Lindsay Tanner: Tonight is Tony Abbott’s big test, is he going to put his money where his mouth is and join the Government in its commitment to surpluses as soon as possible. The chart that we are releasing today and the accompanying table show that his existing explicit commitments already send the Budget $15.7 billion more into the red over the forward estimates, and would wipe out the Government’s projected surpluses for 2012-13 and 2013-14. In 2012-13 the Government, the Government is projecting a $1 billion surplus, with Mr Abbott’s existing commitments that would turn into a $4.4 billion deficit, in 2013-14, the Government is projecting a $5.4 billion surplus. Mr Abbott’s commitments would turn that into a $540 million deficit.
That is of course before we even get to the Government’s tax reform package where Tony Abbott has already indicated he will oppose the Government’s Resource Super Profits Tax. The big question for him is, is he also going to oppose cutting company tax, increasing the amount from $1000 to $5000 that small businesses can write off immediately, increasing superannuation and all of the reforms and tax cuts that are in that package. If he is going to support them, he has to explain how is going to pay for those commitments.
The outcome of Mr Abbott’s stance is there will be no surpluses over the forward estimates, the deficits would be bigger in each of the four years and it would take longer to pay down debt.
Tonight Tony Abbott faces four tests.
He has to explain how he is going to finance the $15.7 billion of additional spending he has already committed to, but has not provided savings for.
He will have to explain if he is going to oppose the Resource Super Profits Tax, whether it will also oppose the tax cuts that are being financed by that tax and if not how he will finance them.
Third he will have to match the Government’s commitment to extend its cap of 2 per cent increase in spending up to the point where the Budget is in surplus to the extent of 1 per cent of GDP.
And finally the test he will have to meet is that he will maintain the surpluses that the Government committed to for 2012-13 and 2012-14 in the Budget on Tuesday night.
He will also have to show he understands the difference between the recurrent and capital sides of the Budget. and that he understand the investments that are on the capital side that earn a return – such as investments in equity of the Australian Rail Track Corporation or the equity of the National Broadband Network - cannot be converted into recurrent expenditure without hitting the budget bottom line and sending the Budget further into deficit.
Just today, his Finance Minister, Andrew Robb, said on the doors - quote “a Coalition government would under any circumstances bring the Budget back to surplus well before a Labor Government could.”
The facts tell a completely different story.
Tonight is put up or shut up time. The debt and deficit campaign is dead, tonight we will find out whether Tony Abbott has the good grace to bury the corpse and give it a decent funeral. Tonight we will find out whether he can be trusted to manage the nation’s finance or if he is just a giant risk to economic recovery in Australia.
Tony Abbott’s approach to Budget policy is like those dodgy American evangelists who preach chastity during the day and then at night are out at cheap motels.
Q: Mr Robb says you are not going to reach your surplus as you claim because all your assumptions are based on sand.
Tanner: We reject those assertions. The people who have put the forecast together for the Budget are the same people that have put the forecasts together for previous Budgets under the previous Government. Forecasting is always an inexact science but we stand by the Treasury forecasts, they are always conservative. Now that the Coalition has had to retreat from their debt and deficit scare campaign, they are now left with the last resort of a scoundrel, to claim the figures are shonky.
Q: Your whole narrative here is based on these forward figures and on what you say you will do. You are asking people to trust you given the litany of broken promises your government delivered this term aren’t you
Tanner: We believe the Government’s record during the global financial crisis in extraordinary circumstances demonstrates that we can be trusted with managing the economy and the nation’s finances. Tony Abbott and the Coalition are a giant risk to nation’s prosperity and the nation’s finances. We are happy for people to judge us on our total record. The key contrast here is between the Government which has got the runs on the board, and has set the sails for Budget surpluses, for paying off the very modest debt the Government incurred during the global financial crisis.
Q: You set four tests for Tony Abbott but haven’t you broken one of your own because you said all revenue flows would flow to the bottom line. Economists have said that is not what has happened here
Tanner: I have read one commentary that suggests that. I don’t accept that assessment, we have honoured our budget restraint commitments, and the evidence is there.
Q: On the two-per cent cap, why have you brought the funding forward from one year to current financial year, aren’t you playing with the cap, making it easier to meet the cap in future years.
Tanner: No that is not true at all. In any given budget there is always movement of funds both large and small. In the Expenditure Review Committee there is actually a process that I am responsible for called movement of funds. It is mostly rats and mice things, one million dollars here, three million dollars there. But there are substantial other movements, for example in the defence area, there are always changes in the profile of defence projects, where a certain amount of money will be made available in a given year and then a year later that profile has changed.
