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

11 May 2011

Interview with Adam Spencer

ABC Radio, Sydney

11 May 2011

SUBJECTS: 2011-12 Budget; putting a price on carbon

SPENCER:

Treasurer, thank you very much for coming.  How do you feel the morning after a Budget, Treasurer?

TREASURER:

Well, it's always good to deliver the Budget.  It's a pretty big thing in the life of a nation because it indicates what our priorities for the future are, what our opportunities are, and what our challenges are.

SPENCER:

Why is it so important that we have to be in surplus by 2012-13, and how sure are you that we'll be there?

TREASURER:

Well, I'm sure we that will be there.  It's very important that we come back to surplus in 2012-13 because we've got a very big mining boom, and an investment boom that comes with it, going on in Australia.  So it's important that we do not in any way compound the price pressures which will flow from the very strong investment pipeline which is going to support really strong jobs growth in Australia.

Adam, we've got something like half a million jobs that are going to be created in Australia in the next couple of years, and that comes on top of the 750,000 jobs that have been created in Australia in the past three and a bit years.  So what we've go to do is that we've got to make sure we've got the training and skills available.  I mean that's half a million reasons why we've got to train more Australians.

SPENCER:

Given that next year's Budget is blown from a projected $10 billion or so, to $20 billion, that's a $10 billion blowout.  How can we be at all going to be confident about your predictions for two years down the track when you say we'll be in surplus by a mere $3.5 billion?

TREASURER:

Well, because there have been very significant changes to our revenue caused first of all by the natural disasters and the uncertainty that flow from Japan, but also a greater than expected effect and flow-on from the global financial crisis which caused very substantial revenue write-downs.  So that is what was impacting there. But what we have done in the face of that is apply very strict spending discipline, a very strict expenditure cap.  That's the reason we're coming back to surplus, despite the fact that we've had those very significant revenue write-downs.

SPENCER:

A lot of the commentary today is on the cuts to middle class welfare.  Tony Abbott described the Budget this morning as tough on families not tough on waste.  For example you're freezing some payments at current levels, means testing and the like.  The cut-off point for most of these is about $150,000.  Now, in 2011 is a family in Sydney with a mortgage on $150,000 really that well off?

TREASURER:

I don't think someone on a $150,000 as necessarily being rich.

SPENCER:

Then why is that when means testing is cutting in?  Why is that when benefits are starting to be cut off?  Could you not be better off Treasurer, being tougher on the genuinely wealthy?

TREASURER:

The fact is that we have taken a number of decisions in the genuinely wealthy area, but the fact is that we've got to make our family payments system sustainable.  I'm a great believer in family payments system.  I think it's really important that we have family payments.

You've got a lot of people out there that argue that we should be getting rid of family payments for people on modest incomes.  The fact is that people can access family payments on incomes, joint incomes over $100,000, but what we've done here is we've put in place a pause on the indexation of the upper income testing level, which is about $98,000 a year.  So some people will receive a little bit less over that level.  That's an important thing to do because we simply can't have the growth in family payments that we've been giving in recent years.

So it makes them sustainable, but we haven't in any way sought to go out and take action which would be detrimental to people on basically average incomes. We've not done that at all, because all of the time we've in government we've been about increasing child care assistance, for example we've increased the Child Care Cash Rebate from 30 per cent to 50 per cent.  That one is not means tested.  We've added schools uniform to the Educations Tax Rebate.  So there's a lot we are doing for families under financial pressure.

SPENCER:

What will the price of carbon be next year?  You don't have to give me an exact price, but say within $10.00 a ton –

TREASURER:

Adam, that would be a silly thing to do. We will announce the price, the interim price on carbon for the Emissions Trading System when we've completed the design of the scheme.

SPENCER:

But Treasurer, if you can't give me a price even within a $10.00 - $15.00 range at the moment then surely that blows a hole in this Budget that makes most of this Budget completely hypothetical.  The professor of Business at the University of New South Wales, Neil Warren said before seven o'clock, most of this Budget will have to be recast. We'll have the most significant taxation reform in this country's history when it comes in a couple of months.

