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Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

28 January 2011

Interview with James Carlton

ABC Radio National

28 January 2011

SUBJECTS: Floods Rebuild

CARLTON:

The Treasurer, Wayne Swan, is with us now from Brisbane. Treasurer, good morning.

TREASURER:

Good morning James.

CARLTON:

The levy raises $1.8 billion, of course you could have raised that through further spending cuts or you could have slightly delayed the return to surplus. Why was taxing the most attractive of the three options?

TREASURER:

Well, we've gone for cuts in the budget first, two out of every three dollars in this package comes from cuts and one in every three comes from raising the levy. Look, that was a very interesting set of interviews you did there and I just wanted to make a couple of points about those. I mean, 60 per cent of taxpayers will pay less than $1. So this is a progressive levy and it's only temporary, and the reason it's temporary is that this has been an unprecedented event. This will be, in economic terms, probably the most significant natural disaster in our history and because of that we have seen extraordinary generosity from so many people and the donations to the Premier's fund have been very important but the problem we've got is the recovery and the rebuilding doesn't end at the front gate and this package is directed to rebuilding essential community infrastructure which has been devastated across a very significant part of Queensland, but not just Queensland, also in Victoria.

So what we're doing here is rebuilding the roads and the schools and the community infrastructure. So we've got to do a couple of things here. we've got to respond generously, as generously as we can to those people that have been devastated but that doesn't end at the front gate of their home. There's the community we've got to rebuild as well and because this is a one-off event, we decided it was important to fund it in the way in which we have. We think it's a responsible package because we not only give the people of Queensland the chance they need to rebuild but it also strengthens our economy and keeps it strong.

CARLTON:

The recovery effort will be substantial, no doubt about that, but frankly the levy isn't that substantial. What is it? 0.1 per cent of GDP?

TREASURER:

Well it's a modest levy, James.

CARLTON:

The point being, its presence or absence is hardly going to seriously affect capacity or wages or interest rates or anything else.

TREASURER:

Well, no but the important thing is to fund this in a responsible way so that we keep our economy strong. Now there's been a lot of commentary about why are we determined to bring the budget back to surplus in 2012-13. We'll we're determined to do that because the economy is growing strongly. We are -

CARLTON:

Would the budget be in surplus in 2012/13 without this levy?

TREASURER:

Well, we certainly wouldn't be in surplus if we weren't putting in place this package and we're going to keep it in surplus. It's not because of the vague objective, but because that's the responsible economic thing to do because when your economy is growing strongly, when you're creating the sorts of jobs that we are creating, you do need to keep your public finances strong. Now that's the lesson that everybody ought to take from the Global Financial Crisis. We moved to support our economy when the Global Financial Crisis came along and we said at that time when the economy began to grow strongly again, we'd come back to surplus and that's what we're doing and that's the responsible thing to do because it will keep our economy strong and give us the capacity in the future to respond to other unexpected events.

CARLTON:

But you'd be back to surplus with or without the levy either way by 2012-13?

TREASURER:

Well, what we've got to do is put in place a package and fund it. They're the budget rules we're operating under, and we think this is the fairest way to do it. A modest levy, a modest levy and changing of priorities elsewhere in the Budget, with 60 per cent of people paying less than $1. It is not a big slug and it's temporary, but it's going to help the people of Queensland. And when people are suffering, when work needs doing, I think Australians understand that we do have to share.

CARLTON:

Let's clarify some of those issues raised by the Leader of the Opposition regarding business owners. On what grounds will they be exempt from paying the levy?

TREASURER:

Well if people are flood-affected, if they've received our disaster relief payments they will not be paying the levy, and of course it will depend what their income is. But you will not be paying this levy if you've received those disaster payments.

CARLTON:

If the cost of reconstruction blows out and both you and the Prime Minister have foreshadowed that that's at least possible, the Prime Minister has said that every single cent of that will be met with spending cuts.

TREASURER:

That's right.

CARLTON:

Is there any point at which keeping that promise becomes unsustainable, irresponsible?

TREASURER:

Well what we will do is what we've done since we were first elected James. We've put in place changes and priorities in our Budget and over time put in place substantial expenditure cuts. We've done it again on this occasion to fund this package and we will always continue to search in the Budget for savings. We'll do that, that's an ongoing process. That's what responsible governments do.

