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

12 May 2013

Interview with Laurie Oakes, Today on Sunday

Canberra

SUBJECTS: Budget 2013-14

OAKES:

Mr Swan, welcome to the program.

TREASURER:

Good morning Laurie, and it's Mother's Day, so I wanted to send a cheerio to my wife Kim, up in Brisbane, and my mother-in-law Shirley, over in Yass.

OAKES:

Among all the grim tidings we're had about Tuesday night's Budget, there's a bit of good news around today. Firstly, more money for prostate cancer research and you're a prostate cancer sufferer - have been, is that a factor?

TREASURER:

I'm certainly a cancer survivor and I'm very proud of what the Government has done over a long period of time to boost research into cancer and also to assist with its early detection. So when it comes to breast cancer, additional initiatives there. But also for prostate cancer, re-funding two specialist research centres and funding a new one as well, because with breast cancer and prostate cancer early detection is always the best protection. And in my case, I certainly owe my life to early detection - to the science of early detection. So getting the research there, lifting that up, and also screening - which we're doing more of in terms of breast cancer as well, and that's being announced in the Budget. This will give a lot of people more peace of mind, because when a member of the family gets cancer, everyone in the family is affected. So, we're all in it together, whether it's prostate cancer, breast cancer, bowel cancer.

OAKES:

The other good news, I suppose, in the papers about the Budget, the Sunday Tele has a story saying you are set to trump Tony Abbott on the funding for WestConnex, the Sydney transport scheme. Tell us about that.

TREASURER:

Well, we're certainly prepared to put in matching funding for that very important Sydney project. But importantly -

OAKES:

$1.8 billion, is that correct?

TREASURER:

Well, it will be outlined in the Budget, and it is over a number of years. This is a very big project which extends beyond the forward estimates. But I think there's a very important difference between us and Tony Abbott. Tony Abbott has a proposal up there that may mean tolls, we're not in the camp for tolls in terms of this project

OAKES:

It's obviously buying votes in Sydney's west. Can you afford to do much vote buying in this Budget? It doesn't sound like it.

TREASURER:

Well I think what we have to continue to do is what we have always done, which is build the nation. We've had a very substantial nation-building program, when it's come to road, rail or port and it will be continued, and that will be outlined and it can be funded. Just as we've been committed to the NBN, a very important nation-building project, because it lifts our productivity. In this Budget, Laurie, we are always looking to the future, making the necessary investments for the future, whether it's in education or whether it's in critical economic infrastructure, and that will be there on the night.

OAKES:

We can't talk about this year's Budget, I think, without starting off with last year's. In your Budget speech last year, would you agree in retrospect it makes hilarious reading?

TREASURER:

Well it's certainly true that when I was sitting here last year we were on track to come back to surplus in 2012-13. Indeed, we were on track to come back to surplus from the 2010-11 Budget. But of course, circumstances have changed dramatically over the past year, and what responsible governments do in those circumstances is they change as well. But I accept that people will be watching this Budget and saying 'what's changed?'. Well, what has changed has been a fundamental write-down of revenue, which is unprecedented, which couldn't be forecast or predicted - and I have been talking about that change in revenue since the end of last year.

OAKES:

You were quite categoric...

TREASURER:

Yes, I was.

OAKES:

You said for example, 'the deficit years of the global recession are behind us, the surplus years are here.' Now, that'll have people laughing in the aisles…

TREASURER:

Well first of all, can I just make a couple of points - I do want to spend some time going through that in detail. The first point I want to make is the Australian economy is in good shape. You know, we have outperformed every other developed economy over the past five years and we will continue to do that over the next few years. But coming with that has been a very strong and high Australian dollar. And that strong and high Australian dollar has caused an unprecedented set of circumstances in terms of the tax collections for the Commonwealth Government through last year and early this year - something that hasn't ever happened before, in over 50 years - and what I want to do is explain to the Australian people why that happened. But I absolutely accept that people will [be] sitting back and saying 'how has that happened? Why is that the case?'.
Would I prefer that it hadn't happened? Absolutely. Am I prepared to take my medicine for it? Absolutely. But my job is to get the big economic decisions right. And I stood up at the end of last year and explained to the Australian people that revenues were down, and of course, as we went through this year, that increased dramatically.

OAKES:

But a year ago you budgeted for a surplus of $1.5 billion.

TREASURER:

That's right.

OAKES:

Now wwe are now facing a massive deficit, rather than a surplus. The Fin Review says $17 billion. Is that close?

TREASURER:

Certainly $17 billion [write-down] in 2012-13, and the nature of the revenue write-downs do spread across the forward estimates. But I was faced with a choice, the government was faced with a choice. We could turn around in the face of those revenue write-downs and cut to the bone, slash spending right now and hit jobs, and push up unemployment. Or, stand up and explain to the Australian people that our number one priority is to support jobs and growth, and that's what I'm doing…

OAKES:

Just about everybody said a year ago that you were mad, that you couldn't achieve it.