Q: Is it true that the Government wouldn’t mind if some mining projects failed because it would address the two-speed economy and have you received any advice on that.
Tanner: On the second question, I am not in a position to say. I would be very surprised if we had but any such advice would go the Treasurer. I am not aware of any such advice. We would not accept such advice of that kind. We certainly do not agree that would be good for Australia, nor do we think this is likely to happen.
Q: Would you encourage customers who feel ripped off to join the class action against the banks
Tanner: First I confess I am not yet across the detail of the class action. Second we as governments usually do, operate on the principle of not interfering in a rhetorical way in legal proceedings. In effect all I would say is you have legal rights, if in your view you have been dealt with wrongly, and there is legal avenue open to you, then you are entitled to exercise those legal rights. But it is not appropriate for us be intervening.
Q: With the mining tax, is there Government really prepared for the long bitter battle that could come from this industry? Or do you think it’s just shadow boxing and that they will come and talk to you.
Tanner: I can’t see into the future so I can’t predict how the mining industry will pursue this issue. We have seen this numerous times in the past in Australia where there have been taxes that apply to particular activities and those that have been affected have screamed blue murder about it. Very often the claims that have been made have been very overblown. The restaurant industry was going to close down as a result of fringe benefits tax in the 1980’s, when I look around my electorate the evidence is very much different. The gold tax in the 1980’s was going to destroy gold mining in Australia which of course hasn’t happened. So we are entering a period of serious negotiation with the mining industry where there are lots of issues of complex detail that need to be worked through. We have shown we are willing to listen to what they have got to say. Some people make complaints about consultation but no one ever complains about consultation when they like the outcome; that is the real issue here. We have a wider issue here though and that is ensuring Australians get a fair share of their resources which are being exploited for prices that were not in contemplation some years ago.
Q: How do you defend the Budget against claims that there is not much cutting going here but there is an increase in taxing.
Tanner: In a couple of ways, firstly there have been significant cuts and we are copping a bit of flak for them and that is fair enough. Wayne Swan indicated on Budget night that we were trying to hand out haircuts as widely as possible. Areas such as the reduction in the upper limit of the child-care tax rebate, there are quite a lengthy list of these things. We have had some very tough negotiations with the pharmaceutical industry to achieve some pretty significant savings. The key thing is wider spending discipline. We have got projected spending growth that is going to be below the growth in the economy across the forward estimates which is very very significant.
Q: The Budget Forecast project surpluses from 2012-13, would it be fiscally responsible to bank those surpluses in a sovereign wealth fund.
Tanner: I have discussed this prospect publicly in the past, and I have made the point then and I reiterate now that the primary objective has got to be to pay down debt. We are projecting that occur in 2018. I think 2018 is far enough away for it to be not really appropriate for me or anyone else to be making serious assertions about what might happen in 2019. So i regard the discussion as an interesting hypothetical but it is not one any sensible government can get seriously into in the position we are in.
Q: Did the Prime Minister lose his cool on the 7.30 report last night?
Tanner: As I said on Jon Faine this morning, and I’ll probably never be forgiven for this. Jon Faine described this as a meltdown. And I said to Jon, you’ve clearly never met my three year old daughter. So, frankly having watched that footage, I think it’s ridiculous to suggest that there was anything untoward there. The Prime Minister was just very passionately defending his position as somebody who is committed to tackling climate change, who along with the government has had to adjust our position, without changing the content, but adjust the position, in order to deal with realities. Both our inability to get the position through the Senate because the Greens voted to torpedo it and the fact that Copenhagen did not deliver the outcome that many people were accepting and we’ve now got a much more uncertain global environment. I don’t accept that he lost his cool, or that he had a meltdown or any of those other things.
Q: But doesn’t it display a basic inconsistency, because after Copenhagen he claimed it was a success? Last night he made it pretty clear it was an abject failure.
Tanner: I think you’d need to read the comments closely to see whether or not the claim of inconsistency is justified. But certainly there is no doubt that at the outcome of Copenhagen; it was not the outcome people were hoping for. But nonetheless there were some significant and important steps forward there. So you’d have to say it was a success in part, because if you regard zero as the starting point, then positive things, the effective global commitment to the 2 per cent, sorry, 2 degree increase, and the willingness of developing countries to make internationally scrutinised commitments, those are the kinds of things that were an important step forward. But relative to where expectations were, it clearly wasn’t a success and it has left the world in somewhat uncharted territory
Q: ….How concerning is it that Kevin Rudd has mused publicly that China might implode?
