HOST:
The Assistant Treasurer David Bradbury is at Sydney Airport on his way to Canberra, he joins us now. Mr Bradbury, good morning to you. How tough has it been to find the estimated $4 billion in savings required to keep the budget in surplus?
BRADBURY:
Good morning Michael, good to be with you. Obviously, this is an ongoing and difficult challenge for the government to make sure that we are able to return the budget to surplus. If you look at the backdrop to the decisions that we've had to take in the Mid-Year Economic and Fiscal Outlook, you see, coming from Europe, we continue to have the debt crisis and all of the issues that follow on from that. In the US we continue to see sluggish growth and of course we've seen, in our own region, in the Asian region, that there has been a bit of a slow down as well. Notwithstanding all of those considerations, we continue to be reasonably optimistic about where the Australian economy is. As the IMF has indicated, we're expected to grow faster than any major advanced economy this year and next year and so many of our settings are at an appropriate level.
If you look at unemployment, still relatively low, inflation contained and of course we have a strong pipeline of investment that continues to come into the country. These are big challenges, but of course, against the backdrop of our own settings here in Australia, we should be, and we are, working very hard to make sure that we return the budget to surplus.
HOST:
We've had the leaking already of some of the measures to be announced today, including increasing visa fees, closing some salary sacrifice loopholes, but you're going to need a whole lot more in terms of potentially swingeing cuts and tax inreases to plug that $4 billion gap this year and $20 billion over the forward estimates?
BRADBURY:
We've always taken the view that you need to be responsible with the savings measures that you put in place, and we've got a history of being responsible with the savings measures that we've already introduced, but we will be looking with a view, not just towards achieving a surplus in the current fiscal year, we're having a look at what this means for the longer term because we want to make sure we have a sustainable budgetary position moving forward. We need to make sure that the spending commitments that we as a government have today and will have tomorrow will be within the means of what we can deliver. That's important. That's what international markets and commentators will be looking for, it's one of the things that's distinguished the Australian economy from so many others. We've been able to manage a tight fiscal proposition and at the same time build a sustainable budget and economy for the future.
HOST:
Yeah, but how can you be sure that what we are about to see today in terms of spending cuts and tax increases will have the effect opposite to what you intend and actually slow economic growth by pulling all of this demand out of the economy. Isn't there a serious risk of hindering growth in the economy going forward?
BRADBURY:
I think one of the big differences between where the Australian economy is at and where our competitor economies across the world are at is that we still have considerable room when it comes to monetary policy, and as you've seen in the past, by running tight fiscal policy as we've done and certainly as we announced in returning the budget to surplus earlier this year, you've seen the Reserve Bank with some capacity and some room to move has been able to cut interest rates. That's been really significant for so many families across the country. A family that's on a mortgage of about $300,000 is now paying about $4,500 less than they were when our government came to office and of that amount about $2,500 of those savings have been handed to people in the last 12 months.
So, we recognise the challenges of the global economy but one of the key things we can do to continue to engender international confidence in our economy is to make sure we stick to our fiscal plan and our clear fiscal plan is to return the budget to surplus. Not an easy objective but an important one for the long-term sustainability of our economy.
HOST:
Going back to monetary policy with what you said before, will the cuts today make it easier for the Reserve Bank to cut interest rates again at its next board meeting next month?
BRADBURY:
Well clearly, when you're running a tight fiscal policy then there will be some room to move for the Reserve Bank. Obviously the bank operates independently and it's appropriate that that be the case, but what we have seen, over the last year in particular, has been where the government's been running a very tight fiscal policy at the same time as the Reserve Bank has had that room to move to cut rates and to deliver benefit not just to mortgage holders but to small businesses and all those across the country that have some exposure to interest rates through their borrowing.
HOST:
And finally David Bradbury, the mid-year review comes on the very day that the first receipts start flowing in from your much-vaunted mining tax, therefore won't any budget forecast , any budget parameters unveiled today, be very quickly out of date given the negative impact economists see of the commodity price cycle on what you'll get from the mining tax?
BRADBURY:
I hear these criticisms from time to time and as any economist will tell you there's always one extra piece of information that might just add that little bit more clarity.
HOST:
It's a pretty big piece of information David Bradbury, the mining tax.
BRADBURY:
Well I would simply make the point that in the overall scheme of Commonwealth revenue the mining tax is a very small proportion of them, but can I make this point, and I've seen the criticism that Mr Hockey's been out there making. Mr Hockey has no consistency on this issue. Last year he was calling on the government to release MYEFO earlier. He said that the problem was that if you didn't release it early enough there wouldn't be any Parliamentary scrutiny. I make the point that in releasing MYEFO today there are still two Parliamentary sitting weeks. We're giving the Parliament the opportunity to scrutinise the material that we put forward. That's in stark contrast to those several occasions under the previous government where they either handed down MYEFO in the days before Christmas or even in January. But can I just make this final point and to say that if Mr Hockey is calling on us to meet our commitments under the Charter of Budget Honesty, and let's face it that's the basis under which MYEFO is required to be handed down, I give this guarantee. This government will meet all of its obligations under the Charter of Budget Honesty, Mr Hockey should do the same thing, unlike the last election where he refused to do so and we saw what happened. He ended up going to the election and after the election he was exposed as having an $11 billion black hole. If he wants to play by the rules then he should join us in doing so.