The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of David Bradbury

David Bradbury

Assistant Treasurer, Minister Assisting for Financial Services & Superannuation and Minister for Competition Policy & Consumer Affairs

5 March 2012 - 18 September 2013

Transcript of 09/05/2012

NO.043

Interview with Stuart Bocking

2UE Mornings

9 May 2012

SUBJECTS: Budget, MRRT, economic forecasts

STUART BOCKING:

The Assistant Treasurer David Bradbury is on the line from Canberra and he joins me, Minister good morning.

DAVID BRADBURY:

Good morning Stuart, good to be with you.

BOCKING:

Thank you for your time. Given the blow out in the current year’s figures, the level of uncertainty on world markets, what we’re seeing out of Greece now, a wafer-thin surplus literally could go either way couldn’t it?

BRADBURY:

Well we have promised that we would hand down a budget that returned the nations finances to surplus and that’s what we’ve done. This is based on all of the available information, we have complied with the charter of budget honesty which sets out how you account and cost the various processes and elements that are contained within the budget.

BOCKING:

I understand that but if we’re talking about a projected deficit last year of $22bn, it’s going to be closer to $50bn by the end of June 30, clearly we’re talking about a wafer-thin budget of $1.5bn, it could go either way couldn’t it?

BRADBURY:

Well I don’t accept the suggestion that it’s going to be $50bn by the end of June, I don’t know what that is based on. The $44bn will be based on what we believe to be the position. Now in terms of the surplus that is forecast, then certainly that is based upon all of the revenue and expenditure assumptions and measures that are set out within the budget. We’re determined to continue to run a tight operation to achieve that. Of course the single biggest factor that has made it difficult for us to continue to run tight fiscal policy has been the write down of revenues over time and it’s important to understand this that like trying to balance the family budget, if you take a hit and are not receiving the same level of income and many families have faced this themselves where perhaps they’re not receiving the overtime that they previously had, so you take a hit on your revenue, less income coming in, expenses well there are many expenses which you can begin to alter or change but there a lot of expenses which are built in. Now what we’ve experienced in the last few years has been an impact of about $150bn worth of revenue that we would have otherwise received that we haven’t received...

BOCKING:

But this highlights really that you were backed into a corner by the opposition on this notion that we simply had to return the budget to surplus even if it is just on paper, we just had to do it. Because at a time where the Reserve Bank is lowering interest rates trying to stimulate the economy, we’re going to other way fiscally by trying to tighten things up. The two seem to be working counter to each other, don’t they?

BRADBURY:

Well that's just wrong, Stuart...

BOCKING:

How is it wrong? How on earth is it wrong? If the Reserve Bank is trying to free up the economy by lower interest rates and getting more stimulus into the economy suddenly you are pulling out the equivalent of $34bn worth of spending in the space of 1 year. That is extraordinary fiscal restraint, that is working in the other direction isn’t it?

BRADBURY:

Okay, don’t use my words use the words of the IMF. The IMF have just released a statement a couple of days ago that basically said that the position we’re in at the moment and they gave a very big tick, a glowing endorsement of our finances here in Australia, but the point they made was that at this stage of the economic cycle the appropriate balance of settings for policy in Australia was to have tighter fiscal policy, which is what we’re doing by returning the budget to surplus and a relaxation of monetary policy. Can I make this point Stuart, that people talk about the measures that the Reserve Bank is taking, but can I say that when you have the economic fundamentals that we have, first point to make; we have growth returning to trend, unemployment at low levels, inflation is contained, record spending when it comes to capital investment, record pipeline of investment, these are the circumstances in which governments need to return budgets to surplus...

BOCKING:

It is though but within your own budget papers unemployment is forecast to rise, David.

BRADBURY:

Very modestly...

BOCKING:

Well say very modestly to the hundreds, thousands, ten thousand people who lose their jobs, all very well to say it’s a modest increase.

