LAURIE OAKES: Mr Tanner welcome to the program.
LINDSAY TANNER: Morning Laurie.
LAURIE OAKES: The Prime Minister is back from the G20 in London, I hope they fed him on the flight.
LINDSAY TANNER: I presume they will Laurie but I don’t place too much emphasis on these kind of things, I suspect it has been blown out of proportion in the bit in the newspaper articles that have occurred.
LAURIE OAKES: Well they didn’t feed him at all or his entourage on the flight back from the Pacific Islands Forum in Port Moresby, do you think it might have been a Defense cost cutting exercise, have you been clamping down on that?
LINDSAY TANNER: No doubt somebody will try to blame me for that. No I’ve got no idea honestly Laurie, we’re dealing with bigger issues than this kind of stuff and sometimes these problems can occur and sometimes it happens on ordinary domestic flights that you have these glitches so I wouldn’t read too much into it.
LAURIE OAKES: Alright, we’ll get to more important matters than. The government has done a deal with the big banks so that unemployed home buyers will get a reprieve on mortgage repayments. How will that work?
LINDSAY TANNER: It just means the banks are committing themselves to offer where it is appropriate people who have become unemployed, a holiday for up to 12 months, from paying interest on their mortgages, and of course for many mortgages the amount you pay in interest is much, much higher than the amount you are paying off the principle if you’ve got a pretty substantial mortgage. So that will be done on a case by case basis because the banks of course have got to protect depositors’ money. But it is an important step forward. The government has provided a lot of support to our banks through the guarantees that have been delivered and we believe the community is entitled to something in return and this is one of the things the banks are agreeing to do. It is important it doesn’t undermine their finances, and it won’t, but it will also help a lot of people who do struggle because of the tough times we are entering into.
LAURIE OAKES: Did you use the guarantee that you’ve given the banks as leverage to persuade them to do this?
LINDSAY TANNER: No we haven’t used it as leverage because clearly it has already happened. And we are not about to take it away. But it is an important item in the overall mix, that the banks are getting very serious support from the community through the Government because of their central role in our economy, because of the need to withstand the effects of the global financial crisis, and we therefore think that part of that does mean that there are certain circumstances where we can call on them for assistance, provided that - and this is the crucial proviso, that this does not in any way undermine their financial well being, because we need strong, robust banks and the key thing that is keeping Australia's position in relatively good shape compared with many other countries is that our banking system is sound, many others aren't.
LAURIE OAKES: What about the people who got their mortgages through lenders other than banks. Will they be disadvantaged?
LINDSAY TANNER: There are obviously a proportion of people who won't have the same possibilities offered to them by other lenders. But I suspect you'll find that there will be individual arrangements that may apply in some of those circumstances. Of course the bulk of mortgages across Australia are held by the four major banks. I would hope that some other lenders will follow suit, but of course it will depend on the individual circumstances of those lenders.
LAURIE OAKES: Well, will this just apply to home-buyers who lose their jobs, or will people with other kinds of loans, perhaps car loans - also benefit?
LINDSAY TANNER: There's no specific agreement on those things, but we are encouraging the banks to look at those things and they have agreed to apply the same kind of analysis to the other loans. So it will also boil down to an individual assessment of the credit worthiness and the circumstances of the individual. We don't expect banks to be throwing depositors' money away. So they have got to make assessments about the circumstances of the individual, but certainly those other loans were discussed with the banks and they've agreed to give consideration to the possibilities where appropriate.
LAURIE OAKES: This kind of help for people who lose their jobs raises the question again of how bad unemployment is likely to get. How bad will it get?
LINDSAY TANNER: Well, you've had a number of people from the Government, including myself, acknowledging over the past week or so Laurie, that the recent analysis of the world economy by the OECD and the World Bank does show that it's likely that the figures that we put forward as our projections, the Treasury projections for the economy at the beginning of February will worsen when the new figures are put out in the Budget in early May. How much by, we can't tell, but clearly there's a significant chance that the projections for unemployment will worsen.
LAURIE OAKES: The economists are talking about a level as high as 11%. Is that being unduly alarmist, or is that possible?
LINDSAY TANNER: Oh, look, I'm not going to speculate on what's possible, because so much of this is driven by what's happening internationally that it is very difficult to assess what the impact of those things could be on Australia if they do worsen internationally. I'm optimistic that the world is turning around. The G20 summit was a very important step, although there's a lot more to go. And there have been some positive signs, particularly the small recovery of the US stock market and the Australian stock market, so we need to be careful about preaching doom and gloom about these things, but clearly there is a significant risk that the unemployment rate will end up higher than what we projected only a few months ago.
LAURIE OAKES: There's been reports, in fact, that you're framing the Budget, the Government is framing the Budget on the basis of projections of a world recovery next year. Is that so?
LINDSAY TANNER: Look, I don't believe that's right Laurie. I think that's jumping the gun somewhat. But we face a very serious challenge. The next three years, we're projecting deficits that will total almost $100 billion, and there's ever chance that that figure will be revised upwards. Now, the debt that will produce will be sustainable, but we can not afford to allow those kind of deficits to continue indefinitely, because if we do, then we will get into serious economic problems. So that means we have to start the work, we have to lay the foundations for returning the Budget to surplus in this Budget. It doesn't mean that we sit around for a few years and then tackle that issue. We have got to lay the foundations now and that means tough choices.
LAURIE OAKES: What kind of choices? Are you talking about taking the axe to middle class welfare? Is it time to do that?
