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

29 November 2011

Joint Press Conference
with
The Hon Penny Wong MP
Minister for Finance and Deregulation

Press Conference

Canberra

29 November 2011

SUBJECTS: Mid-year Economic and Fiscal Outlook

TREASURER:

Good morning. Well, it's good afternoon. Well, as we release this mid-year update, I think it's pretty clear that storm clouds are gathering and this time the darkest shadows are cast over Europe. And it's against this backdrop that Treasury has revised down its forecast for global growth by 1 per cent in 2012. We've also seen some forecasts from the OECD overnight and, of course, their downside forecasts can show what can happen if things were to take a turn for the worse.

Now, despite the storm clouds on the global horizon, we remain on track to deliver a surplus, as planned, in 2012-13. Now we've been talking about this for some time. I've been making the point, Penny's been making the point, the Prime Minister's been making the point that no economy or no budget is immune from what's happening in the global economy, including our own and that's why our growth forecasts have been revised down here to trend.

Now, as you would expect, this has made the return to surplus more difficult, with this global turmoil hitting revenues to the tune of $20 billion. So revenues have been hit, budget revenues have been hit to the tune of $20 billion.

Now, at a time of heightened global instability, our fiscal discipline here needs to send a message to the world and that is precisely what we are doing by bringing the budget back to surplus in 2012-13. We are showcasing to the world the strong economic fundamentals of the Australian economy.

Now, our fiscal position is right for our economic circumstances here in Australia. We're taking a balanced approach to ensure that our public finances remain strong and, in fact, the strength of our public finances have been recognised again today by the ratings from Fitch. This is the first time in Australian history that we have received the gold-plated AAA rating from all three global rating agencies. The first time in history.

At the end of the day, strong public finances and strong economic fundamentals are the best protection that we can provide for working people in our country. And because of the choices that we have made over the past four years in terms of budget management and managing the economy more generally, we have the best set of economic fundamentals in the developed world. Most countries could only dream of having growth at trend levels but that's what we're expecting here in Australia despite all of the storm clouds that are on the horizon.

Now, I just do want to spend a bit of time going through some of the detail because we are experiencing the worst bout of global instability since the global financial crisis. Now, we've seen the sovereign debt crisis intensify in Europe in recent works. We've seen its impact upon global markets, particularly market volatility, and of course we have seen its impact on global confidence.

This chart here shows that we've substantially revised down growth forecasts for advanced economies, and it also shows that we expect to see Europe head into recession but most importantly what it shows is that two of the big economic drivers in the global economy, notably the US and the euro area, are both misfiring at the same time and that does provide a very substantial challenge in terms of global growth.

Chart - International GDP growth forecasts revised down

So global growth has been revised down by one percentage point in 2012, from 4½ per cent to 3½ per cent. And as I said, what that largely reflects is developments in both the United States, but most particularly developments in Europe and of course these are transmitted through to our economy through a number of channels.

Firstly, global turbulence affects the stock market, the share market. I think our share market is down something like 15 per cent since May this year. It's created some volatility, for example, in commodity prices and we'll talk a bit about that later on. But what it does most fundamentally is that it does unsettle consumers and it does unsettle businesses.

So we've seen confidence fall, we've seen households become a little more cautious and of course we've seen business be hesitant in terms of their hiring decisions. And of course it then flows through to global trade and we've seen a dampening of global trade outside of mining, and of course what that does is exacerbate the pressures which we normally have in our domestic economy which flow from a continuing high dollar, although down a little now. And of course we already had, before these events intensified, cautious consumer behaviour.

So it tends to work its way through the system and develop a feedback loop. Now what this means for our forecast is that growth is expected to be 3 ¼ per cent in both 2011-12 and 2012-13. Important figures because they are growth figures around our traditional trend level - an exceptional degree of growth, if you like, given some of the circumstances that we are facing. So growth is now down in terms of this year mid-year review, by ¾ of a percentage point in 2011-2012 and ½ a percentage point below our budget forecast in 2012- 2013.

