FRAN KELLY:
Minister good morning.
ARTHUR SINODINOS:
You're welcome Fran, good to be on your programme again.
FRAN KELLY:
Minister, before we get to the debt ceiling, can I just follow up from the discussion I was having there with Jillian Broadbent of Clean Energy Finance Corporation? She says there is a really strong case in terms of emissions and financial benefits for retaining the Corporation and she just wants the Government to consider it, do you think that is a good idea?
ARTHUR SINODINOS:
Well look Fran the challenge is this, we took to the election a separate platform around abolishing the Carbon Tax, having a Direct Action program, maintaining the renewable energy target and we think that's the suite of programs can deliver the sort of 5 per cent reduction at least in emissions that is a bi-partisan commitment by 2020. The issue with the Clean Energy Finance Corporation is, I suppose it's getting our head around how this can be so successful, if it's not for the fact that the Government is involved. And what I mean by that is, if this was commercially viable, well it wouldn't need the Government. But if the Government is having to be involved and co-financier see the Government as standing behind all these projects, then they are simply getting up because the Government can borrow more cheaply than anybody else…
FRAN KELLY:
But isn't that just one way of leveraging more money, I mean the same way the Government guaranteed banks to make sure they stood solid. I mean, it's just a way of using the might of the Government to unleash or leverage a lot more investment, isn't it?
ARTHUR SINODINOS:
Well the circumstance you mention were particularly in the context of the global financial crisis of standing behind the Australian banks, but the sort of proposition I think Jillian is putting, is essentially a proposition that the Government could do this across the board and just support all borrowing or all lending by the private sector in the same way and…
FRAN KELLY:
Well I don't think she's saying that, I think she's saying here is a particular case that is working, will you look at it without reference to being stuck bound by a promise you made before the election, before it was really up and running properly?
ARTHUR SINODINOS:
And we've come at market failure in the emission's space if you like in a different way.
FRAN KELLY:
So you won't even consider it?
ARTHUR SINODINOS:
Well look, we had a look at this before we made commitments during the campaign and it's funny after the campaign everybody seems to be begging us not to go through with our election commitments.
FRAN KELLY:
Yes, but is it worth sticking to a commitment if it's proven that actually by not sticking with it you'd be making a lot more money and a lot more clean energy.
ARTHUR SINODINOS:
I'm not convinced that would be the case, but am always happy to go through the CFC's annual report and have another look.
FRAN KELLY:
All right, let's get to the debt ceiling now abolished, what assurance can you give tax payers that the debt won't just continue to blow out now that there's no ceiling?
ARTHUR SINODINOS:
Well look we're not treating the removal of this debt ceiling as a licence to print money as it were, or to just have debt unlimited. We went to the election with a very strong commitment to getting the Budget back under control. We've done it before in the Howard Government and we'll do it again under this Government and people know that. The reason we've agreed to do this particular deal is because other parties, principally the Labor party, were not prepared to do a deal over having a $500 billion limit. The Greens came to the table and said: look, this was an artefact of Labor's time in office, it leads to too much argy bargy, let's focus on the substance of why debt needs to go up, what's good debt, what's bad debt and let's create more transparency around the debate on debt. And they came up with some sensible proposals that the Government was prepared to look at.
FRAN KELLY:
Talking of budget promises though, I mean all, the party that made so much noise about Labor's debt, so critical of the debt levels, now you've negotiated with the Greens to remove the one constraint on rising debt, it is hard to explain that change, isn't it?
ARTHUR SINODINOS:
The constraint on us is the commitments we've made to get back to a solid surplus of at least 1 per cent of GDP, while also dealing with issues like increasing defence spending to 2 per cent of GDP, reducing tax and government spending as a proportion of the economy and offsetting all new spending. So the debate around what we do to get the Budget under control is a different debate to the debate around debt limits, and in fact the debt limit debate's been a furphy in that regard.
FRAN KELLY:
Yes but it's a furphy that the Opposition was happy to make plenty of political mileage out of before the election.
ARTHUR SINODINOS:
The mileage we took out of what happened in the previous six years was the fact that the Government kept saying just around the corner they were going to deliver a surplus and they never did. And we had this embarrassment of them having to come back to the Parliament every so often to raise their debt limit, because they couldn't keep their promises.
FRAN KELLY:
But you might have to do the same thing, I mean you say you are making a strong commitment of getting the Budget under control, but I think I'm right in saying we still have no timeline of when the Government will be able to deliver a surplus, no timeline of when debt will start going down and no promise of how high the debt will go.
ARTHUR SINODINOS:
The Mid Year Economic and Fiscal Outlook will lay out, in effect, what we've inherited and what the Forward Estimates look like for the next four years. And then in the Budget we'll have our medium term budget strategy laid out, which will give you more information on over what period we can achieve a surplus. We'll have the benefit of the work of the Commission of Audit, which will report to the Government in two tranches at the end of January and then towards the Budget period. And so there will be plenty of information on the table about our medium term budget strategy by the time people look at our budget.
FRAN KELLY:
Given the Treasurer said yesterday the national accounts out yesterday, which were disappointing underlining there will be a growth hole, that was his term, in the economy over the next few years, that means, I think translated, lower taxation, revenue for the Budget, with PEFO, with MYEFO rather looming, will you be forced to find further savings in the Budget or do you expect that the deficit will have to balloon out a bit more?
ARTHUR SINODINOS:
The challenge Fran is to make sure that our fiscal policy is such that we support the economy in the near term, while putting in place savings that have a particular benefit or dividend over the medium term. We have big expenditures to come on the National Disability Insurance Scheme in the second half of this decade, a further potential up kick in education spending, the ageing of the population and other pressures mean that health spending is going to continue to increase. The challenge here is to support the economy in the near term, including by rebalancing government spending more towards infrastructure, which has a productivity and a competiveness spin off and having measures which have a medium term impact in consolidating the Budget and getting spending back under control.
FRAN KELLY:
And Arthur Sinodinos just finally, we've only got a minute until the news I'm sorry, but the PM gave a speech last night to the business community. He said the Government's determined to be a reforming one in the tradition of the Hawke and Howard Governments, but we will be pragmatic reformers rather than ideological ones. Now Hawke had financial deregulation and the floating of the dollar, John Howard had the GST as you well remember, what's Tony Abbott big ticket economic reform?
ARTHUR SINODINOS:
Well, the difference here is, and what he said last night is, we've set in train a number of processes, which mean that in terms of competition policy we'll have, you know, two decades on our version of the Hilmer Review, which was very important to the structure of the Australian economy. I think that's going to be one of the more important things that will come out over the next little while, the White Paper on Tax Reform and coupled with that a thorough revamp of Federal-State relations. These are big ticket items, these are all things, which can help rebalance the Federation and provide greater responsibility devolved to the local level and it will all work together as an integrated whole.
FRAN KELLY:
We better leave it there. We're about to hit the news. Arthur Sinodinos thank you very much for joining us.
ARTHUR SINODINOS:
Thanks very much Fran.