Laurie Oakes: Mr Tanner, welcome to the program.
Lindsay Tanner: Morning Laurie.
Laurie Oakes: The state elections yesterday first. Labor got smashed in Tasmania but looks like falling across the line in South Australia, what message do you read into all that?
Lindsay Tanner: Oh these elections were dominated by local issues, Laurie. And if you look across the couple of years we've been in office, there have been half a dozen State elections and they've been mixed results, frankly, for Labor. We've had a bad defeat in Western Australia, held government in Queensland, and now it looks likely in South Australia. So, I don't think there's much in the way of federal implications. Both of them are governments have been in for a while too, so that inevitably governments that are long-term governments lose a bit of skin along the way, but we'll just see what the final details are and obviously we always learn lessons from every election.
Laurie Oakes: South Australian voters suddenly fell out of love with Mike Rann, though, and he's often compared with Kevin Rudd.. and the critics of both of them say they're both about spin. Do you think Kevin Rudd should take a bit of a lesson out of what's happened to Mike Rann?
Lindsay Tanner: Oh, look, I think there were very peculiar factors involved in the South Australian election, Laurie, that are hard to compare with anything else. The issue with Michelle Chantelois obviously cast a pall over the entire election campaign and it's been described as a bit of a soap opera. Now, I wasn't close to the campaign. It inevitably does always have some lessons for everybody to pick over and try and work out what they mean for other politicians in Australia. But I don't think there's much in the way of comparison there. Basically spin is a reality in modern politics across the board, whether any of us likes it or not.
Laurie Oakes: Now, people have seen parallels, though, between Tony Abbott and the South Australian Liberal leader, Isobel Redmond. Now, as far as I know, she's not into Speedos and Lycra, but she is seen as unpredictable. She's seen as a straight-talker rather than a spin merchant and she dramatically changed the situation coming into the leadership eight months before an election. I mean, does that parallel concern you?
Lindsay Tanner: Oh, look, I think there's some obvious differences too. The national stage is very different from a State election. The issues are different. People will put much more focus on the future of the country, obviously, when they're selecting a national government. Tony Abbott's treating Opposition like some kind of backpacking holiday, where he's out there in the Speedos and on the quad bike and on the surf board, occasionally dabbling in some off-the-top-the-head policy pronouncements. That's OK for his first few months because people are interested in the new guy but I think in the longer term that's really going to fall apart for him. It's about time he started paying some attention to the substance of being an alternative government and giving people a serious choice on issues.
Laurie Oakes: Well, just to finish the discussion of the elections. In Tasmania, I think it's 10 seats to Labor, 10 to the Liberals; 5 to the Greens, and the likelihood is that we'll emerge with a government that's not a Labor government. How will that affect the Federal Government's big hospitals policy? Does it reduce your chances of getting that accepted by State premiers?
Lindsay Tanner: To be honest, I don't know, Laurie. We found that we've been able to work with Colin Barnett, the WA Liberal Premier and if anything, we need to recall that the situation that we inherited in 2007 was literally unprecedented for Labor, that we had Labor premiers and first ministers all around the country. It's pretty unlikely that that's going to continue for a long period of time, so we're now getting back towards something that we would accept as more normal, which means a federal government that has to deal with premiers that it disagrees with in some cases on issues and in some cases because we're on different sides of the political fence, so I think we'll just approach any new Tasmanian government, of whichever side of politics it's represented by, on their merits and on the merits of what they want to get out of reforming our nation's hospitals and our health system. That's what we're really committed to doing. We accept that's a difficult negotiation and it's difficult whoever is in power in the States.
Laurie Oakes: What are your predictions about the great debate on Tuesday on health and hospital policy? Can Kevin Rudd beat Tony Abbott in a debate?
Lindsay Tanner: Oh, look, I think he can, Laurie. But I think really the question for journalists is, are they going to look at the flim-flam and the pyrotechnics or are they for once going to actually look at substance? Are they going to analyse the policy alternatives here. We've got a very substantial policy option here that is about taking responsibility for the nation's health system. It's about the Commonwealth finally actually saying, "We are going to ensure that the funding challenges of the future, which are very big, will be our problem, and services and decisions about services, will be delivered locally and the States will retain a very substantial involvement." Now that is a very major change. People agree or disagree but it's a major change. Tony Abbott will throw out one-liners and cute little numbers, and he'll rant and rave and he'll accuse Kevin Rudd of lying. But it's a long overdue that he was subject it serious analysis about his position on the future of the health system. If that happens, he won't win the debate.