CARLTON:

But if you can't find them you'll be in a bind between this promise and the need to find more money.

TREASURER:

Well, we've made our commitment here, we've explained the need for a temporary levy now to give people in Queensland the certainty, to fully fund this package so we can get on with the job of rebuilding Queensland. I know that's not a priority for Tony Abbott. Tony Abbott wants to play the same old political games, trotting out the same old lines, pretending that there's some sort of magic honey-pot somewhere in the Budget - but there just isn't. And of course, we saw during the last election campaign Departments of Finance and Treasury say that Tony Abbott had an $11 billion hole in his proposed savings, so he has no credibility in this area whatsoever.

CARLTON:

Wayne Swan, of course you need the support of the Greens and Independents to pass the levy. Both those Greens and Independents want a permanent sovereign fund to cover disaster relief. Is it worth considering?

TREASURER:

Well it's certainly worth having the discussion about what we do with the long term response to this unprecedented event. I'm certainly up for that discussion, the Government is up for that discussion but what we're concentrating on right now is helping people in Queensland - businesses, families, communities - get their lives back together because there's an enormous amount of devastation and trauma up here and that's why we thought it was important, very early on, to pre-pay $2 billion to the reconstruction authority so everybody could see that there was strong backing for the rebuild up here. Because people out there need to have a degree of certainty in their lives. This has been a major traumatic event for so many people and it will have significant impacts on the economy as well, so it's pretty important for us to put our proposals on the table as quickly as we responsibly could.

CARLTON:

After the election, Treasurer, you promised, or the Government promised to rural independents, $800 million for infrastructure. Now, as a result of the floods nearly half of that will be earmarked for recovery infrastructure. As badly needed as this is, don't the rural independents, aren't they entitled to feel a little bit miffed because it was supposed to build infrastructure that hadn't yet been built, not repair infrastructure that got damaged?

TREASURER:

Sure, but we will work with local communities on their priorities here. It's only fair enough and only natural that monies that were going to be spent in one way or the other under that agreement we now look at how can actually get maximum advantage out of those monies in terms of flood recovery. That's just common sense and I think the independents are up for a discussion about that.

CARLTON:

The Greens are certainly frustrated that so many of the carbon abatement programs have been slashed so aggressively. In many respects those decisions could have been made in advance - in the last Parliament. The Government says that they were cut because we have an emissions trading scheme coming in, or a price on carbon coming in -

TREASURER:

No, I don't think that's the right sequence. I mean as you're aware what happened with the trading scheme was it was voted down by the Liberals, we've subsequently had an election and we've subsequently started a discussion with the community and also with the independents, with the minor parties in the Parliament, about how we will go about putting a price on carbon. Because we're determined to address this issue about reducing carbon emissions in our economy. And that is the most cost efficient way of dealing with the issue of climate change. So that's our priority. So in light of that priority and in light of what we're doing to get a community consensus on the carbon price, we've decided to change our priority.

CARLTON:

You'll have something to say later today Treasurer about the impact of the floods on the economy and revenue. What's your best estimate?

TREASURER:

Well, I'm not going to pre-empt a speech I give later today but yesterday we outlined what we see, at this stage, as the cost - particularly in terms of infrastructure. But of course, we've got the issue of cost to Commonwealth revenue as well, and also the impacts of prices and so on. I'll be having a bit more to say about some of those issues later today.

CARLTON:

In the short term obviously it will have a negative impact on GDP. Is there a point into the future where the recovery will actually be stimulatory?

TREASURER:

Certainly. There certainly is which is one of the reasons why we've had to look at re-sequencing, if you like, some of our expenditure on infrastructure. It's going to be difficult, particularly in Queensland, to proceed with all of the capital works type expenditure that's on the books when a massive rebuilding effort is required in other areas, plus there's a very, very big investment pipeline particularly in resources in some areas of the State. So we're going to work our way through all of those issues with the Queensland Government and with the private sector as well.

CARLTON:

Wayne Swan, thank you for updating us this morning.

TREASURER:

Good to be with you.