively know that we want to have conversations about our future – that we want to participate in a policy discussion about the sustainability of superannuation, the quality of healthcare and so on. They want to do that. And maybe it was finding the obvious but it also helped us to focus on issues like longevity, and also, the sustainability of quality of life.

LINDA MOTTRAM:

Okay, Joe Hockey is here, Federal Treasurer, Member for North Sydney. You’ve released an options paper for taking the steam out of the foreign investment pouring into residential property. One of the changes that you’ve highlighted is a fine of up to 25 per cent of the value of the property, as well as forced sale of the property for people who do break the law. What are the laws? How easy is it to buy a residential property for a foreign investor?

TREASURER:

Foreign investors can apply to buy new property and that’s welcome because – these are laws that have been around for some time…

LINDA MOTTRAM:

Yes.

TREASURER:

And why? Because when a foreign investor buys a new property, the construction of that new property creates jobs and that’s new investment and new stock. That helps to add to some of the demand. In relation to existing property, a foreign investor is not allowed to buy an existing property unless they’re prepared to demolish it and build a new one, now. My concern is two-fold. In the first instance, I’m concerned that there is a feeling in some parts of the community that – and let’s be frank about it – that a Chinese person bowls up at an auction, outbids everyone else; that they’re a foreigner. Well, they might be fifth generation Australian and they might be more Australian than me. It’s this sort of fear that someone’s getting away with it and that is an issue and we’re seeking to address that. The second issue is, you know, I keep having people say to me, ‘so and so bought this property. They’re never there, they live overseas somewhere’, and it could be anywhere in the world; they’re not allowed to do that. So, whenever we get that information, we investigate it. Now, what’s happened is the Foreign Investment Review Board hasn’t been doing enough work in this regard and I said to them, ‘enough’. They said they haven’t got the resources. We said, ‘okay, well there’ll be properly an application fee for any foreigner that wants to buy something in Australia’. That’s appropriate. We’ll use the money from that fee to help to fund a more [inaudible] for the Foreign Investment Review Board.

LINDA MOTTRAM:

So, that’s the $5,000 application fee that you’ve [inaudible]

TREASURER:

Yeah, for under $1 million. But also, you know, it looks like now it’s about an average of 34 applications for a purchase of a business over $1 billion each year. So, they’re going to have to pay $100,000 and that’s intensive work for us.

LINDA MOTTRAM:

Okay, Paul – sorry I was reading two things at once. Joe Hockey is here; Paul Clitheroe told Richard Glover’s Drive earlier this week that Australia is one of the only countries in the developed world who give tax relief on investment properties and not on the family home. Will you look at shifting this?

TREASURER:

That means having capital gains tax on the family home. So, I don’t think – Paul – there must have been another sentence there because usually if you have tax-deductibility on the family home, you have capital gains on the family home. Now, if Australians are suggesting that’s something they’d prefer, they’re welcome to put that view but…

LINDA MOTTRAM:

Too hard...

… frankly, that’d be a very contentious issue, wouldn’t it?

LINDA MOTTRAM:

Yeah, absolutely.

TREASURER:

Because, you know, the most tax-effective investment you’ll probably ever have in your life is your own family home and that’s one of the reasons why Australians are very good at renovations and upgrades, which creates jobs as well, because they pour resources into their family home. That in turn means that the quality of our housing stock is, I think, very good by world comparison and of course, it is not to be taxed [inaudible] for a lot of people, the sale of their major family home when they’re downsizing, is a big part of their retirement savings.

LINDA MOTTRAM:

Can I ask you a question about scientists? I’m going to ask you a question about scientists. We’ve been talking to scientists a lot…

TREASURER:

It’s not my expert field but I’ll give it a shot…

LINDA MOTTRAM:

Well, it is actually in your field. A lot of prominent scientists we’ve been speaking to since the Budget actually but more recently in the past week – people like [inaudible], we heard Brian Schmidt also talking about the fate of the [inaudible]. They want it disassociated from the education reforms, which are stuck in the Senate, of course, because they’re concerned that what’s going to happen is scientists doing really really important work in what’s supposed to be the knowledge nation, are about to literally be told we can’t fund you anymore. That means they won’t be doing that work. Will you do what the scientists are asking and pull those two things apart?

