The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

30 April 2008

Interview with David Speers

Sky News

30 April 2008

SUBJECTS: Budget; Excise on RTDs; Tax Reform; Foreign Investment

SPEERS:

Wayne Swan, thanks for your time. According to Finance Department figures, the surplus to February was $17.6 billion. Will you need to cut spending in the Budget to reach the target that you've set of a surplus of 1.5 per cent of GDP?

TREASURER:

We certainly need a responsible Budget, David. We have to get rid of the reckless spending that we've seen from the previous government that's put upward pressure on inflation. There's no doubt we do need to rein in spending. The Finance Department figures, I don't think, will give an accurate reflection of flows of revenue. As you know, these are challenging times. The countervailing forces in our economy are strong - high underlying inflation on the one hand, and on the other hand, financial market turmoil internationally. That will impact on our revenues in this Budget.

SPEERS:

So, why are the Finance figures particularly accurate?

TREASURER:

Well, because the Finance figures only run through to February. We've got a situation now where revenues will be affected by the fallout in the stock market.

SPEERS:

Well, Ken Henry, the head of your Department, has made it fairly clear in some comments yesterday that the forecast for growth at 3.5 per cent will actually come in lower than that, and also the forecast inflation of 2.75 per cent for next year, inflation will actually be higher than that. Do you agree obviously with your Department boss on that?

TREASURER:

Well, we'll have to wait until Budget night to see all the figuring. But we do know at the moment that these are challenging times in the international economy. We've got the highest underlying inflation in 16 years domestically. That certainly has an impact, particularly in terms of spending, and also impacts on revenue. The fallout from what's occurring in the share market, for example, will most probably affect tax revenues, particularly capital gains tax. So, people cannot assume that the automatic revenue flows that they've seen to the Budget from the boom in recent years will continue to flow through into this Budget.

SPEERS:

So, the days of bumper budget surpluses automatically rolling in are over?

TREASURER:

Well, we will certainly have a significant Budget surplus. It is absolutely required to tackle the inflation problem that we face. We've got to deal with reckless spending and what we have to do is to make the investments for the future. That's terribly important. We've got to lift the productivity growth in this economy. So, what you'll see is a responsible Budget which reins in spending, makes the investments for the future, and looks after the economy, particularly when it comes to those working families who've worked hard to make it strong.

SPEERS:

So, the Treasury Secretary, Ken Henry, is right? Growth is lower than forecast and inflation's higher than forecast, what does that mean for the economy?

TREASURER:

I think what you'll see is a responsible Budget. You'll see a Budget which is dedicated to delivering sustainable growth in the long-term, and most importantly, putting downward pressure on inflation and downward pressure on interest rates, and also safeguarding this economy from the fallout from international events that are impacting upon business confidence and consumer confidence both here and abroad. That's what we've got to do. It's a balance between fighting inflation on the one hand, and on the other hand, safeguarding our economy from the fallout from these international events.

SPEERS:

On the weekend the Government's increased the tax on these so-called 'alcopops' - the pre-mixed drinks. Some members of the Government's Preventative Health Taskforce are saying you should also increase the excise on other alcoholic products and cigarettes as well, in the interest of improving the health of the nation. Will you do that?

TREASURER:

I can't comment on Budget decisions, that's for Budget night. I just make this point about the excise increase on RTDs: that was closing a loophole that was left open some years ago, and it also relates to teenage binge drinking. So, it was a very specific initiative for very specific reasons.

SPEERS:

But teenagers binge drink beer and other drinks as well.

TREASURER:

I think the evidence is pretty clear from all of the experts that this measure will have an impact on teenage binge drinking, and it should be seen in that light, not in the light of revenue.

SPEERS:

What about cigarette and tobacco excise?

TREASURER:

As I said, I'm not going to speculate about Budget measures on the night, one way or the other.

SPEERS:

Okay. The Prime Minister has flagged a 'root and branch' review of the tax system. You've already ruled out changes to the GST as part of that. Can I ask you about superannuation taxes? Will they be reviewed?

TREASURER:

We'll respond to the suggestion from the Summit in good time. The Prime Minister has made it very clear that we're onboard when it comes to tax reform. We've got significant tax reforms in this Budget and we've got a tax reform agenda when it comes to income tax out into the future in terms of our aspirational goals for personal income tax. There are a variety of other issues when it comes to tax and the Government will take its time to respond.

SPEERS:

Okay. But you can't say whether we could see a change in the tax mix in relation to superannuation as a result of that?

TREASURER:

David, I'm not going to speculate about the tax reform process we'll go through. We'll outline that in good time and everybody can respond when we do that.

SPEERS:

And just finally, China's Sinosteel has done a deal to acquire the West Australian mining company, Midwest. It is the first successful acquisition by a Chinese company of an Australian resources company. Do you welcome that sort of Chinese investment to buy up Australian resources companies?

TREASURER:

We welcome foreign investment and we don't discriminate in terms of the source. We've got a set of foreign investment guidelines that we apply in the national interest and we will apply those in the national interest to any applications that come before the Foreign Investment Review Board. As it goes to individual takeovers, I don't make comments about those at all.

SPEERS:

You're not worried about China's ambitions to buy up Australian resources companies?

TREASURER:

No what I will do is apply our foreign investment guidelines in the national interest irrespective of the source of those funds. Chinese investment has got a role to play in this country. But we've made it very clear, when it comes to foreign investment from Chinese Government entities, that we will apply our national interest criteria as we do in all other cases.

SPEERS:

China hasn't been told to back off buying up Australian resources companies?

TREASURER:

No what we're doing is applying our guidelines that we announced some months ago and we will continue to apply them because they are very important. We think it is important that investment is competitive, that investment is non-strategic and that investment is in our national interest.

SPEERS:

Treasurer Wayne Swan, thanks for your time.

TREASURER:

Good to be with you.