TREASURER:

I'm sorry, that's not right. There is no credible economic forecaster who predicted this nature of revenue write-down for this year, or across the revenue estimates. Can I just explain why? What we have had happen in our economy in the last three quarters of last year is that nominal GDP growth for the first time in 50 years has fallen below real GDP growth [for three quarters]. We also had a situation where the Australian dollar remained high, when the price of our exports fell - something that has never happened before. The combination of those factors is what has hit all of the profit-based taxes in our revenue lines, and are resulting in these revenue write-downs. And Laurie, that wasn't predicted by any serious economic forecaster last year.

OAKES:

Joe Hockey predicted it.

TREASURER:

Well Joe Hockey's always always out there preaching doom and gloom…

OAKES:

He's been proved right.

TREASURER:

No, he hasn't been proven right. Our economy is among the strongest in the developed world. But what has happened in the past year is that our revenues have been hit. The responsible course of action when faced with that is to support gobs and growth. So I stood up last December and said it would be unlikely that we would come back to surplus in 2012-13. At that stage, the revenue write-down from the mid-year budget update of $4 billion had been achieved over the first four months of the financial year. And as we've gone through this year, the revenue write-downs have got larger and larger, and at every stage of that process I've informed the Australian people about what has been happening, and I have taken the responsible course. I'll take my medicine; I'll accept the politics of this are very uncomfortable. But getting the big economic decisions right to support Australian jobs is what people expect of me, no matter how uncomfortable that is politically.

OAKES:

You said in this chair last year that getting the Budget back into the black was critical. The Prime Minister, Julia Gillard, said it was an economic imperative. Suddenly it's not critical and it's not imperative? How come?

TREASURER:

Well, we are going to grow solidly through the next year. But if we cut to make up for the revenue downgrades we'll be hitting growth and jobs and we'd be sending unemployment up. Look, when circumstances change in the global economy, responsible governments change too. The global economy has taken an axe to our revenues, and this government won't take an axe to the Australian economy and to jobs.

OAKES:

We read in the newspapers that in the Budget you'll set out a plan to get back into surplus by 2016-17. Is that right?

TREASURER:

Well, we'll set out our plan to get back into surplus, a pathway back to surplus, and all of the detail will be there on Budget night. I'm not going to…

OAKES:

Why would anyone believe you after the fiasco of last year's Budget?


TREASURER:

Because rresponsible governments have to respond to changed circumstances. You can't sit here Laurie and pretend the global economy doesn't change. Our economy is strong relative to other developed economies, but one of the reasons it is strong is because we have, through the Global Financial Crisis, supported our economy, continued to grow. Coming with that strength has been a high dollar. That high dollar has put a lot of pressure on our economy, a lot of pressure on industry and it has led to this write-down in profits-based taxes and that's what we are dealing with in this Budget.

OAKES:

Are you going to get up tomorrow and start your speech saying "Ladies and gentlemen, circumstances can change, so what I'm saying tonight can be taken with a grain of salt"?

TREASURER:

I'm certainly going to get up and explain that this Government is committed to supporting jobs and growth and that the alternative pathway to what we have done would be to cut to the bone like Mr Abbott and Mr Hockey want to do. Every time there's an economic debate, they deny these revenue write-downs have happened. They say that we should be slashing expenditure. Their alternative course is to cut to the bone, and what that will do will hit jobs and hit economic growth and send up deficits and debt.

OAKES:

Another part of your speech that reads like stand-up comedy from last year, you were boasting about spreading the benefits of the mining boom via your mining tax. That tax produced no money, people see that as another bungle.

TREASURER:

The forecast will be there. What has impacted on the mining tax is what has impacted across all the profit-based taxes, the high dollar, and in particular, the lower terms of trade, that is the price for our exports in the second half of last year. They came off dramatically. That does impact on government revenues. The fact is that what responsible governments do in those circumstances is put in place settings which support domestic jobs and growth, and that is what we're doing, just like we did during the Global Financial Crisis. We got the big economic calls right then, they were controversial, they were disputed by the Opposition at that stage, they were disputed by many economic commentators, and we produced the best outcome of any developed economy in the world. And we'll do it again Laurie.

OAKES:

The Government's already either confirmed or announced a lot of the nasties in the Budget. The increase in Medicare Levy, deferral of a tax cut, cancellation of Family Tax Benefit increases. Is the worst of it out there now or are there other nasties to come?

TREASURER:

What we are doing in this Budget is not only charting a pathway back to surplus, supporting growth, but we are making room in the Budget to put in place the really wise investments for the future that will build future prosperity, and in particular, the education investments in the school improvement program, otherwise known as Gonski. That's absolutely critical, not just for fairness for every child to get a good start in life, but also for the economy, to lift our productivity and to make sure we can compete in the Asian Century. So there's going be a lot of emphasis on education and of course all of the arrangements to fund DisabilityCare Australia, otherwise known as the National Disability Insurance Scheme. And what we will do in the Budget is demonstrate how these big reforms for the future are funded into the future.

OAKES:

So will there be more nasties?

TREASURER:

We'll have to wait until the night, Laurie. I'm not going to reveal all on the program this morning, no matter how tempting it is.

