The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

12 July 2011

Interview with Steve Chase

ABC News Radio

12 July 2011

SUBJECTS: Polls; economic reform; Tony Abbott's threat to vote against tax cuts, increases in household assistance and tax reform; Peabody investment in Australian coal

CHASE:

Wayne Swan, good morning. 

TREASURER:

Good morning Steve.  Good to be with you.

CHASE:

Thank you.  Now as you're aware Labor's support, according to Newspoll today and Essential yesterday, is heading south.  Now I put it to you that advocating a tax is hardly the ideal way to turn that around, is it?

TREASURER:

Well, these are very big reforms and there's been a very big dishonest scare campaign so we expected to lose some paint but big reforms are the ones that make the country strong.   And in the past when there have been big reforms, there's been big dishonest scare campaigns run just like this scare campaign. But at the end of the day the Australian people will be supporting good policy for the future, which creates a prosperous economy and a sustainable environment.

CHASE:

Is your backbench scared?  Is the caucus solid behind these reforms particularly in the coal mining seats?

TREASURER:

I think the caucus understands very clearly the economic and environmental importance of reducing carbon pollution.  We've simply got to do that.  Now, what we've got here is a scheme which puts a price on carbon for the 500 big polluters in the country.  It's not a tax directly on households at all.  It's a tax on the big polluters.  Of course there is a price impact which flows through the system, a relatively small price impact – 0.7 per cent in terms of the CPI – and what we have put in place is assistance to both households and also industry so we can make that transition and get to a clean energy future because the whole point of a price on carbon is to get the investment in energy efficiency and renewable energy.

CHASE:

Now the Opposition Leader Tony Abbott, as you're aware, also has been out about this morning talking on Channel Nine about the state of the, or solidity, or the solidness of the Labor caucus.  Let's hear what he had to say before we give you the right of reply.

ABBOTT:

This is a bad deal for the Australian people.  It is a very bad deal for the Australian people and I don't think you should for a moment assume that it's a done deal.  I know there were some Labor MPs cracking hardy yesterday about how they love this carbon tax even though it's going to do terrible things to jobs in their electorates.  There is a lot of unhappiness in the caucus, a very great deal of unhappiness in the caucus.  This is not a tax package that was approved by the caucus.  It's a tax package that was approved by the Greens and the Independents.  It's got the Greens fingerprints all over it and that's why the caucus is so unhappy about it.

CHASE:

That's the Opposition Leader Tony Abbott.  Wayne Swan, no nervous Nellies on your Backbench?

TREASURER:

 Let me say I saw Mr Abbott make those remarks and what he was refusing to do was to indicate what he would do with our tax reforms, with our tax cuts, with our increases in pensions and family allowances.  It's pretty clear to me that he intends to rip those out if he's elected.  So he would, if he was elected, come in and rip out a fundamental tax reform which removes another 1 million households or taxpayers from the system – significant tax cuts for people on under $80,000 and increases in the pension. And I think Mr Abbott's the one who has got the problem because I don't think Opposition Members are going to support a situation where legislated tax cuts, and tax reform, and legislated increases in pensions and family allowances are ripped out by the Liberal and National Parties.  He's got the problem.

CHASE:

Sounds as though the first thing you'll do when Parliament comes back is to actually push those tax cut plans through.

TREASURER:

Well they're pretty important, not just…

CHASE:

But you will, that will be the first cab off the rank?

TREASURER:

Well, we're going to legislate all of the reforms that we have outlined.  It's very important that we do that.  It's important so there can be some certainty so we can drive that investment in renewable energy to a cleaner energy future.  It's very important that we get through significant tax reforms.  This is a very big tax reform; lifting the tax free threshold from $6,000 a year to $18,000.  A very, very significant reform and now Mr Abbott's going to turn around and wreck it because you see he doesn't have a positive plan.  He just wants to wreck everything.

CHASE:

Now the Fin Review is reporting today that you're going to let the deficit blow out this year rather than cut spending to offset the cost of the plan – $4.3 billion.  Is that right and if so where does it leave your pledge to return to surplus?

TREASURER:

We're going to return our Budget to surplus in 2012-13.  There is an upfront cost and we were upfront about that cost when we announced the scheme.  We will follow our fiscal rules.  The Budget will be in surplus in 2012-13 and we will continue…

CHASE:

What about the deficit though?

TREASURER:

… and we will continue to build surpluses after that.  Our fiscal strategy is in place and we will return to surplus.

CHASE:

But is the Financial Review right in suggesting that the deficit will blow out this year?

TREASURER:

Well, certainly there is an upfront cost.  I was upfront about that.  There's no doubt that there is a significant cost in the first year.  That's what happens with big reforms but we come back to surplus in 2012-13 and continue to build surpluses after that.

CHASE:

Now yesterday local shares fell markedly, as you would also know, and airlines, manufacturers, energy companies, retailers and the like all flagged price rises in response to the carbon tax.  Is there a very real danger that there's going to be a cost blowout not foreseen by Treasury forecasts in the package?

TREASURER:

No, I don't believe so.  The people that have done our modelling are the same people who did the modelling for the previous government when they introduced the GST.  The impact on the CPI here is less than 1 per cent – 0.7 per cent – and I think that will be the outcome.  It was certainly, the outcome last time that they did the modelling for a very big package – eight times bigger than this one – was correct.

CHASE:

There's also news around this morning that there's going to be this big takeover bid for Macarthur Coal.  How do you view that in the current climate?

TREASURER:

Well, I can't make any comment on that directly, on that transaction because I do administer our foreign investment laws and our national interest test, but I think I can say that what this really shows is that there is very strong investment in our coal industry. And Mr Abbott in fact visited a coal mine owned by the company Peabody yesterday.  I think what this really proves is that Tony Abbott's Chicken Little routine is simply hollow.  The fact is there is very strong investment and faith in the future of our coal industry and Tony Abbott when he goes around talking about how the whole sky is going to fall in in the resources industry is just not telling the truth.

CHASE:

I'd just like to ask you one final question before we let you go.  Looking ahead to the tax summit later this year, can we expect any further income tax reform of the magnitude of what you announced on Sunday concerning the tripling of the tax free threshold?

TREASURER:

Well, reform of the tax system is ongoing and that's what we've proved.  We put further reforms in in our recent Budget.  More reforms in this package, a very significant reform in terms of the income tax system and of course at the forum we'll be discussing further reforms across a range of areas not just in income tax but in business tax, state taxation, and so on.

CHASE:

Wayne Swan good to talk to you this morning.

TREASURER:

Good to be with you.