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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

3 March 2011

Interview with Fran Kelly

ABC Radio National

3 March 2011

SUBJECTS: Private Members Bill; Carbon Price; Minerals Resource Rent Tax; National Accounts; Foreign Investment

TREASURER:

Good morning Fran. It's good to be with you.

KELLY:

Treasurer, we'll get to the growth figures in a moment but can I ask you about this delegation of Senators - Hutchins, Farrell and Hogg, they visited the Prime Minister yesterday to tell her they're unhappy. What are their concerns?

TREASURER:

Well there are a variety of Private Members Bills floating around the parliament at the moment, Fran. And there is a Bill relating to the power of Federal Ministers and the Territories and I think it is correct to say it is from Senator Brown. They raised a series of issues about his Bill, which I think are entirely legitimate, the Prime Minister listened to their views, and of course, this is a bill which is going off to a Senate committee. We're going to seek some further advice on the Bill and its impact and deal with it in due course.

KELLY:

I think there is a broader sense that they're worried strategically – that it's a misstep for the Government to look so close to the Greens on social issues. What's your view on that?

TREASURER:

Well I don't think you can characterise our response to this bill in that way at all. The fact is that senators will have concerns about the power of the Commonwealth vis-a-vis the Territories and other issues associated with that. But we have a lot of private members legislation at the moment, it is important that gets proper scrutiny, and that's what we're going to see.

KELLY:

Now, you got stuck into Tony Abbott yesterday for comments made by some on his frontbench about the Prime Minister and we'll come to those comments in a second. But you also said this debate around a carbon tax needs facts not fear. Isn't that the problem, you're not putting the facts out there, and in the absence of detail costings, people are nervous - business knows the carbon tax will cost them money and so do consumers.

TREASURER:

Well, we are putting the facts out there but what is happening is that the Opposition is running a fear campaign not based on fact. Now, what we have said we will do is that we will put in place an emissions trading scheme – a carbon price. We've said that we will consult with the wider community, with the business community and that we are working with the Multi-Party Committee to design that scheme. Now, its coverage, the price on carbon, all of those, have to be worked out as we go through the consultation. So we have been upfront with the Australian people about what we are doing, where we are going, the timetable we have put in place-

KELLY:

Well you may be being upfront with them but you're scaring them by the sounds of things with this talk of a carbon tax because talkback calls are running firmly against the tax. A survey yesterday showed only 18 per cent of people in New South Wales are in favour of a carbon tax, 62 per cent against. People hear the word `tax' and there's a negative reaction – is that what's going on?

TREASURER:

Well first of all it's a price on carbon. Yes, there'll be a fixed price in the early stages of the scheme-

KELLY:

Which the Prime Minister says is effectively a tax.

TREASURER:

Yes, it can be described as effectively a tax, but the truth is this: that we are moving to an emissions trading scheme. In that emissions trading scheme there'll be a fixed price for a couple of years, we'll move to a floating price with a cap on carbon emissions. Now, this is very important: nobody can say with any certainty what the price on carbon will be, what the coverage of the scheme will be. We have to go out and consult with the community and with industry on all of that. But what the Opposition is doing is making up a price on carbon, making up a price for its impacts on various goods, doing all of those things, and then trying to inflame the issue with language such as they used yesterday comparing Government ministers to Colonel Gaddafi, to a murderous dictator.

This just demonstrates how desperate they are, how devoid of any alternative policy they are. The only policy they have is one where they will spend tens of billions of dollars of taxpayers' money, tens of billions of dollars of taxpayers' money, effectively a tax on the taxpayers of Australia and hand that money to polluters. That's the only alternative we've got from the Opposition. What we are saying is that all of the revenue raised from the emissions trading scheme will either go to households or to industry to assist with the transition.

KELLY:

Well industry isn't happy. We were speaking to Paul O'Malley, the CEO of Bluescope Steel earlier, he says his industry won't be compensated for a carbon tax. He says the Greens policy, therefore the Government's policy, means that. And he wants you to consider that until an emissions trading scheme comes in not levying the tax on trade-exposed industries like steel.

