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 Fran Kelly

ABC Radio National

11 May 2011

SUBJECTS: Budget 2011-12

KELLY:

Treasurer Wayne Swan, has made jobs and skills the cornerstone of his fourth Budget and it reflects the ideology of the Prime Minister – work hard and you will prosper.  The Treasurer says that any Australian willing to work won’t be left behind.  Building a more productive workforce doesn’t come cheap though; the Budget includes a $3 billion training package, funding to increase skilled migration to the regions and a number of smaller measures to encourage people off welfare and into jobs.  I spoke with the Treasurer a short time ago.

TREASURER:

Good morning Fran, it’s really good to be here.

KELLY:

You’ve been threatening us with a tough Budget for tough times.  Did this minority Government that we’re in force you to get the chisel out rather than the chainsaw?

TREASURER:

There’s $22 billion worth of saves in this Budget and we’ve got real expenditure increasing by only one per cent on average across five years.  That’s not happened in this country for a long, long period of time.  For example, the previous Howard Government were spending, on average, increasing spending by 3.5 per cent a year.  We have applied a very strict spending cap at 2 per cent and we’re half of that on average, across the Budget estimates.  That’s pretty strict fiscal discipline Fran, and if you want to use the jargon of the economists that you’ve been talking to, this is a very large fiscal consolidation, 3.8 per cent of GDP over two years.

KELLY:

Well why is it that the economists are unanimously disappointed with your cutting?  Where do you see, what are the tough cuts here?

TREASURER:

I’m not sure that’s the case that they are all disappointed.  There are fundamental structural saves in here, not just for four years, but saves which go for 40 years.  So when the economists examine what we have done in terms of Budget repair, they look first of all to our spending cap, the 2 per cent, and they see that over the five years it’s 1 per cent a year.  They contrast that to the outrageous spending of the Liberal and National parties when they were in power.  They see the restraint that that brings.  Then they look to the nature of the saves.  What do they deliver in the long term?  For example, they would look at the change to the Dependent Spouse Tax Offset.  That brings a big benefit to the Budget, not just over four years, but over 40 years.  That’s the sort of reform they want to see.

And there are a number of measures in this Budget which were mentioned in the tax review and which we’ve taken up.  For example, the measure on the fringe benefits on cars.  They said this ought to be cleaned up.  It wasn’t being used properly.  We’ve done that.  That’s got an enduring benefit across the Budget.  So a very good savings record in this Budget.  A very big fiscal consolidation.  So I reject the notion that the Government hasn’t worked hard in this Budget to make sure that we take the decisions which set the Budget up to come back to surplus in 2012-13, but to build surpluses beyond that.

KELLY:

So if there are tough cuts, there must be pain.  We heard from Joe Hockey earlier, he said the people feeling the pains from one of those cuts you mentioned, the change to the FBT car usage loophole, says it will be tradies who drive all day, every day, who will be feeling it.

TREASURER:

Look, poor old Joe.  Poor old Joe just can’t make up his mind about this Budget.  He was out there last week saying that he was going to bring the Budget back to surplus next year.  I’d like to see that.  I mean he must have slept through the global financial crisis, the global recession and the natural disasters.  He can’t make up his mind.

KELLY:

But aren’t tradies going to be hit hard by this change to the FBT loophole?

TREASURER:

Well, it won’t necessarily be tradies.  Certainly we’ve got a measure in the Budget which is there for tradies, particularly those with utes.  A very significant measure in terms of our $5,000 instant asset write-off.

KELLY:

But they will lose the tax break too, won’t they?

TREASURER:

Not all of them will.  Some people will.  This is a benefit, a fringe benefit, which is accessed by many people.  They basically have a company car for private use.  Essentially that is what it is.  We’re cleaning that up.  Some people will be better off and some people will be worse off over time, but everybody will get the same treatment.  That’s what we need and that’s what we have when we put in place decent tax reforms.

KELLY:

Joe Hockey also said, when we spoke to him earlier, that all families are hit in this Budget.  He said, quote: “Don’t buy this line that it’s just high income families.  A family earning $45,000 a year is going to be worse off with the freezing of the Family Tax Benefit Supplement”.

TREASURER:

Well Joe Hockey once again cannot make up his mind.

KELLY:

Well is that right?

TREASURER:

No.  Well, first of all, what we’re doing is pausing the indexation of the very top rate.  So we’re better targeting family payments.  We’ve got to make them sustainable and in terms of what Joe Hockey has had to say, there is a freeze to the indexation of what is called the supplements.  That will have a very small impact, a very small impact.

KELLY:

How small?  Like for a family earning $45,000?  How much will that mean?  As inflation rises, they’re supplement is frozen.

TREASURER:

Yes, that’s right and it will impact over time, but it’s only a pause for a period of time, but it will not be very much money at all.

KELLY:

The big spend at the heart of this Budget is the $3 billion for skills and training.

TREASURER:

Well, and also mental health.

KELLY:

And mental health.

TREASURER:

Let’s not forget mental health.

KELLY:

Let’s go to skills and training because you want the opportunities of the mining boom to deliver employment opportunities for all.  The skills crisis is here now.  How quickly can you skill up the workforce?

TREASURER:

Well, we’ve been planning for these changes over the past year.  In fact, we began the planning for these changes in last year’s Budget.  Setting up this new skills fund is absolutely critical and working with industry in partnership to identify where the places are required, what the training needs are, and then working with them to deliver those needs is a complete change.

