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

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

4 May 2008

Interview with Barrie Cassidy

ABC TV Insiders Program

4 May 2008

SUBJECTS: Budget, FOI, NSW ALP State Conference, Banks

CASSIDY:

Wayne Swan, good morning and welcome.      

TREASURER:

Good morning, Barrie.

CASSIDY:

After 12 years of Peter Costello Budgets it’s you turn.  How will the public notice the difference?

TREASURER:

Well, it will be a pleasure and an honour to deliver the first Budget of the Rudd Government. And what they’ll notice is a Government that’s dedicated to fighting inflation, to delivering for working families, and most importantly I think, investing for the future.  What we will see is a Budget which is dedicated to the long-term, but takes up the challenge of fighting inflation, because fighting inflation at the moment is something that must be done.  We’ve got to rein in the unproductive spending of the previous government and get the fundamentals right in this economy.

CASSIDY:

But I think the previous government would have said all of that.  What’s the difference?  What’s the difference in the philosophy?

TREASURER:

Well, because the previous government didn’t practice that, you see, Barrie.  They went on a spending spree which has put upward pressure on prices, upward pressure on inflation, it’s produced eight interest rate rises in three years, and a situation where working families are really hit for six when they go to the supermarket, when they go to the petrol bowser, when they try and pay the bills at the end of the week.  It’s harder and harder to do that.  And the reason that is the case is that inflation has hit a 16-year in high in October, November and December last year and again in the March quarter.  These inflationary pressures have been building for a long time.  If we don’t deal with them, we’ll have higher prices and higher interest rates for longer.  The country simply can’t afford that.  We’ve got to get the budget back onto a sustainable footing and that certainly means reining in spending.

CASSIDY:

Now, the issue that George raised before.  You say that revenue will start to come off because of the sub-prime crisis, so you lose some revenue there.  But revenue is about to strengthen because of higher commodity prices.  Which factor will be the greater – more money come in or more money go out?

TREASURER:

We will not see, in this Budget, the revenue surprises on the upside that the previous government had.  The previous government were very lucky, Barrie.  They were very lucky with those revenue surprises.  It’s true there are swings and roundabouts.  There’s no doubt that the revenue from the increase in the terms of trade will flow again.  But on the downside we’ve got the fallout from the US sub-prime crisis which has impacted upon world growth, but it’s also hit share markets globally and domestically.  It’s had a very big impact on business confidence and consumer sentiment and we are going to see less by way of business taxation increases in this Budget than we’ve seen for a long time.  So, it’s made our task harder. The previous government were pretty lazy, Barrie.  They went on a spending spree and they just simply relied on these increases in revenue to fund their increase in spending.  What we’ve got to do is to rein in spending.  And so we can deliver our election promises, we’ve got to change the priorities in the Budget, and in particular, direct revenue to those areas of investment such as education and health.

CASSIDY:

Well, what’s your best guess, though?  Surely the change in the terms of the balance of trade will offset any losses due to the sub-prime crisis?

TREASURER:

No, they certainly won’t be offsetting losses due to the sub-prime crisis.  We’ll see the final figures on Budget night, Barrie.  These figures are still bouncing around only a week and a bit out from the Budget.  We haven’t seen this sort of volatility in the revenue figures for a long time.        

CASSIDY:

Now, you committed to these tax cuts in the Budget before the inflation problem arose.  Circumstances have changed.  Why are you not changing with the circumstances?

TREASURER:

Well, Barrie, I make no apology for delivering the tax cuts that we promised.  These are tax cuts that the Labor Party fought for during the previous Parliament for three years.  I have to disagree with what George said before.  The reforms in this tax package at the lower end in terms of the Low Income Tax Offset and in terms of lifting the threshold for the 30 cent rate were reforms that we fought for for a long period of time because they give some justice and fairness to low and middle income earners, particularly second income earners who, when they work a few more hours, lose too much when they pay their tax and have their family payments withdrawn.  So, we think these are absolutely essential to relieve the cost pressures on working families, but also to reward the hard work of people who make the economy strong, to encourage their participation in the labour market, and to encourage them to increase their skills.