Laurie Oakes: But it is a debate and your skill as a debater matters in these situations. Tony Abbott, as you say, is very good on the attack. I wrote in a column yesterday that Kevin Rudd is to oratory what the cane toad is to native fauna. I mean, if he loses the debate it hurts your cause doesn't it?
Lindsay Tanner: Well I think that assessment is slightly unfair, Laurie buy I think Kevin Rudd's a very good debater. But I think you'll need to look really at the total picture here and the real question here is actually getting your message across but that presumes that there is some substance in the message. Tony Abbott might be entertaining, from time to time. I think often he's over the top. I think he can alienate people. He's too aggressive. He's too erratic. But that's my view. Others may have a different view. But the real question is where's the substance, where's the future policy and that is what will tell in the long term.
Laurie Oakes: But Kevin Rudd chose the team for this debate. It's unprecedented - a leaders' election debate six months out from the poll. He knows very well that Tony Abbott's only been Liberal leader for three months and hasn't yet got a full health policy developed. So of course Tony Abbott will attack, I mean that's all he can do. And I think the punters will realise that, won't they?
Lindsay Tanner: Laurie, we're only months from an election. Tony Abbott gets away with all kinds of things that no Labor leader would have ever got away with. Can you imagine, had we, in 2007, come up with a paid parental leave scheme involving a giant big new tax on business, where we couldn't even identify the details of the scheme, where there were two or three different versions of it, we couldn't say when it started and we're giving a huge free kick to higher income-earners. We would have been absolutely flayed alive in the media, so he's getting away, in my view, with an absolutely flakey performance on this and we're bound to see similar things happen on the health front. Now, the test is, is there a substantive alternative policy for the future of the nation here? And we are months away from an election. It's about time we started seeing some substance.
Laurie Oakes: Well, he's got plenty to attack you with, though, hasn't he? Thanks to your own efforts. I mean, he's running with the line, "How can you trust Labor to run a complex hospital system when it can't manage a simple task like putting pink batts into the roofs of houses.", now that's pretty devastating?
Lindsay Tanner: Well, first Laurie, we are not proposing to run the hospital system. We are proposing to take responsibility for the "funding framework" and to ensure that the longer term challenge of huge cost increases because of the ageing of the population, the increase in the cost of technology are ultimately the responsibility of the national government. We're not proposing to run hospitals. We want that to be done locally with still substantial State government involvement in the distribution of resources and we concede that we've had problems with the insulation programme. We're acting to remedy those problems. All governments, ultimately, once they've got a track record, do alienate people. They do make mistakes. Things sometimes don't go quite according to plan. That is just the reality of life. That's one of the reasons why longer-term State governments, as you've seen in South Australia and Tasmania yesterday, often find it difficult to get re-elected but I'd like people to look at the total picture here. We believe we've got a sensible, strong alternative for health that finally addresses some of those problems of cost-shifting and buck-passing and inefficiency that have bedevilled the system for many years.
Laurie Oakes: But you can't divorce health from the other issues. I mean the home insulation thing wasn't a hiccup. It was a debacle. And now it's quite clear - everyone knows that this waste and mismanagement in the building and education revolution school halls programme and that's quite clear. Now, surely, there might have been good reasons for these stimulus projects being rushed in but as Finance Minister now you must be weeping as all this waste comes to light.
Lindsay Tanner: Well, on the school building programme, Laurie, always when you've got thousands upon thousands of modest-sized individual projects across the country, there are going to be individual problems at some locations. The number of complaints has related to something like 0.7% of the total number of projects. And almost every time the Opposition raises one of these issues in the Parliament, they don't do their homework, they make assertions that are not backed up by facts and when we actually look into it we discover that the light that they're putting on it, the spin they're putting on it, is simply not justified by the facts. They keep comparing apples and oranges and saying, "Why is this one $850,000 when that one was $200,000?" and it turns out they're comparing two totally different propositions so I don't accept that there has been widespread waste in the programme. Inevitably, there will be individual problems at particular locations because each school's different; there are individual circumstances with the construction sector that will always cause some dramas just as if you're puting a renovation in your house, you might have an argument with the builder. Those things are always going to happen, but the total picture, I think, is still very positive for Australia. It helped to keep 200,000-plus people in employment. It helped keep the construction sector alive and is still doing so at a time of great challenge. And, of course, it's building new facilities for our primary school kids for the future.
Laurie Oakes: Everyone I think agrees that the economy is recovering from the global financial downturn a lot faster than anyone expected. That presumably means that the budget will go back into surplus faster. How much faster? When will we see a surplus now?
