TREASURER:
Firstly, let me say that I think we are all thinking about the people who are affected by the bushfires today. It is a tough country out there. It is a damn tough country. Obviously, the Federal Government will be doing anything it possibly can to assist in fighting the fires and to assist in the recovery efforts.
The Australian Bureau of Statistics has released the latest inflation figures for the last quarter. What they show is that inflation was above expectations in the last quarter at 1.2%. The main drivers were the things that people have to pay for every day. In particular, electricity prices increased significantly in the last quarter by 4.4%, meaning that since the introduction of the carbon price, electricity has increased by 22%. This quarter brings an end to the period during which the Labor Party was in Government. Electricity prices doubled from the time Labor was first elected in 2007.
Abolishing the carbon tax will save households on average, $550 a year, next year. So I implore the Labor Party to allow the carbon tax repeal legislation to pass through the Parliament so that Australians can have some relief on every day cost of living challenges. In particular, as you can see, there was a significant increase in automotive fuel prices in the last quarter, 7.6%. Now on 1 July next year, the carbon tax is scheduled to hit fuel transport for industrial usage. If the carbon tax is repealed, then those prices will not go up.
I cannot understand why the Labor Party would stand in the way of a tax cut for every day Australians from the 1st of July next year, because that is exactly what they are doing. By opposing the Carbon Tax Repeal Legislation, they are ensuring prices are higher than they should be for every day Australians, but most particularly they are denying Australians a much-needed tax cut. We are going to prosecute this argument very forthrightly in the next few weeks.
The second issue I wanted to touch on was our decision to put $8.8 billion into the Reserve Bank. It is a significant decision, obviously. It is not something that has not been flagged by my previously expressed concerns and as the background notes show, the press release will identify I raised this in a speech in February 2013.
Our institutions must be at their absolute strongest to deal with the challenges in the days, weeks and months ahead and the Coalition government will not allow our institutions to be in any way weakened. We need all the ammunition in the guns for what is before us and this is part of that equation. It is a significant hit to the budget but, as you can clearly see, the previous Government took an extraordinary dividend from the Reserve Bank previously. In doing so, they weakened the Reserve Bank Reserve Fund which I am about fixing and ensuring, as I said, that our institutions are at their strongest.
JOURNALIST:
The $8.8 billion; is that a bail out?
TREASURER:
It is not a bail out. I do not want to suggest that the Reserve Bank is in any way in a diminished position. I do want to make sure that the reserve bank is at its strongest. In discussions with the Reserve Bank Board and the Governor of the Reserve Bank it is patently obvious that they need to have 15% capital risk. I would just say that I want to make sure that they are at their strongest.
JOURNALIST:
You say that you need all this ammunition in the gun. Why? What have your discussions in Washington and New York about the global economy made you think about why you need all that ammunition in the gun?
TREASURER:
It is not just the experience in the United States or discussions with other finance ministers and Central Bank Governors. I identified the issue in February this year. I was concerned about it in February. I pledged in February that one of the first things I would do is sit down with the Governor of the Reserve Bank and discuss the matter.
JOURNALIST:
On the CPI you’ve devoted a great deal of your commentary to the electricity prices and call on Labor to support the repeal bill. Can you guarantee that if the carbon tax is removed that the first CPI figures after that will see electricity prices fall?
TREASURER:
That depends on the timing of the pass through and we will empower the ACCC.
JOURNALIST:
[Inaudible]
TREASURER:
I am not going to make big grandiose pledges. Obviously if you are taking a tax off electricity, prices will come off. They are certainly not going to rise in any way in same shape or form as they would with a new tax on them. The best way to address it is to pass the bills. I do not know why Labor would stand in the way of a tax cut for every day Australians that goes directly to lower costs of living challenges. I do not know why they would do it. If they do not hear the message of the Australian people and do not hear the economic message as well, this has a stimulatory effect on the economy, getting rid of the Carbon Tax. It actually helps to increase economic growth. If Labor is standing in the way of increased economic growth and they are standing in the way of a tax [decreased] for everyday Australians and they are standing in favour of higher every day costs for Australians. I am sure the Australian people will not forgive them for it.
