Interview with Alex Kirk
AM Program, ABC Radio
1 February 2010
SUBJECTS: Intergenerational Report; CPRS; Liberal's savings record; mortgage interest rates
INTRODUCTION:
The Treasurer Wayne Swan will today release the latest Intergenerational Report charting the economic challenges Australia will face over the next 40 years. It forecasts the population will reach 35 million by 2050 with the proportion aged 65 and over expected to almost double. Wayne Swan wants to encourage more older Australians to stay in the workforce or go back to work. If the Government starts now he argues, the nation can avoid painful and extensive adjustments in the future. Wayne Swan spoke to Alexandra Kirk a short time ago.
KIRK:
Treasurer good morning.
TREASURER:
Good morning.
KIRK:
The Howard Government offered a cash incentive for seniors to keep working. You obviously think they need an even bigger carrot - more cash?
TREASURER:
Well, that's why in our last Budget we put in place a new work bonus for those pensioners that wish to work a few additional hours because they were being penalised in the tax system. So the first $250 of fortnightly income was exempted from the means test. That has been widely welcomed by seniors and by pensioners because it gives those pensioners the choice.
KIRK:
You've previously said that many Australians, including older people, are hit for 6 by the tax system when they work a few extra hours. Is it time to put your money where your mouth is when it comes to tax breaks?
TREASURER:
Well, certainly when it came to the work bonus that we put in place in our last Budget. That is precisely what we did. But as to the other broader issues of the tax system they're being handled by the independent tax inquiry.
KIRK:
Do you think you need to do something quickly, that is, this Budget?
TREASURER:
I think we acted in the last Budget. So we've put in place substantial incentives for pensioners and seniors in that Budget. But on the broader question of the tax system more generally, those matters are being dealt with by the independent tax inquiry.
KIRK:
Many older Australians have already been forced back to work because of their superannuation being hit hard by the global financial crisis. Do you really need to offer an added incentive?
TREASURER:
Well, it's certainly been tough for a lot of older Australians during this period. We're having a look at the retirement income system in total through the independent tax inquiry, and we'll deal with those matters after we've considered that report in detail.
KIRK:
On that point, the super industry has just released a report showing the huge gap between what Australians have saved for their retirement and what they need to live on. Working extra might help, but in the longer term don't you have to bite the bullet and lift compulsory super contributions to at least 12 per cent?
TREASURER:
Well, as I said before I'm not going to pre-empt the report from the independent tax inquiry. There's no doubt that adequacy in the retirement income system is critical and all of those issues are being dealt with by the independent tax inquiry, as well as the other report being prepared by Mr Cooper.
KIRK:
You accept that retirement incomes are inadequate.
TREASURER:
Well, I certainly accept that there are great challenges in the retirement income system. I accept that there are many who have been hurt by events in the global economy over recent times, and that we have to do better as we move forward.
KIRK:
Do you in principle; agree that it's time compulsory super contributions were lifted?
TREASURER:
I'm not going to pre-empt the outcome or the Governments consideration of those two inquiries.
KIRK:
The Government will reintroduce its Emissions Trading Scheme into Parliament tomorrow, with the Opposition Leader unveiling his plan to cut emissions financed from the Budget. In preparing for the Budget you've been scouring the landscape for spending cuts. Is there a lot of fat that can be cut?
TREASURER:
Well, I think I'll make it very clear in my presentation later today that there is a need for continuing Budget discipline, and that small adjustments that are made now will pay very big dividends over the next 40 years, and that's part and parcel of dealing with the ageing of the population. But if you look at what the Opposition is doing at the moment, their opposition to the means testing of the private health insurance rebate is having a fundamental impact on the Budget not just $2 billion over the forward estimates, but $100 billion dollars over 40 years. Those are the sorts of adjustments that must be made if we are going to deal with the pressures on the Budget that arise from the ageing of the population.
KIRK:
Is there room though for the Opposition from what you've seen so far, for them to be able to find the savings to fund measures to reduce green house emissions by 5 per cent through the Budget?
TREASURER:
Well, the Opposition is already opposing savings that the Government has got in the system from the last Budget, and that will impact to the tune of $100 billion through the period of this Intergenerational Report. And we've already seen from them opposition to means testing of other payments, so presumably that's going to put a further hole in the Budget. We've seen the Leader of the Opposition talk about on the one hand lower tax, and on the other hand higher spending, that's just a magic pudding. Nothing they say adds up at the moment.
KIRK:
So you don't think it's doable?
TREASURER:
I don't think that they can be trusted on the economy. They can put a hole in the Budget to the tune of $100 billion over the period of this Intergenerational Report, they can talk about abolishing means tests in other areas of the Budget, and at the same time talk about increased Government spending.
KIRK:
The Reserve Bank Board meets tomorrow. Australians are bracing themselves for another interest rate rise. Access Economics has predicted the banks - maybe not tomorrow, but over the next few months - will undercut the Reserve Bank's rate hikes. Can they afford to do it by any significant amount, in your view?
TREASURER:
Well, I'm not going to speculate about what's going to happen in the future. But what I do know is that when 3 major banks increase their rates over and above the official cash rate of the Reserve Bank that was totally unjustified, and the community backlash against those banks has been substantial, and I certainly hope they heed the warning.