Lindsay Tanner: Well, there has been some speculation that I think's been totally over the top on this, Laurie, and people suggesting the budget is going to get back into surplus within a year or so. That would be really nice if that were going to happen but I think you can virtually discount any of those very rosy projections. The economy's still fragile; growth is still pretty bumpy and, of course, even though we've managed to keep unemployment low, underneath that there has been a substantial reduction in average hours worked so people have still got their jobs, but a lot of them are actually working fewer hours. That means lower wages, less money flowing into their pay packets, less money being spent. So those projections that some of the private sector economists are putting out I think just don't pass muster. Obviously we're hopeful that the outlook over the next few years will end up being a bit brighter than we projected towards the end of last year. But, we don't presume anything and if that does occur, my guess is it will be a pretty modest change in the picture, nothing like what is being projected. I think people should take a cold shower on this one. We've still got a long, hard road to get back into surplus. It's going to take a number of years in my view.
Laurie Oakes: We've also got an election this year and presumably the Labor Government wants to be able to spend money. You can't let Tony Abbott make all the promises. Is that one reason we won't see a surplus by 2012-13?
Lindsay Tanner: Oh, not if I've got anything to do with it, Laurie although obviously different ministers have different objectives in this regard, but, we are totally focused on getting the budget back into surplus. We've set a tight set of rules, capping spending at 2% in real terms each year until we're back into surplus, not allowing taxes as a proportion of the economy to go above where they were when we took office and we will stick to those rules and I think the landscape has changed a bit on this front, the days when you could wander round literally handing out money like some feudal lord off the back of the sleigh in the village, I think those days are gone. I think people are much more sophisticated now and they don't want to see governments or Oppositions making wild promises. That's one of the reasons why, I think, there has been a pretty poor reaction to Tony Abbott's paid parental leave scheme - that it's a big new tax, it's big new spending, it's dubious policy and I think people are not as bribable as many think.
Laurie Oakes: Did you breathe a sigh of relief this morning when you read that AMP will cut its variable home loan rate by nearly 0.5% tomorrow? Do you think that will weaken the Opposition's attack on the government over interest rates?
Lindsay Tanner: It's a very positive development. What it comes from is the Government's decision that was not really noticed by many at the time of the global financial crisis to put a lot of money into purchasing mortgage-backed securities to enable the non-bank providers of mortgage finance to effectively stay afloat, because they were getting an absolute beating and, of course, the guarantees that we put in place in a sense added to that pressure. So what this shows is that that policy has worked and it is helping to maintain competition in the sector. A lot of people have had big questions about the level of competition in financial services, particularly in home mortgages. And the concentration and the four major banks as a result of the global financial crisis, so, it does show that that policy is working...
Laurie Oakes: Would you expect other institutions to do the same?
Lindsay Tanner: Oh, look, without really being able to dig deep into the financial modelling of AMP, I wouldn't want to say to other people, "Look, you should do exactly the same thing as they are doing," but certainly we very strongly repudiate the suggestions that have come from some of the people in the banking sector that they should be putting up their rates, irrespective of the Reserve Bank position. As far as we're concerned, these increases aren't justified. It's good to see now that there is more competition. We think competition will improve as things start to get back to normal. This is a good sign.
Laurie Oakes: A final issue. Can I quote you something Mr Abbott said yesterday in the "Australian"'? He's quoted as saying that he's always been sceptical about economics as a science. He sees it more of an art. Do you see it that way?
Lindsay Tanner: Oh, look, I think it's a bit of both really to be honest, Laurie. But there was something else in the "Australian" quoting one of his former Cabinet colleagues, possibly somebody who's still senior in a party today, saying that Peter Costello was very frustrated at Tony Abbott's lack of interest in financial and economic issues around the Cabinet table. We've seen him in fact quoted in Nicki Saber's (?) book saying that he ruled out Tony Abbott being his Deputy because of his complete incompetence on economics. We've had no major speech from Tony Abbott on the economy and he's been office now, as Opposition leader for three or four months. We've had virtually no questions in the Parliament this year about the economy. His Shadow Treasurer Joe Hockey is AWOL. He's making speeches saying our anti-terrorism laws are too strict and we that shouldn't be trying to block pornography on the Internet getting to children. And, of course, we've got Senator Barnaby Joyce, who's away with the pixies, and clearly he can't even tell billions from millions and puts out an absolutely ridiculous statement on a daily basis, so, the Opposition's got a real problem here and irrespective of academic meanderings about whether economics is an art or a science, I think there is a real question mark here about whether they have got the capacity to be trusted, to manage Australia's economy and finances. We think they're a giant risk to our prosperity and our recovery.
Laurie Oakes: Minister, we thank you.
Lindsay Tanner: Thanks very much, Laurie.
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