HOST:
David Bradbury is the Assistant Treasurer and he joins us. Well, Assistant Treasurer, is this report out a little earlier than usual?
DAVID BRADBURY:
Good afternoon Gary, good to be with you. There's been a lot of commentary about the timing of the release of MYEFO but can I just put a few facts on the record. The first one is that the Government is required to release MYEFO according to the Charter of Budget Honesty Act and that sets out the requirement that says it should be released within six months of the Budget or no later than the end of January each year. Now that gives plenty of scope. But can I just take you through a bit of the history here, and you'd be well acquainted with some of this, there was a period throughout the Howard/Costello Government where three consecutive MYEFOs were released just before Christmas and there was a big song and a dance at that time about how if you release it that close to Christmas it doesn't get the sort of scrutiny that it deserves. Last year, Mr Hockey was suggesting that the Government release it earlier. This year, we've released it earlier. I'd make the point that two weeks ago Mr Hockey stood up in the Parliament and urgently called upon the Government to update its forecasts. We've done that, and now he's jumping up and down and saying it's too early. The bottom line is that it's meant to be half way through the budgetary cycle, we had the Budget being handed down in May, now this is pretty close to six months, give or take, and frankly I think that there's a bit of mischief being made but it's of no great consequence in the scheme of things.
HOST:
But if you look at the trend line based on May through to this, a few weeks early, based on what you've just said a few weeks early, we're not going to quibble about it, the trend line might suggest a few weeks from now the position might in fact have been worse.
BRADBURY:
Well, if you have a look, particularly at commodity prices, it's true to say that they have come off their record highs, but some commodity prices have actually rebounded somewhat in the last couple of weeks. So it's quite conceivable that if we held off for another couple of weeks that rebound could have continued. Look, this is speculation, this is not, these factors can have an impact at the margins. But the bottom line is that this is a significant exercise that we're engaged with in handing down the mid-year review, it's one that sets out the forecasts right across the economy, those forecasts did need updating because there have been changes in the global economy that have impacted on Australia, whether that would materially change in any way if we came back and did it again in two or three or four weeks' time. I suspect it's not going to be significant. In the end, these are the figures that we've got. What I would say is that Mr Hockey suggested last year that there needed to be parliamentary scrutiny of MYEFO, let's not forget there's only two sitting weeks left in the year, so if we had held on any longer then surely the criticism that would have been levelled at the Government at that point would have been that we were denying the Opposition the chance to scrutinise this in the Parliament.
HOST:
Those are all fair points you make.
Now let's move on to the substance of this. Really, people aren't spending enough money for government to get tax, that's the bottom line isn't it?
BRADBURY:
Well, look, that's a significant part of the overall picture in Australia's economy today. There are a couple of big factors that are having an impact. Obviously, you've got some global concerns, the euro debt crisis, you've got sluggish growth in the US. And closer to home in our region, the Asian regional economies have not been as strong as they were.
HOST:
Let's talk about inside Australia. People just are not spending money.
BRADBURY:
I'm coming to the point you make, which is a good one, and domestically people are, we talked about this in the Budget papers in May about the rise of the cautious consumer. There is a structural change going on out there in the community. Even consumers that do have money, they are not spending it in the same way as they were. And in part, no doubt, that's impacted by the fact that we've been through a Global Financial Crisis. People have seen that as you accumulate wealth, movements in the stock exchange can impact on your super, can impact on the value of your house, can make all of these changes. And people are approaching their household finances in a much more cautious way. And we're seeing that even though, if you take a family on a mortgage, with a mortgage of $300,000, they're actually paying $4,500 less today as a result of reduced interest payments than they would [inaudible]
HOST:
With the greatest respect, every time I hear you, Wayne Swan, anybody else say that, people inside the Canberra beltway, I never talked like that when I was down there. What I don't get is, don't you realise that people are still paying the same amount of money. They're actually, in a lot of cases, I would have thought the majority of cases, are not paying less off their mortgage when they've got a chance to, they actually keep paying the same amount.
BRADBURY:
I think you're making a really good point. In terms of what they're required to pay, it's been reduced by those figures. What they're actually doing, and I think you're right, that for a lot of people, they're taking this opportunity to pay down more of their mortgage and that's a sensible and responsible thing for a household to do over the medium term. But of course, the more money people are ploughing into paying down their mortgages, the less money they're spending out on consumable items, you know driving, stimulating economic activity.
HOST:
Government charges, government charges. Taxes, bills, I mean the size of utility bills just keeps growing. The size of the cost of living, it just seems like groceries, everything just keeps going up and up and up except people's pay packets.