The really good thing and the thing that I'm so pleased about, and I know the Government is so pleased about, is that unemployment is expected to stay low because at the end of the day employment is the key to peace of mind and it's the key to living standards. We do expect to see the unemployment rate just tick up a little to be at 5½ per cent over the forecast period. Compare this, and think about it this way, to what is going on in other countries around the world - 9 and 10 per cent in the United States and Europe, and much higher in many individual economies throughout Europe. Spanish youth unemployment, for example, is 50 per cent. So a very good outcome in terms of employment growth here in Australia.

The other good news is that price pressures have eased since the Budget, with headline and underlying inflation expected to sit well within the RBA's target band, excluding the one-off impact of the carbon price in 2012-13.

Now, I want to make this point, because there's going to be a lot of commentary about this today but our forecasts are very much in line with the forecasts of the Reserve Bank, which prepares its forecasts separately from us, very much in line with reputable international organisations like the OECD and the International Monetary Fund and very much in line with what many of the highly qualified market forecasters are putting forward.

Now I just want to spend a bit of time talking about the fiscal outlook. As I said before the worsening global outlook for the global economy has impacted upon revenues and ripped more than $20 billion from budget revenues. Let me just put that into context. $20 billion is the equivalent of the entire schools and higher education budget all gone in one hit. That's how big it is across the forward estimates. About one third of this loss is due to declines in asset prices, with some $7 billion being written down in terms of capital gains revenue. Revenue has also been hit by softer employment growth flowing from softer global growth generally and the turmoil in Europe in particular.

All of this has meant the deficit for this year is higher at $37.1 billion or 2.5 per cent of GDP, we then expect it to return to a modest surplus of $1.5 billion in 2012-13. The increase in the budget deficit in 2011-12 is not due to new discretionary spending as some people might have you believe.

So I wanted to spend a little bit of time going through what is occurring in 2011-12. $11 billion of the increase is either essential or unavoidable, and what does it reflect? It reflects a write down of $5 billion in tax revenues flowing from the events that I've talked about before, from the turmoil in Europe. It reflects a $2.3 billion increase in natural disaster payments flowing from the most costly natural disasters in our history and I'll make a point about that: In terms of that $2.3 billion, some of that is a pre-payment and some of it is additional costs, not just for the floods and cyclones of this year, but for floods and cyclones of previous years as well because I think people tend to forget just how big the natural disasters have been in Australia in the past couple of years culminating in what occurred in Queensland this year but there is much more expense flowing through to our budget bottom line from other natural disasters as well. And it is in that context that there is a $2.3 billion in 2011-12.

It also reflects $1.4 billion in accelerated infrastructure expenditure. That is very important because we found ourselves in a position to bring forward a number of critical infrastructure projects and that's pretty important given what is still a weakness in the non-residential construction sector. And on top of that, there's around $3 billion in upfront assistance to businesses and households which we are putting in place to assist them to adjust to the carbon price. So I want to make the point that there's nothing particularly discretionary about the increase in the deficit in 2011-12.

Now because there has been such a substantial hit to revenues, the Government has had to find substantial savings in the budget and what we've tried really hard to do is to make sure we get the appropriate mix of savings which deals with the near-term global uncertainty whilst at the same time, strengthening our budget position in the medium term and in the long term.

Now this mid-year update delivers a further $11.5 billion in new savings through spending cuts, deferring the start date of some initiatives and further reforms to taxation. I make the point that these savings build over time, and they do strengthen the structural position of the budget. After taking into account new spending, taking into account the upfront assistance, which is provided as part of the Clean Energy Future package, the net improvement to the budget bottom line is $6.8 billion.

This is the third consecutive mid-year update which will deliver net savings to the budget - now that's a record of fiscal discipline which has been unmatched by any previous government. There's no other government in our history that has delivered that sort of discipline over time. We offset all of the spending in the last election campaign, we did it again in the Budget, and we've done it again here in MYEFO and I would like to pay tribute to the very good work of Penny Wong in that regard.

