STUART BOCKING: Online right now from Canberra is the Finance Minister, Lindsay Tanner. He joins us. Minister, good morning
LINDSAY TANNER: Good morning folks.
TRACEY SPICER: Morning minister. The Business Council says you're playing a high stakes game, but if the resource boom falters, the whole budget would collapse in a heap. What do you say to that?
LINDSAY TANNER: Well I think that's rubbish. Obviously we make forecast - the treasury puts out forecast in any budget that projects where the economy's likely to head and based on the best available information they've got, and there are always risks associated with those forecast that apply to anybody's forecast in this game, whether it's treasury or anybody else. But frankly this is just empty rhetoric from the BCA and I think it's unworthy of them.
STUART BOCKING: When you see the numbers come in, are you surprised yourself when you sit back in reasonableness terms and think, gee I'm surprised they were that far out. For instance, only six months ago they were forecasting a deficit of six billion dollars more than it came in as projected last night. Some of the peak debt levels were reported out to reach upwards of $200 billion. Now it's been revised back to $93 billion, less than half of what was forecast at one stage. Just as somebody having a look at the figures, do you sometimes sit back and think, I'm surprised these figures fluctuate as wildly as they obviously do, and given it, how much [indistinct] can we put in some of these projections going three or four years ahead?
LINDSAY TANNER: Well I think we've just been through the most extraordinary period in the world economy for 70 or 80 years Stuart. And so that's the real key to the not unreasonable observation you've just made, and that is that the events that occurred from kind of mid-2008 through to, you know, the latter part of last year, but still we're seeing some aftershocks now in Europe of course, are just extraordinary. And I think if you looked at forecasting all around the world, you've seen that they've pretty much thrown people in both directions, and so of course what's happened is that we had to radically revise our forecast a couple of years ago because things went pear-shaped very quickly, and we were forecasting a very strong surplus in 2008, and that melted away almost overnight because of the Global Financial Crisis and some respects the same thing has happened coming back the other way, that the strength and the recovery has been stronger than perhaps people anticipated, so I wouldn't put any criticism on the forecasters, because basically we're dealing with unprecedented events.
TRACEY SPICER: But equally minister, if things go pear-shaped again, is there a Plan B?
LINDSAY TANNER: Well, always the key thing here is the strength of the national balance sheet, and this is what you're seeing in economies in Europe is such a problem that you've economies that have had deficits for as far as anybody can remember, even in good times. You've got very, very substantial debt already and of course, you've got an ageing population, so the expenses they're going to hit are going to grow very substantially in the next five to ten years, so they are very exposed to downturns and that's really what the problem is in places like Greece and Spain and Portugal. Australia's in a fortunate position that we don't have that exposure. We have some challenges, but we are - our balance sheet's in a much stronger position to enable us to withstand these things and that's precisely what we've just lived through. We've had to have deficits for a period. We've incurred some very modest debt, but as this budget shows, we're getting ourselves beyond that very quickly. Other nations are not in the same position.
STUART BOCKING: When you talk about a stronger balance sheet, it certainly is. In part of course that's come about because you've cut spending, relating to a range of different projects, the emissions trading scheme, there were significant expense put aside for that. The decision to kill off the new child care centres, scrapping the home insulation scheme. Do you think when voters assess all of this, they will put more store in the fact that you've pulled back spending rather than obviously have been forced to break some of those promises?
LINDSAY TANNER: I think people will make their own calls about these things Stuart, and - one of the things I've learned over the years in politics is that it's very rare that people will decide their vote based on one thing. They usually look at a wider picture and it's never perfect. There's always going to be things they'll mark the Government down about no matter who the Government is and that's fair enough. It's just the nature of the business. And so, you'll get different responses from different people, but I think broadly people will understand that we've had such dramatic changes in circumstances that some of those decisions which were tough and which some people won't like were just ultimately unavoidable. And therefore, I think, on average, we'll get judged reasonably by those things. But different people will form different views.
TRACEY SPICER: Still, the Government bangs on and on about working families, then announces that tens of thousands of those working families will lose hundreds of dollars a year in child care subsidies under cut-backs to the rebate. Why are you essentially punishing your key constituency?