JOURNALIST:
On the RBA discussion, what are they telling you about the risk involved, and with the $8 billion how is that being funded? Through borrowing?
TREASURER:
It can only be through borrowing. We have no choice in this regard. It is a significant sum of money. It is the money that should have been put in by the Labor Party. As you can see - and I refer you to the table that was in the background notes - you can see the flow of dividends to the government. Emphatically I refer you to the position where the Treasurer of the day, Wayne Swan, said and gave an undertaking to the Reserve Bank that they could replenish their Reserve Fund and not take dividends. Then in order to try and get to surplus he took a dividend against the wishes of the Reserve Bank. So in many ways we are fixing the problems that we inherited.
JOURNALIST:
What are they telling you about the risk?
TREASURER:
The economy is obviously still growing, as it should be. I am not going to comment on my individual discussions with the Reserve Bank, only to say to you that the United States has not resolved its structural issues. It has not resolved them. They have kicked the can along the road closer to the mid-term elections. I do not see a way forward out of that. We are not going to allow Australia to become in any way as vulnerable as the United States or some other jurisdictions may be over the months and years ahead.
JOURNALIST:
The Government has pledged to bringing down the debt legacy left to you by the Labor Government. How do you explain to the Australian people that instead of bringing it down you’re actually exponentially adding to it?
TREASURER:
The last Pre-election Fiscal Outlook said that debt was $370 billion. I have been advised that there has been deterioration in the outlook based on the information and parameters set by the Labor Party. There has been a number of factors. I have been advised, within the current framework, the debt will peak at above $400 billion. That is the Labor Party’s framework. I have also been advised appropriately - and it is not rocket science - that you need $40 billion to $60 billion capacity headroom to deal with some of the challenges of refinancing. That is why we came to that figure - to ensure that we do not have to go back to the Parliament to ensure that we are not in the same position as the Labor Party. I want to emphasise to you and some of your colleagues that the debt limit is not what the debt is going to be. That has only happened under Labor, where the debt limit, at $75 billion and $200 billion and $250 billion and now $300 billion - where the debt limit ends up being the debt.
JOURNALIST:
[Inaudible]
TREASURER:
Absolutely it is. It is money that should have been allocated by the Labor Party in Government. But they did not. Despite the warnings, they did not do it and they should have done it.
JOURNALIST:
This morning you said that Australian debt is well sought after on the open markets, which it obviously is…
TREASURER:
It’s not always …
JOURNALIST:
By European countries and by America. But one of the biggest purchasers of sovereign debt is China. Have you any concerns about Australia’s sovereign debt being owned by the Chinese banks?
TREASURER:
I have always pointed out that it does not help us to have to rely on international capital markets for the funding of our needs. Australia has been a net borrower from the rest of the world since white settlement. When we move on the Financial System Inquiry, one of the main terms of reference will be to focus on how we as a nation can fund ourselves without relying on borrowing from the rest of the world each year over the generations ahead. It is not something that can be solved easily or quickly. I want to reduce our exposure to the world and global capital markets.
JOURNALIST:
[inaudible]
TREASURER:
No. I am not in the business of specific buyers. If people lend us money most of the risk is in their hands, but we are AAA rated and we are in good shape.
JOURNALIST:
As someone who is mindful of waste and how every public dollar is spent, how is that good value for money for Australian taxpayers?
TREASURER:
Everyone should comply with the rules. The rules are laid down for a particular purpose. Whenever I have had any associated private activity I pay for that activity myself. That might be why some people repaid money and people should act within the framework.
JOURNALIST:
[inaudible]
TREASURER:
I don’t know.
JOURNALIST:
There has been a lot of discussion about infrastructure in the last few days and there are suggestions that you are looking at Sydney Airport for the May Budget. As a general principle, do you think there is a role for Commonwealth debt to help fund infrastructure that will boost productivity like Sydney Airport?
