LYNDAL CURTIS:
Treasurer, welcome to Capital Hill.
TREASURER:
Great to be with you.
LYNDAL CURTIS:
The States essentially have to find the money to make up for the $80 billion in cuts to growth in public hospitals and schools spending and some national partnership cuts. Essentially, do you not mind if they raise taxes?
TREASURER:
Well, we are still giving them $400 billion in the 6 years after 2017 for schools and hospitals, so...
LYNDAL CURTIS:
But these areas, particularly health, is one of the fastest growing areas of expenditure, isn't it?
TREASURER:
And we are still giving them well over 1 per cent above inflation in growth funding for hospitals and over 2 per cent above inflation for schools, so there is still a substantial increase. What happened was that Julia Gillard and Kevin Rudd had these bonus deals and all you have to do at the end of the day is increase the taxes at a federal level to pretend that you're giving new money to the states.
LYNDAL CURTIS:
But you don't mind if the States increase their own taxes?
TREASURER:
Well, that is a matter for them because they do run the schools and hospitals.
LYNDAL CURTIS:
Essentially they would take the blame, wouldn't they, for either not tipping in that extra money or raising taxes, so it is an exercise in cost-shifting and blame-shifting?
TREASURER:
No, it's not cost-shifting because we don't run the schools and hospitals, and this is a fundamental point and it’s a really important point. You will always be more careful with the money you spend if you have to earn in, and in politics earning it is change in taxation arrangements. So when there is free money from the Federal Government for states, there is certainly inevitably going to be less likely to get efficiencies at a State level. Now, I think it's important, it's hugely important that we re-align the Federation and Tony Abbott has committed to doing that with the Federation white paper and also the taxation white paper which we will be dealing with over the next 12 months.
LYNDAL CURTIS:
Why doesn't the same argument apply to roads, because you are tipping in, aren't you, money for roads that would be the States' responsibilities?
TREASURER:
Well, we do have responsibility for the national roads, such as the Pacific Highway and so on, but the fact is I'm doing it from an economic perspective that we actually need to stimulate that particular part of the economy for a short period of time.
LYNDAL CURTIS:
But you accept it is a different argument to the one you're asking the States to agree to for schools and hospitals?
TREASURER:
And what we're also doing, importantly, is we are focusing on getting private sector involvement in a lot of those activities. Now, a lot of those roads wouldn't be happening if we didn't contribute. It's not the ongoing costs, but it's certainly, from our perspective, the stimulation costs, and because we've got overarching responsibility for the economy, we have to stimulate, now if that's through the states, that's terrific, but the important point is at the end of the day they are still in charge of maintenance.
LYNDAL CURTIS:
Some of the states have talked about the GST. You say it's up to them to come to you with an argument. If they all said yes, they wanted it, would agree to it? Could you say no?
TREASURER:
Well, let's see what happened because we've been caught in the argy-bargy between states on increasing the low-value GST, I've said that previously on the GST, if the States all agree to deal with a low-value GST, then we would be prepared to address that matter, but they couldn't get agreement and it still hasn't happened. So it is a matter for them. They get all the money from the GST. So, that is money that goes to them. If they want to change it, they've got to argue for it.
LYNDAL CURTIS:
On doctors' visits you said this morning that people could forego either a couple of beers a week or some cigarettes essentially because of the cost of them. If they've already done that to save money or if those things are their only indulgence for the week, that's difficult for people to give up, isn't it?
TREASURER:
Of course it's difficult, of course it's difficult. You use the term "indulgence". There is nothing more important than the health of your child or the health of yourself and if we contribute to our own health care and invest in our bodies and our own state of mind, that's the best investment that we could possibly make.
LYNDAL CURTIS:
But there are people out there, people who work and raise families and their budgets are so tight that they can count in cents the amount of money they have at the end of the week.
TREASURER:
And there is a safety net, there is an appropriate safety net in certain circumstances with a discretion with the doctor if it does come down to that, but the fundamental point is, are people in a position now where they're not prepared to give up a couple of cups of coffee or something else in their lives in order to take a sick child to the doctor. The question comes down to priorities, and the fact is that the $7 that is being asked of people is going to go to a further investment in health care, a big investment in health care, in the medical research future Fund which means that we could find the cure for cancer or Alzheimer's or something that will inevitably afflict us or our family in the future.
LYNDAL CURTIS:
Why do you put medical research at the top in the hierarchy of what you're prepared to fund, because you did cut money to other research institutions including the CSIRO which was behind the invention of Wi-Fi?
TREASURER:
Well, because in this case, the savings are coming out of health. So the savings are coming out of health to go into health, and better health care, and it's only through cure and discovery that we are going to make over the long term, the health system affordable for every Australian.
LYNDAL CURTIS:
You also said this morning in response to the question about someone who wasn't working and now may not get payments for six months, who might struggle to pay this; you said they should have a job. That's very easy to say. It's a lot harder to do, isn't it? If it was easy to fix, if governments had had a magic wand to wave, they would have done that long before now?
