LEIGH SALES:
Treasurer, thanks for your time.
TREASURER:
Good to be with you, Leigh.
LEIGH SALES:
You're at the G20 talking about global growth but isn't the difficulty for you that the Australian economy is going in the opposite direction; our economy is running below trend?
TREASURER:
Well, it's certainly not going in the opposite direction. The Australian economy is still growing. We want it to grow faster and everything we are doing at the moment is about driving a faster economy and delivering more jobs and that's one of the reasons why we have such a large infrastructure spend, which I announced in the May Budget.
LEIGH SALES:
It's fair to say isn't it though that on current trends, the Budget deficit next year will be bigger, not smaller?
TREASURER:
Well it certainly – well, I don't expect it to be bigger than this year. The fact is that we are certainly focused on getting back to surplus. The best way to do that Leigh, in the face of falling revenue, is to reduce your expenditure and unfortunately, Mr Shorten and the Labor Party are now blocking $28 billion of savings, including $5 billion that they themselves announced but have changed their mind on.
LEIGH SALES:
I will come to that in a second, but firstly, you say you don't expect the deficit to be getting bigger. The think-tank, Macroeconomics says that there has been a $51 billion deterioration in Commonwealth finances over the forward estimates between the Budget and the Mid-Year Economic Forecast, which is coming up. You've got six months until the next Budget to make a dent in that; time's running out, isn't it?
TREASURER:
Well, no, it is very important that we take a careful – a methodical approach, to the Budget. Unlike our predecessors, we are determined not to make ad hoc decisions. We want the economy to have every opportunity possible to grow faster than it is, to create more jobs than it is. So, our Mid-Year Update in December will be exactly that. It will be an update. We're not going to have large structural changes in the mid-year statement in December. We'll go about that methodically in the lead-up to the next Budget, next year.
LEIGH SALES:
If you're not going to have large structural changes in the Mid-Year Economic Forecast, plus the fact that you have only got about half of your proposed saving measures through the Parliament so far, that means it's a completely logical conclusion, isn't it, that the deficit next year is going to have to be bigger than it is this year?
TREASURER:
Well, no. The starting point is that you shouldn't write off our opportunities to get things through the Parliament. Yes, it is difficult. Yes, we are dealing with unpredictable people. I mean, the most unpredictable people in the Senate are not the independents, it's actually the Labor Party and the Greens. I'm still confident that we're going to get some of our more contentious initiatives through the Senate, because we must. They are the sorts of structural reforms that will build a stronger economy and make sure we get back to surplus.
LEIGH SALES:
But Treasurer, it's wishful thinking, isn't it, to say we will get some things through the Senate because we must. Well, that hasn't proven the case on you know, plenty of measures so far?
TREASURER:
Well, that's not right. We did get through the Carbon Tax repeal. Some people suggested that wasn't going to happen. We got through the repeal of the Mining Tax and associated expenditure. People said that wasn't going to happen. We got Direct Action through the Senate and people said that wasn't going to happen. There's been a number of initiatives where people said it wasn't going to happen, including financial advice reforms. So, we continue to plough on. The Australian people expect us to be able to govern. They also expect our opponents to be constructive, which I think is hugely important if we're going to build the pillars of reform.
LEIGH SALES:
Let's say for argument's sake that you're right and that you're going to get all of your Budget measures through the Senate, you would still have a $21 billion shortfall over the forward estimates, thanks to things like the collapsing iron ore price. So, Australians really need to brace themselves don't they for the next Budget, that it's going to include even harsher cuts than this one?
TREASURER:
Well, not necessarily, Leigh. That's one of the reasons why we are working so hard to open up new trade agreements in Asia, particularly as we've done with Korea and Japan. I'm very hopeful that we will be able to land a free trade agreement with China. These agreements broaden our market. They open up our market opportunities. Now, you're right, iron ore prices falling has had an impact on the Budget, of course it has. Iron ore exports represent one in every five dollars of our exports. So, when our income as a nation falls, because the iron ore price has fallen 30 per cent since May, it does have an effect on the Budget… (Inaudible)
LEIGH SALES:
But Treasurer, sorry to interrupt, I remember your predecessor Wayne Swan making pretty much exactly that argument on the program and I could play you back exactly what you would've said at the time which was, ‘Well, no, no, no, no it's not a revenue problem, it's a spending problem.’
TREASURER:
And you are absolutely right, and in those days, Wayne Swan had an iron ore price well over $100 a tonne. We're facing an iron ore price below $70 a tonne. So he wasn't - the problem wasn't his revenue; the problem was that they continually overestimated the revenue, spent against their overestimate, and never pulled back. What we did in the May Budget was we took a more conservative position on estimates about prices for iron ore than the Labor Party, or the market. We took a more conservative position and iron ore prices have fallen even further, so thank God we were careful and prudent in the Budget.
LEIGH SALES:
On another matter, the US and China announced a landmark deal on climate change yesterday. Is Australia out of step with what's going on globally?
TREASURER:
Not at all. The deal that China and the United States made was a good deal. It's hugely encouraging I think for the world, that China and the United States have been able to sit down and negotiate over an issue – an important issue – and that gives us hope that they can do it in relation to trade and a range of other issues. Now, in relation to the United States' commitment, over a 30-year period, I'm advised it's the same as that of Australia. From the equivalent of 1990 to 2020, we both have the equivalent ‘apples with apples’ comparison reduction in emissions The issue will be after 2020, and that's yet to be discussed.
LEIGH SALES:
We've got the two most powerful nations in the world working together on climate change and pledging major emission cuts at the same time as Australia has changed course in this area, abolishing the Climate Change Commission, cutting the Science Minister, shifting to Direct Action, which is not favoured by most economists and environmentalists. How is that not out of step with what China and the US are doing?
TREASURER:
Well, because the United States and in fact China both have Direct Action plans as a starting point. Secondly, I might've missed it and you can correct me, but I don't recall either the President of China or the President of the United States saying they were going to introduce a carbon tax. I didn't hear that, and what we've said is, Direct Action is the plan that ensures that we continue to reduce our emissions, but at the same time, we do not cause enormous harm to the Australian economy. Now, that's a very similar path to what China and the United States are doing, focusing on renewable energies, focusing on new technologies, and at the end of the day, Direct Action is helping to deliver that.
LEIGH SALES:
Just two things very quickly: we've seen some big splits in the Palmer United Party in the past couple of days. Are you going to start negotiating with all of them individually rather than as a bloc?
TREASURER:
Well, we've always had discussions with individual Senators in the Palmer United Party. In fact, I've thrown open the books of the Treasury to them and they've had ample opportunity, as have other independents, to participate in direct discussions with us.
LEIGH SALES:
And the Tasmanian Senator Jacqui Lambie says she will vote against all government legislation unless you reverse course on a Defence pay deal. Is there any room for manoeuvre on that? Yes or no?
TREASURER:
Well, no. Look, we would love to pay our Defence Force more money but every dollar we pay is borrowed. It's borrowed money. So we're borrowing money to pay wages. Now, that is unsustainable and I would say to Senator Lambie, if you really do care about Defence Force pay, you'd help us to address the mess that was left to us by the previous Government and ensure that the Australian Government pays its Defence Force personnel out of the money it earns from taxpayers rather than having to borrow money to pay wages.
LEIGH SALES:
Treasurer, thank you very much.
TREASURER:
Thanks very much.