MICHAEL SMITH: Our Prime Minister painted himself as an economic conservative prior to the election, economic chameleon would be more my view. One bloke, who I get the sense is a genuine conservative when it comes to managing the nation's finances and strikes me that he's doing a pretty good job of it, is the Finance Minister Lindsay Tanner. Hello.
LINDSAY TANNER: Good afternoon Michael.
MICHAEL SMITH: It's always good to chat with you. Lindsay I just - really a couple of things; it's a quote of Ross Guest, who's a professor of economics up here in Brissie. He's talking about the unions. He's talking about the dreamworld, the dreamworld whereby Australia saves jobs. The dreamworld where endless stimulus packages create long-term jobs. Where wage rises create a magical reinforcing circle. Where wage rise leads to more demand, leads to more job, higher wages. He goes on a fair bit. He's talking about fantasy economics. He says: there was a time when the hard-headed union leadership knew it and they rejected stuff like protectionism, but no so more. He says have a look at this buy Australian campaign unions are urging on governments and which the New South Wales Government has already put in place. What do you reckon would be the effect of a buy Australia legislation?
LINDSAY TANNER: Well his comments are a little bit harsh Mike, but I think there's an underlying reality there, that is we're a trading nation. We're big exporters. It's really important to our future prosperity. And the great lesson from the Great Depression in the 1930s was that a lot of nations put in place protectionist things like we'll only buy our own goods, all that kind of stuff and that entrenched the Depression throughout the whole decade. And there's been a lot of statements internationally, including by Kevin Rudd, saying we've got to resist that temptation. We've got to keep trading. The other thing that my research has really shown, and I'm still working on this, is that if you look at what the Federal Government buys at the moment, about two-thirds of it is already sourced from Australia, and most of the imports are stuff that aren't manufactured in Australia. We don't make photocopiers in Australia, for example. So we've got to import them.
MICHAEL SMITH: Well more is the tragedy though that we don't have an elaborately transformed manufactured cen... you know, high-tech sort of manufacturing.
LINDSAY TANNER: Oh, look, we do have a fair bit of it, but it tends to be diffused around the country. You'd be surprised at how much there is in Queensland, for example.
MICHAEL SMITH: Well run us through it Linds, what do you know about it?
LINDSAY TANNER: You know, well I visited a place called, I think from memory, Globescope in recent times, which is a spin-off from the mining industry which involves a bit of manufacturing, a bit of services, where they provide technology that help in open cut mines. It helps predict when there's going to be a wall collapse, for example, and that's exported round the world. There's all kinds of small to medium companies all around Australia, including a significant presence in parts of Queensland, doing these sorts of things. But people tend not to hear about it. And, of course, there's many companies that are involved in producing things that aren't consumer products, so we don't, as ordinary citizens, encounter them. There's a good place in the east of Melbourne that produces equipment for communications towers, like mobile phone towers. They're exporting that to Japan. Now because none of us consumes mobile phone towers we, you know, we don't hear about it.
MICHAEL SMITH: We need to do more of that stuff, make stuff that, you know, creates value in my view. But that's a discussion for another day I suppose Lindsay. Let's come back to the unions. It's tempting to, you know, to just think, or to allay your mind to accept the thought that shit, we should look after our own. We should buy Australian, you know, and therefore government should legislate for that. You have to convince us, I suppose, as to why it's not in our interests to do that?
LINDSAY TANNER: Well, look, that's a fair enough comment Mike and it's a natural.
MICHAEL SMITH: That's it, yeah.
LINDSAY TANNER: ...human response. And the answer to these; first, we have international obligations. We've signed up to trade agreements that in effect inhibit us from doing those kind of things and if we break those agreements, we'll be subject to retaliations. So we might gain a little bit on one area, but we'll loose elsewhere. Secondly, if we do that, it will push prices up and the end result is it if we, for example, pay a little bit more for certain products the Government buys, well [audio cuts out] it's either you're paying higher taxes, or your services elsewhere are reduced.
MICHAEL SMITH: Or your borrowing's increased Lindsay.
LINDSAY TANNER: Yeah, precisely. That is the alternative option. That's correct. So it comes from an understandable impulse, but we have to resist it. And you could apply the same thing and say well, why should Queensland trade with New South Wales?
MICHAEL SMITH: Yeah.
LINDSAY TANNER: And, of course, the end result is greater economic inefficiency. Trade is at the heart of Australia's economic future and we've got to stay true to that.
MICHAEL SMITH: When are we going to be out of debt?
LINDSAY TANNER: Well our projection is for the budget return to surplus in 2015/16 and once, of course, it turns to surplus, you start paying down the debt and we believe, on the projections we've set forward, that that would occur at about 2022, back to zero debt. Now, of course, many things will happen between now and then and many budgets will come and go and there may even be changes of government, but that's the current projection.
MICHAEL SMITH: [Laughs] What's your tip on that Lindsay?
LINDSAY TANNER: [Laughs] Look, I wouldn't gamble on those things. I think that something I've said many times is that I'm always very conscious that we get signed up for a three year contract. No matter what the polls say, no matter how good or bad anybody might be doing, you never assume anything about the Australian [indistinct].
MICHAEL SMITH: Well you're a senior member of the cabinet there. You just said you signed up for a three year term. Are you going to commit that the Government will run its term?
LINDSAY TANNER: As far as I'm concerned, that's what should happen. Now we all know that there are theoretical possibilities of double-dissolution...
MICHAEL SMITH: Yes.