KELLY:

So have we been getting it wrong all this time and the years before and has our training model, if you like, been wrong?

TREASURER:

Well, what we have done is substantially changed and refined our model because circumstances have changed dramatically.  I mean, we do have this huge investment pipeline, this huge investment pipeline which is coming through which is having all sorts of implications for our labour market – who we train, where we train and also the mobility of the labour market.  So there’s a dramatically changing situation around us arising from this investment boom and responding to that needs a new approach and that’s what we’ve put in this Budget and we’ve done it, I might say, in consultation with both industry and with unions. 

We want to work with the workforce, with unions and also with industry to get this in place so we can meet the skills needs of this country and also so we can make some headway in terms of all of those participation initiatives we’ve got, because we’ve also got to make some progress at that really difficult end of the labour market where people have been excluded for far too long.  We simply don’t have a person to waste.

KELLY:

Industry is calling out for skilled workers.  Why should the Government be spending all this money training people?  Why aren’t the big mining and construction companies doing more in this regard because they’ll reap the benefits.

TREASURER:

That’s a very good question Fran, because what we are expecting as part of this new fund is that industry will chip in 50 per cent.  This is a big change.

KELLY:

So for every dollar of the $3 billion there will be a matching dollar from industry?

TREASURER:

We want industry to chip in 50 per cent.  It will differ by sector.

KELLY:

Want them to or they’ll be forced to?

TREASURER:

No we want them to and that is part of the arrangement and we’ll work our way through that sector by sector.

KELLY:

Bob Brown and the Greens are unhappy with the boost to overseas skilled migration.  Now, that’s obviously bringing in workers to fill the immediate gap in the skills crisis.  He says you should be using Australians first before what he calls queue jumpers.

TREASURER:

Well that’s our view too.  That’s our view.  We should be using Australians first and that’s why there is such a big package in here for participation and skills.  Fran, we’ve got unemployment coming down to 4.5 per cent.  So naturally, given the size of the investment boom that we have, there are going to be skills shortages in parts of the country from time to time and even labour shortages.  So what we’ve had to do…

KELLY:

So this increase in the skilled migration, is that going to be phased out as we skill Australian workers?  Will you see that numbers coming down again?

TREASURER:

Well, we are running out of workers in the longer term here Fran.  So what we have to do is, first and foremost, we have to train Australians.  That’s why skills and participation is a centrepiece of this Budget but also there will be a need for temporary migration in some parts of the country given the volume and size of these projects.  So we have to be able to do both and we have to do it intelligently. 

But I want to make this point, in terms of the net migration to Australia, net migration to Australia is down to 180,000.  It’s come down dramatically in the last few years because we cleaned up the program and we’ve started to focus it much more narrowly on skills and that’s very important because there’s a strong economic need for that.

KELLY:

Treasurer, I know your time is tight, but two quick questions.  The welfare to work measures – also a major element of this Budget.  You’ve announced measures to tackle the blow-out in the number of people on the Disability Support Pension.  How many people will move off welfare and into work as a result of this spend on participation?

TREASURER:

Well, we couldn’t give you a final figure on that because there are differing groups who have differing needs and different incapacities.

KELLY:

You must have some idea, I mean there’s costs built in here.

TREASURER:

Well, there certainly are, but they are the costs to go in and do the assessment, they are the costs to put in place the training, the work experience and so on.  So its horses for courses.  There are different groups of people. 

So you mentioned, for example, those on the Disability Support Pension.  We want to have a look and work with those under age 35 who can do some more hours of work each week on the Disability Support Pension.  We’ve got to go in and do the assessment of those people before we can actually estimate how many of them may have a prospect of getting into work.  We don’t know the answer to that.  For example, when it comes to the very long-term unemployed.  We’ve put aside something like 35,000 wage subsidies to try and get more of those into work, to get them a start in the workforce, to get through the door to talk to an employer.  So a variety of approaches for a variety of different groups.

KELLY:

Treasurer, Tony Abbott says this Budget has a hole at the heart of it because there’s no mention of the carbon tax.  In fact, it includes the Mining Profits Tax, which hasn’t yet been legislated, which will almost certainly be amended.

TREASURER:

Fran, that’s just rubbish.

KELLY:

Well, it does include the Mining Tax.

TREASURER:

Of course it does because the Mining Tax…

KELLY:

That mining tax will not be legislated as it –

TREASURER:

Fran, this sort of rubbish should not pass as intelligent commentary from Tony Abbott.  The fact is that we have designed a Mining Tax, that’s why it’s in the Budget.  We changed the design last year.  That’s why it’s in the Budget.  We changed the estimates.  We don’t have a final design for the Emissions Trading Scheme.  You can’t put it in the Budget unless you’ve got a final design.  They will be provided in full, in Budget quality and they will –

KELLY:

My question was going to be, you’ll need a mini-Budget within months won’t you, with these two big taxes?

TREASURER:

No we won’t need a mini-Budget within months.  What we are doing is we’re doing the modelling; we’re doing the design of the scheme.  When we’ve got all that together we will publish that and then we will incorporate that in our Budget update that follows.  That is the sensible way to do it.  It is, in fact, the only way it can be done.

KELLY:

Will you get a bounce from this Budget?

TREASURER:

It’s not a question of getting a bounce.  It’s getting the settings right for the future and maximising the prosperity in this country that comes from the mining boom and spreading it to every postcode.

KELLY:

Treasurer, thanks so much for your time.