The point I want to make is that we've continued our record of fiscal discipline, a record which has been endorsed by the international community and again today by the ratings agencies, and all of that's important because what it does send is a very important message, a very important message about the strong fundamentals in the Australian economy and given what's occurring elsewhere in the world, there couldn't be a more important time to send that very clear message. And what all that means is that when you look around the world at developed economies, ours is among the strongest.

So we expect to be back in surplus ahead of major advanced economies and our debt is a small fraction of our peers. So you can see that reflected very much in those charts in terms of budget balance and also in terms of government net debt.

Chart - Fiscal position one of the strongets in the developed world

But I would commend to you a reading of the analysis today from Fitch which reinforces the point about what good shape Australia's public finances are in and about how low our debt is, relative to other major economies in the world. As you can see in that chart, Australia's net debt - we've just got a cloud there [photographer stands in front of overhead projector] - Australia's net debt at 8.9 per cent of GDP in 2011-12 peaks at less than a tenth of major advanced economies.

So, despite all of that turbulence, despite all of the events of recent years, what this demonstrates is just how strong our budget position is, just how strong our public finances are and how that is clearly understood by international agencies including private sector rating agencies.

Now, what we've also seen is the extent to which our outlook can be tempered by global developments and it is the case that there are sectors of the Australian economy that are not doing as well as others but nevertheless when it comes down to the fundamentals that's what really counts when we're getting people assessing our economy and they are unrivalled compared to all of our peers.

They look at Australia and see unemployment, contained inflation and they also look at a huge pipeline of investment that is gearing up and, of course, I draw your attention to the latest assessment today of the resource pipeline in Australia which has been upgraded from $430 billion to $450+ billion in the assessment of ABARES - whatever its new name is - which has just come out today.

So our economy is growing solidly around trend pace, we've got unemployment with a five in front of it - almost half that we've seen in the United States - we've got contained inflation and we've got a record investment pipeline. So we can see just how far ahead our economy of many other advanced economies. You can see it in terms of GDP levels and you can see it in terms of employment levels.

If you're looking really for a measure of how well Australia's done in recent years, compared to other developed economies, you can see it over there on the far slide. GDP in Australia is now almost six per cent greater than it was prior to the global financial crisis. There's barely a developed economy in the world who can say that that is a situation for them, that they are ahead. There are some, there are one or two, that are ahead of where they were prior to the global financial crisis.

Chart - Australian economy outperforms

And of course all of that's important because ultimately it flows through to jobs and job security for the Australian workforce. I make that point because what today's update is about is not just the numbers, it's much, much more than numbers that are on a page.

They are evidence today of the good decisions that we've taken to secure our economy and to secure the jobs of millions of Australians who get up every day and go to work and provide for their families. Today's figures are also evidence of the threats that do lie abroad and how we have to be acutely aware of all of those.

But I think what we have done here today is that we've provided a map which charts a course through all of these dangers, as we return to budget surplus and it's very important to continue to do that to maintain confidence in our economy. It's more important now at a time of heightened global instability.

I just wanted to finish by making a couple of points and reflect on a few things because I've now been Treasurer of Australia for four years and in those four years we've seen some of the most difficult and turbulent times in the global economy in our lifetimes. I think it's probably pretty fair to say some of the most difficult in terms of the times of the global economy since the Great Depression and during that time our Government has responded in a careful way. Our Government has responded in a calm way. We have sat down and assessed conditions and responded appropriately. We've had to balance, if you like, the need for savings to maintain strong public finances on the one hand, against the prospect of instability taking place in the global economy on the other and we face this prospect again.

So what we are doing here is sticking to our record of fiscal discipline and I believe that with the numbers that we have put forward today, we have put forward I think a prudent and appropriate set of numbers. If you like, we've taken the middle path between those who say we don't need a surplus, and those who say we should take a really big axe to spending. We've taken the middle path because we're committed to getting the balance right and I think that's what Australians have come to expect from the Government at a time of global uncertainty.