LINDSAY TANNER: Well I wouldn't see it as punishing people. What we've effectively done is just pared(*) it back a bit to the maximum level that we set a couple of years ago. Only a very small proportion of families actually get up to that level…
STUART BOCKING: Which is seven and a half thousand dollars?
LINDSAY TANNER: That's correct, so - and of course we shouldn't forget that we actually increased it substantially in the wake of the 2007 Election from 30 per cent to 50 per cent…
TRACEY SPICER: Still, child care fees will go up in the next couple of years under this one in four rule?
LINDSAY TANNER: So people - yes but we're also contributing some serious additional spending to help cover off on that particular problem. The point you quite validly make is that by entrenching stricter quality rules that does have an impact on cost. So the answer is that a lot of different areas of the budget have had a bit of a haircut. You know, one of the things we've had to do is to just - in a whole range of areas, say look we've got to tighten our belt a bit in this area and that area and inevitably we'll cop a bit of flack for some of those things, but the key is getting the budget back in the surplus, getting the national finances strongly and as quickly as we can.
STUART BOCKING: Obviously, as it stands at the moment, and this came in under the previous government, capital gains received a 50 per cent discount on your marginal rate of tax when you held that asset for longer than a year. You have now extended that to a degree, as it relates to interest earned on deposits in banks, building societies and the like. It is capped at $1,000. Is there not still some sort of inequity in the system given that certain types of investments receive the 50 per cent discount on the entire capital gain and yet when it comes to savings, where we try to encourage more and more savings through superannuation and other types of savings, we have capped that 50 per cent tax discount at $1,000?
LINDSAY TANNER: Well, it's not a straightforward comparison, Stuart, because many of those investments where the capital gains tax applies, of course, will have significant risk involved in them, where you will have a situation where of course if you make a loss, then you have a capital loss that you can carry forward and discount any future tax liability with. So it's not an exact comparison, but nonetheless it's a fair point in the sense that what we're trying to do here is correct some of the disadvantage that ordinary deposits have been at, in terms of savings, but particularly for small savers. This is one of the key things I think about this initiative is that there's a lot of people out there who have modest savings. They don't have enough money to get into the fancier investments and to go out and get brokers and all this kind of stuff, but they have got modest savings. Well, we want to give them a bit of a break and encourage people - particularly battlers who want to save a bit, but we understand they're not going to be saving hundreds of thousands of dollars because they don't have it - to give them a bit of a break. So that's the purpose. Your broader point is broadly reasonable but we need to keep in mind that there are different dynamics with different kinds of savings.
STUART BOCKING: I understand that. I am very much in favour of that. I think anything we can do to encourage savings is a good idea. Joe Hockey ridicules it though, saying, well, it basically amounts to no more than $3 a week.
LINDSAY TANNER: Well, look, I think that just shows how out of touch the kind of rich guys who inhabit the other side are with these things.
STUART BOCKING: There's a few rich guys on your side as well.
TRACEY SPICER: Yeah, take a look at the Prime Minister.
LINDSAY TANNER: There's one or two. But I tell you what, if you stacked the two teams together, in terms of assets, let me tell you…
STUART BOCKING: We're going to have a salary cap for politicians now, are we?
LINDSAY TANNER: My only significant asset is my home and it's got a mortgage that is about the national average, so…
STUART BOCKING: Good on you.
LINDSAY TANNER: Now, fair enough, there are a few people on our side who are a bit better off than me, but in any event, that's a bit beside the point. But I think nonetheless there is a valid point in this, and that is that the additional benefit to people, the $150 a year for their saving, for a lot people, particularly small savers, that helps, that helps.
STUART BOCKING: Sure.
LINDSAY TANNER: And particularly also that you're getting some significant tax cuts in the pipeline here. Again, they're modest. We don't make a big song and dance about them, but they're helpful to people. For a lot of people in the community, every little bit extra helps.
TRACEY SPICER: Yeah, it's better than nothing. Lindsay Tanner, some economists say you haven't done enough to cut back the tail end of the stimulus. How will you keep a lid on inflation and therefore interest rates when at the same time you're predicting the continuing mining boom and a surge in private sector demand?
