CURTIS: Penny Wong, welcome to News 24.
WONG: Good to be with you.
CURTIS: A third of the increase in the deficit for 2011-12 has come from writedowns in revenues, because of the global instability. The Treasurer says it’s the worst instability since the global financial crisis, and that the storm clouds are gathering. How can you say with any certainty that a surplus of just $1.5 billion can be delivered in 2012-13?
WONG: First, in terms of the global economic circumstance, certainly the outlook’s deteriorated. We are forecasting less economic growth in the global economy than we were at budget, and that’s consistent with the OECD report which was released yesterday. But I think it’s important to remember why we do this. We do this because it’s important to hold to fiscal discipline, and because that’s in the national interest. We’ve seen what happens when financial markets have to pass harsh judgement on governments who don’t have sustainable budget positions.
CURTIS: But isn’t the question, though, whether you can actually deliver it? If Europe gets worse – and there’s a real prospect that might happen – your surplus is too thin really to cover writedowns in revenues that might happen.
WONG: And we’ve more than offset all new spending in this MYEFO, the mid-year update, to ensure we maintain the fiscal discipline we’ve shown to date, in past budgets as well. But I would say this: we are determined to deliver a surplus in 2012-13, but it is a commonsense proposition that if the global outlook continues to deteriorate, and deteriorates further, it will make it much harder.
CURTIS: Make it much harder – are you prepared to entertain the thought at all of doing what you did during the global financial crisis and spending more to hold up the economy, instead of trying to hit this very small surplus target?
WONG: I’m not going to get into what if, what if. We’ve made some very significant decisions in this mid-year update in the context of a very big hit to revenue, a $20 billion hit. From six months ago, we now have $20 billion less over the forward estimates than we anticipated. You should anticipate continuing to see that sort of discipline. I would also say that this is a Government with a track record of doing what’s required to support jobs. That’s why we handed down the mid-year update that we have.
CURTIS: But you’re taking a very different approach to the instability that happens now than you took during the global financial crisis. Why is that? When you chose to spend last time, you’re choosing to save this time.
WONG: We are still – notwithstanding the downgrade to the growth forecast – we’re forecast to grow at trend. Now it is true that there’s a lot more risk associated with the path ahead as a result of what’s happening in the global economy. But we still forecast to grow at trend, and so this is a responsible update that reflects that data. It also reflects the uncertainties we see in the global economy.
CURTIS: You’ve got a surplus in 2012-13 of just $1.5 billion, in the following year just $1.9 billion. What do you do if your hand is forced by the global economy? Or is it up to the Reserve Bank to do the heavy lifting?
WONG: Well I think that’s another what if, and I’ve answered that. But obviously, interest rates are a matter for the Reserve Bank, and they’re independent of government. What we have to do as a Government is to hold to a disciplined fiscal approach, and that’s what we’re doing. And I think that what we’ve seen today, with the ratings agency Fitch giving us a AAA rating, the first time in the nation’s history all three ratings agencies have done so, is a testament to the importance of the discipline the Government’s showing.
CURTIS: In this budget update you’ve pushed some spending back, and pulled some spending forward. Why can’t those be seen as accounting tricks, or fiddling the books, in order to deliver the surplus you say you want to get to?
WONG: Well I’m sure the Opposition will say that, because that’s easier to say than actually being upfront about how much they’re going to cut and what they’re going to cut. The challenge for Tony Abbott when he stands up shortly, is to actually be upfront with the Australian people about what he proposes to cut. We’ve outlined very clearly the reasons for the deficit in 2011-12. You’ve gone through some of them: a $5 billion writedown in revenue, the upfront costs of carbon, the bringing forward of some very meritorious infrastructure spending, and of course, the hit to the budget as a result of a couple of reforms not yet passing the Senate – private health insurance and the dental scheme being one of them. So what you see over time is the surpluses, and it is a modest surplus but we see them steadily building over time.
CURTIS: You have increased the efficiency dividend for the public service again in this budget update. The Government promised at the last election that it would not increase the efficiency dividend for the public service. It’s now a promise twice broken. Is it just more politically palatable to hit public servants than it is to hit the wider economy with savings?
WONG: We’ve made a range of savings, that is not the only saving we have made. And it is, I agree, it is not an easy saving to make. But we think it is important, in the context of and for the reasons I have outlined as to why we have to make savings and for government to make its contribution. And this is a contribution that we are asking the public service to make.
CURTIS: You say there will be no forced redundancies but in the end there is a real prospect there will be fewer jobs in the public service as a result of this.
WONG: The first call for these savings should be on non-staffing efficiencies. We’ve got a unit in my Department that’s there to help support agencies and strengthen the efficiencies process. We also have a stakeholder group which we are happy to discuss these matters with. To try and work through how these efficiencies can be found. And we would expect that we should look at those issues first. Remember the Government has already delivered some $10 billion through these sorts of savings processes – through co-ordinated procurement, on travel and similar sorts of reforms.
CURTIS: On the question of jobs the Treasurer says that jobs are effectively the Government’s number one priority. Your unemployment forecasts in this budget update have a five in front of them, where previously they had a four in front of them. You’re expecting more people to be out of work over the next couple of years aren’t you?
WONG: And we’re expecting more jobs too. We should remember that there are many many advanced economies including the United States and certainly all of Europe, all of the European zone who would want an unemployment rate with a five in front of it. And it would seem a very distant thing, when they’re looking at nine or ten per cent unemployment. We have made jobs a priority. We have continued to ensure that the circumstances are there to enable jobs to be created. And that always remains a Labor priority.
CURTIS: You mentioned the extra funding for the upfront household assistance under the carbon tax. The Treasurer included that as a list of what he said was non-discretionary spending which helped increase the deficit. But isn’t that a political decision on your part, so people get the money before they feel the pain of the carbon tax?
WONG: It’s a policy decision which we have been upfront about. When the Prime Minister announced the Clean Energy package, she said we are making an upfront payment. Not just because of the carbon price and its implications but because of the very good tax package that was associated and is associated with the carbon price that will deliver tax cuts to everyone earning up to $80,000 a year. Something that Tony Abbott is simply not going to be able to match.
CURTIS: The Greens and Rob Oakeshott have already expressed concern about some of your cuts to higher education including increasing the contributions for both mathematics and science units. Are you going to have some trouble getting this through the Parliament?
WONG: What I’d say to them is look at what the Government is spending. We are putting more money into universities. Some $5 billion in additional funding. We are seeing more students at university some 100 000 more students at Australian universities because of the reforms of this Government. We are obviously going to look at ways to ensure we continue to get people into maths and science. But this was not a measure that was effective.
CURTIS: Looking to the next budget, you’re going to effectively have an austere couple of budgets, particularly going into an election year in 2012-13 if you’re to keep the surplus aren’t you?
WONG: We are always going to have to be disciplined. And we have been to date, offsetting all new spending and we will continue to hold to that discipline in the years ahead.
CURTIS: Penny Wong, thank you very much for your time.
WONG: Good to be with you.
ENDS