We've got the big calls right in the past and we'll keep getting them right, as the global economic storm clouds gather yet again. And what has driven all of us, particularly the Government, is that we do what's right, we also do what is fair and we do what is equitable and that's appropriate for a Labor Government. Thank you. Just one sec, Penny's going to say a couple of words.

WONG:

Thanks very much Wayne. Obviously in this mid-year review, we have had to strike a balance between the uncertainty that we see abroad against the imperative of supporting jobs and growth here in Australia.

I did want to make some brief comments about the efficiency dividend. The context of this decision is global economic turbulence wiping some $20 billion out of government revenues, and this is of course on top of the $130 billion writedown since the global financial crisis.

We are in tight fiscal circumstances, and it's the Government's judgement that government has to play its part, tighten its belt. And government, the public service, has to continue to make a contribution to delivering savings.

The decision the Government has made is that from July 1, an additional 2.5 per cent efficiency dividend will apply to agencies. This is on top of the existing 1.5 per cent that has previously been put in place. This results in savings of about $1.5 billion over the forward estimates.

Obviously, when we are looking to ensure that the Government continues to show its fiscal discipline for the reasons Wayne has outlined, and continues to deliver good Labor reforms, such as carbon and such as the pay increase for the community sector, we have to look at savings across the budget, and government has to contribute.

Our expectation is that agencies will find savings in a range of areas to meet this one-off increase, including reductions, for example, in the use of travel, consultants, hospitality, and advertising. And I would remind people that we have delivered some $10 billion worth of reforms in government efficiency since we came to Government. The Government's strong expectation is that agencies will continue to meet the efficiency dividend, without resorting to forced redundancies.

Obviously, this is just one of the savings measures in this mid-year review - some $11.5 billion worth of savings measures. Savings which have allowed us to fund our substantial policy reforms announced since the Budget, as well as keeping the budget on track to return to surplus - a very significant achievement given global conditions.

The mid-year review reflects the cost of the Clean Energy Future reforms to put a price on carbon. It makes a provision for the Government's contribution to low-paid workers in the social and community services sector, the vast majority of whom are women.

As the Treasurer said, this has been a challenging MYEFO because of the economic circumstances we face, and in particular, global circumstances. That's made delivering these historic policy reforms even more significant. But we have funded these reforms, and other new spending in the mid-year review in a responsible way, just as we have done in the past, and just as we will continue to do so into the future.

The savings in the mid-year review are a mix of spending cuts, deferrals of commitments, as well as measures to improve the integrity and fairness of the tax system. As the Treasurer said, a mix appropriate to the current economic circumstances; reflecting global uncertainty in the near-term, but solid medium-term prospects for the Australian economy. And some of these savings continue to build over time, and deliver an enduring benefit to the budget.

Just in closing, I'd say this: this is a complex economic environment to put a mid-year review together, an environment where we have had to chart the right course. Making sure we continue to demonstrate the fiscal discipline that is so important, but at the same time supporting jobs and growth in the Australian economy, just as the Government did during the global financial crisis.

JOURNALIST:

On the subject of jobs you have a forecast of that will go up to 5.5 per cent and (inaudible) an increase of 0.3 per cent and there are (inaudible). What would you say to the argument that you are willing to sacrifice jobs and allow an increase in that unemployment number to achieve a political vanity project of achieving a surplus on your date?

TREASURER:

No nothing could be more important to job creation in our economy for the long term and for the short term than getting the fiscal decisions right and we have got them right. We've put in place the appropriate degree of fiscal discipline to ensure our economy keeps growing. Our economy is going to grow at trend. Unfortunately it's not growing substantially above trend as we forecast at the budget because of events in the global economy but everything we've done here is to strike the right balance between supporting jobs and growth on the one hand and making sure that our public finances are in the position that we will be judged to be having sustainable growth over time. If adverse judgements were made then we would be in a much more difficult situation. It is regrettable, absolutely, that unemployment will tick up a little but we will still have a record of job creation which will be very strong by any standards - 300,000 additional jobs as we go through to the middle of 2012-13 but the unemployment rate will tick up a little. That is one consequence of where we are at the moment.