LINDSAY TANNER: Well, look, the mistake that people focusing on that stimulus make is to assume that it's somehow separate from all government spending. The impact on the wider economy of government spending is from total government spending. It is not just one separate bit. And of course that stimulus spending is winding down. It is actually in effect subtracting from growth now because of that wind down. So the real question is about total government spending, I think. And here, what you've got is the key reason why - or one of the key reasons why it's really important to be getting fiscal discipline into the system and why that two per cent cap on spending increase is important. Now, the key thing there of course is that that cap is lower than the projected rate of growth in the economy. And so therefore you have got a pretty strict straightjacket around government spending. And we believe that the settings are right. They won't be putting upward pressure on interest rates. There's a whole lot of other factors involved in influencing interest rates of course but we believe that our settings won't be putting that upward pressure on rates.
STUART BOCKING: Two final things in closing. If the tobacco tax increase is as successful as the Government suggests they would like it to be, does that not run the risk then all of a sudden, a couple of billion dollars of the budget gets blown away in all of that? If as many smokers give up, as some would suggest they would like to see happen, well, clearly that forecast $5 billion worth of additional revenue just collapses.
LINDSAY TANNER: Well, we have actually factored into the numbers an assumption of a reduced number of smokers. I think the figure is 87,000 fewer smokers. So the figures that Treasury has put forward about the impact on the budget do include an assumption about a reduction in the incidence of smoking, which, of course, there's been plenty of experience to guide us on these things. Now, it may be that that ends up being slightly out, one way or the other, but I don't think it will be massively out. There might be a few more cigarettes sold than we expect, there might be a few less but broadly, what you've just outlined is already assumed in the numbers.
STUART BOCKING: The Greens say the Rudd Government has all but conceded defeat on the environmental front in its latest budget. You are one of those Labor MPs that faces a significant challenge in your own seat of Melbourne from potential Greens candidates. Does that pose a problem for you and others, where there are strong Greens candidates in some of these federal seats, where they look at the ETS and some of these other big promises on the environmental front and green groups can point the finger and say, well, there you go, you've virtually conceded defeat on the environmental front? How tough, for instance, does it make it for you in your own seat of Melbourne?
LINDSAY TANNER: Look, I've faced this challenge for a number of years, and certainly, it is tough. But the Greens are the great windbags of Australian politics. They're always promising the earth but of course they never have to deliver. They're not going to be the government, so they can run around and demand the most extreme things, knowing full well that they don't have to persuade a majority of Australians to support it, and they don't have to find the money to pay for it. So I think most people are practical enough to understand that. And in this case, the real joke is that they were the ones who killed the emissions trading scheme because after Tony Abbott knocked off Malcolm Turnbull and the Liberals flip-flopped on their position, two Liberal Senators still voted with the Government.
STUART BOCKING: In favour of it, yeah.
LINDSAY TANNER: And had the Greens voted for it - even though they say it's not good enough, had they voted for it, it would now be in place. They were the ones who killed it, so for them to now complain about that, I think, is the grossest hypocrisy.
STUART BOCKING: All right. I wish you well. Thanks so much for your time.
LINDSAY TANNER: Good to talk to you, folks.
TRACEY SPICER: Thanks, Minister.
STUART BOCKING: All the best to you. The Finance Minister there, Lindsay Tanner. One of the other points the Greens had made in relation to monies flowing from the super mining profits tax is the idea of quarantining it off into some type of fund that could be there as - you know, guard against a rainy day once the boom runs out, similar to what they do in some other countries overseas. Now, that wasn't a bad idea. One of those ideas that the Greens have put up that was obviously rejected by the Government, they have got other ways of using that money and other ways of dealing with that money, but not the silliest suggestion being put out there by Bob Brown.
TRACEY SPICER: That's right. Like the sensible carbon tax that they suggested after the ETS didn't get through. And I think part of the fierce criticism of the Greens that Lindsay Tanner just expressed there, I think is a little bit scared. And I think everyone, you know, who is in a seat where there is a Greens candidate would be a little bit concerned because regardless of whether they follow through on anything, it's a great place to park a protest vote.
STUART BOCKING: I think he was spot on. They are the great windbags of Australian politics. And he's quite right. They can say what they like, knowing they will never have to put it into practice.
-ends-
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