TREASURER:

Well, none of that is right.  The fact is that we haven't designed the scheme, so when we've designed the scheme we will produce the modelling, we'll produce the full design, and of course we'll produce the price, and then we'll incorporate it in our Budget update.  But that's not completed yet.  The modelling is not complete; we are still consulting with industry.  When we've done all that we'll put it out there, but it is simply inaccurate to claim that it could have been there when it hasn't been designed. 

And secondly, in the past when these situations have arisen, the Liberals when they were in government, when they had put forward a concept but not a full design, had never incorporated that into their Budget.  They didn't do it with the GST and they didn't do it when they announced the Emissions Trading Scheme.  But we'll put it all out there, there will be nothing for people to worry about.  It will all be there for people to see and it will be incorporated into our Budget update for all people to see in the appropriate way, which would be in the mid-term review at the end of the year.

SPENCER:

On the topic of the means testing for private health insurance, which is intended to save money, but if this forces thousands of people back into the public system who can pay their current private health insurance but when it goes up effectively almost 40 per cent will choose not to.

TREASURER:

The means testing hasn't passed the Parliament as yet.  This is a measure from previous Budgets which has yet to pass the Senate.  It's a very important measure to make our Budget sustainable over time.

SPENCER:

Where's the saving if it forces thousands of people back into the public system?

TREASURER:

I don't accept that it's going to do that at all, and the fact is that in this Budget there is a very, very significant emphasis on health.  The Mental Health Package in this Budget is very important.

SPENCER:

That's been applauded Treasurer, but how can removing a 30 per cent rebate in private health insurance not make a lot of people go - I'm out of this, and going back to the public system?

TREASURER:

Because the...

SPENCER:

It's not going to entice more people into private health.

TREASURER:

Adam, that's not what the modelling says, and it's not what a large part of the industry actually says.  But the fact is that it's a measure that we've put forward in the previous Budget, it hasn't passed as yet.  The Government will do its very best to ensure that it's passed because it's got a very big cost to revenue.  The fact is Budgets are about priorities.  People are very keen and the Government is very keen to put a very significant package in here on mental health. We've done that, and our health budget over time also has to be sustainable.

SPENCER:

Can I ask you in closing, a more general question, not about last night, not about today, but about the long-term future.  There's a growing chorus of people Treasurer, and not just fringe players, we are talking about Joseph Stiglitz, the Nobel Prize winning economist. 

TREASURER:

I know Joseph.

SPENCER:

He points out that the inexorable growth of the economy, the ongoing cause of growth, 3 per cent growth, just can't go on forever.  There are finite resources, such that we can't grow forever.  Some people say we need to move away from what they describe as an obsession with growth.  When do you think the idea of the growing economy will come to a halt?

TREASURER:

I don't want the idea of a growing economy to come to a halt.

SPENCER:

Do you think ours might, will grow indefinitely and infinitely?

TREASURER:

If we had a halt to growth, what that would mean would be quite far higher unemployment in a lot of industries for a lot of Australians.

SPENCER:

Then what happens when the halt to growth instantly comes about or automatically comes about when you run out of petrol, and you run out of plastic, and you can't feed people?

TREASURER:

Well, we are not going run out of those basic materials but I do –

SPENCER:

We are not going to run out of petrol soon, with the greatest of respect?

TREASURER:

One of the reasons Adam, we are putting a price on carbon is that so that we can get the investment in the renewable energy, which will drive our economy for the future.

SPENCER:

So the economy of Australia and the economy of the world could continue to grow at say 3 per cent forever.

TREASURER:

I do believe economy of the world with the appropriate sustainable policies in place, with appropriate pricing on carbon, and all of the other changes we have to make, does mean the economy can continue to grow, but we have to change the way we do things. That's why the Government has such a trade emphasis on a price on carbon.

So I'm in agreement with you about the objective here.  We can't continue to pollute the world the way we have been polluting the world.  The whole point of an Emissions Trading System is to change the investment incentives away from carbon-intensive products into renewable energy.  So that is the whole discussion we are having.  That whole issue lies at the heart of the debate we are having about carbon pricing, and Emission Trading Schemes.

SPENCER:

You have a very busy morning in front of you.  I'll let you go Treasurer.  Thanks for your time.

TREASURER:

Good to be with you.