FRAN KELLY:
Treasurer, good morning, welcome to Breakfast.
TREASURER:
Good morning Fran.
FRAN KELLY:
Treasurer, the latest GDP figures out yesterday revealed that economic growth picked up in the December quarter to record a better than expected growth rate of 2.8 percent annually. That’s just below Australian long term trend. Amidst all the doom and gloom of jobs loses at Qantas and the car manufacturers, that’s something to celebrate isn’t it?
TREASURER:
The trend is good but it’s not good enough. The fact is, we need to get 3-3.25 percent growth, simply to be able to address what is a rising unemployment rate. Now Fran, that is not easy to achieve because it needs to be sustainable, so we will outline in the Budget, or we will provide details in the Budget of what we are going to do to lay down the structural reforms to help to address some of the long term challenges we have.
FRAN KELLY:
Okay but if the momentum continues, would it be fair to say that the economy could reach trend growth by the end of the year or early next year which the Reserve Banks outlook, or are you more pessimistic than that?
TREASURER:
Look, I’m not going to give on the run forecasts. The fact is we have structural challenges in the Budget; we have structural challenges in the economy. We need to reallocate government expenditure where it can be done, from some areas to other areas; particularly anything that enhances infrastructure that is productive and helps to build a new economy and facilitate the transition from the mining boom, to what will be a services and exports boom of the next 30-40 years.
FRAN KELLY:
Treasurer, the GDP growth figures out yesterday cover the final 3 months to December last year. They revealed: a strong pickup in consumer spending, a stronger than expected pickup in mining exports and housing activity, even manufacturing output grew. It seems the previous government handed the Coalition an economy in pretty good shape, or better shape than you thought?
TREASURER:
Well no, they didn’t hand us an economy that was better than we thought. In fact, the thing that most surprised me was that when I came in, I wasn’t surprised by what they left, which was a mess. If you think $123 billion of deficits is terrific or $667 billion of debt is terrific…
FRAN KELLY:
It’s more about the indicators of the shape of the economy moving forward.
TREASURER:
Well the indicators of the shape of the economy? They left me with an unemployment rising to 6.25 percent, the left me with deteriorating terms of trade, they left me with business and consumer confidence at lows. We are turning the corner but there is much work to be done.
FRAN KELLY:
This must be quite good news though; the news you got yesterday for the upcoming Budget because stronger growth means higher revenues for the government?
TREASURER:
Not necessarily at all. The fact is that iron ore and coal prices are below what we forecast and you wouldn’t automatically assume that some of the trends in the economy are going to deliver high revenue. The revenue equation is much more complicated and certainly you are not going to have the same revenue streams at a 6-6.25 percent unemployment rate with falling participation than you would have with a 4.1 percent unemployment rate with high participation.
FRAN KELLY:
So it sounds like you are still warning of a tough budget to come. How tough will your budget be?
TREASURER:
Our Budget needs to put in place some of the structural reforms that are necessary to lay down a sustainable path to surplus, and a consistent path to surplus. Fran, Labor left us with a log jam of massive spending increases. Of the 17 top surveyed IMF countries, Labor left us with the fastest growth in spending of anyone in the world, anyone in the world and they left us with the third highest growth in debt of anyone in the top 17. So the fact of the matter is, they have left a whole lot of landmines in the Budget .We need to carefully remove those landmines and put us back on a path that gets us away from a $123 billion of deficit and starts to pay down the log jam of $667 billion of debt.
FRAN KELLY:
So structural reforms, what does that mean? Does that mean immediate cuts to program or does that mean cut offs in the out years to programs to things like the growth in schools funding under the Gonski school, better school funding programs or the Disability Insurance Scheme; some kind of curtailing of that?
TREASURER:
Well I’m not going to again get into the business of delivering a budget on your program, no matter that your program is a very significant program with a huge audience Fran, but I don’t want to do that. I would rather focus on the fact that we are addressing every area of the Budget, looking at ways to get rid of waste, that’s a starting point - get rid of the duplication. There is widespread duplication across the public sector at the State and Federal level and the Local Government level for that matter. But we are also very focused on how we can recycle assets; sell existing government assets, giving mums and dads of Australia an opportunity to buy those assets out of their superannuation monies or through other means, and recycle precious taxpayer money into new productive assets that are going to facilitate growth in the non-mining sector, this a huge point. There is a transition; the mining industry has gone from the construction phase which created a lot of jobs with the construction of new mines. It’s gone into the production phase. Now that’s terrific for exports, we are exporting our socks off but it’s certainly means there is less employment and we need to realign the economy to stimulate the 90 percent of the economy that is not involved in mining and that 90 percent of the economy is health and education and business services, but importantly we are not picking winners we are focused on lifting the tides so that all boats will rise.
FRAN KELLY:
Its eighteen to eight on Breakfast this morning, our guest this morning is the Federal Treasurer, Joe Hockey. Joe Hockey, you've had the Commission of Audit - the draft Commission of Audit report for three weeks now. You've said previously that the Government will be inclined to act on a great many of the recommendations of the Commission of Audit, when will we see it?