LINDSAY TANNER: ...that happened at times in the past. The last thing the Government wants is to see that happening. Now there are some circumstances where theoretically you may have no choice. I don't envisage those circumstances occurring. As far as...
MICHAEL SMITH: What do you mean you'd have no choice? You'd always have a choice?
LINDSAY TANNER: Well if thing - if enough things are getting blocked in the Senate that is effectively making it impossible for the Government to get its program through, or to govern, those are the kind of circumstances that that...
MICHAEL SMITH: Yeah, touché.
LINDSAY TANNER: ...provisionally is designed to deal with. But I'd emphasise...
MICHAEL SMITH: I reckon you're getting on shaky ground though Lindsay, because like the Prime Minister said the greatest issue, the moral thing, the big thing is this Emissions Trading Scheme. It's going to have to be put in place and then he turns round and delays it anyway?
LINDSAY TANNER: Oh, well, we were kind of in an unavoidable position of reality there Mike. We - at the time he made that statement, there was no global financial crisis, there was no global recession. The circumstances we were in meant it was the responsible thing to do, to delay the course of the Coalition...
MICHAEL SMITH: Of course it is going to damage the economy when we put it in?
LINDSAY TANNER: Well not so much that it's going to damage the economy, but just it's very tricky and complicated and inevitably it involves a disruption to day to day activity that has to be managed. So it's a very big challenging thing. But look, you know...
MICHAEL SMITH: But you reckon it's not going to damage the economy Lindsay the ETS.
LINDSAY TANNER: No, no, I did - no, because I think it is in the medium-term is actually going to help our economy and the thing to remember is that you've got to assess this in net terms...
MICHAEL SMITH: Yeah.
LINDSAY TANNER: ...and that is what damage are you seeking to insure yourself against, to avoid...
MICHAEL SMITH: Well what is it? What is it?
LINDSAY TANNER: Well the threat to things like the Barrier Reef. The threat to our agricultural sector, for example. The threat to our security if we have huge disruptions in nations to our north where large numbers of people become refugees, because their countries are half under water, or they're no longer inhabitable.
MICHAEL SMITH: Yeah, Lindsay, I understand all those arguments.
LINDSAY TANNER: [Indistinct] issues are very important.
MICHAEL SMITH: Are you one of those people Lindsay that believes that we can control the climate, you can say, like the Prime Minister says, we're going to commit to make sure that the temperature doesn't go up by more than two per cent and we're good enough to do that?
LINDSAY TANNER: Look, I - there are obviously uncertainties involved here Mike, but I can't - let me give you a kind of illustration.
MICHAEL SMITH: Yeah.
LINDSAY TANNER: I can't control whether or not my house burns down, but I can take out an insurance policy to protect myself against that risk. And that's the same issue we're dealing with here. That's all the...
MICHAEL SMITH: It is, it's an expensive insurance policy. By geez, bang goes the whole economy.
LINDSAY TANNER: Well look I - I think time will tell whether that's a fair assessment. I believe - typically what happens with these things is that you get hugely overblown rhetoric. I notice with - no, I'm not accusing of it, but I just mean in the general public debate, I notice that there's been a bit of controversy about a number of major companies who've said one thing in the public debate saying; oh, we're going to be ruined if this thing happened...
MICHAEL SMITH: Yeah.
LINDSAY TANNER: ...and yet saying the opposite in their formal statements to the stock exchange.
MICHAEL SMITH: Same on both sides are greedy so, you know, the Barrier Reef's gone. Do you know an interesting exercise Lindsay, I know it's just raving on a little bit here, but if you Google things that you love and climate change or things that you hate and climate change, the things you love are going to be ruined by it and we're going to be overcome with swarms of cockroaches and jelly fish, it's just funny. [Laughs]
LINDSAY TANNER: [Laughs]
MICHAEL SMITH: It's true, you go and try and it. Go to Google, Google sharks and climate change. There will be heaps more sharks. Google butterflies, oh my god, we're going to loose butterflies. Cockroaches, heaps more cockroaches.
LINDSAY TANNER: [Laughs] Well maybe I won't go back into the water then, if [laughs]...
MICHAEL SMITH: [Laughs]
LINDSAY TANNER: ...[indistinct] sharks. But never mind, let me emphasise, the last thing on the Government's mind is an early election. You know, you never know what...
MICHAEL SMITH: Oh, turn it up.
LINDSAY TANNER: No, no, that's a - look, I...
MICHAEL SMITH: You must be looking at Turnbull and laughing?
LINDSAY TANNER: No, look Mike, people in Australia are cynical. We've had two recent instances...
MICHAEL SMITH: Why would that be? [Laughs]
LINDSAY TANNER: We've had - yeah, well, I can't imagine why. We've had two recent instances of a state government and a territory government that went to an early election expecting to win…
MICHAEL SMITH: Yeah.
LINDSAY TANNER: The State Government in WA lost and the Territory Government in North Territory almost lost, so I think that does indicate that for all the politicians who think, okay, Anna Bligh won, fair enough…
MICHAEL SMITH: Yes, thank you. You know, I couldn't - I was sitting next to Wayne Swan on that night mate, and I saw his eyes when he saw that election.
LINDSAY TANNER: [Laughs]
MICHAEL SMITH: So mate, I've got to wrap mate, I'm sorry. It's just, it's time always Linds. It's good to talk to you mate.
LINDSAY TANNER: That's fine. No worries. Good to talk to you.
MICHAEL SMITH: Ta-ta. Lindsay Tanner, Finance Minister.
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