But the first priority of this government from day one has been jobs and good budget management. We put that in place during the global financial crisis and the global recession, and as we go forward jobs and good budget management is still our number one priority as we set about dealing on the one hand with the challenges of what's going on in Europe and on the other making sure we spread the opportunities of the mining boom to every corner of our country.

JOURNALIST:

It's a very slender surplus but nonetheless it's a surplus but how confident are you of being able to maintain the (inaudible)?

TREASURER:

Well, it's a modest surplus but it's one that's achievable given the growth forecasts that we've got. I'll just explain that we're still expecting very considerable job growth over the next couple of years, something like 300,000 additional jobs but less than we had expected at the time of budget. There's the new figures out today that I pointed to in my introduction, the resources pipeline has now strengthened yet again and gone from $430 billion to $450 billion. Now that's why the range of policies that we've spent a large amount of our time in the past 12 months working on and which were the centrepiece of our Budget in May this year are so important. Spreading the opportunities of that strong growth in the resources sector to other parts of the economy is what we've got to be about. That's why labour force participation was front and centre at the Budget. That's why skills and training and education were front and centre at the Budget. So we're going to do our best to keep this economy growing sustainable despite the headwinds that we're seeing.

JOURNALIST:

So you're hanging on by the skin of your teeth?

TREASURER:

Well, we've got a lot of things going for us here and we should be confident in our own strengths. As we've said on a number of occasions we're not immune from what's going on in the global economy but we can deal with those things that we can control and do our best with each and every one of them and that's what the government is trying to do and that's why, once again, Fitch has recognised the strength of Australia. For the first time in history we've now got the three global rating agencies giving us their gold plated rating for our public finances and with the forwards of our economy. We've got to keep doing that. We do have to stay ahead of the game. We're not immune from all of that but what's going on in Europe is just a reminder to us that we've got to strive even harder to do better.

JOURNALIST:

Treasurer, we've worked out to be 2011-12 (inaudible) by $15 billion. Can you say that there is no discretionary spending and I accept that there is some spending that was (inaudible) by the carbon deal and a few other bits and pieces. But you have actually brought all of (inaudible) spending including that $1.4 billion in infrastructure. How is that not an accounted figure, given that that equates roughly to the surplus for the (inaudible). Given that some of those projects will be jointly funded with the states and won't actually start until July next year.

TREASURER:

Well, we're trying to bring them forward as fast as we can for the reasons that I outlined before, that is that there's still a weakness in non-residential construction and the timing of many projects and the assessment of when they can be done changes over time. I'm familiar with a couple of those projects in my home state and it's great news that they are in a position to go ahead more quickly than we'd anticipated back at the budget. So we are accelerating these investments for very good reasons because we know how important infrastructure is to the performance of our economy. So $1.4 billion in terms of infrastructure, no apologies for that, entirely legitimate, and these sorts of things are done all of the time.

Secondly, as I said before in my introductory remarks, the $2.3 billion, I think, in this for Queensland is very important. Queensland is this year spending over $3 billion in flood recovery for example. And we're not just dealing with an upfront payment. We're also dealing with a whole lot of payments that weren't expected at budget which have now come forward from previous cyclones before the ones that occurred this year - so $2.3 billion there. And then there is of course the carbon package - $3 billion. So when you bring those together you get to - and a revenue write down of $5 [billion] - you get to around $11 [billion]. Let me take you to some of the others which you would call discretionary.