TREASURER:
You'll see it in due course. We’ve only had it a few weeks as you say.
FRAN KELLY:
Three weeks, a fair bit of time. How long till we see it?
TREASURER:
I haven't been that busy of course, I've had lots of game and golf and tennis over the last three weeks and I haven't had quite the time if you believe that to go through it all, as we are going through it all. It is a comprehensive report of more than 900 pages. We've only received the interim report; we haven't received the total report yet. We'll carefully consider it and the Australian people will see that the Commission of Audit report lays down a platform that is not going to be all delivered in the first budget, it's a platform that lays down a road map for getting the Budget fixed.
FRAN KELLY:
There are two state elections within the next fortnight. There’s a WA Senate election re-run on the 5th of April. Is that one reason why we're not going to see the Commission of Audit any time soon?
TREASURER:
No, no.
FRAN KELLY:
Is there a chance we will see the Commission of Audit interim report before the WA Senate re-run?
TREASURER:
We're working through it Fran. We are endeavouring to be methodical and careful and practical. We're not playing games here. This is about the long-term sustainability of the Budget.
FRAN KELLY:
Treasurer, on the issue which has been consuming a lot of your time lately, Qantas. It has changed its line on the Carbon Tax. Earlier in the week it was saying that the Carbon Tax which cost $106 million last year for Qantas, was not behind its financial troubles and now Alan Joyce says it’s one of the factors that Qantas is dealing with. Has the Government, as the Opposition alleges, leaned on the carrier?
TREASURER:
Not at all, not at all. We haven’t leaned on the carrier; they came asking us for help, we…
FRAN KELLY:
I mean over the Carbon Tax, to change their position on the Carbon Tax. Have you had conversations with Alan Joyce about that this week?
TREASURER:
Alan Joyce rang me yesterday and we talked about it but it was nothing more than him saying, “The interpretation about the Carbon Tax was entirely incorrect. A low level person at Qantas put out the statement which is not consistent with either of his statements or his previous statements on the Carbon Tax” and I said that’s a matter for you, that was about it. We certainly don’t put pressure on companies like that and Labor shouldn’t judge us by their standards.
FRAN KELLY:
How annoyed were you though when Qantas issued that statement on Monday night about the Carbon Tax really not being part of its financial troubles which coincided with the Cabinet deliberations?
TREASURER:
Fran it was entirely inconsistent with the numbers they released to their shareholders a week earlier, which said that the unrecovered $106 million (inaudible) corrected it yesterday. It was a misinterpretation of what the really meant.
FRAN KELLY:
Speaking of consistency, Alan Joyce now says that Qantas is, “a very healthy airline”- that’s the quote. If it is very healthy, why was it ever asking for a debt guarantee and why were you ever considering it because you were clearly convinced they needed it not long ago?
TREASURER:
No they were asking for it because the playing field is not level. Virgin have a comparable advantage over Qantas, in that they don’t have a sale act holding them back. Now the best thing Labor can do is support us repealing the Sale Act. If you care about the workers of Qantas and you look at the competition they are facing from overseas on international travel and domestically from Virgin, you will see that the best thing you can do for Qantas, is repeal the restriction in the Sale Act. Now we looked at it very carefully, we’ve had a lot of analysis done in response to the reasonable request from Qantas. We formed a decision as a government that the best thing we can do is get rid of the Qantas Sale Act, so Qantas and Virgin are competing on a level playing field. Now this is up to Mr Shorten. I mean he can’t be both a protectionist and an interventionist and still claim to be concerned about the workers of Australia. He actually needs to focus on being consistent and predictable and in this regard, if he really cares about the workers he will see the repeal of Qantas Sale Act and support it
FRAN KELLY:
Treasurer, can I discuss with you just finally about Tony Abbott’s proposed Paid Parental Leave Scheme due to come in within months. Reportedly the Commission of Audit has suggested that it is too expensive. The PM last week said, “It’s good for women, it’s good for families and it’s very good for our economy and it is all about lifting women’s participation and therefore productivity in the workforce”. For women to come back to the workforce they need childcare; notoriously difficult to find and afford for many women and men. If you are spending $5.5 billion on the Paid Parental Leave Scheme, you will have to invest more heavily in childcare places. How much are you going to spend on childcare?
TREASURER:
You will have to wait for the Budget Fran.
FRAN KELLY:
Will there be more money for childcare?
TREASURER:
The trajectory of childcare is incredible. The cost increases that currently foreshadowed us are significant for the Government’s Budget. I would just say to you, this is not just about women, this is about men, it’s about the level of workforce participation. Childcare is also importantly about flexibility at work and if we want to improve productivity, we have to improve labour flexibility and childcare is essential to that.
FRAN KELLY:
Joe Hockey, thank you very much for joining us on Breakfast.
TREASURER:
Thank you Fran.