GREENWOOD: First up on Money News tonight. The person who really was responsible for trying to get the cuts out of the Budget. And that of course is the Finance Minister Penny Wong who joins us here on Money News. Many thanks for your time Penny.
WONG: Good to be with you again.
GREENWOOD: Here’s the interesting point. I spoke with a very senior chief executive today of a major Australian company who said to me if he had produced a budget for his shareholders in May this year that projected a $22 billion deficit and in November/December it had blown out to $37 billion, he would be sacked immediately. Why should this Government on the projections of this year suddenly be held in the public’s confidence?
WONG: Well would you have anticipated what has occurred in Europe and the global economy in May of this year?
GREENWOOD: Only thing is, I’m suggesting that so far, so far at least anyway, the European situation has not necessarily touched Australia in a significant way.
WONG: I don’t agree with that, I think you’ll see in this year’s mid year update that we’ve seen a hit on government revenues over the forward estimates of $20 billion. That means we are getting $20 billion less over the forward estimates budget period than we anticipated at the budget time.
GREENWOOD: These are all projections. This is over the next four years, just to explain to people. And the $20 billion is there. So in other words, you’re doing a little bit of conservative management of the Budget. But the point still remains that today, this year certainly, that this budget deficit is going to be much larger than anybody would have anticipated which has opened you up to the charge of course, that you’ve featherbedded the budget this year, increased the deficit this year so that you can achieve a surplus next year.
WONG: Let’s remember a couple of things should we. The first is there’s not just one surplus that’s projected, there are a number of surpluses that are projected over the budget period from 2012-13 onwards over the subsequent three years. The second thing I’d say is this – have a look at what the deficit this year has increased by and why.
About $5 billion of it is lower tax receipts. About $2.3 billion is additional spending on natural disasters such as the rebuild in Queensland, about $3 billion is assistance to households and business from the Clean Energy Package. And there’s about $1.4 billion from accelerated infrastructure funding. So these are spending demands, some of which are simply lower tax receipts and some of which are important things such as the rebuilding from the floods –
GREENWOOD: Everybody in this country would forgive you that because any government would have to wear that. One small thing – what about that Clean Energy cost that you spoke about there. Is that not a cost that otherwise might have been in next year’s budget and not in the current year’s budget?
WONG: This is an announcement we made in July, we made a very clear decision to provide some upfront assistance, not all, but some upfront assistance to households and to business in this year ahead of the carbon price coming into place. And that is a sensible policy decision, it’s about saying we want to make sure that people have the capacity to deal with the small impact of the carbon price as and when it happens.
But if I can take one step back – this is a budget where we have more than offset all new spending. So if you want to come back to your first example about why is the deficit bigger - we have offset all new spending just as we did in the budget. Just as we did in the election campaign. Now that is a very significant fiscal discipline that hasn’t been seen before at a time when we’re battling lower company tax receipts, lower capital gains receipts and low personal income tax receipts because of the effect on the economy of a weaker global economy.
GREENWOOD: Let’s go to the poor old public servants. Now you’ve already squeezed them up, 1.5 per cent in the last budget. Effectively told the department heads they’ve got to find 1.5 per cent efficiency dividends or savings if you like. You’ve now gone back to them and said they’ve got to find another 2.5 per cent. Surely, at some point in time you’re going to get some push back from those public servants.
WONG: This is a difficult decision. And when you’ve taken a $100 billion worth of savings already over your past four budgets, there’s not a lot of easy decisions left and this is a very difficult decision and I’ve no doubt there are some people are not very happy about it. I accept that.
GREENWOOD: Have you taken a view on how many public servants, federal public servants will be sacked as a result of that decision?
WONG: Our position is we should look first to savings in non staffing areas such as reducing consultants, minimising media and advertising expenditure. Those sorts of back office and other expenditure savings. In terms of jobs, I’d make this point. There is a significant amount of turn over in the public service – there is I think, 7 per cent attrition rate across the public service. And our expectation is that there is not going to be a requirement for forced redundancies.
GREENWOOD: In other words, you’re not counting out the prospect of forced redundancies if your department heads to whom you have given the responsibility of this productivity bonus, can simply find no other way other but to actually reduce their headcounts.
WONG: Our expectation is no forced redundancies, ultimately, how agencies meet these savings is a decision for heads of agencies and we have a clear policy in place in relation to redeployment. And we’ll also be supporting agencies finding these savings and we’ve laid out a consultation process and an implementation process for that.
GREENWOOD: Also, one other point that has been increased of course is the unemployment rate which will eventually get to 5.5 per cent is the forecast. Now quite clearly, there are some individuals who are going to be affected by that rising unemployment rate. Is there much support around for them?
WONG: Look, let’s remember the budget updates forecast more jobs. 300 000 new jobs by June 2013.
GREENWOOD: But a higher unemployment rate.
WONG: That is true because we are not immune as an economy from what is happening globally. But 5.5 per cent and 300 000 new jobs when you’ve got Europe at double digit unemployment rate, you’ve got the US at nine plus per cent. We do compare very well because our economy’s fundamentals do remain very strong.
GREENWOOD: Penny, you’re from the Labor Party, you would understand the person who loses their job doesn’t give a rats about somebody in Europe or the United States and their unemployment rate.
WONG: And because we are the Labor Government we have prioritised both through the global financial crisis and this budget update, ensuring we keep the economy strong and we support jobs.
GREENWOOD: Finally, a piece of good news – Fitch Ratings has upgraded the Australian credit rating effectively from AA plus to AAA. This is genuinely good news and as you pointed out, comparative to other Western economies right now, we are still in a very strong position.
WONG: And it demonstrates the importance of the Government’s discipline and the fact that the Fitch has now said we’re AAA as well. It’s the first time in Australia’s history, we’ve received a AAA rating from all three global ratings agencies is really an endorsement of the Government’s budget strategy.
GREENWOOD: Penny Wong, our Finance Minister, we appreciate your time here on Money News.
WONG: Good to talk to you again.
ENDS