Tanner: Well first I sadly still haven’t had an opportunity to read the transcript or the speech from 2007 from which that is supposedly extracted. I’m always a bit cautious about responding to things of that kind when they are asserted by people who have an axe to grind, eg. our opponents, to make sure that (a) they’re accurate and (b) they’re not taken out of context. Now to the extent that I do know about that speech, I don’t think any of us would back away from the thrust of his comment which was that the Government at the time, remember we were in opposition, the government at the time was cruising on the back of the mining boom, not investing for the future, complacent, taking for granted the benefits of the mining boom and not using them for long term future prosperity. And therefore in effect, what he was saying was, these things can come and go and if that happens clearly Australia has wasted an opportunity. As to the specific words and what the context might have been and what they might mean, I can’t really say.
Q: ..there is a need for a significant boost to the supply side needed to keep price pressures down, and he said there needed to be well targeted investment as part of that, do you think the government is fulfilling it’s part of the bargain there?
Tanner: We certainly agree with him and it’s a long hard haul frankly, but I’ll give you one example of where we’re doing that and something that I am very passionate about. And something I give considerable credit to the Howard Government for, incidentally, which typically we don’t always do. And that is the Australian Rail Track Corporation. Set up by the Howard Government in 1997 as a result of splitting up the old Australian National which was established by the Whitlam government. And what has happened under this government, is that we have massively invested in the ARTC and the interstate and rail freight infrastructure. which is really crucially important for a country like Australian which is very large, with dispersed population and a handful of big population centres. And that has enormous benefits in productivity and often things that are not noticed. So in this budget there is further billion dollars or so, of additional equity announced for the ARTC to go into some major projects to further upgrade the standard of that interstate rail track. Now the impact of these things is often not widely understood. I launched a project in Geelong in January this year, which was very interesting for me, a $50 million project, part of the stimulus package and the net outcomes of this project are faster times, faster freight times from Victoria to Adelaide first. Second, significantly lower track maintenance costs. Third, significantly lower maintenance costs and equivalent costs for the rolling stock. Because with timber sleepers, although you don’t see it with the naked eye, with timber sleeping the rails are a bit like that, concrete sleepers newly laid are a bit like that, so the end result that you get far less wear and tear both on the tracks and the rolling stock. And additionally you get local manufacturers getting the benefit making the sleepers and a range of indirect spin offs as well from that activity. This is one example what the Deputy Governor was referring to. It’s really critical.. It’s not particularly politically sexy, in spite of my best efforts, in spot Anthony Albanese’s best efforts we’re never likely to get it on the front page of the average tabloid newspaper, but it is fundamentally important for Australia’s future. Many other things of this kind are occurring. Now I think it is worth pointing out, you can’t do the kind of things that we have to do in this country overnight. It is a gradual extended process. We have a big infrastructure deficit to catch up on, particularly in our cities. But I don’t think anyone can question the effort that the Government is making in this regard. There is always going to be debate about the detail, that’s fine, but I would suggest that in response to the Deputy Governor’s comments that’s exactly what we’re doing and we agree with his comments
Q: Can I just ask another question about the ARTC. Because you raised it and I do find the ARTC sexy.
Tanner: Goodness me, I’ve finally found someone!
Q: I notice that the Henry Review suggested that there be incentives to get more freight on the railway, but from what I remember it was greater taxing on road freight. I notice the government didn’t take that up, and I was surprised by that given you are looking for environmental outcomes, having been unable get up the CPRS, why didn’t you and should you in the future?
Tanner: I think the main thing I’d say is that we’ve already got a process in play, with respect to both charging and regulation of heavy vehicles and trying to get a uniform national system, which is proving challenging. Anthony Albanese’s in there working hard and we are making progress and it’s broadly on track, but you can imagine the difficulties that are involved there. That will deliver those kind of benefits in the medium term. There have of course been some changes already that we’ve pushed through to the charging regime that have significantly diminished that gap. I think our primary focus has been on assisting the rail industry to be of a more competitive standard. So we shouldn’t underestimate the extent to which Australia’s rail infrastructure has been degraded and become dilapidated. We have got substantial sections of the interstate track that was basically built for steam trains and has had over many many decades, under governments of both persuasions, pretty limited investment. TO be fair, the Howard Government did start a process of regeneration in this area, maybe you could suggest that it should have done more, but in this area I’m happy to give them a degree of credit for getting the setting right, and also starting to put money in. We are putting a lot more money in. And we believe it’s actually a very important thing. And I’m glad I finally found a journalist that thinks it’s sexy. Thank you very much folks.
-ends-
| Media Contact: | Website: |
|---|---|
| Nardia Dazkiw - 0418 144 690 | www.financeminister.gov.au |