The others are something like almost a billion lost for the budget because the Parliament didn't pass the PHI legislation, a billion. That's another part of it. Also increased expenditure in childcare, aged care and dental. So if you have a look, and I urge you all to go and do it, just have a look at the increase and add all those things up and I think that you'd agree with me that they are entirely legitimate and appropriate and it is not unusual in these circumstances for anyone's budget at any time in our history for those sorts of numbers to move around. It is a minor surplus but nevertheless what really counts is the trend over time, and I can get the Finance Minister to talk about that, we're engaged in a very substantial fiscal consolidation and we're bringing our spending down. Penny, do you just want to say something about that?

WONG:

Just to make the point that obviously that the surpluses do build steadily over time, and that's in the context of a very significant write-down in revenue across the forward estimates.

JOURNALIST:

Mr Swan, today you've talked about doing what is right, fair and equitable and showing discipline. Can you explain why new parents are going to face a $437 dollar cut to the baby bonus when you've just paid $16,000 for a former MP who has been out of Parliament for 36 years to have free travel and $15,000 for a former millionaire Minister to visit his holiday home in Broome quite frequently? Can you explain what sort of message this sends, why you haven't abolished the gold pass and why the public shouldn't be annoyed that when you're talking about belt tightening pollies perks seem to be off limits?

TREASURER:

Okay let me deal with the baby bonus bit first. I'll say a few things about that and then I'll deal with the second part. Firstly I'm a very strong supporter of the family payments system and I've been a very strong supporter of the Baby Bonus as well but these payments must be sustainable over time. Now we've done a lot of work to make family payments system sustainable as you'd be aware over previous budgets and we made a major addition to the family payments system which is being discussed only this week which is the increase in money for teenagers. When the Baby Bonus was introduced I think it came in at about $3000 and it's up to $5000. So in a relatively short period of time there's been an increase in something like 70 per cent of the level of the bonus. Committed, as we are, with the bonus we decided we needed to make it sustainable over time which is why we're resetting it at $5000 only from 1 September next year, I make that point, so people clearly know what it is going to be in 9 months time. So $5000 is, we think, an appropriate level. I think it's a significant amount of support.

On the second part of your question there is a review of all of these entitlements by the remuneration body at the moment, an independent body, the government will deal with its recommendations at the appropriate time.

WONG:

Can I just make one point on the baby bonus issue. This is also the Government that has delivered paid parental leave. And the Government that's increased assistance to families through the Child Care Rebate, both in terms of the percentage and the total amount payable. That's in addition to the family tax improvements that the Treasurer has already referenced. So I think it's very clear the priority we have given to supporting families with new babies.

JOURNALIST:

Do you think it's justified to keep the gold pass?

TREASURER:

Well, it's very controversial. It's being reviewed by that independent tribunal at the moment and I'll save any comment until we see what they've got to say about it.

JOURNALIST:

Treasurer, were you tempted to pocket the $2.1 billion allocated to the Epping to Parramatta rail line. How long will that offer remain on the table? Isn't that an easy save in these (inaudible) times?

TREASURER:

Well, those matters are subject to discussion with the New South Wales Government and their attitude to that project and other projects is not [clear] at the moment. We are committed to very significant infrastructure projects right around the country including in New South Wales and no one's keener to see progress on infrastructure in New South Wales than this government and our Transport Minister Mr Albanese.

JOURNALIST:

Treasurer, you're hanging quite a lot on the importance of your fiscal guidelines, if you like, to (inaudible). The Mid-Year Review shows that real spending is increasing by a 3.7 per cent this year compared to your commitment to keep it under 2 per cent. So I just want to ask you about that and also can I just ask you : on page 35 of the MYEFO documents in the reconciliation table, if you go to the payments line it shows pretty clearly that while you're hitting 2011-12, 2013-14, 2014-15 really hard or in reverse. It really looks like you've had to put a lot of effort into just getting that surplus number for 2012-13 at the cost of the other years bottom lines. Why not just smooth it out, given that you're now in a huge fiscal turnaround between this year and next year which must have (inaudible)?