LINDSAY TANNER: Clearly I can't speculate on some of the specific decisions that we might face, but probably the most obvious area is that we've got a number of things that are in-train, a number of issues that we are keen to tackle. A number of very big issues where it is going to be difficult to fund all of those things all at once, and where some of the ambitions that we had at a time when the economy was much more robust and the global circumstances were much more benign, we will have to delay, we will have to work out a priority order. We'll have to be careful about how we proceed there, because we have to make sure that we lay a foundation to get the Budget back into surplus. It's going to be a tough job and it's going to take some time, but we can't afford a delay in tackling that job.
LAURIE OAKES: When you talk about things needing to be delayed, the words "paid maternity leave" spring to mind immediately.
LINDSAY TANNER: Well that's one of the issues, there are a number of other areas such as financing of higher education and innovation, there is a variety of other issues where we do have a high priority to tackling these things. And I'm certainly not by any means suggesting they're off the table, but it is just a lot harder than perhaps we anticipated six or nine months ago to deal with the issues in this Budget in a very substantial way. We have got some difficult choices that we have to make about all these things Laurie and we've got to make sure that we maintain the pattern of stimulus payments being temporary. We can't afford to lock in new stimulus that is just going to continue indefinitely, because that will worsen the structural position of the Budget.
LAURIE OAKES: But, is stimulus still a priority of the Budget? Are we going to need more economic stimulus?
LINDSAY TANNER: Look, it's impossible to say at this point, and one thing we've learned over the past year or so is to not rule things in or rule them out because the circumstances have changed so dramatically, and often so quickly. But there is now a very large amount of stimulus in the Australian economy. There's a lot of money flowing, both by cuts in interest rates and through the Government's packages and of course, the money flowing from the second package is really only just starting to get moving. The payments to individuals of course are just underway, and the money that's going to flow to building schools and insulation and new homes, all of that is really only just getting moving. So there is a lot ..
LAURIE OAKES: You've got tax cuts coming through in July too, haven't you?
LINDSAY TANNER: That's right, there's significant tax cuts that are an installment in a three-year plan. We got the first installment last year, this is the second installment, so that is another part of the overall picture. But I wouldn't rule out further stimulus. We've always taken the position that whatever is required to sustain jobs, to sustain economic growth will be done. Now we've got a longer term constraint that we have got to worry about and that I am in particular worried about, and that is returning the Budget to surplus. That's just part of the picture that we have to grapple with.
LAURIE OAKES: Malcolm Turnbull says the coalition will use its Senate numbers to try to block a third spend-a-thon. Are you worried about that? Worried about getting your Budget measures through the Senate?
LINDSAY TANNER: That is a worry, and I think Mr Turnbull should have a bit of a think about his position. What he defines as a spend-a-thon may not be what the rest of the nation sees as a spend-a-thon. It may be essential expenditure to sustain jobs and to sustain growth. He's the Opposition, he leads the Opposition. He's not the Government, and he should abandon this notion that he can somehow run the country from Opposition and use the Senate as a way to sabotage the Government's efforts to sustain the Australian economy at a moment of international crisis. It's a bit like somebody trying to tear the wheel out of the captain's hands on a ship that is in the middle of a storm.
LAURIE OAKES: Well given Malcolm Turnbull's ceaseless attacks on you for what he calls "cash splashes", I wondered how you reacted to Tony Abbott's admission that the Howard Government came to believe in ‘magic pudding’ economics.
LINDSAY TANNER: Well Tony sometimes does let slip the odd honest remark, and that's one. What we've seen in effect is something that people like Saul Leslake have been talking about for years and that is the Howard Government getting a short-term bonus from the mining boom and acting as if it is permanent, setting in place decisions that effectively treat that bonus as permanent. And now of course, through the collapse in company tax revenues and capital gains tax and to some degree, income tax, we're now left handling the ongoing problem that that creates. That's why it is going to be tough to get the Budget back into surplus.
LAURIE OAKES: The Prime Minister said that pensioners will get a rise in the Budget. Does that mean all pensioners? For example, there's some concern that the 35-year Nexus between the Aged Pension and the sole parent may be broken. Will sole parents dip out?
LINDSAY TANNER: We're yet to make those decisions Laurie and clearly in the constrained circumstances we're in, there is again some difficult choices to make. We intend to honour our commitment to Australia's pensioners but the detail of that and the boundaries of course are matters that are still under consideration. And the additional factor that I think is important here of course is that the money that does flow through honouring that commitment will also add to the stimulus effect in the economy. So that's an important dimension. It is money that will flow into spending, flow into jobs, flow into growth.
LAURIE OAKES: What about the suggestion that you'll raise revenue by removing some of the anomalies and the way various alcoholic beverages are taxed?
LINDSAY TANNER: Under the experience of recent circumstances in the Senate, I think that might be a rather difficult option Laurie. But I wouldn't speculate on any of those things. I think our primary focus is inevitably going to be on constraining spending and I wouldn't want to speculate on anything of that kind. Of course, we still face a dilemma on the alcopops front where we believe there are good reasons for fixing that problem. So I think really one thing at a time, irrespective of what people see as anomalies, some people will not necessarily see them in that light. The important thing for us here is to actually get our initial commitment, our initial policy through, we still haven't succeeded with that.
LAURIE OAKES: Minister, we thank you.
LINDSAY TANNER: Thanks very much Laurie.
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