FRAN KELLY: Finance Minister Lindsay Tanner says the emissions trading scheme will have only a modest impact on the budget nevertheless. He joins us now in our Parliament House studio. Lindsay Tanner welcome back to Breakfast.
LINDSAY TANNER: Good morning Fran.
FRAN KELLY: Minister, have the Liberal amendments to the emissions trading scheme made it a better scheme in your view?
LINDSAY TANNER: Oh I don't think it's probably the right way of describing it Fran, I think probably the true thing is that a lot of these issues that are involved here are highly contestable and we've been involved with very serious and complex negotiations with the Liberal Party and of course our objective has been to get the legislation through the Senate.
That's just the reality that we as a government have to deal with and we have managed to achieve what I think is a good outcome and I just think the Liberal Party should get on with getting it through the Senate. Now that they've made the decision, however messily, to endorse the legislation we'd like to get it through.
FRAN KELLY: I think it's important to get your view on this. I think people at home would like to know whether they've ended up with a better scheme or a worse scheme. You're the Finance Minister, you've had to let go of an extra $7 billion plus to get this through. That must have hurt. Do you think this is you know, bad but necessary policy? Is that your judgement?
LINDSAY TANNER: No I think we've ended up with a good result. There's obviously scope for debate on all of the aspects of the scheme and you can go round and round the dance floor about some of the fine detail where there is no absolute right or wrong. It's just a judgement call about to what extent should you provide assistance to particular sectors that are going to be unusually affected by the scheme. There is no precise science in that. It's just a judgement call about the extent to which assistance should be provided and obviously there's different views about that and we have to negotiate in order to get it through the Senate. And we have been in a position where the numbers for the budget have been changing by other factors anyway, in particular the rise in the value of the Australian dollar has influenced the numbers so fortunately we've ended up with an agreement that doesn't really do much damage to the overall budget position.
FRAN KELLY: I wanted to ask you about that because you say that despite this $7 billion plus assistance to industry the cost of the budget will only be $770 million by 2020, based on two things I think as I understand it; a revised estimate of the price of carbon permits, and also the rising dollar. Now 2012 is three years away, the dollar is incredibly volatile. Less than a year ago it was much, much, much lower than it is now. What happens if the dollar sinks again and the carbon price rises?
LINDSAY TANNER: Well Fran these assessments were all based on projections which of course are built on assumptions about where the future value of the dollar will be and those projections will change from time to time but you have to make projections and that applies right across the board which is [indistinct].
FRAN KELLY: [Interrupts] But you really can't project the dollar can you? Would Treasury have projected 12 months ago that the dollar was going to be at 93 cents?
LINDSAY TANNER: Fran you have to do that for other budget matters as well, so whether you like it or not, and it's not just the value of the dollar, there's all kinds of variables in the Australian economy that when the - Treasury is putting forward projections and indeed my department as well about where spending will be, about where revenue will be, about where economic activity will be in three, four years time. And now in a broad sense we're even doing that 10 years out then you have to make assessments about where that will be. Now obviously that also is not an absolute precise science. Nobody can say exactly what the value of the Australian dollar will be in 10 years but the point is that the fundamentals that drive the value of the dollar in Treasury's assessment have obviously shifted and therefore as a result of that we're projecting a different configuration for the household assistance for reasons that I can explain should you want me to.
FRAN KELLY: But you're - basically you're gambling on the - a high dollar, and you're gambling on the - a carbon price of $26 I think it is a tonne. Now the carbon price is set by market. That could change too. I guess that what...
LINDSAY TANNER: [Interrupts] Well Fran the absurdity in what you've just said is that that would apply that - your pejorative term gambling no matter what the assessment was. So it wouldn't matter whether the assessment of the carbon price was 26, or 29, or 58, or 133, that same logic would apply.
FRAN KELLY: Yeah okay.
LINDSAY TANNER: You have to make these projections.
FRAN KELLY: Fair enough, but it comes down to then the point of will - if the dollar drops, if the carbon price rises, whatever, is the Government guaranteeing that householders will get compensated fully for the impact on their energy bills, if energy bills go up markedly, even if it means taking a bigger hit to the budget bottom line?
LINDSAY TANNER: We are guaranteeing that full compensation and in fact over compensation will be paid to lower income earners. In 90 per cent of cases that will be 120 per cent compensation so they'll get slightly more than they lose and for the bulk of middle income families they'll get significant compensation. That's what the Government's guaranteeing. The world is going to change over 10, 15 years in all kinds of ways Fran so we are guaranteeing to put in place that compensation arrangement. The metrics are in there in the scheme that govern that. Those metrics haven't changed as a result of the negotiations and they won't change.
FRAN KELLY: Okay, so that's a guarantee, no matter if the budget is tight?
LINDSAY TANNER: I'm indicating to you we're guaranteeing that we are going to ensure that low income households are fully compensated and that middle income households are substantially compensated and that is going to be a committed the Government will stick to. Of course in between times, we'll have elections; you may have changes of government. All kinds of things can happen Fran but as far as I'm concerned the Rudd Government's committed to those aspects of the scheme and will stay committed to them.
FRAN KELLY: The total assistance package for industry is projected to be worth around $120 billion which is a staggering amount of money. Protecting these industries with massive amounts of assistance only delays the switch to a low-emissions economy say your critics. How do you expect to achieve even the five per cent reduction in carbon emissions let alone more ambitious targets under such a compromised deal?
LINDSAY TANNER: Well the targets are still in place and the capacity to strengthen the scheme should there be an agreement of a stronger nature from Copenhagen is also still in place and the statement that the compensation for industry is in some way weakening the scheme or retarding the shift to a low-carbon economy is not necessarily correct. So for example one of the arguments put by the electricity generators is that if they end up in administration, if their assets are so devalued that they are unable to invest in new capacity, invest in cleaner technologies then that is not a good thing for the transition that our economy needs to make to a different mix of energy supply. So there's obviously some very fine judgements involved here and you've got all kinds of arguments that you always get in something as complex and difficult as this kind of scheme. We believe we've ended up with a good outcome that Australia can take to Copenhagen as long as we get it through the Senate. The current Opposition is the most bitterly divided Opposition since the Labor split in the 1950s and so we've got a real challenge on our hands to actually get an implementation of the commitment they've made so I'd urge them to get on with the business of just getting it through the Senate so Australia's got a position.
FRAN KELLY: Well Malcolm Turnbull used up a lot of political capital within his party room to do this deal. The Government owes Malcolm Turnbull here really don't you?
LINDSAY TANNER: Oh we don't owe Malcolm Turnbull or owe anybody. We owe the Australian electorate good government. That's what we owe. We owe them the exercise of our judgement as the elected government to make good decisions that we believe are in the interests of Australia and in this case that's precisely what we've done.
FRAN KELLY: It comes back to the original question. This is a good ETS policy in your view?
LINDSAY TANNER: Yes I believe we can certainly get behind the position. We've had some tough times in these negotiations, we've had to grapple with some of the complex issues and make hard calls ourselves, just as Malcolm Turnbull and the Liberal Party have done but if we didn't believe that the outcome that we've now got was not adequate, we wouldn't have supported it, we wouldn't have accepted it.
FRAN KELLY: Lindsay Tanner thanks very much for joining us.
LINDSAY TANNER: Thanks very much Fran.
FRAN KELLY: Finance Minister Lindsay Tanner.
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