HOST:
Tomorrow night, Wayne Swan will hand down his Budget, the one aimed at delivering on the promise to bring the Budget back to surplus. The scale of the task will mean that the Government has to cut spending as well as delay some spending. Some of the nasties and some of the goodies have already been announced.
To talk about what lies ahead in the Budget we've been joined by the Assistant Treasurer David Bradbury and his Coalition counterpart, Mathias Cormann.
Welcome to you both.
First to some pre-Budget messaging from Wayne Swan and his Coalition counter-part, Joe Hockey.
[Swan audio]
[Hockey audio]
David, Chris Richardson from Deloitte Access Economics, sometimes referred to as the shadow Treasury, said a return to Surplus will require cuts not seen for more than a decade. Is that the size of the task you're facing?
BRADBURY:
Well, it is a significant task but we've always said that returning the Budget to surplus is the right thing to do in the current economic circumstances. If you have a look, we currently have contained inflation, low unemployment, our growth is returning to trend, we've got a record pipeline of investment. These are the circumstances where in which governments need to be returning the Budget to surplus and that's what we'll be doing.
HOST:
But growth won't do the trick because a lot of growth is coming from business investment and that doesn't have a big impact for revenue, in terms of getting more revenue, and just delaying some spending and trimming other spending won't do the task, the cuts will have to be real and ongoing, won't they?
BRADBURY:
Look, that's right, the point you make is if you look at the revenue writedowns, that is very much part of the story of the challenge that we faced over the last couple of years, but we faced that and continue to face it in this Budget. We are trying to continue to provide the services that people rely upon but to do it with less revenue coming through the door. And if you have a look, when all of the details are released you'll see that as a proportion of GDP, overall levels of taxation will be lower than they were throughout the period of the Howard Government. That's an important benchmark through which people should judge just whether or not this is an appropriately calibrated Budget.
HOST:
Mathias, if the Government's able to achieve that sort of benchmark, tax as a share of GDP lower than the Howard Government, doesn't that mean it's making real progress on getting the Budget back into a structural surplus?
CORMANN:
Spending as a share of GDP is higher than what it was under the Howard Government and of course what this Government never includes in its taxation figures is the $133 billion of deferred taxation – Government net debt. Can I just make an observation upfront: before every single Budget, Wayne Swan and a number of other Labor Ministers come out and say this is going to be a tough Budget. And then every single Budget, every one of the four Budgets we had more spending, more new Labor Party taxes and of course more debt - $167 billion worth of accumulated deficits, $133 billion of Government net debt. Let's see what is going to be put forward on paper tomorrow but of course we already know that while they might use every accounting trick in the book to make it look like a surplus Budget, when it's all said and done in September 2013 it is highly unlikely that on their past track record they would actually deliver a surplus.
HOST:
You talk about accounting tricks, now some of those highlighted by the Coalition includes bringing some spending into this year, delaying spending for further down the track. Isn't that in the end just management of money and putting the spending where you can most afford it?
CORMANN:
They're shifting money as you say from 2013 to 2012. It's clearly part of trying to manufacture this surplus in 2012-13. They're shifting money from 2012-13 into the subsequent year. They're keeping a lot of money, of course, that's been spent and a lot of borrowing off-Budget, like the billions of dollars that are going to be borrowed for the NBN or for the Bob Brown Clean Energy Corporation, that would not be under Budget.
HOST:
Would a Coalition Government put that sort of spending on the Budget?
CORMANN:
Our Budget would be transparent, would be including all expenditure as it has in the past.
BRADBURY:
Which would mean that your previous Budgets, previous Coalition Budgets, are handed down under the very same rules that we'll be handing down our Budget under.
I think the key point, and it never ceases to amaze me, the audacity of the Liberal Party. This is the Party that at the last election, let's not forget the $11 billion black hole and they want to head into discussion about the Budget talking about fudges and fudging figures. They are the masters of fudge and there's no better evidence than the shonky effort for a costings exercise they undertook at the last election.
HOST:
In the end though, you're the one in Government, it's up to you to make these numbers believable and deliverable.
BRADBURY:
They were believable and deliverable at the last election and they will continue to be believable and deliverable.
CORMANN:
Of course you weren't believable at the last election. This Government, before the last election, in its Pre-Election and Fiscal Outlook, they told us that the deficit this financial year would be $10.4 billion. By the time of the Mid-Year Economic and Fiscal Outlook before Christmas in 2011, it was up to $37.1 billion. We're now led to believe that it's going to be more than $40 billion. There's been a $30 billion blow out in the deficit this financial year under this Government in just one year, so how can we believe anything the Government says or does.
HOST:
We might move on to some of the things we do know. One of the measures that was announced on the weekend was converting the education tax rebate into a no-receipts-required payment.
[Macklin audio]
David, not as many as you had hoped were claiming the rebate. You had a choice, didn't you, to put the money into the bank or shove it into people's hands. It's a little more than fortuitous, isn't it, that the money will be going out just before people see the impact of the carbon price?