CASSIDY:

But as I said, circumstances have changed.  So, you’re putting a moral responsibility – keeping your promises – ahead of the economic responsibility?

TREASURER:

No, we understand the need to build a very strong surplus and we also understand the need to rein in spending. So, we are going to make the spending cuts elsewhere in the Budget.  We know we need a strong surplus to rein in public demand and to rein in inflation.  We also know we need a strong surplus so we can make those long-term investments for the future.  And we also know we need a strong surplus as a buffer, if you like, to the international uncertainty the country is facing at the moment.  So, that means we will deliver the tax cuts on the one hand, but we will cut back on spending in other areas of the Budget, particularly in those areas where the previous government was reckless.

CASSIDY:

And you say you will but without hurting working families, if you’re too attuned to that concern about not hurting working families, aren’t you simply inviting headlines that you wimped it?

TREASURER:

No, we are going to bring down a responsible Budget.  We will rein in spending. The previous government was spending like a drunken sailor, Barrie.  They had the biggest increase in spending in the last four years of any four-year period in the last decade and a half.  So, we are going to rein in that spending and we’re also going to change spending priorities in the Budget.  That’s terribly important if we’re going to deal with rising prices, rising inflation and put some downward pressure on inflation and interest rates.   

CASSIDY:

Okay.  The baby bonus.  You’ve refused to rule in or out whether that’s about to be means tested, but surely if cuts are hard to find, as Kevin Rudd says they are, then a starting point would have to be denying the baby bonus to millionaires?

TREASURER:

Well, I’d like to make a couple of points here, Barrie.   We have been strong supporters of the family payment system and payments like the baby bonus.  We’ve also made it very clear that our priority in this Budget is to support those working families out there that are doing it tough, particularly because of rising prices and rising interest rates.  So, they’re the focus in the Budget – low and middle income earners who go to work day in, day out, come home, cook the tea, go to work again the next day, do a long commute.  We’ve got to value those.  So we will be providing our increased support in this Budget to those people, which is why we’re so committed to the tax cuts, so committed to the increased childcare relief - because we have to make room in our Budget for those initiatives, which is why we’re reining in spending elsewhere.

CASSIDY:

Will there be anything new in the Budget on paid maternity leave?  Presumably, if you ever did introduce a more generous arrangement for maternity leave then you would fold the baby bonus into the new arrangements?

TREASURER:

Well, Barrie, we’ve sent a reference to the Productivity Commission to report by early next year on the costs and benefits, both economic and social, of paid maternity leave.  We see it as a very important initiative.  You know, parents who are raising young children are doing the most important job in the nation and it is particularly important after the birth of a child, that particularly the mum has time to recuperate.  So, paid maternity leave is an important part of that equation and we will work our way through all of those issues as we go through this term.

CASSIDY:

And you can’t consider one without the other?  You’d have to consider the baby bonus with the paid maternity leave in the new arrangements?

TREASURER:

I’m not going to speculate on how we reshape future policy.  Just to make the point that we are very supportive of families when it comes to family payments and when it comes to arrangements like paid maternity leave and paternity leave, because they’re an important part in an economy where we have labour shortages and skills shortages, an important part of encouraging this balance, if you like, between work on the one hand, and family on the other.

CASSIDY:

You make constant references to working families, that they have to be protected, but what are couples without kids supposed to think?  What about singles, pensioners, the unemployed?  You never say that you’re setting out to protect them?

TREASURER:

We certainly do.  We not only protect them, we support them.  When I talk about low and middle income families, I talk about people across the income range…

CASSIDY:

No you don’t, you talk about working families.

TREASURER:

I talk about pensioners as well, I talk about singles on low incomes, they’re all part of the Australian family, Barrie.

CASSIDY:

So, who’s not?  Who do you exclude?  Who are you not setting out to protect?

