INTRO:
The Prime Minister, Kevin Rudd, says that tackling inflation is more important than delivering future tax cuts. While the new Labor Government has vowed to deliver the $31 billion tax cut it promised during the election campaign, the Treasurer, Wayne Swan, has pledged that any extra revenue will go towards bolstering the Budget surplus. But the Treasurer won't say just how much bigger he'd like that surplus to be. Mr Swan has been speaking to Alexandra Kirk in Canberra.
TREASURER:
We simply can no longer afford to have Mr Turnbull and the Liberals' reckless spending sprees that have produced seven rises in interest rates in the last three years.
KIRK:
Well, how much extra tax revenue are you expecting over and above the projected $10 billion surplus?
TREASURER:
Well, that's what we'll see on Budget night. We've made it very clear that we will put in place additional savings, additional to the savings that we took to the people at the last election of $10 billion. But the fundamental point is this. The era of reckless spending that we saw from Mr Turnbull and the Liberals is over because what it produced, in addition to their inattention to capacity constraints, was seven interest rate rises in three years which have hit working families for six.
KIRK:
Now, Labor has known, going into the election, that inflation was a problem, in fact, you've been badgering the Coalition for at least the past three years about that, so wasn't it irresponsible on your part to match the Coalition's tax cuts promise which promised to deliver tax cuts for the next three financial years?
TREASURER:
Not at all. The tax cuts that we proposed will enhance labour force participation and put incentive into the system for people who work hard to make our economy strong. And we have argued that case for low and middle income earners for a long period of time. But we recognise that there needs to be budget restraint, that we can find additional savings and still deliver this tax relief to hard working Australian families. The problem we have here is that Mr Turnbull thinks that inflation is a fairy story. And if he can't understand the problem he can't be part of the solution.
KIRK:
If you're so worried about inflation and you need to bolster the surplus, why don't you scale back or abandon some of the tax cuts?
TREASURER:
We are scaling back Federal Government expenditure in total. We have a razor gang to take the axe to unproductive spending. We can still deliver vital tax relief to hard working families and encourage labour force participation and take the axe to the reckless spending spree that the Liberal Party went on for the last three years, which produced seven interest rate rises in three years.
KIRK:
Australians have got used to tax cuts every year. Should they get ready to stop expecting that?
TREASURER:
Well, what we have to do is the Federal Government has to show restraint, it has to lead the way. Australia faces a very significant inflation problem. Inflation erodes living standards, it pushes up prices, it makes life difficult for working families, it erodes savings and it pushes up the cost for doing business. It has to be dealt with. The Liberal Party's reckless spending spree and its failure to make the necessary investments in skills and to provide leadership when it came to infrastructure has produced seven interest rate rises in a three-year period. We've got to break that cycle and this government is determined to do it with the Prime Minister's five-point plan to win the war on inflation,
KIRK:
I'll ask that question again. Should Australians get used to the idea of not expecting tax cuts every year?
TREASURER:
Well, Australians have tax cuts legislated for the next three years.
KIRK:
But after that?
TREASURER:
But what we're determined to do over the next three-year period is to find additional savings in the budget by eliminating unproductive spending and by getting control of the federal Budget. It is absolutely critical to have an impact on inflationary expectations and inflationary outlook that we inherited from Mr Turnbull and the Liberals.
KIRK:
With interest rates on the rise and some banks raising rates by more than the official hike, you're meeting the nation's top economic advisers later today to nut out a plan to remove the banks' disincentives to customers switching banks. One report has suggested that it'll only apply to credit and debit payments, not to the big exit fees for, for example, loans. Will your plan cover all exit fees?
TREASURER:
I'm talking to the Council this afternoon about a package of measures to make the banking system work for Australian families, not against them. And I'll announce that package after I've had those discussions this afternoon.
KIRK:
Will it go across the board, though, or be specific to only some exit fees and not others?
TREASURER:
I'm not going into the detail of the package. We've got a significant package which we want to discuss with the economic regulators. We'll work our way through those issues and we'll announce it in good time.
KIRK:
And just on the previous issue, you've said that you want to squirrel away at least one and a half per cent of GDP in a surplus – that's around $18 billion. How much higher would you like it to be, ideally?
TREASURER:
Well, Alex, I'd like to give you a scoop and announce what we're doing in the Federal Budget in May but I can't do it today.