BRADBURY:
We've always taken the approach that the money that was allocated for the education tax refund wasn't a paper exercise. We allocated that money because we wanted that assistance to flow through to families struggling with the costs of keeping their kids in school. Now, we had sought to amend the Education Tax Refund and we broadened the criteria in terms of the range of items so that school uniforms were included. It became apparent to us that for many families, the complexity involved in hanging onto receipts and submitting those receipts at the end of the year was a barrier that was stopping them from being able to access the money that we wanted to put in their pockets to help them with the costs of raising their kids. Now, when that became apparent to us it's in the context of that that we designed a better means of facilitating the payment of the School Kids Bonus and we think that targeted and timely assistance flowing through when people need it most, at the start of the school year and also half-way through the school year, that's about helping people and helping them when they need Government assistance the most.
HOST:
Mathias, Joe Hockey's criticised this payment, saying it's another form of compensation for the carbon tax but most parents would be spending this money anyway on their children.
CORMANN:
Well this is the Government borrowing money they haven't got to give it away.
HOST:
They were going to give it away anyway, it's just in a different way.
CORMANN:
And with a $40 billion deficit this financial year, that's all I say. So the Government's borrowing money to give it away and of course this was money that wasn't due to be given away in June. I don't know, there's no requirement for parents to use it towards education of their children, and of course June is a very strange time to provide people with money to help them with the education of their children. This is all driven by the carbon tax-
HOST:
You don't think parents will be spending money anway on their children's education?
CORMANN:
I think families that are doing it tough with the cost-of-living pressures would be much better off if this bad Government dropped their carbon tax. It's the carbon tax that's hurting people, it's the carbon tax that's pushing up the cost of living, so if the Labor Party wants to do something about helping Australian families with their cost of living pressures, scrap the carbon tax. A lot of your Ministers are now briefing off the record, a lot of people are now briefing out of Caucus –
BRADBURY:
That's rubbish.
CORMANN:
Kristina Keneally is saying on the record you should scrap the carbon tax, so do it, just help families and stop the carbon tax.
HOST:
I might just move on because we've had this argument on this program before. David, the money from the Education Tax Refund, now the School Kids Bonus, will now be going to sole parents too, at the same time as you're forcing more of them onto the Newstart payment when their children turn eight. Aren't you, in that case, giving money with one hand and taking it with the other?
BRADBURY:
No, I don't accept that characterisation at all. What we are doing is two separate initiatives. One of those measures is directed towards providing assistance for families that have children of school age because, irrespective of your family circumstances, you need to provide for your children when it comes to uniforms, shoes, school bags. This whole argument you hear from Mathias and from the Liberal Party, it's an insult, it's an insult to working people. When the Liberal Party come forward and they say, we want you to show us documentation that you're spending it on school goods, the reality is that anyone that has a child in school knows that it doesn't take anything at all to clock up the $410 or $820 worth of expenses. By the time you get them clothed and you send them off to school with their bags, forget the computer and the broadband connection, you're going to clock up those sorts of expenses, so it's just insulting to run this line.
HOST:
Mathias, the Coalition's been calling for a long time for the Government to return the Budget to surplus. Can you demand a return to surplus and quibble with how it's done?
CORMANN:
Well, of course the Government should return the Budget to surplus, we've got the best terms of trade in 140 years. The Government has imposed 20 new or increased taxes. The Budget should already be in surplus. What is going to matter though is how the Government's going to bring the Budget back into surplus. If it's just going to be the lazy way, the lazy Labor way through more tax, then that is obviously not an acceptable way for them to do it. If it is true, showing genuine and legitimate spending restraint, if they are going to do in this Budget what they haven't done in any other Budget, and that is spend less, then obviously that is something that we will welcome.
HOST:
If the Government does announce legitimate cuts to spending, can you afford to say no to them?
CORMANN:
Well, in relation to specific measures, with the Labor Party the devil is always in the detail. We know that this is a weak and incompetent Government that is not good with detail. This is a Government that has stuffed the easiest announcements and the easiest policy initiatives up in the past and so we will look at the totality of the Budget and look at specific measures in the normal course of events in a responsible fashion and we will make judgements on them.
HOST:
David in the end you will have to get your Budget through the Parliament. It is not only in the Government's hands to deliver your surplus. Do you accept that there may be measures that may get knocked back and that that may harm your chances of getting your Budget back to surplus?
BRADBURY:
We are confident that we will get our Budget through the Parliament as we've done on previous occasions.
HOST:
Even if it requires some negotiation and changes around the edges?
BRADBURY:
These matters always require some negotiation but can I make this point, that the Liberal Party holds themselves out as the alternative Government. Tony Abbott every day of the week's calling for an early election because he thinks he's ready to govern. If they're ready to govern, then every time they come into the Parliament and they knock back a savings measure, when they knock them over, that $70 billion Budget crater they've got just grows bigger and bigger. The Australian people need to know that rather than helping fill the hole, they're digging deeper and deeper, and that's the challenge that the Coalition faces. Support our measures; it's all good and well for Joe Hockey to go off talking about the end of the age of entitlement – put your money where your mouth is.
HOST:
And that's where we'll have to leave it. David Bradbury and Mathias Cormann, thank you very much for your time.