TREASURER:
Well, what I'm seeking to emphasise is, the best way to build an economy is to do what we are doing, and that is reduce the size of the deficit, start paying down government debt and invest in infrastructure for the medium and long term with immediate jobs in the construction of it. This is the plan that builds a stronger economy that makes it more likely that young people are going to get a job – a well-paid job.
LYNDAL CURTIS:
Is this though your version of Paul Keating going and telling protesters to go and get a job?
TREASURER:
Not at all because Paul Keating never had a solution and our solution is a range of things including $20,000 loans for apprentices to get on with the job of completing an apprenticeship, and for the first time, for the first time extending concessional university loans to diplomas and sub-bachelor degrees. This is landmark historic change that is going to increase access to education and training.
LYNDAL CURTIS:
You will have to negotiate the passage of your Budget through the Senate. The Prime Minister says he is prepared to horse trade. As Treasurer, are there things you are not prepared to give up? Is there a bottom line in the Budget that you don't want to see wound back?
TREASURER:
Well, the bottom line is that we've got to fix the Budget and we've got to fix the economy.
LYNDAL CURTIS:
So if the savings are smaller as a result of Senate negotiations, are you prepared to accept it?
TREASURER:
It just means that further savings have to be found in other areas, so if the Greens oppose the debt levy and it doesn't get through, then it simply means that others are going to have to pay more, and if the changes in the co-contribution do not get through, it simply means that there won't be any additional funding for medical research.
LYNDAL CURTIS:
Will you be urging your colleagues, whose will be negotiating in the Senate, not to give up that bottom line?
TREASURER:
Well, from my perspective it is hugely important that we lay down the best policy to fix the Budget and fix the economy. That's what we've done, and I would urge the Senate, and I would urge everyone to understand, that it is best that we fix the roof while the sun is shining, because when it starts raining, the damage is going to be far more severe.
LYNDAL CURTIS:
There is already talk about holding out the threat of taking the Budget to an early election. Is that a real prospect if you don't get what you want, or is it the usual empty threat?
TREASURER:
I don't think anyone is eager to have yet another election in Australia, but I think people are eager for us to be able to fix the Budget and get on with the job of providing stable government.
LYNDAL CURTIS:
When you were sitting in the Expenditure Review Committee going through the savings, looking for savings wherever you could, did you ever regret opposing the Federal, the then Labor Government’s changes on FBT?
TREASURER:
No because they would have taken a baseball bat to the charity sector, they would have taken a baseball bat of significant proportions to the car industry in Australia. That was bad policy, it was going to be hugely costly, at the end of the day the Government would have lost more money than it would have gained.
LYNDAL CURTIS:
You started a campaign, single handedly in 2012, against the age of entitlement, saying it was over. Did you take long to convince the Prime Minister that that was the right course of action?
TREASURER:
Well, there is an inevitable path here that we need to live within our means, and if the Government lives within its means, it gives every member of the community the chance for them to live within their means.
LYNDAL CURTIS:
But for a lot of that time, you were the only one on the Coalition side saying those sorts of things?
TREASURER:
Well, what matters is what you do in Government and Tony Abbott and I are absolutely committed to ensuring the Government lives within its means, because if it does, then it gives Australians the opportunity to have more money in their pockets, rather than pay more tax.
LYNDAL CURTIS:
Finally, are you prepared to wear the political pain that may come from this Budget, lose some votes if that in the end is what happens?
TREASURER:
Well, this Budget is not about politics, it is about good policy. The fact is, there has been so much political commentary about the Budget, but there hasn't been economic commentary because the economic commentary knows something needs to be done and we have to move now, and I would just say to Bill Shorten and everyone else, if you've got a better alternative to fix up the mess, tell us what it is, but simply don't be a critic with no response to the problem.
LYNDAL CURTIS:
You were fairly careful, though, particularly in the election campaign about the promises you made. You talked about tax in the size of the overall tax mix. Tony Abbott made more specific promises. People will judge those to be broken, won't they?
TREASURER:
That's political commentary and what I'm interested in...
LYNDAL CURTIS:
But it is political commentary that you ran very successfully against Julia Gillard over one broken promise?
TREASURER:
Well, Julia Gillard in relation to the Carbon Tax, changed her policy in order to win over the Greens. There was no economic argument at all. It was simply about winning over the Greens and maintaining power. Everything we are doing in this Budget is about the national interest; it is about the way forward, to strengthen the economy, to create jobs.
LYNDAL CURTIS:
So it’s ok to break promises or do things you didn’t promise in an election in the economic interest?
TREASURER:
I don’t accept that. But I do say, that if people think there is political downside in this Budget for the Government, well there may be, that’s their comment, but from my perspective and the perspective of the Prime Minister and the entire Government, we must do what is right for the country, and there is no doubt any serious analysis of the Budget would prove that what we are doing is right for the country.
LYNDAL CURTIS:
Joe Hockey thanks for your time.
TREASURER:
Thank you.