TREASURER:

Okay well if you look at the spending increase for that year 1.5 per cent of that 3.7 is entirely due to floods and [carbon]. So, you know, it's getting close to two. It is inevitable with a 2 per cent cap that sometimes you would go over and sometimes would go substantially under. One of the things that you've missed in the table is that spending growth the year before that was negative. The first time, I think, we've had negative spending growth in any year in a long time. So that, if you like, exaggerates the 3.7 per cent figure as well. But as we go forward, as you know our fiscal rule is for a 2 per cent cap on average after we return to surplus. That's what we're doing but I know Penny's got a couple of points she wants to make here.

WONG:

Just to make the point that if you look over the forward estimates period, it's an average of 1.5 per cent per year in real spending growth, so that's obviously under the 2 per cent. It is true, for the reasons we've outlined, in 2011-12 there has been additional expenditure associated primarily - as the Treasurer said - with the Queensland rebuild, and also the historic reform on carbon. Both of these things are not negotiable from a Labor Government's perspective. The point of the rules you've outlined is to deliver fiscal discipline. And I think when we've offset all new spending and delivered a 1.5 per cent on average real growth in expenditure over the forward estimates, we are delivering that discipline.

JOURNALIST:

Treasurer, back in 2009 when you laid out the plan to get back to surplus it was predicated on growth well above trend for an extended period of time. You haven't got that. You've done it once, but you're not going to get close to it (inaudible) these figures. You've had to push out net debt, coming back to zero net debt by at least a year and that's predicated on some very large surpluses in the out year. Haven't you just sown the seeds for some really big problems for whoever has to get up in that chair in the coming years?

TREASURER:

Not at all, not at all I think you'll find. This is a general question, I think, more about forecasting and where the Treasury lies vis a vis everybody else in their assessments. I think if you look at what's been occurring in Australia over the last few years generally the Treasury is always the most conservative of most of the forecasters in terms of its growth projections. We had this, for example, in terms of commodity prices, you might recall, at the budget last year and I think pretty fair to say that Treasury was closer to that than just about anyone else.

So forecasting's not an exact science, but I think the Treasury of Australia has a reasonable record, or in fact a very good record, of forecasting. But things have changed, we have been through the most volatile time since the Great Depression in the international economy and new challenges present themselves. What this Government has shown itself capable of is correctly assessing those changes and acting when required to act.

But I think anyone who looks at the Australian economy, anyone who looks at the region, anyone who looks at growth in the region, accepts the fact that there are some very special things happening in Australia and they mean that we are in a position to grow at around trend when many other developed economies are not.

JOURNALIST:

Treasurer, have you adjusted any of the mining tax revenue protection, given the changes in commodity prices in recent times? Related to that, you've made some changes to the outlays that were linked to the mining tax in what was originally announced, including the standard deduction and so forth. Can you now say whether the overall package of tax reforms linked to the mining tax are positive for the budget or negative for the budget?

TREASURER:

Well, round about even stevens through the ‘13 and ‘14. We have adjusted the revenues. As you know the revenues from any of these sorts of taxes are affected by quantity, price, and the exchange rate and one of the very big differences between now and budget is the exchange rate. So the exchange rate has exerted an upward lift, if you like, on the amount of revenues and that's been important. I think the revenues are down in terms of the MRRT by about 0.5, half a million, sorry half a billion. So that's about where they are.

JOURNALIST:

(inaudible) three years, the other half a billion (inaudible)

JOURNALIST:

Treasurer, there's about $600 million in saves, deferrals of bonuses to teachers and schools and universities, so there's the education revolution hit a wall here and also you're talking about $216 million trade on the failure of the Malaysia solution. What's the increased cost because of that failure?

TREASURER:

Just on education - some of the measures we're still implementing, but they are subject to negotiation with the states and the major stakeholders, so there are deferrals in the context of trying to get the measurements and the metrics right and I think the major stakeholders will all say that. So we want to make sure we get it right and that's what we're doing. The education revolution is powering ahead, there's a lot more money overall going into education under this government, because it's fundamental to our view of the world, about opportunity and about prosperity.

