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

18 July 2008

Interview with David Speers

Sky News

18 July 2008

SUBJECT: Woodside Petroleum/LNG, Carbon Pollution Reduction Scheme, Interest Rates, IMF Report

SPEERS:

Treasurer, Wayne Swan, joins us now from Wellington, where he's been holding talks on climate change and other things with his New Zealand counterpart. Mr Swan, welcome this morning. First, on this Woodside claim, Woodside Petroleum boss, Don Voelte, says it will be impossible for two $30 billion projects off Western Australia to go ahead because of your Carbon Pollution Reduction Scheme. Is he right?

TREASURER:

Well, good morning David. I think it's a bit early for Mr Voelte to be drawing those conclusions. As you would be aware, David, we went to great lengths in this Green Paper to say that we would be consulting with industry about the impact and about how the scheme would work. And as you know, we have made very substantial provision in this scheme for the allocation of permits to energy-intensive, trade-exposed industries. Now, whether Mr Voelte and his firm do qualify is something that we will sort out as we go through the Green Paper process.

This industry is very important to Australia and we do recognise that there does need to be additional assistance to energy-intensive, trade-exposed industries. That is provided for in the Green Paper. Whether Mr Voelte's operations qualify for that is something that we will work out as we go through the consultation process.

I have spoken to Mr Voelte some weeks ago and I am going to have a meeting with him in a week or two. I certainly look forward to that discussion because this industry is important to the future of Australia and it does have a big future in our country.

SPEERS:

Well, the Green Paper states that only companies producing more than 2000 tonnes of CO2 emissions per million dollars of production will qualify for 90 per cent free permits. So, what does that mean for the LNG sector? If they don't produce 2000 tonnes of carbon per million dollars of production they're not going to get that 90 per cent offset, are they?

TREASURER:

Well, it also indicates that for the oil and gas industry there will be permits for up to 60 per cent. So, whether Mr Voelte's operations and industries fit into that framework is what we will establish through the consultation process. It is not entirely clear, nor do we have the latest data, on the energy intensity of the operations that Mr Voelte is talking about. That's why we're having the consultation process. That's why I say it's a bit early for anybody to be reaching that conclusion. We'll be out there consulting with Woodside and other companies. These are very important industries for Australia and the Government is absolutely committed to assisting those above a certain threshold. But at the end of the day we do have to take decisions which are economically responsible, which recognise the circumstances of particular industries and which protect our national economic interest.

SPEERS:

But Treasurer, 60 per cent free permits still leaves them a long way short of 100 per cent offsets. It would be the only LNG industry in the world hit with this sort of tax. And as Don Voelte's pointing out, it's LNG being sold to China that is reducing global emissions because every time LNG is used in China rather than dirty coal, that's a lot less CO2 going into the atmosphere.

TREASURER:

All of those things are true but what we have to have is a scheme which has integrity, which is based on a set of principles that are workable and affordable, and that work for Australia. As I said before, it's a bit early for anyone to be reaching those conclusions. We put out there some indicative figures. The data is old. What we want to do is to consult with industry across the board, and over the next few months myself and Climate Change Minister, Penny Wong, will be consulting widely with industry specifically about these matters, specifically about the thresholds, and specifically about the latest data that they have available. We will act responsibly in this matter. It is in our national interest not to have these industries transfer overseas but we have to act in an economically responsible way, and that's what we'll do.

SPEERS:

Can you guarantee, Treasurer, that no LNG project in Australia will go under because of your scheme?

TREASURER:

What I can guarantee is that we will do the economically responsible thing by Australia, that we will implement our scheme in a measured way and an economically responsible way. And as we go through the Green Paper…

SPEERS:

… no guarantee about the future of these LNG projects?

TREASURER:

No we will sit down, David, with the industry and talk to them about the propositions that they have. At the end of the day, there's no free lunch in here either. We will protect the national interest. The whole point of this scheme is to protect our national interest to maximise our prosperity in the future, given the impacts of dangerous climate change on our economy for the future. We will act responsibly and that's why we're going through a period of consultation. I can't provide final details today, but I will certainly sit down with Mr Voelte, the Government will take his concerns seriously and we'll work our way through all of the issues.