OAKES:

One theme is a clampdown on international tax avoidance, on multinationals avoiding Australian tax. I understand you are about to sign a new tax agreement with Switzerland, is that part of this effort?

TREASURER:

Yes we are. I'm involved in an international effort. In fact, at the last G20 meeting I had a meeting with George Osborne, the Chancellor of the UK, the Finance Ministers from France and a number of other countries, including Germany and South Africa. There does need to be a very substantial clampdown on tax havens, on high-wealth individuals hiding their money in tax havens and of course, profit shifting which occurs through many multinational companies. Yes, there's emphasis on that. We are just about to sign a new tax treaty with Switzerland, which will give authorities access to tax information that high-wealth individuals have hidden in accounts.

OAKES:

Will you be able to identify people hiding money in Switzerland and how much?

TREASURER:

First of all, it won't be me, it will be the Tax Office, because confidentiality is very important here Laurie. When we signed one of these agreements with Singapore two years ago, that produced additional revenue to the Australian Tax Office of over $100 million. So yes this is a very important breakthrough in detecting those people who hide their wealth in various parts of the globe. What we're having now through the G20 is a very concerted effort from many developed and developing countries to make sure we protect the integrity of our tax-base because when you have these leakages and these people don't pay their tax, everyone has to pay more to make up for them.

OAKES:

One of the things you need money for is asylum seekers, since the Government hasn't stopped the boats, as Tony Abbott would say. The Opposition says you've created a $5 billion black hole because you forecast a slowing down of asylum seeker boat arrivals when in fact records are being broken by the day. Are you being honest in this Budget?

TREASURER:

It's a bit rich coming from the Opposition that's opposed just about every measure that we've required to actually slow the boats down, and of course wouldn't agree to the most fundamental measure that we needed which was further offshore processing.

OAKES:

That's cooking the books? It's pretending…

TREASURER:

No, I don't accept that for a minute, all of our forecasts...

OAKES:

What will it cost in the Budget?

TREASURER:

The figures will be there on Budget night Laurie. I'm not going into them today.

OAKES:

Why not?

TREASURER:

Because they'll be there on Budget night along with all of the other accounting. That's what Budget night is for and I'm sure you'll be here asking me about them on Budget night.

OAKES:

Will you be forecasting a slowing down in boat arrivals?

TREASURER:

All of the forecasts across all of our areas of activity will be there on Budget night Laurie and I'm sure you'll take the opportunity to ask about those on Budget night.

OAKES:

That leads me to the politics of the Budget. We've got an election coming up on September 14, you're going into this campaign having raised a tax, the Medicare Levy, cutting back on a whole lot of services and promised tax concessions. How will that play with voters?

TREASURER:

First thing is that voters want their government to get the big economic calls right, and in particular…

OAKES:

You haven't done that…

TREASURER:

We have done that Laurie. That's the whole point. The politics may be uncomfortable, but we've got the big economic calls right. We got them right in the Global Financial Crisis and global recession and we're getting them right again in the face of this unprecedented hit to tax revenue, because our number one priority, as it was during the Global Financial Crisis, is to support growth and jobs. But also, always looking to the future to make the wise investments that build prosperity for the future whilst charting a responsible fiscal policy and pathway back to surplus. That's what the Budget does.

OAKES:

You would argue that last year's Budget is now a nonsense when you look at it in retrospect. It's not evidence of government incompetence?

TREASURER:

What I would argue is that we take responsible decisions based on changed circumstances. As I said to you before, just because the global economy has taken an axe to our revenues, doesn't mean to say we should turn around and take an axe to the Budget and to jobs. We're not going to do that, we've changed tack - we had to do that in the face of this revenue write-down, just as we did Laurie, during the Global Financial Crisis, particularly after the collapse of Lehmann Brothers. At that time, people were saying similar things to what you're saying now. We got the big economic calls right then and we're getting them right again.

OAKES:

Climate Change Minister, Greg Combet, is quoted today as saying Labor people should be confident of victory in the election?

TREASURER:

I believe we will win.

OAKES:

What has he been smoking, you smoking the same?

TREASURER:

I believe we will win the election because there's a very clear choice here: between a Labor Government absolutely dedicated to supporting jobs and growth, making those big investments for the future in school improvement, and particularly in disability. Conservative governments never do that. We've done it through the 70s, 80s and the 90s - we've done it through national superannuation, we've done it through Medicare. We always make the big investments in the future. What they do, what conservative governments always do, is rip those away and in the case of our current economic environment, what they would do is cut to the bone, particularly in health and education. Because their belief is the belief that people who preach austerity in Europe is, what they do, which is that they should cut to the bone just because revenue has receded. That's not the right thing to do. It's not the right thing to do for Australia.

OAKES:

So you don't think this is your last Budget?

TREASURER:

I certainly don't, no.

OAKES:

Well if you're right I'll see you next year, otherwise it'll be Joe Hockey sitting there.

TREASURER:

Well I'll be looking forward to it Laurie. Thank you.