TREASURER:

Well we're happy to talk to Mr O'Malley about his individual concerns and we will do that through our business roundtable, we'll talk about the coverage. We acknowledge that those energy-intensive, trade-exposed industries do face particular challenges. We acknowledge that, and we are working with industry as we go through and design the coverage of the scheme and the industry assistance packages.

KELLY:

But can you assure him - because this is what he was arguing to us on Breakfast - that a carbon tax without a similar tax being levied on his competitors in Asia will see manufacturing, steel manufacturing, offshore. What's your insurance policy for him?

TREASURER:

Well what we have to deal with is the fact that they are moving offshore in this area as well, we are falling behind. Yes, we have to be very concerned with the competitiveness of our industries and we are, and as we go through the design of the scheme we'll take into account his concerns.

KELLY:

Let's go to the National Accounts now. You described the positive growth figures as impressive, but the floods in Queensland knocked almost half a percent off the result. The full impact of the floods and Cyclone Yasi won't be felt until the March quarter. Is there a chance we're going to go negative in that quarter? Is that what you expect?

TREASURER:

Well what we had yesterday Fran were very solid results particularly given the headwinds that we were facing in the economy, particularly given the bad weather in the December quarter, particularly in the month of December. And as you've correctly said, that had an impact on growth in December. We've also got a higher Australian dollar as well and of course that has an impact. But the full impact of the floods in South East Queensland and Cyclone Yasi will be felt in the March quarter. There's no doubt that the economy will take a knock in the March quarter and it will also have Budget implications and will impact on our Budget bottom line. But what I said yesterday is that the underlying fundamentals of our economy are strong. We have a very strong investment pipeline. We've had strong job creation over the past year, something like 330,000 jobs. So the outlook for Australia is strong but we will take a knock, if you like, in the March quarter, but we will bounce back and growth will be strong as we go through the latter part of next year.

KELLY:

Just in terms of the Budget implications there that you're talking about, of perhaps going into close to negative territory in the March quarter, ABARE has upgraded its forecasts for iron ore and coal exports over the next five years suggesting the revenue you'll collect from the mining tax at least and not to mention company taxes in the first couple of years will be well ahead of Budget estimates of $7.4 billion. What will that mean for the spending cuts being forecast? Will that offset?

TREASURER:

Well Fran, I think we're getting ahead of ourselves there. I made the point yesterday in the press conference that company tax will be somewhat weaker in the earlier parts of this year but the ABARE forecast for commodity prices do indicate that our terms of trade are going to remain high. This is something that I've argued since basically May last year that as we go through the Asian Century our terms of trade will be higher than they historically were. And of course, what that means for Australia in the longer term is good news. But I don't think you can take ABARE's report and turn around and say that there'll be all this additional money in the bank in the next few months. [inaudible] it simply doesn't work like that.

KELLY:

Well the commodity prices are going strongly – you're not expecting additional receipts?

TREASURER:

Yeah, we will receive some additional receipts from commodity prices. But you might well recall that when I produced the mid-year review at the end of last year, the stronger Australian dollar had a countering affect on the strong prices. So there are swings and roundabouts and when it comes to the MRRT well that is not yet in operation. We are currently drafting that legislation which will go to the parliament later this year. So you have to bear all those things in mind and not get too far ahead of ourselves.

KELLY:

Just finally Treasurer when you changed the foreign investment rules in 2009, you said it was not about targeting China, Today we learn in the press from Wikileaks, the Fairfax press has this, the Foreign Investment Review Board briefed the U.S. Embassy that that's exactly what the changes were about. How do you explain that?

TREASURER:

Well, that's what Wikileaks says, I've not-

KELLY:

It's a direct quote from FIRB to the U.S. Embassy.

TREASURER:

Well, I don't necessarily take that as being accurate. What I can say is we've produced those guidelines so that we could have a set of guidelines that dealt with state owned enterprise investment, and it doesn't discriminate against any country at all.

KELLY:

Wayne Swan, thank you very much for joining us.

TREASURER:

Thank you.