BRADBURY:
Some of the factors that we can point to in the mid-year review that are significant is that wages growth and consumption growth has continued to hold up quite strongly in the context of what has been a softening global economy. But you're right, the cost of living pressures that families are facing do continue to rise and it's in that context that people are also making these longer term decisions about how they spend their money.
HOST:
But David Bradbury, what's been announced today are measures that are going to drive up the cost of living. I mean, private health insurance is slowly but surely being killed off by this Government. This Government has a philosophical objection to it, but as you would understand in a cooperative environment, unless you've got people joining the pool, that is the wealthy as well as the poorer people, the pool's going to diminish in size and the cost for entry into that pool's going to keep increasing. So private health insurance is going to go up yet again because of the measures you've announced today.
BRADBURY:
Can I be really clear about the private health insurance measure. And this is actually a significant and fundamental reform. We are committed to private support for the private health insurance sector and for those that have private health insurance through the rebate. The rebate stays at the same amounts that it was, but if you have a system where premiums can increase at whatever rate and the Government will continue to pick up 30 per cent of the tab, then you're taking away the pressure to constrain or to restrain the growth in premium prices. And one of the things that we are saying is that, and that's been increasing out of kilter over time and to be honest it's unsustainable if it keeps increasing at that rate.
HOST:
The cost of health is going to drive up in the area of the public sector.
BRADBURY:
What we are saying is that we will cover the 30 per cent. But there will be a cap on the growth in the premium component that we'll fund and that will be capped according to the CPI or where the increase in the premium is less than that by the increase in the premium.
HOST:
Well, we'll see how it goes. But visa charges, I mean it's just, why doesn't the Government do something big like just say look everybody else has to live within their means, what we'll do is we'll defer the National Broadband Network for a year. We'll save $5 billion by not doing whatever it is they're currently doing right now. Why don't we put something like that off for another year?
BRADBURY:
Well, look, the investment in the National Broadband Network is a long term national infrastructure project. Now you can delay these things and there will always be people that will make short term judgements about trying to save a quid and you end up poking yourself in the eye in the longer term.
HOST:
But David, the technology could drive the National Broadband Network into redundancy before it actually even is built.
BRADBURY:
Well, I disagree with that because it's not about the technology, it's about the fibre, which is the…
HOST:
The technology.
BRADBURY:
That is the way in which the technologies will be opened up. This is like the electricity wires. If people had said, back when they started rolling out the electricity wires, now is not the time to do it, let's hold off, then that would have delayed the uptake of all of the economic activity that that generated. The same way the National Broadband Network is about hooking people to high speed broadband. But look, notwithstanding all of that, you mention the visa charges. If we have to look at where we might be able to increase rates and charges, and let's be clear about this, that taxation as a percentage of the economy, and this is the best measure of determining how much taxation the government is imposing, it's currently at 22.1 per cent of GDP. Now that is lower than it was an anytime during the course of the Howard Government. We have introduced some tax related measures, and you mentioned the visa charges which are increased charges, but equally, if there are people out there wanting to come to Australia, prepared to pay those charges, then we think it's appropriate that that be one area where we increase the burden rather than shifting that burden on to Australians, the families that you're talking about, that are struggling with cost of living.
HOST:
Except, David Bradbury, skilled migrants will pay more, so people who are skilled migrants grow five and six unskilled jobs and refugees won't be. So I mean there's all sorts of, I know that area pretty well, I am just saying to you that it all looks good on a piece of paper in a budget review committee sense but in reality it actually sends all the wrong signals. Canada will subsidise people to bring skills to their country, we're now going to tax them, that's really what you're saying today. And that doesn't drive economic growth.
BRADBURY:
Well, look, to take your point to the nth degree, you wouldn't have any charges on these things, you'd pay people to come here and I don't think anyone's suggesting that, I don't know if they do but if they do it in Canada, good luck to them. I'd say good luck to anyone wanting to go out and sell that as a proposition in the community, because frankly I don't think it's unfair, there is demand, there are plenty of people out there wanting to come to Australia to work, there's no shortage of them.
HOST:
Yea, why not.
BRADBURY:
And we thing this is an appropriate means. And look, the alternative is you'd have to find it from someone else and I don't see that…
HOST:
We'll, I've come up with a suggestion, but look either way, you're the Assistant Treasurer, I appreciate your time today David Bradbury. You've given a good explanation of where the Government sits. Appreciate your time.