PRESENTER:
A short time ago the Treasurer, Joe Hockey, joined me from our Canberra studio. Treasurer, thanks for your time.
TREASURER:
Great pleasure.
PRESENTER:
The MYEFO says that Australians will have to adjust to reductions in some spending to which they've become accustomed and you said in your speech today that they will also have to adjust their thinking on what they expect governments to provide. I wonder if you can elaborate on that a bit for our viewers so they know what you're expecting from them ahead?
TREASURER:
The previous Government promised that spending would not increase by more than 2% per annum on average and it increased by 3.4% and it is going up to 3.7%. So clearly the Government is spending too much money. That is not sustainable because even if there are no tax cuts for 10 years, the Budget will never come back to surplus. Now that is the legacy that has been left to us by Labor. We have got to fix it and what we have got to do is make sure that when it comes to expenditure it is as much about saying "no" to new spending proposals as it is about making sure that there is no waste of taxpayers' money.
PRESENTER:
But when you say that, since the election your Government has announced several new, lots of new spending proposals. How do you reconcile that with what you've just said there?
TREASURER:
Governments do not stop spending money. They still have to spend money and in our case we have had to spend money fixing the problems that we inherited. For example, Labor announced that no illegal migrants coming on boats would get to mainland Australia, so they would need to be housed offshore. The problem was that they did not fund it, so we have had to find $1.2 billion to fund that.
PRESENTER:
But not all of the new spending that you've announced relates to things that Labor has done. For example, you've got your Paid Parental Leave scheme which is coming up at some unspecified point in the future. That's not fixing up something that's Labor's done. That's a new spending initiative that you guys are doing?
TREASURER:
That is fully funded as it was before the election. It is, after the election fully funded. It does not detract from the Budget bottom line. But there are other areas where, for example, the previous Government said that they wouldd fund the initiatives but they did not put the money in place. And one classic is: they did not announce before the election that they were cutting over 14,000 public servants and after the election we discovered not only did they not announce it but they did not fund it. So we have got to find that money.
PRESENTER:
But you're making a case that we have to be very careful in the sort of spending we announce and very prudent because we have this big budget problem. Take something like the carbon tax, for example, which you're abolishing. At the same time though, you're keeping the compensation measures associated with it. How is that prudent economic management?
TREASURER:
We found other offsets in the Budget to pay for the loss of revenue from the carbon tax. We found that before the election. After the election it is vitally important that we do not increase personal income tax rates and we do not cut the pension because we have inherited an economy that is at the moment heading in the wrong direction. We want it to head in the right direction. We are going to do everything we can to change the direction of the economy to give people hope that tomorrow will be better than today.
PRESENTER:
But not all of your spending initiatives are offset though. MYEFO makes it clear that you're adding $13.7 billion to the deficit over four years.
TREASURER:
That is fixing up some of the problems that we inherited. For example, we had to put $8.8 billion into the Reserve Bank because the Government kept taking dividends out of the Reserve Bank and the Reserve Bank could not keep paying those dividends. So we had to put the money back into the Reserve Bank. We have faced numerous other problems that the previous Government failed to address. You know, as John F. Kennedy said, “I was disappointed that, in fact, it was as bad as I thought it would be before the election”.
PRESENTER:
You only have just been elected, so of course there is a degree of what you've inherited. But I'm just wondering – when does that statute of limitations expire? Because presumably in a couple of years, if you say, "Oh well, unemployment is going up and we blame Labor," that's not really going to wash with voters after a few years?
TREASURER:
No, it won't. But we have been in Government just on 100 days. We cannot be blamed for what we have inherited. But I tell you what. We are going to fix the problem. We have done it before and we will do it again. We will fix the problems that we have inherited and we will turn the ship around.
PRESENTER:
Do you accept that from every day that you've been in office, including from today onwards, that you have the ability to impose policies which, of course, change this position that you've inherited?
TREASURER:
We have already started. We introduced $20 billion of savings into the Parliament and the Labor Party is now blocking them in the Senate. Those savings – $20 billion of savings – imagine how that fixes the budget bottom line and starts to pay down the debt. But of the $20 billion of savings we have introduced, $5 billion were introduced by the Labor Party before the election and now after the election they're voting against their own savings. They are being reckless and irresponsible, but we are absolutely determined to fix the budget and fix the economy.
PRESENTER:
To go back to the first point I made about your request that Australians are going to have to start thinking a little bit differently about what they want Government to provide. You pointed out today that much of the projected growth in spending is in social programs. There's an anticipated welfare blow-out of more than $11 billion for family tax payments, childcare rebates and pensions. Are those the sorts of things that people are going to find scaled back?
TREASURER:
Not particularly. I do not want to get into any individual policy announcements because we have got a Commission of Audit that is looking at every area of Government, seeing where we can get rid of the waste and how we can make sure that whatever payments are in place are sustainable.
PRESENTER:
But you have floated that thing today about the public needing to adjust their thinking. I guess I'm trying to get to in what areas are they going to need to do that?
TREASURER:
For example, businesses just cannot expect to receive a cheque from the Government when they are under financial distress. It is as simple as that. One taxpayer's cheque to another taxpayer detracts from the economy as a starting point. The fact is: we are not going to be writing blank cheques to businesses that are under financial stress, because every household is under some form of stress.
PRESENTER:
Should that apply to individuals then as well as businesses?
TREASURER:
There are no free cheques. There are no free lunches from Government. The days of just handing out cash and helicoptering money out is just not possible. I will give you one example: we said that we have to get rid of the Schoolkids Bonus. Labor is not only blocking that in the Senate, another round of Schoolkids Bonus has to go out now which adds to the deficit by $730 million this year. You cannot just keep sending out cheques because at the end of the day there is not much left in the taxpayers' pocket.
PRESENTER:
If the budget challenges are so dire as what you point out, then why have you hamstrung yourself by ruling out things such as adjusting the rate of the GST and undertaking major-scale industrial reform, things businesses have been crying out for?
TREASURER:
We are keeping to our election promises. There is just no argument about that. We framed our election promises knowing that the books would be bad and that there would be challenges in the economy. But this is a medium and long-term plan. Things are not going to be turned around overnight. We have got to have in place a proper process for dealing with the sustainability of Government expenditure and the challenges in the economy and we are doing that. We are doing it.
PRESENTER:
But my point is: why have you hamstrung yourself by ruling out some really key pillars of the economy?
TREASURER:
I do not accept that we have.
PRESENTER:
But the GST is such a major part of Australia's revenue base?
TREASURER:
It is not as big as people think. There are other areas that are more important, such as personal income tax which is by far the largest tax.
PRESENTER:
Well, you've said you won't touch that either?
TREASURER:
What we have said is we do not want to have a raft of new taxes. What we want instead is to pull back on Government expenditure because the current levels of spending which we inherited from Labor are unsustainable.
PRESENTER:
Treasurer, we probably won't see you between now and Christmas. Thank you very much for all your appearances this year and all the best for 2014.
TREASURER:
Merry Christmas to you and all of your audience.
PRESENTER:
Thank you very much.