BRADBURY:

With respect Stuart, I don’t think our credentials are in question here when it comes to support that we have provided to keep people in the workforce.  Let’s be clear about this, through the Global Financial Crisis where around the world, somewhere in the order of $27 million jobs were shed. Here in Australia, since we came to power, ¾ of a million, 750,000 jobs have been created. We don’t want anyone to lose their job, but what we have forecast and what we are planning for and what we are doing is delivering a surplus budget that will give the Reserve Bank all the room it needs to cut rates if it feels that is what is appropriate. Let me just make this point, that when the previous government was in power, they made a simple proposition that seemed to be uncontested but it seems to be in dispute now and that is when you run budget surpluses, you take pressure off interest rates. It is one of the most significant things you can do in the current set of economic circumstances, is to right tight fiscal policy, get the budget back in to surplus and that will give the Reserve Bank all the room it needs to cut interest rates if it wishes to choose to.

BOCKING:

You’ll get no argument from me on that, I think the difficulty is and people have a problem getting their heads around is that we suddenly go from a deficit of $44bn and in the space of 1 year, 12 months despite increased uncertainty on world markets we still don’t know that growth figure of 3.25% forecast is still up in the air, that somehow we will return to a budget surplus of $1.5bn. That's the problem people have trouble getting their heads around, in the space of 12 months. You talk a lot about the benefits of the boom in reality though the when we look at the forecasts as far as the super profits mining tax is concerned, we still really don’t know how much that mining tax is going to raise, do we?

BRADBURY:

Well the figures are set out across the forward estimates...

BOCKING:

But they’ve already been revised once. It is not expected to raise $9.7bn in its first three years of operation, that’s down from $10.6bn that was only in November’s midyear budget review a couple of months back so already there has been a downward adjustment. Andrew Forrest the other day at the National Press Club and you would have seen this, the head of Fortesque mining, he doesn’t know, he doesn’t know how much his own company will be paying in the mining tax, he admitted it could be anywhere between nothing and $50 million over the next few years, if the key miners don’t know then how does the government know what it is getting from the mining tax?

BRADBURY:

Well we have set out those details and they are based upon the information that is available to government and can I say on this particular front, the major companies at least have been very forthcoming in allowing governments to have access to otherwise what would be commercial in confidence information in order to determine the true value of what this tax will bring in. But can I say you can’t have it both ways. We have undertaken a very spirited public debate on this, the opposition are out there saying this will kill the sector; this mining tax will kill the sector. But then I see Joe Hockey on TV this morning saying the mining tax brings in so little revenue, it’s only 1% of all taxation revenue. You can’t have it both ways.

BOCKING:

No I agree with that.

BRADBURY:

But can I just make this point Stuart, what is most important is that we all know there is a big boom going on out there, not all Australians are getting the benefits of that boom. This budget delivers the benefits of the boom and it spreads it right across the country. That means support in the form of direct assistance to low and middle income earners and that is why this is a strong budget that really underpins traditional Labor values in that sense.

BOCKING:

You’d have seen the headline on the front of the Daily Telegraph today, ‘black swan in cash splash, business and rich slugged to fund election sweeteners’, is this very much aimed at an election given that we will most likely have another budget before we go to the polls again?

BRADBURY:

This has been a tough budget, sure, I accept the point that we have made a conscious effort to try and protect families and households, but we’ve made some big cuts. You only had to go and have a look after the budget at the queue of stakeholders, the queue of people lining up to say that they wanted more money out of this budget or they didn’t like the cuts we made. You’ve got to live within your means, if we want to get back in to surplus tough decisions had to be taken. We’ve taken them, but we’ve taken them with this in mind. We know that many families out there are doing it tough with cost of living pressures, so we want to make sure that at a time where parts of the economy are just going gangbusters, that we’ve got the capacity to spread the benefit of the boom, people will start to see some of those benefits flow through in the form of extra assistance. It’s not about votes, it’s not about elections, as far as we’re concerned the next election is more than a year away.