SPEERS:

Well, the Green Paper says that business only has until October to respond to the framework the Government has laid out. We won't see the Treasury modelling until after that. Now, as the Opposition points out, this does seem to be an awful rush. Wouldn't it be better to stretch out the timeframe here and have a bit more breathing room to consider these things, consult on these things and make sure you get it right?

TREASURER:

David, that is a complete furphy. We are out there consulting on the design of the scheme. When the Treasury modelling is available, we will then be able to take decisions about the targets and we will be consulting about the targets after that Treasury modelling is available. We will be consulting through this process, before the Treasury modelling and after the Treasury modelling and all the way through to the delivery of the White Paper and the final conclusions.

You see, what we've really got with the Opposition at the moment is that they are climate change sceptics but they simply won't admit it. You've got Mr Hunt saying that we've copied their scheme but you've got Dr Nelson saying that we're going to put in place a new tax. What they are going to do is act irresponsibly because they won't front up to the economically responsible path course of action which is to come on board with a sensible scheme which protects our economic prosperity. They just want to play silly politics.

SPEERS:

Treasurer, can I also ask you about the estimate in the Green Paper that electricity prices will rise for households by 16 per cent - that's based on carbon being $20 a tonne. But if you haven't decided how much you're going to compensate the coal-fired power plants, how have you arrived at that figure?

TREASURER:

Those figures in the Green Paper are only indicative, David. What we have to do is to go through the process that I've just discussed before. We also have to get the Treasury modelling before we set our targets. That has a fundamental impact upon the price of carbon. But what we've done is to be open and to be honest with the Australian people. We say to the Australian people there is a cost that comes with tackling dangerous climate change. It's a cost we must all bear because the cost of inaction is far higher. If people think at the moment that food prices are on the rise, just imagine what they will be like if dangerous climate change is allowed to rip its way through the planet. We have to act now. The cost of inaction is greater than the cost of action and we are being honest with people about the impact of this on the family budget.

In the case of these figures that have been put in there for electricity, I think that's about $3 a week on the average family electricity bill. That is one of the reasons why we've gone to great lengths in this paper to say that we will provide additional assistance to households who are adversely affected. We recognise this fact. It's a pity our opposition isn't responsible enough to recognise it as well.

SPEERS:

Treasurer, just quickly on another matter, this week Westpac, NAB, Commonwealth Bank have all lifted their interest rates in Australia. I know you've been urging borrowers to vote with their feet on this, but are you worried that it does look like there's not much point in voting with your feet when they're all doing it? There might be a bit of collusion going on here.

TREASURER:

Well, there's two things here, David. First of all, our bank switching package will be in place by November, fully in place by November, and people can vote with their feet.

Secondly, I am worried about the impact of the global financial crisis in financial markets which is pushing up borrowing costs not just for households but also for businesses. And that is impacting right across the economy.

Those two things combined have produced additional rises in rates over and above the official cash rate. That's unfortunate where people have had to bear eight official interest rate rises in row and these further increases in borrowing costs. What we can do is make sure we give people the maximum amount of choice. That's the most important thing we can do. And the other thing we are doing is to put maximum downward pressure on inflation via our budget process to take the pressure off those households out there affected in the short and longer term.

SPEERS:

And Treasurer, some possibly good news in the latest IMF report. It says growth in the US and globally is perhaps going to turn the corner. Are you heartened by that at all?

TREASURER:

Well, it is a somewhat more optimistic report from the IMF than one that we had I think in April this year, but we are facing the most difficult global conditions in over 25 years. Global inflation is on the rise, borrowing costs are up. The great thing about Australia is that we brought down a Budget which on the one hand can tackle inflation, on the other hand is investing for the future to expand our productive capacity, but also gives us a very strong surplus which serves as a buffer against these strong international forces impacting on our economy.

SPEERS:

Treasurer Wayne Swan, from Wellington, thanks very much for joining us.

TREASURER:

Good to talk to you.