TREASURER:

I’m not setting out to exclude anyone.  When I’m talking about people on modest incomes, low incomes, modest incomes, I’m talking about all people in the community.  But the people out there that are doing it really tough at the moment are those people who are trying to raise a few children.  I’m not saying that someone on a low income or a pension income isn’t doing it tough.  But we do have to make sure that those people that are raising the next generation of young Australians can get by, so that in the future our economy is not only economically healthy but socially healthy.

CASSIDY:

Okay.  The ABC tried to get some information from Treasury on the inflationary effects of your industrial relations changes.  Why was the bulk of that material censored?

TREASURER:

Well, Barrie, this Government has a completely different attitude to the last government…

CASSIDY:

Not so far.       

TREASURER:

Well, we do.  We don’t issue conclusive certificates.  For example, the Treasury, for the first time in history, released the Incoming Government Brief.  But those decisions that are taken about what is removed from the material that is released under FOI are taken by decision-makers in the Department, not by me as the Minister.  We are going to reform the system.  We are going to have an FOI Commissioner who is going to have a look at all of these procedures and have some government oversight of them.  But I don’t think the ABC or any other media organisation would want Wayne Swan as the Minister going into the Department and telling them what they should release or not release under the current law.  That would be completely unacceptable, Barrie.

CASSIDY:

So, who took this decision, a bureaucrat?

TREASURER:

Yes, under the law, the specified decision-maker in the Treasury.  It had nothing to do with me.

CASSIDY:

And the quote was they did it so that unnecessary debate would not be raised.  Don’t they mean inconvenient debate for their boss, for their master?

TREASURER:

No, Barrie, that is the law.  That is the decision-maker following the existing law.  We’ve said we’re going to have a look at all of the FOI arrangements, including the law, have an FOI Commissioner. But I don’t think anyone out there would want me to go into the Department and tell them what decisions they should take under the existing law.  I certainly wouldn’t do that.  There would be a media outcry if I did.

CASSIDY:

So, you’ll do better, you’ll do better in the future?

TREASURER:

We’ve said we’ll do a lot better in the future.

CASSIDY:

Okay, just on the decisions taken yesterday at the NSW conference on privatisation of the power industry.  What do you think Morris Iemma will do next, what should he do next?

TREASURER:

That’s a matter for Morris and his Labor caucus, who I understand, will be meeting later this week.  But could I just say about Morris Iemma, a really gutsy stance that he took. He’s fighting for things that he believes in, and Morris, I think, ought to be admired for the courage that he took to the floor of that conference.  This is an issue which is yet to be finally resolved and we’ll just have to see how it plays out in the next couple of days.

CASSIDY:

And a really gutsy decision now surely would be for the Government to assert its authority over the unions?

TREASURER:

Well, that’s entirely a matter for the NSW Labor Party and their caucus and their leader, Morris Iemma.

CASSIDY:

Just finally, you want the banks to limit bank penalty fees for overdrawn accounts, that sort of thing.  Now the banks are saying if you do that they’ll raise other fees like, for example, low fees on pensioners, the disabled, students and so on.  What do you say to that response?

TREASURER:

Barrie, I don’t think that was a particularly helpful contribution.  The issue that I have raised is the competitiveness of our banking system, particularly when it comes to bank switching.  I’ve also had an ASIC report on exit fees in terms of mortgage home loans and I’d like to see some progress in that area.  I think for the Bankers Association to throw that other issue in on top of this is particularly unhelpful.  What I want to see is a competitive banking sector.  We also need a profitable banking sector, but we need one that is competitive, particularly in the environment where we have very high interest rates at the moment and people are really hurting. I’m going to keep fighting for a more competitive banking sector.

CASSIDY:

And what they’re saying to you is they’ll play hardball.

TREASURER:

Well, I’ll be playing hardball too.

CASSIDY:

Thanks for your time this morning.

TREASURER:

Thank you.