We talk a lot about productivity in Australia, but we don't tend to have the broader debate that's required, which is productivity also in the context of education, with all its facets - from early childhood all the way through to university and of course the skills that go with that. I'll just throw to Penny.

WONG:

Just on this issue, the backdrop to these decisions is some $5 billion additional investment in universities. Around about 100,000 more Australians are in universities as a result of this Government's policies. So, it is wrong to suggest that this is not a priority, and certainly this Prime Minister's delivered continued investment in the education sector.

JOURNALIST:

Treasurer, can I get you to comment on the risks to the budget over the next six months?

TREASURER:

That's an unusual question. Well, as we know there are downside risks which are examined in our statement of sensitivities, David, which you can have a look at, but I would just note that the downside sensitivities dealt with here is one which is predicated on a fixed exchange rate, not one that's moving, so I think it should be read in that context.

I did refer in my opening remarks to the downside scenario on the OECD material published overnight and that's certainly sober reading, but what we have done here is exercise our best judgement about where we think we are right now, at home, in the region and in the global economy.

I know there's a lot of speculation and talk about China, for example, we've got growth in China coming off a bit, we always did. We've got commodity prices coming off next year and coming off after that for some time. I think we've got a pretty conservative set of forecasts, but there are no set of forecasts that can deal with very big and unforeseen, or sudden events.

WONG:

If I can come back to Mark. The onshore processing costs are expected to increase by $1.3 billion over four years as a result of the increase in expected arrival rates, as a consequence of Mr Abbott's opposition to a government being able to implement its policy. This has been partially offset by about $1.1 billion in reduced costs associated with not proceeding with offshore processing.

TREASURER:

The point of that is that the net increase in costs is $200 million. Dennis.

JOURNALIST:

Treasurer, you referred to discriminatory spending and so forth and you've deferred a lot of items. Did it occur to you at any stage to defer the (inaudible) the compensation for the carbon package?

TREASURER:

No.

JOURNALIST:

That package is down, you've re-estimated at 3.3, down by-

WONG:

The revision in the estimates is as a result of better information, particularly in the Jobs and Competitiveness program, it's not a change in policy.

TREASURER:

It's not a change of policy at all. There's a change in the cost of the jobs and competitiveness package relating to baseline data on production levels. So there's no change at all in terms of policy.

JOURNALIST:

Carbon capture and storage is history, is it? And the global institute of carbon capture and storage?

TREASURER:

Well, it's a technology which is going to take a lot of work and time to prove up.

JOURNALIST:

Treasurer, there's only (inaudible) in the budget for the contracted closures for the big electricity generators. I thought that that was actually going to be in the MYEFO, the actual figure for the closing-

TREASURER:

No, well.

WONG:

That could be subject to negotiations, so that wouldn't be disclosed.

JOURNALIST:

(Inaudible)?

WONG:

That wouldn't be disclosed.

TREASURER:

We would never disclose something that's commercial-in-confidence and the subject of commercial negotiation in our budget papers, otherwise you wouldn't have a commercial negotiation.

JOURNALIST:

(Inaudible) $45 billion decrease, I think it's showing in year 2014-15 and a little bit in 2013- 2014. Does that include the $200 million you have to give Tony Windsor for the regional assessment, or was it all just (inaudible)?

TREASURER:

No, well no, I don't think it includes that. It just includes out pricing and our volume date.

WONG:

Those other measures are referenced as well.

JOURNALIST:

Treasurer, just on another matter, on the Labor Party conference coming up this weekend. The Right seems to be having a very full on debate about same-sex marriage, which way will you be voting on the question of changing the party platform and secondly on the conscience vote? And can I ask the same question of the finance minister.

WONG:

I thought we'd manage to get through MYEFO without that question.

TREASURER:

What I was going to say about that, is that I will say that at the conference.

WONG:

I think I've made my view clear.

TREASURER:

Right, thank you.