TREASURER:
Commonwealth debt has funded some infrastructure. Unfortunately as a percentage of debt it has been actually quite a small part of it that has funded infrastructure. A lot of it has funded recurrent activities. That is part of our argument about the debt levels incurred by the previous government. We need to grow the productive capacity of the nation. We must do it, we need to move quickly. We need to do that in partnership with the private sector, there is a lot of money in the private sector. I do not think there is any dispute. Governments around the world - and I raised this at the G20 - are mostly in the same position. We have not got bucket loads of money to spend on the necessary infrastructure to grow our economies. Therefore we need to form partnerships with the private sector. It is one of the three priorities I have laid down for our leadership for the G20 finance ministers next year. It is a hugely important initiative. We are going to have to retool Australia to meet head-on the growth challenges of the next few years. Private investment in public infrastructure is going to be part of that equation.
JOURNALIST:
As part of that, something as crucial as the Sydney airport in getting that going …
TREASURER:
A second airport. I am not putting any money into Max’s airport.
JOURNALIST:
Getting some money quickly into [the Second] Airport given the WestConnex model, that does suggest probably a joint investment by the federal and state governments to get the project up and running I would think.
TREASURER:
I do not want to speculate on any one project. There are going to have to be numerous projects.
JOURNALIST:
Warren Entsch has told me that he doesn’t know if that trip to Cairns constituted electorate business or not. Now, as someone as mindful of waste and reform of entitlements is it something that’s come across your desk [or] the Finance Minister’s desk? Is it time for this Government to actually move on this and tighten the rules.
TREASURER:
As I said previously, when I was standing here, I have got a pretty full dance card at the moment, dealing with the challenges in the economy and the Budget and a range of other things. Can I tell you people should operate again within the guidelines.
JOURNALIST:
[inaudible]
TREASURER:
I am sure there are going to be lots of allegations about people. If the guidelines are wrong then the guidelines are for another minister to change in consultation with others. I would just say you should comply with the guidelines. If there is private activity, make a contribution out of your own pocket to illustrate the fact that you are not just doing a single event.
JOURNALIST:
Barry O’Farrell has spent the last 3 years fighting Anthony Albanese who wanted to put a second airport in the Sydney Basin. Have you had any discussions with Premier O’Farrell since you have become Treasurer, officially or unofficially, to try and get his support that you’re going to need?
TREASURER:
I am not spending a hell of a lot of time on the second airport in Sydney. I am the guy who has to find the money for that and other projects if they are to proceed.
JOURNALIST:
Can I ask about things on your dance card, as you say? When is this getting private money into infrastructure? Is that something for the financial system inquiry and when will we get progress on that? The other thing is about the inherited Budget deficit - $30 billion. You have been bequeathed the settings for that according to PEFO. Now it’s nearer to $40 billion as a result of your grant to the Reserve Bank that, they say, is needed. Does that mean that really we should be thinking that you inherited the settings for a $40 odd-billion deficit rather than a $30 odd-billion deficit, given that Wayne Swan engaged in financial shuffling of cards?
TREASURER:
Yes.
JOURNALIST:
The correct way to think of it …
TREASURER:
We have inherited this situation.
JOURNALIST:
It’s Labor’s $40 billion deficit?
TREASURER:
Of course it is. I am fixing their problems. The things they were warned needed to be addressed and failed to address. I am doing that as a result of their legacy action. I did not take a dividend out of the Reserve Bank of $5.227 billion in 2009, where the highest preceding dividend was $1.5 billion. I did not do that. I did not take a half billion dollar dividend out of the Reserve Bank in 2012-2013 to try and deliver a budget surplus when I was asked not to and when I pledged that I would not. That was Wayne Swan.
JOURNALIST:
$40 billion deficit in the year he promised a surplus?
TREASURER:
Last year he promised a surplus and I said he was not going to do it and I was right.
JOURNALIST:
The other question too, the progress on the Financial System Inquiry?
TREASURER:
We are in discussions with the people we are keen to have involved in the Financial System Inquiry. I would like to see it happen next year. We will probably get draft terms of reference out this year but I am not rushing to add to the workload that we have got.
JOURNALIST:
You’re saying the membership will be announced next year?
TREASURER:
Membership may be announced before next year but I would like it get under way next year. It will be a fairly lengthy inquiry. It is not going to be like the Commission of Audit.