TREASURER:

Well, this is a matter being handled appropriately by the Minister for Education Christopher Pyne.  I’m hopeful that the Senate will pass the higher education reforms in one form or another in the next few weeks. Now, this is a hugely important reform…

LINDA MOTTRAM:

So is science…

TREASURER:

…science is part of it. Universities are a major part of Australia’s research capacity and you know, we’ve crafted a package. The great challenge at the moment, Linda, the great challenge is, somehow I’m meant to do more with less, right - which is what everyone’s trying to do in their daily lives. But with less income for a government, we’re expected to do more in order to address the needs and wants of everyday Australians. Now, we put together packages based on the best information available. We work with the community to develop that. The universities have been strong supporters of our higher education package as a complete package. Now, they’re saying, ‘well, we don’t like this, we do like that’. Various Senators are saying, ‘we don’t like this, we do like that’. What originally was a racehorse ends up looking like a fairly ragged old camel, in one sense, if everyone had their way. So, what we’re trying to do is maintain the integrity. Now, in relation to research, let me say, I would also expect those scientists and researchers to be great advocates for the Medical Research Future Fund, which is a huge contribution to research in Australia. 

LINDA MOTTRAM:

And indeed many of them have been. But Brian Schmidt says it is in the next few weeks when they will need to let go a lot of these scientists [inaudible]

TREASURER:

Well, it has been raised with myself, with my colleagues, by the Minister for Education. It is something that we are looking at. I can’t give you any more commitment than that because it does involve a substantial amount of money and we are trying to work that through, we really are. I can only say, we want to do more in terms of research and we obviously want to support our scientists.

LINDA MOTTRAM:

Okay, just one last one, Joe Hockey: do you support the Prime Minister’s comments that were reported yesterday on radio about remote communities?

TREASURER:

I do. I’ll tell you why, Linda. I mean, I’d imagine you’re the same – I’ve been out to some of these really remote communities and it’s one thing to look at it from my seat of North Sydney, but it’s another thing to be out there where you are 150 kilometres and that 150 kilometres might take you two or three hours to drive – three hours’ drive from the nearest school or the nearest nurse or doctor and there’s a community of 15 or 20 or 30 people. Now, how do you provide them with the services that they should get in the 21st century? I mean…

LINDA MOTTRAM:

The Prime Minster said that, though, those communities are making a lifestyle choice.

TREASURER:

Well, if they choose to stay there. But others – there are other communities that have said, ‘no, we want to go to a bigger town or we want to go to the cities’. That’s their choice as a community, as a family, but the Prime Minister is absolutely right, you can’t raise the expectations that you’re going to have equality of opportunity in every part of Australia – every corner of Australia. If there’s a community of 15 or 20 people that is in a remote part of the country, and you can’t get them basic medical services, you can’t get them a teacher or a school. You can try and set up the school of the air but if they don’t want to participate as parents and so on, it is horrible. And the poverty – the abject poverty out there is horrendous, it’s gut-wrenching and this is something that has been debated for a long period of time. I would just say to you, no Prime Minister in Australia’s history has ever been more engaged with Indigenous communities and remote areas that Tony Abbott, no one. It is an issue that is hotly debated in indigenous communities – there are many different views but it is also hotly debated by people actually on the ground in remote Australia.

LINDA MOTTRAM:

The turn of the phrase though – was the Prime Minister’s turn of phrase less than sensitive?

TREASURER:

No, I don’t think so. It’s right because it is the lifestyle that they want. Do they want that lifestyle to live in a remote area? Some of them do. Some of them say it is part of their tradition; that is their lifestyle, that is the way they live, the way they live is a lifestyle. So, therefore that is the way they live. If they want to move to a larger community – and when you go to places like Wadeye and a range of communities – Hermannsburg and so, even Fitzroy Crossing and so on, how do we make those communities better because a lot of Indigenous families move to those larger communities in order to get the basic services that you would expect? Now, the services in those communities aren’t even totally up to scratch, and if I can give you an example: I used to run – as a Minister –  the shops for remote communities and I even asked leading grocers in Australia to come on board; how can we get fresh food to those communities? I mean, it can take four to five days to get out there and to those communities, it goes off, there isn’t proper refrigeration. It was an absolute nightmare just to provide the sort of services that you and I can get by walking down the street. We’ve got to be fair dinkum about this conversation.

LINDA MOTTRAM:

Well, it seems to have been slightly derailed by the way the Prime Minister phrased it…

TREASURER:

Don’t be hard on him about it because it is the life that people are having that we are trying to deal with and what they choose to have, as well.

LINDA MOTTRAM:

Okay, Joe Hockey, thank you very much for your time today.

TREASURER:

Thanks very much, I appreciate it.