JOURNALIST:
How long do you think?
TREASURER:
Probably, it would need at least 8 or 9 months. I have identified a couple of people overseas I would like involved in the inquiry as well because I think the Campbell inquiry was the first, the Wallace inquiry the second. This is the third significant inquiry that is going to guide the destiny of our financial system and our capacity to insofar as you can inoculate against what is happening in the world.
JOURNALIST:
You say that you want the public to dance with you on and accept the …
TREASURER:
I did not ask for that. I am sure they are more fussy than that!
JOURNALIST:
Take the idea that you want the public to dance with you and accept the tough decisions that you have to make. Doesn’t it set an example for the public that the politicians are making these claims that don’t seem to stack up? Wouldn’t it be easier for you to sell your tough medicine if the politicians weren’t trying to sort of have money from the tax payer that doesn’t seem to be justified?
TREASURER:
I would ask them to keep to the guidelines. I would ask colleagues to keep to the guidelines. Whether it is a journalist’s wedding or a journalist’s funeral, the question really for everyone is, is it appropriate? Frankly, would you be going to that place if not for the work involved? Those sorts of questions need to be asked. That will give people a good guideline on entitlements. I think you have got to be a bit careful here. A lot of politicians live out of a suitcase and many of us would prefer not to.
JOURNALIST:
Treasurer, in 2007 and 2010 the Red Books to the incoming Treasurer were released to the public as it was decided it was in the public interest. Yet the Blue Book to you won’t be because Treasury says it might hamper building an effective and trustworthy relationship with you. Is the public to conclude that the information is perhaps too embarrassing for you to enter the public domain?
TREASURER:
No. I think it is more embarrassing for the previous Government. Even if it is embarrassing for the previous Government - and I say this to you publically and as members of the gallery - I am not going to break my word and use Treasury as a shield or a sword. You are not going to get briefings given to me by Treasury either on background explicitly, or in order to hurt the Labor Party or in order to help us. I do not want to do that and I will not be doing that. The advice Treasury give to me needs to be frank, honest and needs to the basis of an ongoing dialogue. If every single word that you engaged in with perhaps your husband, your wife, your partner was exposed to the general public, you would not have that same relationship. Sometimes I am going to engage in discussions with the Treasury in the national interest. In those discussions, if they are disclosed they might provide misleading information by their very disclosure. Having said that there is a very fulsome FOI framework and it’s up to them to make decisions about whether it is released or not.
JOURNALIST:
Did you discuss with Treasury the decision it made on the incoming government brief FOI requests?
TREASURER:
No.
JOURNALIST:
[inaudible]
TREASURER:
We will have an answer for you in the Budget. We will release the fiscal rules in the Budget and we are going to be methodical and careful about this process. Again, we have got some headwinds coming out of the US early next year and headwinds coming out of Europe with some greater transparency in relation to their banks. I want to make sure that when we make commitments we keep to them. I will just say this about some of the messages I did get in New York from speaking to various agencies and others. Of course the fundamentals matter, but what is worse is when you keep breaking your pledges. That means you do not deliver on them. That is why it is so essential that when it comes to the repeal of the carbon tax and the repeal of the mining tax, the closure of the CEFC, increasing the debt limit to a point that we will not reach, they are absolutely essential. It is far better to be full and frank than to be in a position where you are creating an expectation and failing to deliver. In relation to the fiscal rules, I have to deal with what the real state of the books are. We are still going through them agency by agency at the moment. As you can see with the Reserve Bank statement today, there are other parts of the government where they are running technical losses. That to me is unacceptable.
JOURNALIST:
[inaudible] What other institutions need to be in a better position than they currently are? Is it just about money or is it [inaudible?.
TREASURER:
I think it is best not to answer that. We are going through each institution at a time, ensuring they are in the very best shape.
JOURNALIST:
Are you just talking about financial?
TREASURER:
I am talking about all parts of government to be in the very best shape to deal with the challenges that lie ahead. Tony Abbott said we want to have a no surprises government. I think that is a very good piece of advice.